Loading judgment…
Facts
The assessee, Kempapura Srinivasareddy Uday, filed his return of income for AY 2018-19, declaring Rs. 8,75,220/-. A search action was conducted, and a notice under section 153A was issued. The assessee filed a return under 153A, declaring the same income. The AO disallowed a deduction of Rs. 1,50,000/- for tuition fees due to lack of evidence and added Rs. 4,15,887/- as rental income not declared.
Held
The Tribunal held that the Assessing Officer (AO) was not justified in making additions without any incriminating material found during the search. The assessee had filed his return under section 139(1) before the search, and no assessment was pending. The time limit for issuing a notice under section 143(2) had also expired.
Key Issues
Whether additions made by the AO in a search assessment under section 153A are valid without any incriminating material, especially when the return was filed under section 139(1) and no assessment was pending.
Sections Cited
250, 139(1), 132, 153A, 143(1), 143(2), 142(1), 80C, 22, 234A, 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, BANGALORE “B” BENCH, BANGALORE
Kempapura Srinivasareddy Uday DCIT, Central Circle-2(2) Bengaluru 328, B Block Aces Layout Kundalahalli vs. Bangalore 560037 PAN – ACTPU3804H (Appellant) (Respondent) Assessee by: Shri Siddesh N. Gaddi, CA Revenue by: Shri Satish M., CIT-DR Date of hearing: 24.06.2024 Date of pronouncement: 28.08.2024 O R D E R Per: Keshav Dubey, J.M.
This appeal at the instance of the assessee is directed against ld. CIT(A)’s Order vide DIN- ITBA/APL/M/250/2003-24/1061702458(1) dated 28.02.2024 passed under Section 250 of the Income Tax Act, 1961 (the Act) in respect of Assessment Year (AY) 2018-19.
The assessee has raised the following grounds of appeal: -
1. The impugned order passed by the Learned Officers (the Deputy Commissioner of Income Tax Central Circle 2(2), Blr and the Commissioner of Income Tax (Appeals)-15, Bangalore), to the extent prejudicial to the Appellant, is not justified in law and on facts and circumstances of the case.
2. The CIT(A) has erred in law and on facts in upholding the order of the AO, to the extent it is prejudicial to the interest of the Assessee.
Kempapura Srinivasareddy Uday 3. The Learned Officer has erred in law and on facts in passing the impugned order without jurisdiction; 4. The Learned CIT(A)/AO have erred in law and on facts in not appreciating that in the absence of incriminating materials, there is no question of making an assessment in the case of concluded/unabated assessments.
5. The Learned AO has erred in making an addition u/s 22 of the Act to the extent of Rs. 4,15,887/-.
The above addition made on the basis of assumption is bad in law; 7. The Learned Officers have erred in law and on facts in denying deduction under section 80C of the Act to the extent of Rs. 150,000/-; 8. Based on the above, the Learned AO has erred in law and in fact in raising demand by levying interest u.s 234A/234B of the Act.”
The brief facts of the case are that the assessee being an individual deriving income under the head ‘income from house property’ filed his original return of income u/s. 139(1) of the Act on 08.08.2018 declaring total income of Rs.8,75,220/- after claiming deduction under Chapter VIA of Rs. 1,50,000/-. The assessee in his return of income has declared income from the house property amounting to Rs.10,25,216/-. The return of income was further processed u/s. 143(1) of the Act on 29.07.2020. A search action u/s. 132 of the Act was conducted in the case of the assessee on 05.02.2020 and accordingly notice u/s. 153A of the Act was issued and served on 18.11.2020. In response to the notice u/s. 153A of the Act the assessee filed return of income on 18.12.2020 admitting income of Rs.8,75,220/-. Subsequently notices u/ss. 143(2) as well as 142(1) of the Act were issued requiring the assessee to produce supporting documents/details in support of the claim made in the return. During the course assessment proceedings the Assessing Officer (AO) verified that the assessee claimed deduction of Rs. 1,50,000/- in respect of tuition fees paid for the year. Hence the AO issued show cause notice to the assessee to furnish proof of tuition fees. In the absence of any evidence/documents the AO confirmed the addition of Rs. 1,50,000/- and disallowed assessee’s claim of deduction u/s. 80C of the Act, Further the AO Kempapura Srinivasareddy Uday found from assessee’s bank statement that the assessee received rental income of Rs.14,41,103/- out of which the assessee declared Rs. 10,25,216/- in the return of income. Thus the difference of Rs. 4,15,887/- (14,41,103 – 10,25,216) is treated as income of the assessee and subsequently the AO completed the search proceedings by passing an order u/s. 153 of the Act. Aggrieved by the assessment completed u/s. 153A of the Act vide order dated 23.09.2021 assessee preferred an appeal before the CIT(A).
The ground Nos. 1, 2, 3 and 6 are general in nature and does not require any adjudication. The ground No. 4 relates to the legal validity of the assessment on the ground that in the absence of incriminating material there is no question of making assessment in the case of concluded/unabated assessment. Ground No. 5 relates to the addition u/s. 22 of the Act to the extent of Rs.4,15,887/-. Ground No. 7 relates to the denial of deduction u/s. 80C to the extent of Rs. 1,50,000/-. Ground No. 8 relates to levying of interest u/ss. 234A/234B of the Act.
Before us the learned A.R. of the assessee vehemently submitted that the case of the assessee is squarely covered by the judgement of the Hon'ble Supreme Court in the case of PCIT v. Abhisar Buildwell Pvt. Ltd. [2023] 454 ITR 212 (SC) wherein it was held that in case no incriminating material is found during the search conducted u/s. 132 of the Act, the AO will have no jurisdiction to make an assessment. Further, the learned A.R. submitted that during the course of first appellate proceedings the assessee has filed the details of property flat-wise as well as summary of rental income. Further, it was submitted that in the case of Anirudh Sarawat (tenant) the assessee has received rental income of Rs.18,900/- only for April, 2017 and thereafter he vacated the property. The First Appellate authorities ignored the copy of the bank statement submitted during the appellate proceedings.
Kempapura Srinivasareddy Uday 6. The learned D.R., on the other hand, supported the order of the ld. CIT(A) and highly relied on the order of the ITAT Delhi “G” Bench in the case of Amit Arora v. ACIT {2020] 122 taxmann.com 78 (Delhi-Trib.) and submitted that the AO has jurisdiction to make addition in the assessment order u/s. 153 of the Act regardless of whether any incriminating materials were found/seized during search action u/s. 132 of the Act.
We have heard the rival contentions and perused the material on record. We first take up the issue relating to the legal validity of the addition made u/s. 143 of the Act because this is the basic issue having a hearing on the outcome of the appeal. The assessee had also raised the same legal issue before the ld. CIT(A) in the present case. First of all we would like to make it clear that the case laws relied upon by the Revenue is on different set of facts & circumstances compared to the present facts of the case. The issue decided in the case of Amit Arora v. ACIT (supra) is whether when assessee had filed original return of income after date of search, AO had jurisdiction to make additions in assessment order u/s 153A, regardless of whether any incriminating materials were found /seized in course of search action u/s 132. In the present case the assessee filed his return of Income U/s 139(1) of the Act on 08/08/2018 and the search took place well after the filing the return i.e. on 05/02/2020. Thus It is an undisputed fact that the assessee has filed return of income u/s. 139(1) of the Act on 08.08.2018. The return of income was processed u/s. 143(1) of the Act on 29.07.2020. The search action u/s. 132 of the Act was carried out on 05.02.2020. The assessee filed the return of income in response to notice u/s. 153A on 18.12.2020 admitting the income of Rs,8,75,220/- as declared u/s 139(1). Therefore, the return of income was processed u/s. 143(1) of the Act only after conducting the search on 05.02.2020. Further, the time limit for serving notice u/s. 143(2) on the Kempapura Srinivasareddy Uday assessee was within 6 months from the end of the financial year in which the return is furnished, i.e., 30.09.2019. We found that as on the date of search the time limit for issuing notice u/s. 143(2) has already lapsed. The learned A.R. of the assessee strongly contended that in the absence of any incriminating material, there is no question of making an assessment in the case of concluded/unabated assessment. We also note that during the course of First appellate proceedings, the assessee filed the additional Grounds of Appeal & written submissions as well as additional evidence which were sent by ld. CIT(A) for seeking remand report from AO. The AO submitted remand report- II dated 19.4.2023 in which it has been submitted as under:
7.1 The above remand report was brought to the notice of the assessee and the assessee also submitted rejoinder in which it has been contested that the documents found during the course of search does not belong to the assessee but it is related to HUF & assessee’s mother. The details submitted by the assessee are as under:-
7.2 We have gone through the above table and found that no documents belong to the assessee. The ld. CIT(A) has not disputed the same and during the course of proceedings before us, the ld. D.R. also do not controvert with regard to the above submissions that it belong to the assessee in the rejoinder proceedings noted (supra). Further, we are of the opinion that during the assessment proceedings, the AO has also not referred to any seized material while framing the assessment. Accordingly, we hold that the AO is not justified for making additions towards the rental income for want of any incriminating material. The assessee has also filed return of income for the impugned assessment year u/s 139(1) of the Act and as on the date of search there was no assessment pending and in fact the time limit for issue of notice u/s 143(2) has also expired . In support of our decision, we rely on the decision of the Apex court in the case of PCIT Vs Abhisar Buildwell (2023) 149 taxmann.com 399. We, therefore allow this ground of the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 28th August, 2024.