SREEKUMARI AMMA,THIRUVANANTHAPURAM vs. DCIT, CENTRAL CIRCLE, THIRUVANANTHAPURAM, THIRUVANANTHAPURAM

The only issue contended by the assessee through grounds of appeal is that the order of assessment passed u/s. 143(3) r.w.s. 153A is not based on any incriminating material found during the course of search and accordingly is bad in law.

There was a search u/s. 132 of the IT Act (“the Act”) was carried out in the case of Shri Vinodkumar Kuttappan group on 05.05.2016 and the assessee is wife of Shri Vinod Kumar Kuttappan. The assessee is the Managing Director of Keranadu Printing and Publishing (P) Ltd. and Nightingale College of Nursing, Trivandrum. Warrant of authorisation was also served on the assessee and accordingly, a notice u/s. 153A was served on the assessee. The assessee response to the notice u/s. 153A filed the return of income returning the same income as in the original return of income filed. The Assessing Officer made addition towards depreciation claimed on asset which was not there in the original return of income on the ground that in the absence of any proof of the asset brought in and that the assessee could not prove that the asset was exclusively used for the purpose of business and therefore disallowed 50% of the depreciation claimed. The Assessing Officer also made an addition towards LIC premium paid by the assessee for the reason that the same is not reflected in the outflow of the cash flow statements submitted and no proof was submitted to substantiate the LIC premium paid. The summary of the additions / disallowances made by the Assessing Officer for the years under consideration is as given below:

For A.Ys. 2016-17 and 2017-18, the Assessing Officer made addition towards agricultural income as income from other sources. Aggrieved by the order of the Assessing Officer, the assessee preferred further appeal before the CIT(A). The CIT(A) upheld the additions / disallowances made by Assessing Officer with respect to addition towards depreciation. The CIT(A) held that “4.3 The appellant took grounds regarding disallowance of depreciation for the A.Ys 2011-12 to 2017-18. The appellant submitted that the additions to motor cars are disclosed in the balance sheets filed along with the returns of income. The appellant made additions to motor cars during A.Ys 2011-12, 2013-14 and 2015-16 being Mahindra Jeep, Jaguar car and Range Rover car respectively. The appellant submitted that the claim of depreciation was not made on Range Rover car since the same was used exclusively for the personal purposes The appellant submitted that the said motor cars were used for the appellant's business of catering and Yoga classes. The appellant contended that disallowance on adhoc basis is not justified. The appellant also submitted that the disallowance on depreciation claim was made in the hands of appellant's spouse. The appellant relied on the decisions of ITAT Delhi in the case of Ralhan Construction Company in del/2016. New Delhi Tyre House in ITA No 2359/Del/2019. 4.4 The Assessing Officer reported that the appellant failed to produce the trip sheets of the motor cars to prove that the same were exclusively used for the purposes of business. 4.5 The submissions made and decisions relied on by the appellant and the report of the Assessing officer are carefully considered. Having made a claim for depreciation on motor cars, the burden of proving the exclusive use for exclusive business purpose is on the appellant. The appellant failed to produce the trip sheets of the motor

The CIT(A) also upheld the additions made with regard to deduction claimed u/s.80C by the assessee towards payments made to LIC on the ground that the necessary documents have not been submitted evidencing the claim.

Aggrieved, the assessee is before the Tribunal.

The Ld.AR submitted that the additions made by the Assessing Officer are not based on any incriminating material found during the course of search. The disallowance of depreciation is made on an estimated basis but not based on any incriminating material. The disallowance of depreciation is done for the reason that the assessee did not substantiate the usage of the two cars for the purpose of business and disallowed 50% of the depreciation from which it is evident that no incriminating material is found based on which the said disallowance is made. The Ld.AR in this regard relied on the decision of Hon’ble Delhi High Court in case of Pr.CIT vs. Meeta Gutgutia Prop. Ferns ‘N’ Petals reported in [2017] 395 ITR 526 (Del) where it is held that If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of such an issue can be made to the total income in the assessment under sections 153A and 153C of the Act. The Ld.AR also submitted that the SLP filed by department before the Hon’ble Supreme Court against the above order of Hon’ble Delhi High Court has already been dismissed by the Hon’ble Supreme Court reported in (2018) 257 Taxman 441 (SC).

With regard to addition made on the LIC premium paid, the Ld.AR submitted that the assessee had made the payment and claimed the same u/s. 80C in the return of income and the addition is made for the reason that the evidence in support of the claim is in husband’s name. Accordingly, the Ld.AR submitted that the impugned addition is not again based on any incriminating material but is made towards a deduction which is already claimed in the return of income. Accordingly, the Ld.AR prayed for deletion of addition / disallowance made.

The Ld.DR relied on the order of CIT(A).

We have heard the rival submissions and perused the material on record. We notice that in the case law relied on by the ld AR Meeta Gutgutia (supra) it is held that – 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

The ratio laid down in the above decision where the decision of Hon’ble Supreme Court is followed in the case of Kabul Chawla (supra) is that in the case of abated assessments the scope of making additions by the AO is restricted only to income that is not disclosed which is detected or which emanates from material found in the course of search which are incriminating. The assessee has raised the legal contention with respect to additions made