The Nagpur Bench of the Income Tax Appellate Tribunal ( ITAT ) recently laid down a decision affirming the need for conclusive incriminating evidence to abate an Assessment filed by an Assessee.
The matter pertained to the proposed abatement of the Assessment Returns filed by the Appellant in light of the allegations raised by the Assessing Officer ( AO ) that the land sold by the Appellant cannot be exempt under Section 10 of the Income Tax Act, 1961.
The Assessee, an individual, is a director of M/s Unijules Life Sciences Ltd. The Assessee filed his Income Tax Returns for the Assessment Year 2010-11 on 30.09.2011 declaring a total income of Rs.42,89,230/-. Following filing of his Income Tax Returns, the Assessee was served with a Notice under Section 153A of the Income Tax Act, 1961 on 23.06.2014, nearly 3 years after the last date for issuance of notice pertaining to Assessment Year 2010-11.
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The Assessee had claimed an exemption of Rs.2,55,00,000/- under Section 10 of the Income Tax Act on account of sale of Agricultural Land. The amount claimed by the Assessee was refuted by the AO who proceeded to make additions of Rs.82,00,000/- on account of “deemed dividend under Section 2(22)(e)” and an amount of Rs.2,55,00,000/- on account of “short term capital gains on sale of land for the year 2010-11”. The AO based such additions claiming the land to be non-agricultural and unfit for availing exemption under Section 10 of the Income Tax Act.
The Assessee’s appeal was dismissed by the Commissioner of Income Taxes on legality and merits, following which the Assessee appealed before the ITAT. It was extensively argued by the Counsel for the Department that the purchase of the land was recorded in books of accounts of the Assessee as a fixed asset and can by no means be classified as an exempt income under the Act.
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The ITAT Bench made reference to the judgment of the Supreme Court in Abhisar Buildwell Pvt. Ltd. (2023) where it was held that if no incriminating material is unearthed during the search and seizure proceedings, the AO cannot assess or reassess an Assessment without taking into consideration other completedunabated assessments.
The Nagpur Bench of ITAT comprising V. Durga Rao, Judicial Member and K.M. Roy, Accountant Member once again referred to the decisions given by the Supreme Court stating that if addition has been made by the AO in the absence of any incriminating material, then the assessment can only be reopened as per the mechanism laid down under Section 147 of the Income Tax Act. The lack of substantive corroborative evidence paired with the fact that no incriminating evidence had been discovered by the Department at any stage demerits the claim of the Department, irrespective of unabated assessment.
The ITAT in closing allowed the appeal and deleted the additions made by the AO
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