Point of Law: Once proceeding u/s 153A of Act are initiated, which are special proceedings, legislature in its wisdom bifurcates differential treatment for abated assessment and unabated assessment.

JUDGMENT :

S.P. Khaund, J

1. Heard Mr. S. Chetia, learned Senior Standing Counsel, Income Tax Department and Mr. G.N. Sahewalla, learned Senior Counsel for the respondent assisted by learned counsel Mr. M. Sahewalla.

2. This is an appeal u/s 260A of Income Tax Act, 1961 (the I.T. Act for short) against the order dated 14.11.2018 passed by the Income Tax Appellate Tribunal ‘E’ Court, Kolkata/Guwahati (ITAT for short) in ITA No. 07/Gau/2017 for the assessment year 2011-12. The appellant is the Principal Commissioner of Income Tax Department, Jorhat and the respondent is the assessee under the jurisdiction of the Assistant Commissioner of Income Tax, Circle Dimapur, Nagaland.

3. The substantial questions of law framed in this case are :-

“(i) Whether the Hon’ble ITAT, Guwahati was justified in deleting the disallowances of Rs. 15,46,46,174/-u/s 40(a)(ia) of the I.T. Act, by holding that processing u/s 143(I) is an assessment which is concluded and unabated which cannot be disturbed in the absence of incriminating material found in the course of search.

(ii) Whether the Hon’ble ITAT was justified in holding that the inference drawn from the ledger and books of accounts found during the course of search and statement recorded during search do not constitute incriminating material for addition u/s 40(a)(ia) for Rs. 15,46,46,174/-during assessment/s 153A r/w 143(3).

(iii) Whether the Hon’ble ITAT was justified in holding that the facts of the present case where inference was drawn from the ledger/books of accounts found during the course was similar to the facts in the case of CIT Vs. Kabul Chawla 380 ITR 573(Del) where addition was made u/s 2(22)(e) of the I.T. Act, 1961 and admittedly no incriminating material was found during the search?”

4. The genesis of the case was that, there was a search and seizure operation u/s 132 of the I.T. Act in the case of the respondent Shyama Power Group India Ltd. from 25.02.2014 upto 18.03.2014. The respondent/assessee had already filed its original return of income for the Assessment Year 2011-2012 in time and time limit for issuance of notice u/s 143(2) of the Act for the Assessment Year 2011-12 had expired on the date of search. Hence the date of search of the said assessment year falls under the category of unabated assessment. It is submitted on behalf of the Appellant that during the course of search, the ledger account of sub-contractor expenditure which is also a part of the regular Books of Accounts was found and examined by the search team. Upon analysis of the Ledger Account, the Investigation Wing found entry pertaining to an account of M/s Meitei Electricals Motor Works (hereinafter referred as M/s Meitei) in the books of the assessee for the financial year 2007-08 to 2013-14 showing total credit of Rs. 19,59,14,860/-. The respondent had paid M/s Meitei Rs. 6,37,71,766/-and the balance amount of Rs. 13,21,43,094/-was outstanding as on 31.03.2014. During the course of search and investigation, it was found that the assessee failed to deduct tax at source in respect of the amount which remained outstanding as on 31.03.2014. The credit balance of Rs. 13,21,43,094/-in the account of M/s Meitei in the books of the assessee represented the credit but the same was not paid. As per Section 194C of the I.T. Act, tax is to be deducted at the time of credit of any sum to the account of the sub-contractor or at the time of payment of any sum to a sub-contractor (M/s. Meitei in this case). The amount had already been credited by the respondent in the account of M/s Meitei and the same had been claimed as expenditure in the relevant years. Notice u/s 153A was issued to the assessee to show-cause as to why the amount which was credited in the account of M/s Meitei should not be disallowed u/s 40(a)(ia) of the Act of 1961.

5. The respondent submitted a reply vide letter dated 24.08.2018 stating interaliathat a reference was given regarding the Ledger Account, which is a part of the regular Books of Accounts