Assessee, Sri Lakshmi Venkateshwara Minerals, was is a partnership firm. The business of the firm was trading in iron ore. There was a search & seizure action conducted on 25-11-2010 in the case of K. Mahesh Kumar, who was one of the partners of assessee firm. Proceedings consequent to search was initiated u/s. 153C of the Act. The AO of the assessee partnership firm and the AO of K. Mahesh Kumar who was subjected to search, was one and the same. During assessment proceedings the assessee could not participate in the proceedings and therefore the AO proceeded to frame the assessment in the absence of proper details from the assessee. The AO made a disallowance of 20% of the expenses claimed in the P&L account for the reason that the details of expenses were not furnished by the assessee during assessment proceedings. AO also noticed that for AY 2008-09 there was a difference in total credit in the books of account and gross receipts from business of Rs. 71,02,418 which was treated as unexplained business receipts and added to total income of assessee. This addition was, however, made on a protective basis. Similar additions were made in AYs 2009-10 and 2010-11 also. Aggrieved the assessee preferred appeals before the CIT(Appeals). The CIT(Appeals) upheld the disallowance of expenses. As far as protective addition CIT(A) deleted the addition as it was confirmed in the hands of K. Mahesh Kumar on substantive basis.

The Tribunal held that the assessment in all the three AYs 2008-09 to 2010-11 have already been completed prior to the date of search in the sense that the return filed by the Assessee was accepted and no assessment u/s.143(3) of the Act was framed within the time contemplated in law. Therefore, the scope of making assessment of total income u/s.153C of the Act in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of some other person and which relate to the Assessee. Since the impugned addition of disallowance of expenses were not based on any incriminating material found during search, the additions are liable to be deleted. As far as the addition made on protective basis for AY 2008-09 to 2010-11 were concerned, the Tribunal held that the said addition was made not on the basis of any incriminating material found in the search of K. Mahesh Kumar which relate to the Assessee and therefore the said addition can also not be sustained as it is contrary to the provisions of Sec.153C of the Act. There was no basis for protectively assessing the income in the hands of the Assessee and substantively in the hands of K. Mahesh Kumar. There was no material to show that the income declared by K. Mahesh Kumar was either his income or that of the Assessee. From the fact that K. Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K. Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. Tribunal observed that even going by the theory of the AO that there are differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K. Mahesh Kumar. (IT Nos. 1789 to 1791 & 1813 to 1818/Bang/2017; dt.30-09-2020) (AY .2008-09 to 2010-11)