2013 (11) TMI 1757 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision: Interest Income as Business Income, No Additions Without Incriminating Evidence.

Deputy Commissioner of Income Tax, Central Circle-XXVI II, Kolkata Versus M/s. Merlin Project Ltd.

The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to treat interest income as business income and allow the deduction under ... Search & seizure operation was conducted - Direction for treating interest income as business income and resultantly allowing deduction under section 80IB - Deduction u/s 80IB allowed in entirety in original assessment - The ld. CIT(Appeals) held that no addition could be made under section 153A where regular assessments have been completed - no incriminating material was found in the course of search & seizure operation - the AO is not competent to disallow the amount of deduction? - HELD THAT - the original assessment in this case was completed under section 143(3) in which deduct ion was allowed in entirety under sect ion 80IB of the Act inter alia on the amount of interest income. It is also undisputed that no incriminating material was found during the course of search casting doubt about the allowability or otherwise of such deduction under sect ion 80IB. This fact has been fairly admitted by ld. D.R. during the course of proceedings before us as well. The Mumbai Bench of the Tribunal in the case of ACIT vs. Pratibha Industries (2013) 141 ITD 151 (Mum.) has held, inter alia, that having done original assessment u/s 143(3), if no incriminating material is found during the course of search, then it is not permissible to make any addition in the assessment under section 153A pursuant to search action. The Special Bench of the Tribunal in the case of All Cargo Global Logistics Limited vs. DCIT (2012) 137 ITD 217 (SB)(Mum.) has also held to the same extent. In view of the foregoing discussion, we are of the considered opinion that no exception can be found to the view taken by CIT(Appeals) for deciding this issue in assessee’s favour. Before parting with this matter, we want to make it clear that our decision is based in the backdrop of the facts that the deduct ion under section 80IB could not have been tinkered with because no incriminating material was found during the course of search on this issue when original assessment granting deduct ion on this issue was completed under sect ion 143(3). We have not expressed any opinion on the merits of the case about the allowability or otherwise of deduct ion under section 80IB on interest income arising in the present facts and circumstances. In the result, the appeal filed by the Revenue stands dismissed. Issues involved: Appeal against order related to treating interest income as business income and allowing deduction under section 80IB.Summary:The appeal by the Revenue pertains to an order by the Commissioner of Income Tax (Appeals) regarding the assessment year 2005-06. The main issue is the treatment of interest income as business income and the consequent allowance of deduction under section 80IB. The original assessment allowed the deduction under section 80IB, and no incriminating material was found during a search operation. The Revenue challenges the decision of the Commissioner of Income Tax (Appeals) in favor of the assessee.In the case, a search and seizure operation was conducted, and the Assessing Officer disallowed the deduction under section 80IB for interest income. However, the Commissioner of Income Tax (Appeals) reversed this decision, stating that since the original assessment was completed under section 143(3) and no incriminating material was found, the Assessing Officer could not disallow the deduction. The Tribunal cited precedents to support the view that if no incriminating material is found during a search after the original assessment, no addition can be made under section 153A.The Tribunal emphasized that since no incriminating material was found during the search, the deduction under section 80IB could not be challenged. The decision was based on this specific circumstance, without expressing an opinion on the overall merits of the case. Ultimately, the appeal filed by the Revenue was dismissed, affirming the decision in favor of the assessee.This judgment highlights the importance of incriminating material in post-assessment proceedings and the limitations on making additions under section 153A in the absence of such material.