2019 (2) TMI 1812 - AT - Income Tax

Tribunal Upholds Decisions on Revenue and Assessee Appeals

The Tribunal upheld the CIT(A)'s decisions, dismissing the Revenue's appeals and allowing the assessee's appeals. It emphasized that additions cannot ... Assessment u/s 153A - HELD THAT: The controversy involved in the present case stands concluded saying that while it cannot be disputed that considering section 153A, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. See KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT] Issues Involved:1. Deletion of disallowance under section 40A(3) of the Income Tax Act, 1961.2. Deletion of addition made under section 68 of the Act.3. Deletion of additions made under section 14A of the Act r.w. Rule 8D.4. Deletion of addition made under section 41(1) of the Act.5. Validity of proceedings under section 153A of the Act.6. Addition towards bad debts/business loss.7. Disallowance of interest expenses.8. Disallowance of carry forward loss.9. Addition of remuneration and professional fees.Detailed Analysis:1. Deletion of Disallowance under Section 40A(3):The common ground raised in the first three grounds of appeals is that the CIT(A) erred in deleting disallowance under section 40A(3) made by the AO in assessment framed under section 143(3) r.w.s. 153A. The AO noticed that the assessee made cash payments in violation of section 40A(3). The assessee argued that payments were made in cash due to business expediency as the sellers were farmers without bank accounts. The AO rejected this explanation and added the amount to the total income. The CIT(A), however, deleted the disallowance.2. Deletion of Addition Made under Section 68:For the Asstt.Years 2008-09 and 2009-10, the Revenue challenged the deletion of addition made under section 68 for unsecured loans. The AO added the amounts on the ground that the identity and creditworthiness of the depositors were not proven. The CIT(A) deleted these additions.3. Deletion of Additions Made under Section 14A r.w. Rule 8D:The AO made additions under section 14A r.w. Rule 8D for the Asstt.Years 2008-09 and 2009-10, arguing that the assessee had investments forming part of exempt income. The assessee claimed no expenditure was incurred to earn this income, but the AO applied Rule 8D to make the addition. The CIT(A) deleted these additions.4. Deletion of Addition Made under Section 41(1):For the Asstt.Years 2007-08 and 2010-11, the Revenue contested the deletion of additions made under section 41(1). The AO made these additions on the ground that the assessee did not furnish material to substantiate their claims. The CIT(A) deleted these additions.5. Validity of Proceedings under Section 153A:The assessee challenged the validity of proceedings under section 153A, arguing that no incriminating material was found during the search to justify the additions. The CIT(A) agreed, citing the judgment in Pr.CIT Vs. Saumya Construction, which held that additions under section 153A could only be made based on incriminating material found during the search.6. Addition Towards Bad Debts/Business Loss:The AO disallowed bad debts claimed by the assessee, amounting to Rs. 46,49,227/-, on the ground that no details were provided for verification. The CIT(A) confirmed this addition. The assessee argued that these were expenses incurred during business operations and were unrecoverable, thus written off as bad debts.7. Disallowance of Interest Expenses:The AO noticed that the assessee claimed interest expenditure on unsecured loans used for paying income tax dues. The assessee denied using borrowed funds for this purpose and argued that no incriminating material was found during the search to justify the disallowance. The AO made the disallowance, which the CIT(A) upheld.8. Disallowance of Carry Forward Loss:In the Asstt.Year 2008-09, the assessee raised the issue of disallowance of carry forward loss of Rs. 34,38,408/-. The AO made this disallowance, which the CIT(A) upheld.9. Addition of Remuneration and Professional Fees:For the Asstt.Year 2009-10, the assessee contested the addition of remuneration of Rs. 64,575/- and for the Asstt.Year 2012-13, the addition of professional fees of Rs. 1,00,000/-. The AO made these additions, which the CIT(A) upheld.Conclusion:The Tribunal confirmed the CIT(A)'s decisions on all issues, rejecting the Revenue's grounds of appeal and allowing the assessee's appeals. The Tribunal emphasized that no additions could be sustained without incriminating material found during the search, aligning with the legal position established in various judicial precedents. All appeals of the Revenue were dismissed, and those of the assessees were allowed.