2021 (9) TMI 1471 - AT - Income Tax

ITAT allows appeal for 2013-14, rejects appeal for 2015-16 due to disallowed expenses.

M/s. TMR Projects Ltd. Versus ACIT, Central Circle 13, New Delhi.

M/s. TMR Projects Ltd. Versus ACIT, Central Circle 13, New Delhi. - TMI Issues:1. Validity of assessment under section 153A for Assessment Year 2013-142. Disallowance of expenses for running the business for Assessment Year 2013-143. Disallowance of expenses for running the business for Assessment Year 2015-16Issue 1: Validity of assessment under section 153A for Assessment Year 2013-14:- The assessee challenged the assessment under section 153A for AY 2013-14, contending that it was a concluded assessment and no incriminating material was found during the search.- The search was conducted on a group of cases, including the assessee, and incriminating papers were seized. The assessment was framed under section 153A, resulting in an addition to the income.- The CIT(A) confirmed the addition but reduced the commission income rate from 1% to 0.5%. The assessee argued that no incriminating material was found, and the addition should be deleted.- The ITAT held that the assessment for AY 2013-14 was concluded before the search, and no incriminating material was used for the addition. Citing the decision in CIT Vs. Kabul Chawla, the ITAT directed the AO to delete the addition made without any incriminating evidence.Issue 2: Disallowance of expenses for running the business for Assessment Year 2013-14:- The assessee contested the disallowance of expenses for running the business in AY 2013-14, arguing that the expenses were duly recorded and necessary for business purposes.- The CIT(A) upheld the disallowance, stating that no regular books of account were available during the search, and the director claimed the company was not operational.- The ITAT found that the disallowance was not based on incriminating material and that the absence of books during the search could not justify the addition. The ITAT directed the AO to delete the addition for AY 2013-14.Issue 3: Disallowance of expenses for running the business for Assessment Year 2015-16:- The assessee challenged the disallowance of expenses for running the business in AY 2015-16, arguing that the expenses were necessary for conducting the business.- The CIT(A) reduced the net profit rate from 1% to 0.5% but upheld the disallowance of expenses. The assessee claimed that the expenses should be allowed as deduction.- The ITAT observed that the income was determined by rejecting the books of accounts and calculating profit based on bogus sales. The ITAT upheld the disallowance, stating that no additional expenses could be allowed when the net profit was already determined.- Consequently, the appeal for AY 2015-16 was dismissed.In conclusion, the ITAT allowed the appeal for Assessment Year 2013-14, directing the deletion of additions made without incriminating evidence. However, the appeal for Assessment Year 2015-16 was dismissed as the disallowance of expenses was upheld based on the determination of net profit from rejected books of accounts.