2019 (9) TMI 656 - AT - Income Tax

Tribunal rules in favor of assessee, disallows section 40A(3) disallowances, and directs interest re-computation.

The Asst. Commissioner of Income Tax, Central Circle 1 (1), Pune Versus M/s. A.P. Builders And (Vice-Versa)

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal as withdrawn. Disallowances under section 40A(3) were deleted, the ... Block assessment proceeding u/s 158BC(c) - Disallowance u/s 40A(3) - HELD THAT:- Answer to the question whether any disallowance can be made u/s 40A(3) while passing the block assessment order ? is no. The addition which needs to be made u/s 158BC (c) of the Act is the addition on the basis of the documents found during the course of search. Where this was the position as far as Section 158BC(c) assessment was considered and the provisions of Section 40A(3) of the Act are outside the ambit of block assessment, which is the proposition laid down by Pune Bench of the Tribunal in the case of ACIT Vs. Rushiraj Builders [2012 (2) TMI 686 - ITAT PUNE] . Applying the said proposition to the facts of the case, we hold that there is no merit in making the aforesaid disallowance u/s 40A(3) - decided in favour of assessee Unexplained investment during block period - as per assessee once the addition has been made in one of the hands, then there is no question of making same addition in the hands of the partnership firm - HELD THAT:- In facts and circumstances, when both the partners of the partnership firm were of 20 years of age and were still studying, then and also where the investment has been admitted to have been made by Shri Subash G. Pingale, there is no question of rejecting the plea of the assessee in this regard. Accordingly, we reverse the orders of the authorities below and hold that once the addition has been made in the hands of Shri Subash G. Pingale, may be, the block assessment was not upheld on technical grounds, but where the partners were minors and were studying and had no source of income, then no addition is warranted in the hands of the partnership firm. Charge of interest u/s 158 BFA(1) - whether the said interest levied for filing the return late for the block period is to be upheld or not ? - HELD THAT:- As plea of the assessee before us is that the delay was on the ground that Assessing Officer had not provided the photo copies of the documents. The learned Authorised Representative has pointed out that the issue stands covered by the order of the Pune Bench of the Tribunal in the case of ACIT Vs. Mr. Amod Subhash Pingale [2016 (7) TMI 1542 - ITAT PUNE] . The said paras are being referred to but are not being reproduced for the sake of brevity. In its order the Tribunal has already decided the said issue and remitted the matter back to the file of AO. In view of the same and following the same parity of reasoning, we direct the AO to follow our directions in this regard and re-compute the interest, if any, leviable. Charging of surcharge - HELD THAT:- Search was for the period prior to 01.06.2002 and no surcharge is to be levied in such cases. Such is the proposition laid down by Tribunal in the case of Mr. Amod Subhash Pingale [2016 (7) TMI 1542 - ITAT PUNE] and following the same, we hold that no surcharge is leviable. Issues:Cross appeals by Revenue and assessee against CIT(A) order for block assessment period under section 158BC(c) of the Income-tax Act, 1961.Analysis:Issue 1: Disallowance u/s 40A(3) of the Act- Revenue raised grounds challenging acceptance of cash flow statement by CIT(A).- Departmental Representative withdrew Revenue's appeal, dismissed as withdrawn.- Assessee challenged disallowance made u/s 40A(3) for AY 1996-97 and 1997-98.- Tribunal held disallowance u/s 40A(3) not applicable in block assessment, deleted the disallowance amounts.Issue 2: Unexplained investment in land- Assessee contested unexplained investment of Rs. 55,52,500 for land purchase at Katraj.- Tribunal noted cash payments made for land purchase, disputed by Assessing Officer.- Assessee argued funds provided by another individual, not liable for addition.- Tribunal found no merit in addition, reversed lower authorities' decisions, held no addition warranted.Issue 3: Interest charge u/s 158 BFA(1)- Dispute over interest levied for late filing of block period return.- Assessee claimed delay due to non-provision of documents by Assessing Officer.- Tribunal referred to previous case, directed AO to re-compute interest leviable.Issue 4: Surcharge levy- Challenge against surcharge levy for period before 01.06.2002.- Tribunal followed precedent, held no surcharge applicable in such cases.Additional Grounds:- Assessee raised additional grounds regarding undisclosed income, not pressed, dismissed.- Revenue appeal withdrawn by Department, dismissed as withdrawn.Conclusion:- Assessee's appeal allowed, Revenue's appeal dismissed as withdrawn.- Disallowances under 40A(3) deleted, unexplained investment not upheld, interest re-computation directed, no surcharge levied.