Tribunal rules in favor of assessee, quashing assessment order. Cross Objection allowed, Department's appeal dismissed.

The Tribunal ruled in favor of the assessee, quashing the assessment order due to lack of incriminating material and non-compliance with procedural requirements under the Income Tax Act. The Tribunal allowed the Cross Objection, dismissing the Department's appeal as in fructuous.

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Issues:
- Disallowance of legal and professional expenses
- Allowance of losses on sale of shares
- Validity of transactions relating to sale of shares
- Assessment made without incriminating material
- Jurisdiction under section 153A of the Income Tax Act
- Compliance with section 153C of the Act
- Quashing of assessment and cross objection

Analysis:
1. Disallowance of Legal and Professional Expenses: The Department challenged the deletion of the addition of Rs. 2,78,43,961 made on account of disallowance of legal and professional expenses by the Ld. CIT (A). The Department raised the issue of whether the deletion was justified. The Ld. CIT (A) held in favor of the assessee, allowing the expenses and considering them legitimate.

2. Allowance of Losses on Sale of Shares: The Department contested the allowance of losses amounting to Rs. 7,03,15,125 on the sale of shares of M/s Blue Wing Tours & Travels (P) Ltd. The Ld. CIT (A) deemed the transactions genuine and ruled in favor of the assessee. The Department questioned the authenticity of these transactions.

3. Validity of Transactions Relating to Sale of Shares: The Department raised concerns regarding the authenticity of the transactions involving the sale of shares of M/s Costal Power Projects (P) Ltd. The Ld. CIT (A) upheld the transactions as real and related to the assessee company. The Department challenged this decision.

4. Assessment Made Without Incriminating Material: The assessee contended that the assessment was conducted without any incriminating material found during the search. The Cross Objection filed by the assessee challenged the foundation of the assessment, arguing that it lacked jurisdiction under section 153A of the Income Tax Act.

5. Jurisdiction under Section 153A of the Income Tax Act: The debate centered on the jurisdiction under section 153A of the Act for conducting the assessment. The Ld. AR argued that the assessment was made without any incriminating material found during the search, questioning the validity of the assessment under section 153A.

6. Compliance with Section 153C of the Act: The discussion also revolved around compliance with section 153C of the Act, which deals with material found in the search of a third party. The Tribunal emphasized the necessity of following the correct procedure under the Act when utilizing material found during a search.

7. Quashing of Assessment and Cross Objection: After thorough analysis, the Tribunal concluded that the assessment was invalid as it was conducted without incriminating material and in violation of the procedure provided in the Act. Citing judicial precedents, the Tribunal quashed the assessment order and allowed the Cross Objection of the assessee, thereby dismissing the Department's appeal as in fructuous.

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