2022 (5) TMI 851 - AT - Income Tax

Tribunal Upholds Tax Dispute Decisions, Dismisses Appellant's Challenges on Search, Jurisdiction, and Deductions

M/s Flex Art Foil Ltd. Versus DCIT, Central Circle-4 (2), Nariman Point

M/s Flex Art Foil Ltd. Versus DCIT, Central Circle-4 (2), Nariman Point - TMI Issues:1. Validity of search and seizure action2. Jurisdiction of Assessing Officer in completing assessment3. Disallowance of interest under section 36(1)(iii)4. Addition under section 69C for alleged commission paid5. Disallowance of deduction under section 80ICIssue 1: Validity of search and seizure actionThe appellant challenged the initiation of search and seizure action by the investigation wing, claiming it was without evidence or material information and lacked the satisfaction required under section 132(1) of the Income Tax Act. The Tribunal found that during the search action, incriminating evidence was discovered, including bogus entries related to capital assets and raw material purchases. The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's grounds as the evidence clearly demonstrated the appellant's involvement in availing accommodation entries.Issue 2: Jurisdiction of Assessing OfficerThe appellant contested the completion of assessment under section 143(3) r.w.s 153A, arguing that no incriminating documents were found during the search at their premises. However, the assessing officer disallowed interest expenditure claimed for acquiring bogus capital assets, as the appellant failed to provide details of the funds used for such acquisitions. The Tribunal upheld the CIT(A)'s decision, stating that the appellant could not prove otherwise and hence dismissed this ground of appeal.Issue 3: Disallowance of interest under section 36(1)(iii)The assessing officer disallowed interest expenditure of Rs.17,51,188 claimed by the appellant for acquiring bogus capital assets. Despite opportunities, the appellant did not provide details of the loan funds utilized for these assets. The Tribunal found that the CIT(A)'s detailed findings supported the disallowance, as the interest expenditure was related to bogus assets and the appellant failed to substantiate their claim, leading to the dismissal of this ground of appeal.Issue 4: Addition under section 69C for alleged commission paidThe appellant claimed commission payment to a broker for arranging accommodation entries. The assessing officer added Rs.74,495 under section 69C as estimated commission paid for availing such entries. The Tribunal noted that during the search action, it was revealed that the appellant obtained accommodation entries without actual movement of goods and issued cheques to bogus concerns. The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's appeal on this ground.Issue 5: Disallowance of deduction under section 80ICThe assessing officer disallowed a deduction claimed under section 80IC related to excise refund as other income. Following judicial precedents, the CIT(A) rejected the claim based on the Supreme Court decision in Sterling Food Limited case. The Tribunal found no error in the CIT(A)'s decision, leading to the dismissal of this ground of appeal.In conclusion, the Tribunal dismissed all grounds of appeal raised by the appellant across multiple issues, upholding the decisions made by the CIT(A) and the assessing officer based on the evidence and findings presented during the proceedings.