Assessee Appeals Partially Allowed: Sales & Tax Credit Upheld, Transfer Pricing Adjustments Dismissed

The Tribunal partly allowed the appeals by the assessee, deleting additions towards unaccounted sales and disallowance u/s.10B for AY 2009-10 to 2013-14. The Tribunal directed the AO to verify and allow the tax credit for AY 2009-10. The grounds related to transfer pricing adjustment for AY 2009-10 to 2011-12 were dismissed with directions, and the grounds related to transfer pricing adjustment for AY 2014-15 and deficit stock for AY 2015-16 were dismissed as not pressed.

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Issues Involved:

1. General Grounds and Interest u/s.234B
2. Validity of the Search
3. Addition towards Unaccounted Sales
4. Disallowance u/s.10B
5. Transfer Pricing Adjustment
6. Deficit Stock
7. Tax Credit

Detailed Analysis:

1. General Grounds and Interest u/s.234B:
The general grounds and the ground on interest u/s.234B are deemed consequential and do not warrant separate adjudication. These grounds are not pressed during the hearing and are dismissed as not pressed.

2. Validity of the Search:
Ground No.4, challenging the validity of the search, was not pressed by the appellant during the hearing and is dismissed as not pressed.

3. Addition towards Unaccounted Sales:
The assessee, engaged in trading marble and granite slabs, faced a search operation under section 132 of the Income Tax Act, 1961. The Assessing Officer (AO) made additions towards unaccounted sales based on a show cause notice issued by the Directorate of Revenue Intelligence (DRI). The Tribunal noted that the additions were not based on any incriminating material found during the search but on the DRI's notice, which was issued post-search. The Tribunal relied on the decision in Yunus Zia v. DCIT and the Hon'ble Karnataka High Court's ruling in Prl.CIT vs. M/S. Delhi International Airport Pvt.Ltd., which stated that additions in unabated assessments must be based on incriminating material found during the search. Consequently, the Tribunal held that the additions towards unaccounted sales for AY 2009-10 to 2013-14 were not sustainable and deleted them.

For AY 2014-15 and 2015-16, the Tribunal found that the AO made additions towards unaccounted sales based on the DRI's show cause notice without any incriminating material found during the search. The Tribunal emphasized that the AO should have followed the procedure under section 132A to requisition the material from DRI, which was not done. Therefore, the additions were not sustainable and were deleted.

4. Disallowance u/s.10B:
The AO disallowed the deduction claimed under section 10B on the grounds that the assessee failed to substantiate the claim with documentary evidence and that the export sales included internet transfers and sales against EPCG license holders. The Tribunal noted that the disallowance was not based on any incriminating material found during the search and, following the same reasoning as for the unaccounted sales, deleted the disallowance for AY 2009-10 to 2013-14.

5. Transfer Pricing Adjustment:
For AY 2009-10 to 2011-12, the assessee raised grounds related to transfer pricing adjustments made during regular assessments. The Tribunal dismissed these grounds, directing the AO to give effect to the orders passed by appellate authorities in the original assessment proceedings.

For AY 2014-15, the ground related to transfer pricing adjustment on interest on delayed receivables was not pressed by the appellant and was dismissed as not pressed.

6. Deficit Stock:
For AY 2015-16, the ground related to the addition towards the difference in stock between books of accounts and physical stock was not pressed by the appellant and was dismissed as not pressed.

7. Tax Credit:
For AY 2009-10, the assessee raised a ground contending the tax credit of Rs.22,23,680 paid during regular assessment. The Tribunal directed the AO to verify and allow the tax credit accordingly.

Conclusion:
The appeals by the assessee were partly allowed, with the Tribunal deleting the additions towards unaccounted sales and disallowance u/s.10B for AY 2009-10 to 2013-14, and directing the AO to verify and allow the tax credit for AY 2009-10. The grounds related to transfer pricing adjustment for AY 2009-10 to 2011-12 were dismissed with directions, and the grounds related to transfer pricing adjustment for AY 2014-15 and deficit stock for AY 2015-16 were dismissed as not pressed.

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