AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 1290
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....as an employee of the Kanakia Group (Kanakia Management Services) and was deriving income from salary, other sources, etc. During the year, the assessee was also a partner in a firm, viz. M/s. D.V. Corporation. He filed his return of income originally on 31/08/2006, declaring income of Rs. 2,50,444/-. Later, a search and seizure action u/s 132(1) of the Act was carried out on Kanakia Group of companies on 29/3/2011, during the course of which residential premises of the assessee were also covered. Subsequently, a notice u/s 153A of the Act was issued to the assessee on 4/1/2012. In response, the assessee filed a return of income on 31/1/2012, declaring total income of Rs. 2,50,804/- (almost the same income which was disclosed in the original return of income). Thereafter, statutory notices u/s 143(2) and 142(1) of the Act were issued on 9/7/2012 and 10/7/2012, followed by a questionnaire dated 30/1/2013, calling for various details and clarifications. In due consideration to the facts of the case, the AO disallowed assessee's claim of deduction for business expenses to the tune of Rs. 1,82,715/- and interest paid on loan of Rs. 1,94,749/- by holding that these expenses were of pers....
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....of law and no new facts are required to be brought on record. It is, therefore, humbly prayed that the additional rounds of appeal may kindly be admitted and adjudicated by Your Honours. In this regard, we rely upon the following decisions rendered by various courts. i. National Thermal Power Corporation v. CIT [229 ITR 383 (SC)] ii. Jute Corporation of India Ltd. v. CIT [187 ITR 688 (SC)] iii. Ahmedabad Electricity Co. Ltd. v. CIT [199 ITR 351 (Bom)(FB)]" 4.2 We have heard counsel for both the parties on application for raising additional grounds and considering the fact that the ground raised through the present application is purely legal in nature and no new evidence is required to be brought on record in deciding the pure question of law. Therefore considering the settled ratio laid down in the afore mentioned judgements we allow the assessee to file/raise additional grounds of appeal. "1 The learned CIT (A) erred in law and on facts in holding that the Assessing Officer had a jurisdiction to make additions in the order passed u/s 153A r.w.s. 143(3) of the Act even though the said additions were not based on any incriminating material fou....
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....question of law was involved in the case of Kanakia Group of Companies. Search on whose premises was conducted by the investigating unit Mumbai on 09.03.2011 and at that time the assessee was employee of Kanakia Group Companies (Kanakia Management Services) and regarding that search and subsequent additions were challenged before ITAT and the Hon'ble ITAT in ITA No. 3192 to 3196/Mum/2014 had already decided this issue in favour of respective assessee's vide order dated 10.02.2016 6.2 Before we decide the merits of the case it is necessary to evaluate the orders passed by the Hon'ble ITAT, the operative para of Hon'ble ITAT dated 10.09.2009 in ITA No. 3192 to 3196/Mum/2014 are reproduced below "We have considered the rival contention and also perused the material available on record. We find that the issue in this appeal is squarely covered by the decision vide orders dated 18-01-2016 of the Mumbai Tribunal in ITA No's. 31873189/Mum/2014, in which one of us (Accountant Member) was member of the Division Bench who adjudicated the afore-stated appeal's whereby Revenue appeal's were dismissed, which is reproduced below : "These three appeals by the Reve....
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.... Based upon the search and post search enquiries, the assessee made disclosure of Rs. 49,750/- as sale of scrap. 6. Notice u/s 153A of the Act was issued to the assessee on 04. 01.2012 and in response thereof the assessee filed his return of income on 31.01.2012 declaring a total income of Rs. 14,74,33,828/-. Notices dated 11-7-2012 u/s 143(2) and 142(1) of the Act were issued to the assessee and served upon the assessee. During the course of the assessment proceedings u/s 153A of the Act, the assessee replied the relevance of the seized material. The learned assessing officer(Hereinafter called "the AO") observed that the assessee has earned interest income of Rs. 99,01,472/- and claimed interest expenses of Rs. 96,24.943/- against the same. The break up is as under- Name of the party Interest (Rs.) Amount (Rs.) INTEREST EARNED Kanakia Constructions Pvt. Ltd 5805208 Kanakia Hospitality Pvt. Ltd. 1833985 Supreme Real Estate Developers P. Ltd. 2262279 99,01,472 INTEREST PAID Babubhai M. Kanakia 1395443 Evergreen Financial Services 8139500 M J Ch....
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....as received interest of Rs. 99,01,472/- on the average value of loans given during the year Rs. 8,25,12,267/- as against, the assesse has paid interest of Rs. 95,34,933/- (excluding the interest of Rs. 90,000/- paid to Shri M.J. Chotani as discussed above) on average value of loan received during the year of Rs. 11,43,43,933/- (excluding the loan. of Rs. 5,00,000/- received from Shri M.J. Chotani). The assesse has paid excess interest Rs, 38,19,800/- (@ 12% on the excess average value of loans given ofRs.3,18,31,666/-). Keeping in view of the facts of the case, the interest of Rs. 38,19,800/- is disallowed out of interest paid." Copy of the order is enclosed for reference. As it is evident from the above, the claim of interest paid of Rs. 57, 15, 143/- was allowed to the assesse after disallowing sum of Rs. 39,09,800/- considering facts of the case. On the basis of the same, in the return filed u/s. 153 A, assessee had already disallowed sum of Rs. 39,09,800/- out of total interest paid of Rs. 96,24,943/-. Thus, claim of interest expense needs to be allowed to the assesse. Moreover, without prejudice to the above, We have to submit that ....
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....2.2009. The assessee vide letter dated 25-3-2013 has submitted that similar issue was considered while passing the order dated 31.12.2009 u/» 153A of the Act which was passed with the approval of Addl. CIT, Central Range -7, Mumbai. The assessee has also relied upon the decision of Special Bench decision of ITAT in the case of All Cargo Global Logistics Ltd. v. DCIT (2012) 23 taxmann.com 103 (Mum)[SB] and the relevant extracts of the decision are as under:- In case of assessments which do not abate pursuant to issue of notice under section 153A in addition to income that has already been assessed, assessment will be made on basis of incriminating material found it1 course of search but not produced in course of original assessment and undisclosed income or property discovered in course of search. " Thus, the assessee contended in nutshell that once the assessment has already been finalized earlier after due deliberation on the same issue and that no incriminating material has been found during the course of search on the same issue, additions cannot be made by the A 0. The A 0. however, rejected the contentions of the assessee by holding that in case notice ....
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....sedes the Special Bench decision dated 06-07-2012 in the case of All Cargo Global Logistics (supra). The AO held that the total income can be assessed de-novo of the assessee based upon sound reasoning and a well reasoned order, on any issue, hence, the alternative contention of the assessee is rejected and interest income is assessed at Rs. 99,01,472/- and claim of deduction of interest of Rs. 96,24, 943/- against interest income was disallowed vide assessment order dated 28-03-2013 passed u/s 143(3) of the Act read with Section 153A of the Act. 7. Aggrieved by the assessment orders dated 28-03-2013 passed by the A. O. u/s 143(3) of the Act read with Section 153A of the Act , the assessee preferred an first appeal before the CIT(A). 8. Before the CIT(A), the assessee submitted that the A.O. erred in disallowing the assessee's claim of deduction of Rs. 47,22,282/- towards interest paid on loans while the A.O. taxed the entire interest income of Rs. 99,01,472/- on the ground that there was no direct correlation between the loan taken and loan advanced. The assessee submitted that the assessee voluntarily disallowed interest of Rs. 39,09,800/- which included an ....
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....ibres & Chemicals Ltd. v. CIT - 273 ITR 353 (Cal.) (v) CIT, West Bengal-3 v. Rajan Prasad Moody - 115 ITR 516 (vi) CIT v. Sujani Textile Pvt. Ltd. - 151 ITR 653 (vii) CIT v. Amritaben Shah - 238 ITR 777 (Del.) (viii) CIT v. Neo Poly Pack Pvt. Ltd. - 245 ITR 492 (ix) Parshuram Pottery Works Co. Ltd. v. ITO - 106 ITR 1 (SC)" Thus, the assessee contended that the addition of Rs. 47,22,282/- made by the AO to the income of the assessee needs to be deleted on account of consistency as no new material fact has come on record. The CIT(A) after considering the facts of the case and submission of the assessee and the orders of the A.O. observed that the earlier search and seizure action u/s 132(1) of the Act was carried out in the year 2007 on 19.07.2007 and subsequently the assessment order u/s 153A read with section 143(3) of the Act was passed on 31-12-2009 for the assessment years 2005-06 to 2008-09 , wherein no disallowance of interest paid on loan taken was made under identical circumstances and the assessee's claim towards payment of interest on funds borrowed was allowed as expenditure u/s 57(ifi) of the Act and the ....
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....t on average investment in shares amounting to Rs. 5, 13,43,681/- , dividend income from which has been claimed as exempted income. The total disallowance of interest of Rs. 49,02,661/- which has been voluntarily disallowed by the assessee appears to be fair and reasonable. The CIT(A) on perusal of Bank statement of the assessee gave categorical finding that there is strong direct corelation between loan given and taken. The CIT(A) observed that the AO has not doubted the genuineness of loan taken and loan given. Thus, as per CIT(A) addition of Rs. 47,22,282/- is unsustainable and unjustified and directed the A.O. to delete the same vide orders dated 18.02.2014. 9. Aggrieved by the orders of the CIT(A) dated 18.02.2014, the Revenue is in appeal before the Tribunal. 10. The ld. D.R. relied upon the order of the A.D. and contended that the A.O. has rightly disallowed the expenses of Rs. 47,22,282/- as per the well reasoned order passed by the A. O. 11. The ld. Counsel for the assessee submitted that there are two search and seizure action u/» 132(1) of the Act conducted in the case of the assessee, one in the year 2007 on 19.07.2007 and another on 29-....
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....ue on 29-3-2011 related to the claim of deduction of interest expenditure of Rs. 47, 22, 282/- on the loans borrowed against the interest income of Rs. 99,01,472/- earned by the assessee on the loans advanced. We have also observed that the assessments u/s 153A of the Act pursuant to first search on 19.07.2007 have been concluded for the assessment year 2007-08 on 31.12.2009 which is prior to the date of second search conducted by Revenue on 29-03- 2011 and hence in our considered view, no addition can be made with respect to the claim of deduction of interest expenditure of Rs. 47,22,282/- payable on loans borrowed by the assessee against the interest income from the loans advanced by the assessee company on the same set of material facts as existing while framing assessments u/s 153A read with Section 143(3) of the Act on 31.12.2009, in the absence of any incriminating material found during the course of second search on 29-03-2009. The decision in the case of All Cargo Global Logistics Ltd. (supra) relied upon by the assessee is squarely applicable to this case that In case of assessments which do not abate pursuant to issue of notice under section 153A, in addition to income th....
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....sclosed or made known in course of original assessment and undisclosed income or property discovered in course of search , while in the instant appeal the AO has in the assessments framed vide orders dated 31.12.2009 u/s. 153A read with Section 143(3) of the Act in pursuance to the first search on 19.07.2007 has duly examined and allowed the claim of the assessee for deduction of interest of Rs. 47,22,282/- being interest paid on loan borrowed against the interest income earned on loans advanced by the assessee and no new incriminating material has been found or unearthed during the course of second search on 29-03-2011. The relevant extract of the assessment orders u/s 153A of the Act dated 31.12.2009 in pursuance of first search u/s 132(1) of the Act on 19.07.2007, are as under: I have considered the submission of the assesse and the facts and circumstances of the case. The assesse has paid interest of Rs. 90, 000/- to Shri M J Chotani on a loan of Rs. 5,00,000/- @ 18%. The interest paid to Shri M.J. Chotani was disallowed for the reasons discussed in earlier assessment years. There is no difference in the facts of the case. Accordingly, interest of Rs. 90,000/- paid to ....