TaxTMI 
TaxTMI 
2019 (12) TMI 682
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....ant was erroneous and prejudicial to the interest of revenue and thereby setting aside the said assessment order by invoking the provisions of section 263 of the Income Tax Act 1961. 3. For that on the facts and in the circumstances of the case, the learned Principal Commissioner of Income Tax erred in holding that the AO did not make any enquiry regarding assessment of allowability of interest paid to bank against income computed under the head 'income from house property'. Such finding of the learned Principal Commissioner of Income Tax was perverse and therefore the order passed u/s.263 of the Income Tax Act, 1961 is based on wrong appreciation of facts of the case and hence bad in law. 4. Without prejudice to the above the learned AO could not have entered into the issue of allowability of interest in the assessment order passed u/s. 153A /143(3) of the Income Tax Act, 1961 in absence of any incriminating material found in the course of search. Hence the order passed u/s. 263 of the Income Tax Act, 1961 was bad in law and deserves to be quashed. 5. Without prejudice to the above, the view of the learned AO with respect to allowing the interest against house pro....
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.... 01.04.2010 and Closing Balance of secured loan from State Bank of India of Rs. 22,83,97,247/- as on 31.03.2011. Further, it has been shown that there is balance of Capital Work in Progress of Rs. 32,47,46,813/- at the beginning of the year and Rs. 16,11,87,956/- at the end of the year. It has also been found from Para-VI of accounting policies and notes on accounts that capital work in progress was for Panvel Project and in Part-VII, it was stated that secured loan was taken for Panvel Project. In view of above details of loan outstanding and work in progress shown in the balance sheet and the interest expenditure debited by the assessee company in the Profit & Loss account after disallowance of Rs. 38,38,448/- u/s 14A, the balance amount of interest of Rs. 3,51,12,845/- was found to be incurred for Capital work in progress (Panvel Project) and hence, the interest expenses incurred for capital investment was required to be capitalized being capital expenditure and required to be disallowed and added back to the total income in view of proviso to section 36(1)(iii). However, the A.O has allowed the above interest amount to M/s JKS Infrastructures Pvt. Ltd u/s 24(b) without examin....
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....is issue was examined by the A.O during assessment proceeding but no such query raised by the A.O on allowability of interest and details of examination of interest paid on loans utilized for construction of go-down in Panvel Project, has been found. Therefore, it is clearly found form the record that issue of allowability of interest paid to bank against the income completed under the head "Income from House Property" was not examined. It was not examined as to what part of interest pertain to the part of the Panvel Project that was given on rent after being completed. In the written submission, it is stated that total interest paid for the year for Panvel Project was Rs. 3,89,51,332/- out of which Rs. 3,89,51,332/- was paid for the part of the Panvel Project which was completed and in operation. It has been further explained that Panvel Project was being developed in various phases and interest debited and claimed as deduction in Income Tax return is related only to the phase that is completed. There is inherent contradiction in the above explanation of the assessee. If total interest for the year for Panvel Project was Rs. 3,89,51,332/- and Panvel Project was still not completed....
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....uld be treated as business income. However, the AO rejected the contention of the assessee and treated the income from commercial go-down under the head "Income from house property". Therefore, AO has examined the issue relating to income from commercial godown and then took a possible view, hence order passed by AO u/s 153A/143(3) of the Act, dated 31.03.2016 is not erroneous. Apart from this, the ld. Counsel also pointed out that in assessee`s case a search and seizure operation was conducted under section 132 of the Income Tax Act on 13.03.2014. The assessee`s case for assessment year 2011-12 was not pending at the time of search and seizure and there was no incriminating material unearthed during the search proceedings. Therefore, in case of unabated assessment the addition should not be made without any incriminating material. Hence, the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue. 8. On the other hand, the ld. DR has primarily reiterated the stand taken by the ld PCIT which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 9. We heard both the parties and ca....
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....e possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". 10.Taking note of the aforesaid dictum of law laid down by the Hon'ble Apex Court, let us examine whether order passed by the AO under section 153A/143(3) of the Act, dated 31.03.2016 is erroneous. We note that the assessee filed its return of income u/s 139(1) on 30.09.2011. The time limit for issue of scrutiny notice u/s 143(2) expired on 30.09.2012. The search was initiated in the assessee's case on 13.03.2014. Therefore, we note that at the time of search and seizure the assessment for A.Y.2011-12 was not pending. Therefore, in case of assessee, the assessment year 2011-12 is an unabated assessment. It is settled position of law that in case of unabated assessment, the addition cannot be made by AO without incrementing documents unearthed during search. In assessee`s case, during search operation, the search team did not find and incrementing material. We note that the assessment order u/s 153A /143(3) was passed on 31.03.2016 ....
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.... order passed u/s 153A/143(3) of the Act on 31.03.2016 for A.Y. 2009-10 erroneous and prejudicial to the interests of revenue. We note that assessee company filed its original return of income on 25/09/2009, declaring a total income of Rs. 2,73,270/-. Subsequently, the return was revised by the assessee on 10/06/2010 declaring a total income of Rs. 36,23.652/-. Thereafter, assessment order u/s. 143(3) of the Act was passed vide order dated 27/12/2011 showing assessee company income to the tune of Rs. 49,59,590/-. Subsequently, a search & seizure operation was conducted at different locations of the assessee company on 13/03/2014. Subsequent to search and seizure operation, assessee company filed its return of income on 30/05/2015 declaring the total income of Rs. 36,23,652/- as shown in the revised return filed subsequent to original return of income. Assessment u/s.143(3)/153A was completed on 31/03/2016 by the AO assessing the total income at Rs. 52,63,710/-. The ldPr.CIT exercised his jurisdiction under section 263 of the Act to revise the assessment order passed by the assessing officer, u/s.143(3)/153A of the Act, which was passed by the AO after search and seizure action o....
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....fied of the following twin conditions, in order to exercise his powers of revision: (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) the order of the Assessing Officer sought to be revised is prejudicial to the interests of the Revenue. Therefore, it stands clear that recourse to Section 263(1) of the Income Tax Act, 1961 cannot be taken by the Principal Commissioner if either of the above conditions are not satisfied, i.e. if the impugned assessment order is erroneous but not prejudicial to the interest of the revenue, or if the impugned assessment order is prejudicial to the interest of the revenue but not erroneous. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneou....
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....addition only based on incriminating materials found/unearthed during search. This is a settled position of law and is no longer res integra. The following judgments are given in support of the above proposition of law:- The Hon'ble Delhi High Court in Kabul Chawla (supra) has laid down the law which spells out the power of the AO while exercising power u/s 153A after search u/s 132 of the Act was conducted by the Revenue. The same is reproduced as under: "Summary of legal position 37.On a conspectus of Section 153A(1) of the Act, read with provisions thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and re-assessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment power....
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....id Act of the Ld. Tribunal. The appeal is therefore, dismissed. 25. In view of the aforesaid ratio decidendi of the Hon'ble High Court as well as Hon'ble Supreme Court's decisions cited above, since assessment for Assessment Year 2009-10 was not pending before the Assessing Officer on the date of search i.e. on 13.03.2014, no addition can be made by the Assessing Officer without the aid of incriminating material unearthed during the search conducted on 13.03.2014. Therefore, we have to examine whether there was any incriminating materials unearthed by the Department during search conducted on 13.03.2014. We have gone through the assessment order of Assessing Officer in all the counts before us and we find that the Assessing Officer has not made a whisper of any incriminating material which has been unearthed/seized during the search on 13.03.2014. The Assessing Officer having no incriminating materials unearthed during the search on 13.03.2014 against the assessee company, did not make any additions (with the aid of any incriminating material) against the assesses, before us, for Assessment Year 2009-10. We note that in the assessee`s case under consideration the information ....
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....ng the search, the Assessing Officer has not made any additions in his assessment order dated 31.03.2016, based on incriminating material since there was none unearthed. We take note that it is not the case of ld. Principal CIT that AO failed to made any additions/disallowances based on incriminating material seized/unearthed during search. On this finding of fact by us, we cannot term the assessment order passed by the AO u/s 153A/143(3) dated 31.03.2016 as erroneous. It is important here to note that revision u/s 263 of the Income Tax Act, 1961 has to be made within welldefined limits subject to satisfaction of pre-conditions, as explained by us above, and therefore, similar limitation may have to be read in the instant provision. In relation to the years whose assessment is completed, it is laid down by law that in such situations of completed assessment, assessment u/s 153A of the Income Tax Act, 1961 however shall be to the extent of undisclosed income which is found during the course of search with reference to the valuable articles or things found or documents seized during the search which are not disclosed in the original assessment. The power given by the 1st proviso of s....