TaxTMI 
TaxTMI 
2023 (10) TMI 1573
X X X X Extracts X X X X
X X X X Extracts X X X X
....the land, commercial, residential complexes, etc. A search action under section 132 of the Income-tax Act, 1961 (in short, the Act) was carried out in the case of Hubtown Limited and other group concerns including the assessee on 30/07/2019. The case was centralized with DCIT-7(3), Mumbai and the notice under section 153A was issued on 12/11/2020. In response to the said notices, the assessee filed a return of income on 05/02/2021 declaring total income at a loss of Rs. 72,15,826/-. The Assessing Officer while completing the assessment under section 153A read with section 143(3) made addition towards disallowance of write off of assets/debts under section 37(1) of the Act. On appeal, the CIT(A) confirmed the additions made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal. 4. During the course of hearing, besides filing concise grounds of appeal, with regards to the merits of the issue, the assessee also raised additional grounds on certain legal issues pertaining to the impugned additions. The additional grounds read as below:- "1. The Ld. CIT(A) has erred in not holding that the disallowance of Rs. 8,45,866/- in respect of write-off of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Assessing Officer concluded that there was no transaction between M/s Citygold Farming P Ltd and Shri Sandeep N Gharat so as to justify the write off of what is in the books. The Assessing Officer, on similar grounds, did not accept the write off in the case of M/s Heddle Knowledge P Ltd. The Assessing Officer held that the write off is against the advances of land and, therefore, capital in nature and cannot be allowed. Accordingly, he made the disallowance in the hands of the assessee under section 37(1) while completing the assessment under section 153A read with section 143(3) of the Act. On appeal, the CIT(A) held that there were incriminating material found during the course of search and that the Assessing Officer has correctly made the disallowance based on the material found and the statements recorded. 7. Through the additional grounds, the assessee is contending the disallowance on the legal ground that the write off of debts/advances are made in the books of accounts of M/s Citygold Farming P Ltd and M/s Heddle Knowledge P Ltd prior to the effective date of amalgamation and, therefore, cannot be disallowed in the hands of the assessee for the year under considerat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficer is not based on any seized material found during the course of search. The Ld.AR further argued that the findings given in the CIT(A)'s order stating that incriminating material were found during the course of search, is factually incorrect since in the assessment order, the Assessing Officer has not stated any material to be incriminating that was found in the search. The fact that Assessing Officer has made disallowance based on the financial statements which were part of records makes it clear that the additions made in course of assessment under section 153A is not based on any seized material found during the course of search. Accordingly, the Ld.AR submitted that even on merits, the additions would not sustain. The Ld.AR placed reliance on the decision of the Hon'ble Supreme Court in the case of Abhisar Buildwell (P) Ltd (2023) 454 ITR 212 (SC). 10. The Ld.DR, on the other hand, submitted that the amalgamation order of NCLT is post the date of search and, therefore, the Assessing Officer has concluded the assessment by clubbing the entities. The Ld.DR further submitted that the additional ground through on the legal issue is raised for the first time before the Tribu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is merit in the argument of the Ld.AR that the claims made in the financials of the individual entities cannot be disallowed in the hands of the assessee prior to the date of amalgamation. It is also noticed that the Assessing Officer has issued separate notices of 153A / 153C to these entities in their individual names which makes it clear that prior to amalgamation, these entities have been treated as not part of the assessee. Therefore in our considered view, the disallowance of a claim made in the individual entity's financials cannot be added as income in the hands of the assessee during the year which is prior to amalgamation. Further, we notice that the disallowance made is based on the amounts debited to the Profit and Loss account of these two companies and that the assessing officer has stated in the order under section 153A r.w.s.143(3) that the disallowance is done based on statement recorded from Shri. Sandeep N Gharat. Therefore the submission that the addition is made not based on any seized material but based on statement recorded has merits. Accordingly on this count also, we are of the view that the additions made by the Assessing Officer by way of disallowa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....40,99,309/- claimed towards write off assets/debts basis the entries in the financial statement of Citygold Farming Pvt Ltd. 18. The ld AR made a detailed written submission contending the issues and the same is taken on record. The Ld.AR during the course of hearing submitted that the company had given advance to several farmers, intermediaries in order to purchase certain particles of land. However, the project failed to take off and the assessee has requested the farmers and other intermediaries to refund the advance given to them. It was submitted that despite several attempts, the assessee was not able to either get the refund of advance nor was able to acquire the parcels of land from certain parties. Considering the futility of keeping the sunk cost in the books of account, the assessee has written off the advance given by it to different parties. 19. The Ld.AR submitted certain additional evidence with regard to the advances which have been disallowed under section 37(1) by the Assessing Officer and prayed for the admission of additional evidence. The Ld.AR submitted that the additional evidence go to substantiate the claim of the assessee with regard to the disallowa....