TaxTMI 
TaxTMI 
2025 (2) TMI 1331
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....al by the assessee is directed against the order dated 30/01/2015 of the learned CIT(A) -12 Hyderabad for the A.Y 2008-09 arising from the assessment order passed u/s 143(3) r.w.s. 153A of the I.T. Act, 1961. The assessee has raised the following grounds of appeal: "1. The order of the Ld. CIT(A)-12, Hyderabad is erroneous both on facts and in law. 2. The Ld. CIT(A) ought to have appreciated the fact that the u/s assessment framed 143(3) rws 153A of the Act is invalid assessment as there is no incriminating material found during the course of search. 3. The Ld. CIT(A) ought to have appreciated the fact that items of regular additions cannot be made in a search assessment without there being any incrementing material found during the course of search proceedings. 4. The Ld. CIT(A) erred in Tot adjudicating the ground no 6-11 filed before him relating to inflated expenditure on which addition of Rs. 4,40,00,000/- was made on the merits. 5. The Ld. CIT(A) erred in treating the amount of Rs. 4,40,00,000/- withdrawn from the bank accounts of the assessee's sub-contractors as inflated expenditure of the assessee and adding the same to the ....
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....ee may add, alter or modify or substitute any other point to the Grounds of appeal at any time before or at the time of hearing of the appeal. 3. Ground Nos 1 to 3 are regarding validity of the addition made by the Assessing Officer in the absence any incriminating material found during the course of search & seizure action. The learned AR of the assessee has submitted that the search & seizure operation u/s 132 of the I.T. Act, 1961 was carried out in case of the assessee on 4/3/2011 and therefore, as on the date of search, the assessment for the year under consideration was not pending rather the assessment was already completed u/s 143(3) which was also subjected to the appeal before this Tribunal and vide order dated 28/12/2012, this Tribunal finally disposed of the appeal of the assessee for the A.Y under consideration. In the order passed u/s 153A, the Assessing Officer has not made any addition but has disallowed the claim of deduction u/s 80IA of the I.T. Act, 1961 which is already covered by the decision of this Tribunal in assessee's own case for the A.Ys 2007-08 and 2008-09 as well as for the A.Ys 2012-13 & 2013-14. Thus, the learned AR has submitted that the disa....
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....in respect of other disallowances which would result in enhancement of the business income eligible for deduction u/s 80IA of the Act. He further contended that when the assessee was found indulged in the activity of inflating the expenditure and siphoning of the fund through the sub- contractor/sister concern, then the benefit of section 80IA of the Act cannot be allowed to the assessee in respect of disallowances made by the Assessing Officer. He has relied upon the orders of the Assessing Officer as well as the learned CIT(A). 5. We have considered the rival submissions as well as the relevant material available on record. It is pertinent to note that in the statement recorded by the Assessing Officer on 9/1/2013, Shri Raju Mangulkar has denied all the allegations about the withdrawal of the money from the sub-contractor and handing over the same to the assessee but stated in the said statement that the money withdrawn from the bank account of the sub-contractor was given to the representative of the sub- contractor and not to the assessee company. In any case, the Assessing Officer has not made any separate disallowances based on the said statement of Shri Raju Mangulkar. Ev....
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....der section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referr....
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....n case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceeding....
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.... 14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated a....
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....k submitted by the assessee quoted supra, the amounts received by the sub-contractors have been offered as their turnover and the turnovers had been accepted by the revenue authorities. Therefore, it clearly shows that the payments made by the assessee to sub-contractors is a business expenditure of the assessee. "9.2 We accept the arguments advanced by the ld. AR of the assessee that the Board's Circular No. 37/2016 dated 02/11/2016 is applicable to the case of the assessee. For the sake of clarity, we reproduce the contents in the Circular as under: CIRCULAR NO. 37/2016 F.No. 279/Misc./140/2015/ITJ Government of India Ministry of Finance, Department of Revenue Central Board of Direct Taxes ****** New Delhi, Dated 2nd November 2016 Subject: Chapter VI-A deduction on enhanced profits- Reg. Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific ....
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....t deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned. sd/- (K. Vamsi Krishna) ACIT (OSD)(ITJ), CBDT, New Delhi. Copy to: 9.3 On perusal of the said Circular, it is clear that at times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. The assessee is also eligible to claim for deduction u/s 80IA on the profit earned from its business. The issue before us is also regarding the enhancement of the profit of the assessee which is covered by the said Circular quoted supra and, the....
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....mand proceedings also." 23. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The CIT(A) allowed the claim of the assessee following the decision of his predecessor in assessee's own case for earlier AYs. Before us, the ld. DR has not brought any contrary decision in this regard. Therefore, we uphold the order of CIT(A) and dismiss the ground raised by the revenue on this issue in both the appeals under consideration." 9. Accordingly, ground Nos 4 to 8 and 12 to 16 of assessee's appeal are allowed. 10. The next issue involved in Ground No.9 is regarding the addition of Rs. 1,18,07,320/- made by the learned CIT(A) by enhancing the assessment. The learned AR has submitted that the enhancement made by the learned CIT(A) is not sustainable in law as no show-cause notice was given by the learned CIT(A) as required u/s 251(2) of the I.T. Act, 1961. In support of his contention, he has relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Shapoorji Pallonji Mistry reported in (1962) 44 ITR 891 (S.C) as well as the decision of the Hon'ble Gujarat High C....
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....erefore, passing an order resulting an enhancement of the assessment without giving a show-cause notice to the assessee or reasonable opportunity is not permissible as per the provisions of the Act. Accordingly, the enhancement of assessment without satisfying the mandatory conditions provided in section 251(2) of the I.T. Act, 1961 is not sustainable in law and the same is set aside. 15. The assessee has also raised various additional grounds; however, these grounds are not emanating from the assessment order passed by the Assessing Officer u/s 153A of the Act but these grounds were raised by the assessee which were already subject matter of the appeal filed against the assessment order passed u/s 143(3) of the I.T. Act, 1961. Further, in view of the issue of eligibility of section 80IA on the enhanced eligible business income of the assessee, these additional grounds became infructuous and stands dismissed. 16. In the result, appeal of the assessee is partly allowed. ITA Nos. 12 to 14/Hyd/2020 - Revenue 17. These 3 appeals filed by the Revenue are directed against three separate orders, all dated 11/10/2019 of the learned CIT(A)-12, Hyderabad relating to A.Ys.2009-10 ....
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....2 as how these amounts have been disbursed to the various persons. The Assessing Officer has given the details of the withdrawals of Rs. 25 crores out of which Rs. 22 crores were not related to the year under consideration and therefore, the addition of Rs. 3 crores has been made by the Assessing Officer on this account. The learned DR has further submitted that since the sister concern is used as a conduit for siphoning off of the funds by the assessee, therefore, the addition is rightly made by the Assessing Officer. The learned DR has relied upon the order of the Assessing Officer. 24. On the other land, the learned AR of the assessee has referred to the findings of the learned CIT(A) in para 7.4 and submitted that once an identical addition has been made in the hand of the sister concern Madhucon Land Developers Ltd as these transactions are of withdrawal from bank account of Madhucon Land Developers Ltd, then the addition made in the hands of the assessee is otherwise not sustainable and rightly deleted by the learned CIT(A). He has further contended that the Assessing Officer has made the addition on the basis of the withdrawal made from the bank account of the sister conc....
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....from bank account of M/s. Madhucon Land Developers Ltd, a sister concern of the assessee. The Assessing Officer has then given the details as found during the course of search and seizure action recorded in the seized material which is a diary wherein the transactions of disbursement of various amounts are recorded. Except one transaction i.e. dated 27/09/2008 of Rs. 1 crore, allegedly mentioned in the said diary/note book, all other transactions do not pertain to the A.Y under consideration. Even there is no record to suggest that the alleged Rs. 3 crores has withdrawn from the bank account of the sister concern is an unaccounted or undisclosed income of the assessee. The Assessing Officer has not pointed out that the assessee has made any claim of expenditure of the said amount of Rs. 3 crores. Therefore, the Assessing Officer has not made any addition by making disallowance of the claim of expenditure or deduction in the books of the assessee but the addition is simply made on the basis of the withdrawal of money from the bank account of the sister concern. 27. On appeal, the learned CIT(A) has deleted the addition by giving a finding in para 7.4 as under: "7.4 I hav....
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.... before the Hon'ble jurisdictional High Court. Thus, he has contended to keep the issue alive, the Assessing Officer has made the addition. He has relied upon the order of the Assessing Officer. He has further contended that since the assessee is found indulged in unaccounted activities, therefore, the deduction u/s 80IA cannot be allowed to the extent of the activities found during the course of search & seizure action not part of the books of account of the assessee. 30. On the other hand, the learned AR of the assessee submitted that this issue has already been considered by the Tribunal in assessee's own case for the A.Ys 2012-13 & 2013-14 in ITA Nos. 635 & 636/Hyd/2020 vide order dated 11/01/2022. The learned CIT(A) has deleted the addition by following the decision of this Tribunal in assessee's own case. 31. We have considered the rival submissions as well as perused the relevant material available on record. The learned CIT(A) has deleted the addition made by the Assessing Officer on account of disallowance of deduction u/s 80IA in Para 8.5 of the impugned order as under: "8.5 I have carefully considered the submissions of the appellant, the order....
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.... A.Y 2012-13 that the assessee claimed deduction to the tune of Rs. 478,66,23,2235/-. The Assessing Officer disallowed the same on the ground that the assessee failed to produce supporting details. 22. The CIT(A) allowed the assessee's claim by observing as under: "6.5 1 have carefully considered the submissions of the appellant, the order of the Assessing Officer, the additional grounds raised as well as the comments of the Assessing Officer thereon. As far as the claim of deduction u/s. 80IA is concerned, it is an undisputed fact that the claim has been allowed for the AYs 2007 08 and 2008-09, and also, subsequently, for AY 2013-14. The then CIT(A)-12, my predecessor, while adjudicating the appeal for Asst. Year 2009-10, 2010-11 and 2011-12 held that the appellant company is eligible to claim the deduction u/s. 80IA of the Act. The facts of the case for the appeal under consideration are identical to the preceding years and the claim of deduction u/s. 80IA of the Act is made on the same infrastructural projects which were claimed and allowed in the preceding and succeeding years. Nothing has been brought on record to establish that the projects undertaken by....
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....e and in favour of the assessee and consequently, the impugned order of the learned CIT(A) is upheld. 38. For the A.Y 2011-12, the Revenue has raised more or less similar grounds of appeal except quantum amount. 39. Ground No. 1 is general in nature and does not require any specific adjudication. 40. Ground No.2 is regarding the addition made by the Assessing Officer on account of disallowance of claim of deduction u/s 80IA. This issue is common and identical to the issues involved in Ground No.3 for the A.Y 2009-10. In view of our findings on this issue for the A.Y 2009-10, this ground of revenue appeal stands dismissed and the impugned order of the learned CIT(A) qua this issue is upheld., 41. In the result, all the 3 appeals filed by the Revenue are dismissed. ITA Nos. 723 and 761/Hyd/2020 - A.Y 2013-14 42. These cross appeals are directed against the order dated 15/09/2020 of the learned CIT(A) for the A.Y 2013-14. The assessee as well as Revenue has raised the following grounds of appeal: ITA No.761/Hyd/2020 (Assessee) 43. The assessee has raised the following grounds: S.No Particulars Tax effect 1. The Ld. CIT(A) erred in partly allowing....
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....wards advances written off comprising of advances written off to the tune of Rs. 3,79,50,000/-, bad debts of Rs. 1,46,59,556/- and other advances written off amounting to Rs. 9,29,24,404/-. 3. The Id.CIT(A) erred in deleting Rs. 3,79,50,000/- towards advances written off on the basis of additional evidence furnished without granting opportunity to the Assessing Officer under Rule 46A. 4. The Ld CIT(A) erred in granting relief of Rs. 1,46,59,556/- in respect of bad debts written off when it has not been established that the the assessee had fulfilled the conditions laid down in sub section (2) of section 36 of the Act. 5. The Ld.CIT(A) erred in deleting the remaining advances written off without appreciating the fact that the amounts were written off in anticipation of future works and cannot be allowed as a loss in the ordinary course of business and that the amount also included advances given for purchase of land and other inadmissible expenditure. 6. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary. 45. At the outset, it is seen that there is a delay of 23 days in filing the appeal by t....
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....ing Officer has made disallowance u/s 14A @ 0.5% of the average investment provided in Rule 8D of the I.T Rules, 1963. On appeal, the learned CIT(A) has restricted the disallowance to the exempt income of the assessee at Rs. 45,100/-. It is pertinent to note that this issue has been now settled in view of various judgments of the Hon'ble High Courts as well as the orders of this Tribunal. The assessee has relied upon the following decisions: i) ITAT Hyderabad in the case of Madhucon Projects Ltd in ITA No.635 & 635/Hyd/2020 ii) ITAT Delhi Benches in the case of Religare Securities Ltd in ITA No.230/Del/2017 iii) ITAT Bangalore Benches in the case of PJB Engineering Pvt Ltd in ITA No.2081/Bang/2017. 53. At the outset, we note that this Tribunal in assessee's own case for the A.Y 2011-12 to 2013-14 in ITA No.635 and 636/Hyd/2020 vide order dated 11/01/22 has considered this issue in Para 10 to 12 as under: "10. With regard to the issue of disallowance u/s 14A, which is raised as ground No. 11, the AO noticed from the balance sheet of the assessee that the assessee had made investments in equity shares for an amount of Rs. 1,14,423.26 lak....
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....e additional evidence without giving an opportunity to the Assessing Officer which is in violation of the provisions of Rule 46A of the I.T. Rules, 1963. He has referred to the remand report and submitted that the details were not filed before the Assessing Officer either during the assessment proceedings or during the remand proceedings, but the same were considered by the learned CIT(A) while granting the relief. He has relied upon the order of the Assessing Officer. 57. On the other hand, the learned AR has submitted that the learned CIT(A) has considered each and every item and has given a finding based on the facts emerging from the record. Alternatively, the learned AR has submitted that the disallowance made by the Assessing Officer has resulted enhanced income of eligible business for deduction u/s 80IA and therefore, in view of the decision of this Tribunal as well as the CBDT Circular No.37/2016, the deduction u/s 80IA shall be allowed on the enhanced income. In rejoinder, the learned DR has submitted that the CBDT Circular cannot be applied to all the disallowances but it has given a specific disallowance made u/s 32, 40(a)(ia), 40A(3) and 43B etc., and therefore, the....
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....s allowed. ITA No.762/Hyd/2020 A.Y 2014-15 60. This appeal filed by the assessee is directed against the order dated 15/09/2020 of the learned CIT(A)-12, Hyderabad, relating to A.Y.2014-15. 61. The assessee has raised various grounds of appeal. However, at the time of hearing, the learned AR of the assessee has submitted that the effective grounds are only Ground Nos.3, 4 and 7 which are as under: "3(a) The learned CIT(A) erred in confirming the addition of work contract tax to the extent of Rs. 1,11,54,020/- made u/s 43B of the Act. (b) The learned CIT(A) ought to have considered the payments made till 30.11.2014 for the purpose of application of the provisions of section 43B of the Act and to have deleted the amount of Rs. 1,11,54,020/- also out of the total addition made of Rs. 1,14,54,020/- 4 (a) The learned CIT(A) erred in making an addition of Rs. 79,950/- u/s 14A of the Act instead of deleting the entire addition of Rs. 51,69,28,402/-. (b) The learned CIT(A) ought to have appreciated the fact that the investments were made out of the internal accruals and funds available with the company are more than the investments made. ....
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....1872 to 1875/Hyd/2019. 63. On the other hand, the learned DR has not disputed the fact that an identical issue has been considered and decided by this Tribunal in assessee's own case for the A.Y 2007-08 to 2011-12. However, he has relied upon the impugned order of the learned CIT(A). 64. We have considered the rival submissions and perused the relevant material available on record. At the outset, we note that an identical issue has been considered by this Tribunal in assessee's own case for the A.Y 2007-08, 2009-10 to 2011-12 in ITA Nos. 1872/Hyd/1875 vide order dated 6/1/2022 in para 9 to 9.3 as under: "9. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. We observe that search was conducted on the assessee and its group cases on 04/03/2011 and further search was conducted on 07/03/2011 as per para No. 6 of the assessment order and the statements recorded by the search team, which have been recorded by the AO in his order. For deciding the issue before us, first we have to see the assessment order on the basis of which the additions made by the AO as per para 11, which is re....
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....nhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80IB of the Act. This view was taken by the courts in the following cases: * Income-tax Officer - Ward 5(1) vs. Keval Construction, Tax Appeal No. 443 of 2012, December 10, 2012, Gujarat High Court.(NJRS-2012-LL-1210-45) * Commissioner of Income-tax-IV, Nagpur vs. Sunil Vishwambharnath Tiwari, IT Appeal No. 2 of 2011, September 11, 2015, Bombay High Court.(NJRS-2015-LL-0911-22) (ii) If deduction under section 40A(3) of th....
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....ment to sub- contractors, which was disallowed by the AO and confirmed by the CIT(A) in all the appeals under consideration. All other grounds raised by the assessee in all the appeals, were not pressed before us, therefore, the same are dismissed as not pressed. 9.3 In view of our above observations, we allow the grounds raised by the assessee with regard to inflated expenditure by way of sub-contract payments in all the appeals under consideration. " 65. Thus, by considering the CBDT Circular No.37/2016, the Tribunal has allowed the claim of deduction u/s 80IA on the enhanced business profit of the assessee in consequence of disallowance of expenditure made u/s 43B of the I.T. Act, 1961. To maintain the rule of consistency and following the earlier order of this Tribunal, the claim of deduction u/s 80IA on the enhanced business income as a result of the disallowance made u/s 43B of the I.T. Act, 1961 is allowed. 66. Ground No.4 is regarding the disallowance made by the Assessing Officer u/s 14A of the I.T. Act, 1961 for Rs. 51,69,28,402/- which was restricted by the learned CIT(A) to Rs. 79,950/-. At the time of hearing, the learned AR of the assessee has submitted....