TaxTMI 
TaxTMI 
2025 (2) TMI 1608
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....that the Assessing Officer held that as per exclusive clause in the agreement between the assessee and the Contractor, the assessee had deducted TDS u/s 194C of the Act and the contractors had claimed expenses in their P&L A/c establishing that the said payment was not made to the labourers directly by the assessee. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the fact that in the subsequent year, on the same terms and conditions of the agreement, the assessee had made payment to the contractor by cheque directly and not to the labourers." 3. Facts of the case are that assessee is in the business of processing of sea food, i.e., procuring raw material, processing, packing and export of shrimps and fish. In the present case, impugned assessment order arises out of search and seizure operations u/s. 132 carried out on the business as well as residential premises of Liberty Group including assessee on 05.10.2017. Case of the assessee was centralised with Central Circle-3, Thane, vide order dated 24.08.2018. Notice u/s.153A was issued on 13.09.2019 for Assessment Years 2012-13 to 2017-18. Pursuant to this notic....
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....see's submission that their case is covered by Rule 6DD(k) as the contractor acted only as an agent was also not accepted by the AO as the assessee failed to substantiate the said claim. Since the payments having been made under section 194C as contract payments by way of cash, the same cannot be allowed in view of the provisions of section 40A(3) of the Act. 3.2. On appeal before the ld. CIT(A), disallowance made by ld. Assessing Officer were sustained. Assessee went in further appeal before the Coordinate Bench of ITAT, Chennai, who restored the file to the ld. Assessing Officer for re-adjudication on the issues relating to disallowance u/s 40A(3) raised in the appeal. The observations and findings of Coordinate Bench vide its order dated 07.02.2018 in ITA No.1733/CHNY/2017, in this respect is reproduced as under: 6. A perusal of the facts in the present case clearly shows that the issue of disallowance by invoking the provisions of Sec. 40A(3) has been initiated by the AO only on 30.11.2016. A perusal of the letter of the assessee dated 02.12.2016 also clearly shows that the letter is in response to the discussion, the assessee's representative had with the A....
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....see's appeal to the file of the Assessing Officer for re-adjudication. F 24/12/2019 The Ld. Assessing Officer framed order u/s 143(3) r.w.s. 153A of the Income Tax Act dated 24/12/2019 disallowing payments of Rs. 1,42,71,8717- (processing charges) and Rs. 2.47.07.2157- (contract payment) aggregating to Rs. 3,89,79,086/- u/s 40A(3). No incriminating evidence was found against the Assessee in the course of search operations, which fact is evident from the assessment order framed u/s 143(3) r.w.s. 153A. G 14/06/2024 Being aggrieved, the Assessee preferred appeal before the ld. CIT(A). The Ld. CIT(A)-11 vide order dated 14/06/2024 allowed the Assessee's appeal in toto. H Being aggrieved, the Department is in appeal before the Tribunal in this appeal. 4.1. From the above chronology, most clinching fact in the context of present appeal is that search and seizure operation u/s.132 were carried out on the assessee on 05.10.2017 and the order of Coordinate Bench of ITAT, Chennai restoring the appeal of the assessee to the file of ld. Assessing Officer for re-adjudication was pronounced on 07.02.2018, i.e., subsequent to the date of conduct of search. Tak....
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....spondent before the Tribunal) admittedly, did not file a cross appeal or cross objection u/s.253(4) of the Act and has sought to invoke Rule 27 of the ITAT Rules to question the validity of proceeding u/s.153A by contesting that additions made are not based on incriminating material found and seized during the course of search of the assessee. On confrontation of the contentions raised by the assessee to ld. Sr. DR, it was strongly objected upon, since assessee did not file cross objection or cross appeal and has raised this issue for the first time before the Tribunal by resorting to an application and invoking Rule 27 of ITAT Rules in the course of hearing. Ld. Sr.DR has made a written submission which is perused and considered. In the said submission, while narrating basic details of the case, it is stated that the said set aside proceedings vide order of the Coordinate Bench of ITAT Chennai got abated and the said issue was dealt by the Assessing Officer in the assessment proceedings u/s. 153A of the Act. He justified the disallowance made by ld. Assessing Officer by dealing with the merits of the case. 6. From the submissions made by both the parties, we find that it is the....
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....tion of Rule 27 of the ITAT rules. 6.3. Thus, we need to look into the fulfilment of jurisdictional parameters u/s.153A for the disallowance made by ld. Assessing Officer who held that the proceedings for the year under consideration is abated pursuant to order of Coordinate Bench, whereby the issues were restored to the file of ld. Assessing Officer for re-adjudication. 7. Prima facie, non-compliance with jurisdictional parameters prescribed u/s.153A are to be read with decision of Hon'ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. (supra) and if the same are established, will go to the root of the matter. We make a useful reference to the conclusions drawn by Hon'ble Supreme Court in the case of Abhisar Buildwell (supra) which has dealt with additions/disallowances to be made for the years abated and otherwise, while applying provisions of section 153A. Para - 14 of this decision is extracted below: "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, ....
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.... what was pending was appeal by the assessee before the Tribunal against assessment completed u/s.143(3) contesting disallowances made u/s.40A(3). The Coordinate Bench pronounced its order on 07.02.2018, i.e., subsequent to the conduct of search, whereby it restored the issues to the file of Assessing Officer for re-adjudication. Thus, as contemplated in second proviso to section 153A, on the date of search, neither assessment nor re-assessment was pending so as to get abated. The pendency was in respect of appeal before the Tribunal. 8.1. In this respect we make a useful reference to circular No.7/2003, dated 05.09.2003, containing explanatory notes on provisions relating to direct taxes in respect to Finance Act, 2003 which inserted three new sections, namely, 153A, 153B and 153C, while introducing special procedure for assessment of search cases. In para 65.5 of the said circular, it is clarified that appeal, revision or rectification proceedings, pending on the date of initiation of search u/s 132 or requisition shall not abate. Thus, in the present case, in view of the aforesaid explanatory note, the appeal by the assessee, pending before the Tribunal on the date of initiat....
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....has been repeated verbatim in the post search assessment made u/s.143(3) r.w.s. 153A. We have already extracted para-3 of the original assessment order passed u/s.143(3) whereby, ld. Assessing Officer has noticed the facts for making disallowance based on the perusal of the submissions made by the assessee. 8.4. Furthermore, in the impugned assessment made pursuant to notice u/s. 153A, ld. Assessing Officer noted in para-7 that assessee was given an opportunity to file its submission in the matter, pursuant to direction of ITAT for re-adjudicating the issues in appeal. He has dealt with the submissions filed by the assessee as mentioned in para -9 to conclude that the said payments were not justified and accordingly show cause notice was issued. Assessee filed several submissions reiterating its claim which in the conclusion were not acceptable by the ld. Assessing Officer. Thus, from the submissions filed by the assessee, ld. Assessing Officer ultimately concluded to disallow the claim of assessee u/s. 40A(3) of the Act. It is thus evident from the material on record and observations and findings of ld. Assessing Officer that there is no reference to any incriminating material,....