TaxTMI 
TaxTMI 
2026 (3) TMI 680
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....me assessee, involving similar issues arising out of a similar factual matrix, these appeals were heard together as a matter of convenience and are being decided by way of this consolidated order. With the consent of the parties, all the appeals are adjudicated by a common order and the decision rendered therein shall apply mutatis mutandis to other appeal before us. 3. The assessee has taken the following grounds. Grounds ITA No.6485/Mum/2024, AY 2017-18 "1. The learned Commissioner of Income-tax (Appeals) erred in upholding the validity of the assessment order passed contrary to the provision of section 153A of the Act. 2. The learned Commissioner of Income-tax (Appeals) erred in confirming the additions of Rs. 96,77,633/- made on account of alleged suppressed sales. 3. The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of sum of Rs. 15,284/-on account of prior period expenses. 4. The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowing of a sum aggregating to Rs 1,20,809/- under section 37(1) of the Act on account of Sales tax/VAT not recoverable written off during the ....
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.... in synopsis of submission which is reproduced as below: "Assessment Year 2017-18 For this year, two appeals are arising before the Tribunal viz., ΙΤΑ No.6487/Mum/2024 which is arising from assessment order dated 22.12.2019 passed under section 143(3) of the Income-tax Act (the Act) and appeal being ITA No.6485/Mum/2024 arising from assessment order dated 12.06.2021 passed under section 153A of the Act. In the assessment order passed under section 143(3), the AO made a disallowance of Rs. 47,93,370 being deduction claimed in respect of write off of capital work in progress upon abandonment of projects. In the assessment order passed under section 153A of the Act, the AO made an addition to the Appellant's income in respect of alleged suppressed sales of Rs. 96,77,633. He also made disallowance of prior period expenses of Rs. 15,284 and write off of Sales Tax / VAT of Rs. 1,20,809. The CIT(A) in the appeal arising from the said order passed under section 153A has enhanced the income by Rs. 47,93,370 being disallowance of write off of capital work in progress upon abandonment of projects after upholding the same disallowance in the appellate order....
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....ion 143(3) of the Act has been passed. 5 18.02.2021 Notice had been issued under section 153A of the Act directing the Appellant to file its returns of income inter alia for the year under consideration under the said section. 6 12.06.2021 Pursuant to the above, assessment order under section 153A of the Act has been passed. 5. It is submitted that, since the time for selecting the return of income for scrutiny by issue of notice under section 143(2) was available to the AO at the time of carrying out the search action, the 2nd proviso below section 153A would apply and the assessment would abate. In such circumstances, the only assessment that can be made is under section 153A of the Act. Consequent thereto, the assessment order passed under section 143(3) is invalid and bad in law. However, while dealing with this ground of appeal, the CIT(A) has observed in paragraphs 9 and 9.1 at page 16 of his order as under: "9. According to the appellant, the proceedings had abated on account of the search action initiated on 29.05.2018. I find that the notice u/s. 143(2) was issued subsequently on 09.08.2018 and no assessment was pending as on the date of....
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....taken on record. The Ld. AR submitted that a search action under section 132 of the Act was conducted on 29.05.2018 and that A.Y. 2017-18 was an abated year. He invited our attention to the second proviso to section 153A of the Act, which provides that any assessment or reassessment pending on the date of initiation of search shall abate. Placing reliance on the said proviso, the Ld. AR contended that the action of the Ld. AO in passing assessment orders under both sections 143(3) and 153A for the same assessment year is contrary to law and unsustainable. 7. The Ld. AR placed reliance on the judgment of the Hon'ble Supreme Court in the case of PCIT v. Abhisar Buildwell (P.) Ltd., reported in 454 ITR 212 (SC), wherein it has been held that in the case of unabated assessments, additions under section 153A can be made only on the basis of incriminating material found during the course of search. It was submitted that in the present case, notice under section 143(2) was issued on 09.08.2018, i.e., after initiation of the search proceedings. Therefore, the assessment framed under section 143(3) making an addition of Rs. 47,93,370/- towards write-off of capital work-in-progress is bad....
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....nd por ultra parte accepted the validity of order under section 153A for the same assessment year. The second proviso to section 153A clearly provides that all pending assessments shall abate upon initiation of search. If the assessment under section 143(3) is treated as valid, then the assessment under section 153A would necessarily be regarded as relating to an unabated year, in which case additions could be made only on the basis of incriminating material found during search. The Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd. (supra) has categorically held that the foundation for invoking section 153A is the existence of incriminating material unearthed during search demonstrating undisclosed income. The very object of search assessment is to tax income detected as a result of search and not to revisit concluded matters in the absence of such material. In view of the second proviso to section 153A and respectfully following the ratio laid down by the Hon'ble Apex Court in Abhisar Buildwell (P.) Ltd., we hold that the Ld. AO wrongly assumed jurisdiction in framing the assessment under section 143(3) after initiation of search proceedings. Consequently, the impugned ....
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....ation. Further, the assessee has also mentioned few sales invoices stating that these sales invoices were not in its own ERP system which is without any justification and supporting documents. b. Further, it is pertinent to mention here that it is a common practice of the retail chain business that the sales return is restricted to the limited period of time. Since the assessee is Into high-end designer clothes, It's sales return policy must be very specific and time bound. The assessee while submitting the details of sales return have not submitted such sales return policy adopted by it during the course of its business for the year under assessment. Moreover, such details have been submitted without any explanation/justification and supporting documents. However, before completing this assessment, the undersigned has reviewed the assessee's website to check its sales returns policy which is reproduced as under: It is not ascertainable from the details he details submitted by the assessee that sales returns falls within its return policy or not as no corresponding sales Invoice details, shipment details of sales, other details furnished by the assessee to....
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....books. However, the assessee grossly failed to demonstrate its sales return either online sales or offline sales. Merely submitting the excel sheet cannot justify the claim of the assessee. 4.6 In the light of the above, it is concluded that the theory of sale return and sales not considered in ERP introduced by the assessee to match the difference of sales as per ITR and sales as per ERP is not supported by any cogent evidences. This concocted story of sales return has been brought by the assessee only to save itself from the tax liability nothing else. Thus, the addition of Rs. 96,77,633/- is made to the total income of the assessee for the year under assessment on account of suppressed sales. In this regard, I am satisfied that the assessee has furnished inaccurate particulars of income to conceal its income to the tune of Rs. 96,77,633. Hence, the penalty proceedings u/s 270A(1) of the IT Act, 1961 are initiated separately for underreporting due to misreporting of income on this issue." 11. The addition related to the disallowance of sum of Rs. 15,284/- on account of prior period expenses and the disallowance amount of Rs. 1,20,809/- made on account of sales tax/VAT....
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....in the ERP system and the sales disclosed in the return of income. The variation in sales has been properly reconciled and attributed to sales returns which were reflected in the return of income but were not appearing in the annexures extracted from the ERP system for A.Y. 2017-18. The details of sales and the reconciliation thereof were duly placed on record. We find that there is no cogent material brought on record by the revenue authorities to establish suppression of sales. The rejection of the assessee's explanation is not supported by any substantive evidence. Accordingly, the addition of Rs. 96,77,633/- made on account of alleged suppressed sales is unsustainable in law and is hereby quashed. With regard to the disallowance of Rs. 15,284/- on account of prior period expenses and Rs. 1,20,809/- towards sales tax/VAT written off as irrecoverable, both claimed under section 37(1) of the Act, we find merit in the submissions of the Ld. AR. From paragraph 5 at page 9 of the impugned assessment order, it is noted that the prior period expenditure pertains to maintenance charges payable to DLF Utilities Ltd., relating to A.Y. 2015-16. Further, the amount written off towards irrec....