The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the additions made by the Assessing Officer in both the years under consideration are not based upon any incriminating material found during the course of search operations.
The assessee is engaged in the business of developing Free trade warehousing – Special economic zone, meant for supply chain management, warehousing end to end freight forwarding, rail transportation and is also engaged in software development. The Revenue carried out survey operation under section 133A of the I.T. Act o 20.01.2014. Subsequently search action was carried out under section 132(1) of the Act on 13.6.2014. Subsequent to the search operation the impugned assessments were completed by the Assessing Officer under section 153A read with section 143(3) of the Act.
In A.Y. 2010-11, the Assessing Officer had made addition relating to the alleged commission expenses paid to two concerns under section 69C of the Act and also disallowed interest expenditure under section 36(1)(iii) of the Act. The CIT(A) noticed that A.Y. 2010-11 falls under the category of unabated assessment and above said additions are not based on any incriminating material.
Further the CIT(A) noticed that the own funds available with the assessee was higher than the interest free loan given by the assessee. Accordingly, in the absence of incriminating material, the CIT(A) held that the additions made by the Assessing Officer cannot be sustained. In addition to the above, the CIT(A) held that the interest disallowance is not called for since the interest free funds available with the assessee was more than the interest free advances given by the assessee. Accordingly he allowed the appeal of the assessee.
In A.Y. 2012-13, the Assessing Officer has made the addition of alleged commission expenses under section 69C of the Act and also disallowed a sum of Rs. 2.41 crores under section 14A of the Act. The CIT(A) upheld the addition relating to the alleged commission payment. With regard to the disallowance made under section 14A of the Act, the CIT(A) directed the Assessing Officer to restrict the disallowance to the amount of exempt income earned by the assessee which was Rs. 78,890/-. The revenue has filed the appeal challenging the decision rendered by the CIT(A) in giving relief in respect of disallowance made under section 14A of the Act. The assessee has filed the appeal challenging the additions confirmed by the CIT(A).
After hearing both the parties, the tribunal noted that , it has to be held that the additions made by the Assessing Officer in both the years under consideration are not based upon any incriminating material found during the course of search operations. Since both the years under consideration fall under the category of “unabated assessment years”, the Assessing Officer could not have made addition in both years in the absence of any incriminating material relating to the same. The above said decision of ours is based upon the decision rendered by Hon’ble Supreme Court in the case of Abhishir Buildwell P Ltd (Civil Appeal No.6580 of 2021 dated 24th April, 2023).
The two member bench consisting of Rahul Chaudhary (Judicial member) and B.R. Baskaran (Accountant member) held that the additions made by the Assessing Officer in both the years under consideration are liable to the deleted. There is no requirement to adjudicate the issues urged on merit
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