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2022 (4) TMI 1592 - ITAT INDOREAdmission of additional evidences by CIT(A) - as alleged by revenue that there is violation of the provisions of Rule 46A of the Income Tax Rules, 1962 - HELD THAT:- Whenever any additional evidences are admitted, the CIT(A) is duty bound to provide a copy of such additional evidences to the AO so that the AO after making further inquiry can make his comments on such evidences by way of a Remand Report. We find that in the instant case, the ld. CIT(A) has not only forwarded the additional evidences to the AO, but, on such additional evidences, the AO has also furnished his Remand report and we further find that in the impugned Order, the ld. CIT(A) has mentioned at many places that such Remand Report was duly taken into consideration while passing the impugned Order. We also find that before us, the ld. CIT(DR) could not point out any specific instance where the ld. CIT(A) had not taken the comments of the AO into his consideration. Thus, in our view, there was absolutely no violation of the provisions of Rule 46A of the Income Tax Rules, 1962 in the present case - Decided against revenue. Assessment u/s 153A - Addition u/s 40A - cash expenditure in violation to the provisions of sections 40A(3)/40A(3A) ascertained by the Special Auditors - HELD THAT:- We find that the AO, while making the impugned additions on account of disallowance u/s. 40A(3)/ 40A(3A) of the Act in the assessment years under consideration, has not made any single reference to any incriminating material found during the course of the search. Before us, CIT (DR) has also not brought on record any single incriminating material on the basis whereof the additions have been made by the AO in the assessment order for the years under consideration. We find that the years under appeals are non-abated assessment years. It is a settled proposition of law that addition in non-abated assessment years can be made only on the basis of incriminating material found during the course of search. We find support from the decision of the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] wherein held that completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Thus no addition could have been made by the AO in the assessee’s income in a completed year of assessment without having recourse to any incriminating material. We find full substance in the legal plea taken by the assessee that all the assessment years under appeal are those in respect of which no assessment proceedings could be said to be pending on the date of initiation of the search in the case of the assessee on 07/01/2016 and therefore, merely on the basis of entries found recorded in the regular audited books of account of the assessee, no addition could have been made for making disallowance u/s. 40A(3)/40A(3A) - Decided in favour of assessee. Unexplained expenditure - CIT(A) deleted the addition - AO, from the subject loose papers, noted that the seized document contains details of summary of capital and interest working found in search and seizure action u/s. 132 - HELD THAT:- We find that on the basis of such seized document, the AO reached to the conclusion that the assessee had actually incurred such expenses and such expenses were also claimed by it in its books of account. For reaching such conclusion, the AO took a stand that no books of accounts were produced and therefore, whether or not such expenses have been claimed by the assessee in its books of accounts could not be verified at her end. According to the AO, the assessee has claimed such interest expenditure which are not allowable in the nature. However, we find merit in the contention of the assessee that first of all, the entire books of account in the soft copy were seized by the search party. Secondly, such books of account were duly produced before the Special Auditors and such production of books of account before the Special Auditors is evident from the various findings as regard to the cash payments etc. given by the Special Auditors which have been referred to by the AO in the body of the assessment order itself. Further, we find that without making a reference to the regular books of account, the same could not have been referred to the Special Auditors u/s. 142(2A) of the Act. Thus, the findings given by the AO that the assessee had not produced books of account, in our view, are not factually correct. From financial statements, we did not find claiming of any expenditure by way of interest on share capital as presumed by the AO on the basis of the seized document. We find merit in the contention of the assessee that merely for the purpose of computing the opportunity cost of investment in the assessee company, computation of interest was made on notional basis and from such computation itself, it cannot be conclusively held that such interest expenditure were actually incurred or paid by the assessee company to various shareholders. In view of such finding, we find absolutely no justification in the action of the ld. AO in making the addition in the assessee’s income on account of interest on capital and accordingly no interference is called for in the finding of Ld.CIT(A). - Decided against revenue. Suppression of profit for A.Y. 2012-13 - CIT(A) deleted the addition partly - CIT(A) has applied net profit rate of 1.5% of suppressed sales and has confirmed the addition partly - assessee had maintained two set of books of account as held by both the authorities below - HELD THAT:- We are in agreement with the contention of the assessee that the unaccounted set of books of account maintained by the assessee in the name of M/s. ABC Ltd. are not correct and complete and there were many expenditure which although, apparently incurred by the assessee were not found recorded. In such circumstances, respectfully following the decisions of Balchand Ajit Kumar [2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT] and again in the case of Manmohan Sadhani [2007 (10) TMI 246 - MADHYA PRADESH HIGH COURT] we uphold the findings of the ld. CIT(A) in applying the net profit rate of 1.5% on the amount of suppressed sales which has resulted into confirmation of addition partly. Revenue ground Dismissed. Undisclosed income - difference in figures of capital and loans as per Tally data of ABC Ltd. and the audited accounts of the assessee - CIT(A) deleted the addition - HELD THAT:- The present case is a case of suppression of liabilities in audited books of account vis-à-vis the parallel set of books of account. In our considered view, under the scheme of the law, any undisclosed investment or undisclosed expenditure can be subject matter of addition either u/s. 69 or s. 69A or s. 69B or s. 69C of the Act but in the present case the issue is with regard to unexplained liability. We find that the addition was made by the AO on the only basis of the difference in the audited financial statements and the parallel data. But since, the difference cannot lead to assumption of any income, whether real or deemed, in the hands of the assessee, in our considered view, there was absolutely no justification for the AO to make the impugned addition. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the entire addition. Decided against revenue. Unaccounted cash payment - Undisclosed transactions found recorded in the books of M/s. ABC Ltd.- subject addition was made by the AO on the basis of one computerized excel sheet seized and inventorized - CIT(A) deleted the addition - HELD THAT:- We find that it is not the case of the Revenue that the assessee company was holding any agriculture land at Mortaka and therefore, without having any other corroborative evidence, merely on the basis of such excel sheet, it could not have been conclusively held that such expenditure were incurred by the asseseee company itself. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the addition - Decided against revenue.
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