2013 (10) TMI 1453 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80IA - Bogus and fabricated purchases and sales.
2. Validity of block assessment u/s 158BC without notice u/s 143(2).

Summary:

1. Deduction u/s 80IA - Bogus and Fabricated Purchases and Sales:
The Revenue contested the allowance of deduction u/s 80IA by the CIT(A), arguing that the sales and purchases were bogus and fabricated. The case involved a search u/s 132 at the premises of the assessee and his associates, revealing substantial activities in manufacturing "Attar Hina" (AH), used in Gutkha and other tobacco products. The Assessing Officer (A.O) relied on the statement of Shri Nemichand Mehta (NCM) recorded during the search, concluding that the sales to M/s Jaywant Products Ltd. (JPL) and M/s Jaywant Industries Ltd. (JIL) were bogus, leading to the disallowance of deduction u/s 80IA. However, the CIT(A) allowed the claim, finding that the A.O's conclusions were based on evasive statements without considering relevant evidence. The CIT(A) observed that the assessee provided substantial evidence of manufacturing and selling AH, and the A.O ignored these facts. The ITAT upheld the CIT(A)'s decision, noting that the block assessment cannot be based on inferences without direct evidence of undisclosed income. The transactions were duly recorded in the books of account, and no incriminating material was found during the search.

2. Validity of Block Assessment u/s 158BC without Notice u/s 143(2):
The assessee raised a new plea regarding the validity of the block assessment u/s 158BC due to the absence of a notice u/s 143(2). The assessee argued that the A.O lacked jurisdiction to initiate the block assessment without issuing this notice. The Revenue countered that a composite notice u/s 142(1) and 143(2) was issued, and the letter dated 23.5.2003 satisfied the requirement of section 143(2). The ITAT noted that while the assessee can raise a fresh plea, the issue became academic due to the dismissal of the Revenue's appeal on merits. Therefore, the ITAT did not adjudicate this new plea.

Conclusion: The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order allowing the deduction u/s 80IA and confirming that the block assessment was not sustainable without direct evidence of undisclosed income. The new plea regarding the validity of the block assessment was not adjudicated as it was deemed academic.