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2018 (3) TMI 1615 - AT - Income TaxValidity of assessment framed u/s 153A - Held that - In the case of non abated assessment, no action can be taken u/s. 153A in the absence of any incriminating material. Accordingly, the legal ground raised by the assessee is deserves to be accepted. Reopening of assessment - Held that - It is the sold prerogative of the AO to initiate reassessment proceedings after satisfying the conditions of sec. 148 and recording the reasons for the same. The jurisdiction of the AO cannot be ushered-up in the present proceedings. Since the appeals have already been allowed in favour of the assessee, therefore, what remedy is available to the revenue for proceeding further against the assessee cannot be raised in the present proceedings. The scope of the proceeding cannot be enlarged to give a different colour to proceed against the assessee. Once assessment orders have been set aside u/s. 153A of the IT Act, 1961 and additions have been deleted, revenue is at liberty to take any action as per law, if so, advised in accordance with law. Therefore, no direction is required u/s. 150(1) of the IT, Act Disallowance of site labour expenses - Held that - Our attention was specifically drawn to the fact that even after search, the AO has accepted claim of site labour expenses to the extent of 15% of the total receipt. Further, in fact, the AO himself is not clear whether adhoc disallowance is on the basis of non verification of claim or based on incriminating material. In para 3 of the assessment order, AO has merely considered disallowance on the ground of unverified and unvouched claim. However, in the case of audited books of accounts, the AO cannot consider any adhoc disallowance even u/s. 143(3) much less u/s. 153A. There is this no legal basis for any such disallowance even on merits. Claim of Project Consultancy expenses - Held that - The same was provided after deduction of TDS and further these consultancy services were integral part of the business activities as per evidence placed on record and accordingly there is no prima facie basis for invoking provisions of section 153A in the absence of any nexus between such expenses and seized annexure. We are of the considered opinion that all these expenses are part of record and duly accepted at original stage and as such there is no case of any disallowance in terms of sec. 153A. Disallowance on the basis of annexure M-610/07 seized by CBI - Held that - AO considered the seized annexures by CBI on mechanical basis. It is noted that in the context of show cause notice issued by AO with reference to these seized annexures by CBI, the appellant has denied any connection with these annexures and alleged that same seems to have been planted by our competitor M/s. Enviorntech Overseas Ltd. It is strange that inspite of above submission of the assesse, the AO has not carried out any investigation or sought any report from CBI and merely related the claim of expenses in the books of accounts as attributable to payment of bribe to Delhi Jal Board Officials. In the absence of any adverse report to justify allegation of bribe, we are not inclined to give any credence to such sweeping allegation. Accordingly, we find no justification in the order of CIT(A) in confirming the impugned disallowance of site expenses u/s 37(1) of the Act and same is hereby deleted. Disallowance of claim of statutory deduction u/s 80IA - Held that - CIT(A) has considered this issue in great detail and finding was recorded after proper appreciation of facts and legal position. The Ld. CIT DR has fairly conceded that claim of statutory deduction u/s. 80IA being a purely legal issue is beyond scope of sec. 153A. Further, the appellant has placed on record extract of the contract which is for complete overhaul of sewage system with the help of innovative technology and as such the claim was correctly accepted by AO at the original stage and CIT(A) has rightly considered and accepted the same. There is thus no case of any interference in the finding and conclusion of CIT(A). In respect of adhoc disallowance of 10% of site labour expenses, as per detailed finding recorded in A.Y. 2002-03, we are of the opinion that same is beyond the scope of sec. 153A of the Act.
Issues Involved:
1. Validity of assessments framed under section 153A of the Income Tax Act, 1961. 2. Jurisdiction to initiate proceedings under section 153A in the absence of incriminating material. 3. Disallowance of various expenses (site labour expenses, project consultancy expenses, site expenses) under section 37(1) of the Income Tax Act, 1961. 4. Eligibility for statutory deduction under section 80IA of the Income Tax Act, 1961. 5. Addition of income from undisclosed sources. 6. Procedural issues regarding the passing of ex parte orders without proper notice and opportunity. Detailed Analysis: 1. Validity of Assessments under Section 153A: - The Tribunal adjudicated appeals relating to AY 2002-03 to 2005-06 and AY 2006-07 to 2008-09 in two parts. For AY 2002-03 to 2005-06, the original assessments were completed before the date of search, and there was no case of abatement of pending proceedings. - It was held that in the case of non-abated assessments, no action can be taken under section 153A in the absence of any incriminating material. The Tribunal relied on various judgments, including CIT v. Kabul Chawla, Pr. CIT v. Meeta Gutgutia, and CIT v. Sinhgad Technical Educational Society. 2. Jurisdiction to Initiate Proceedings under Section 153A: - The Tribunal found that the Assessing Officer (AO) had no jurisdiction to initiate proceedings under section 153A in the absence of any incriminating material found during the search. This was particularly relevant for AY 2002-03, where the AO made a 10% ad-hoc disallowance of site labour expenses without any incriminating material. - The Tribunal dismissed the Revenue's contention that the AO could make all additions/disallowances which he could make in an assessment under section 147 even in the absence of any incriminating material. 3. Disallowance of Various Expenses under Section 37(1): - The Tribunal found no justification for the ad-hoc disallowance of 10% of site labour expenses as the AO had not referred to any incriminating material for making such disallowance. - For project consultancy expenses, the Tribunal noted that these were for services obtained for the Delhi Jal Board project and were supported by audited accounts and TDS deductions. The disallowance was held to be without jurisdiction in the absence of any incriminating material. - The Tribunal also found no basis for disallowance of site expenses, as the AO had not substantiated the allegation of bribes to Delhi Jal Board officials with credible evidence. The Tribunal emphasized that disallowances should be based on proper enquiry and investigation. 4. Eligibility for Statutory Deduction under Section 80IA: - The Tribunal upheld the assessee's claim for statutory deduction under section 80IA, noting that the AO had accepted this claim in the original assessments under section 143(3) for various years. The Tribunal found that the AO's contrary view in the order under section 153A was merely a change of opinion. - The Tribunal also noted that the claim was supported by a certificate from the Delhi Jal Board and a CA certificate in Form No. 10CCB. The Tribunal relied on the decision of the Hon'ble Bombay High Court in CIT v. ABG Heavy Industries Ltd., which was upheld by the Supreme Court. 5. Addition of Income from Undisclosed Sources: - For AY 2005-06, the Tribunal found that the AO's addition of ?33,42,000 and ?11,71,000 as income from undisclosed sources was based on conjectures and surmises. The Tribunal restored the matter to the AO for fresh adjudication. - For AY 2008-09, the Tribunal upheld the addition of ?5,50,000 as unexplained cash, noting that the appellant had not provided any explanation for the same. 6. Procedural Issues: - The Tribunal dismissed the assessee's grounds regarding the passing of ex parte orders without proper notice and opportunity, as these grounds were not pressed by the assessee's counsel. Conclusion: The Tribunal partly allowed the appeals for AY 2002-03, 2003-04, 2005-06, and 2008-09, and fully allowed the appeals for AY 2006-07 and 2007-08. The cross objection for AY 2004-05 was allowed, and the Revenue's appeal for AY 2004-05 was dismissed. The Tribunal emphasized the importance of incriminating material for additions/disallowances under section 153A and upheld the assessee's claims for statutory deductions and various expenses based on audited accounts and TDS deductions.
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