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2017 (3) TMI 36 - AT - Income TaxAssessment u/s 153A - addition u/s 14A - Held that - In the present case, since the addition was made by the AO u/s 153A of the Act in the absence of incriminating material found during the course of search. Therefore, in view of the ratio laid down by the Hon ble Jurisdictional High Court in the aforesaid case of CIT Vs Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT the assessment framed u/s 153A of the Act was not valid. Accordingly, additional grounds raised by the assessee are allowed in its favour
Issues Involved:
1. Legality of the addition under Section 14A of the Income Tax Act, 1961. 2. Deletion of disallowance of ?2,31,55,000/- on account of unexplained expenditure on sub-brokerage. 3. Admission of additional grounds by the assessee regarding the absence of incriminating material found during the search. Detailed Analysis: 1. Legality of the Addition under Section 14A of the Income Tax Act, 1961: The assessee challenged the confirmation of the addition of ?1,09,029/- made by the Assessing Officer (AO) under Section 14A of the Income Tax Act, 1961. The AO had initially made a disallowance of ?12,08,391/-, but the Commissioner of Income Tax (Appeals) [CIT(A)] reduced it to ?1,09,029/-. The Tribunal, after considering the submissions and the material on record, upheld the CIT(A)'s decision to sustain the reduced disallowance. 2. Deletion of Disallowance of ?2,31,55,000/- on Account of Unexplained Expenditure on Sub-Brokerage: The department appealed against the CIT(A)'s decision to delete the disallowance of ?2,31,55,000/- made by the AO. The AO had disallowed the sub-brokerage expenses on the grounds that the assessee could not substantiate the services rendered by sub-brokers and the funds mobilized by them. The CIT(A) observed that the disallowance was based on the AO's subjective opinion and suspicion rather than concrete evidence. The CIT(A) noted that the sub-brokers had confirmed the services and payments through banking channels, and no incriminating documents were seized during the search. The Tribunal agreed with the CIT(A)'s findings, emphasizing that the disallowance should have been based on seized documents during the search and not on mere suspicion. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the disallowance. 3. Admission of Additional Grounds by the Assessee Regarding the Absence of Incriminating Material Found During the Search: The assessee sought to admit additional grounds, arguing that no addition could be made under Section 153A in the absence of any incriminating material found during the search. The Tribunal considered the Supreme Court's judgment in NTPC Vs CIT, which allows the Tribunal to consider questions of law arising from facts on record. The Tribunal admitted the additional grounds, noting that they were purely legal and did not require further investigation. The Tribunal referred to the case of CIT Vs Kabul Chawla, where it was held that completed assessments could only be interfered with if incriminating material was found during the search. Since no such material was found in the present case, the Tribunal ruled that the assessment under Section 153A was invalid. Consequently, the additional grounds raised by the assessee were allowed, and the department's appeal was dismissed. Conclusion: The Tribunal allowed the assessee's appeals and dismissed the department's appeal. The key findings included the upholding of the reduced disallowance under Section 14A, the deletion of the disallowance of sub-brokerage expenses due to lack of concrete evidence, and the invalidation of the assessment under Section 153A due to the absence of incriminating material found during the search.
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