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2018 (3) TMI 425 - AT - Income TaxDisallowance u/s.14A - assessment order passed u/s.153C r.w.s. 143(3) - Held that - It is an undisputed fact that the AO already made an addition under the said provisions during the regular assessment proceedings u/s.143(3) of the Act. This issue now stands remitted by the Tribunal to the file of AO. Further, it is an undisputed fact that no seized material exists to support the Revenue to assume jurisdiction validly u/s.153C of the Act for invoking the provisions of section 14A of the Act successfully in this non-abated assessment. We do not approve the AO s attempts to resort to make additions by making disallowance u/s.14A of the Act in the assessment made u/s.153C of the Act in the absence of any incriminating material. - Decided in favour of assessee Disallowance being contribution to Group Gratuity Scheme - perusal of the orders of the Revenue does not indicate the existence of any incriminating material linking to the said claim of the assessee. We find the contents of Para No.7 of the AO and Para Nos. 3.11 and 3.12 of the order of CIT(A) are relevant. Considering the same, we are of the view that this issue also should be decided in favour of the assessee Set off of the disallowed sum against the contingency disclosed by the assessee in the return of income towards discrepancies/additions if any - Held that - It is settled issue that the contingent disclosure is available for set off against the disallowance u/s. 14 of the Act. However, in the present case, the question of set off does not arise as we have already granted relief to the assessee on legal issue relating to the recording of satisfaction before invoking the provisions of section 14A of the Act r.w. Rule 8D(2) of the I.T. Rules. The Ground No.2/Additional Ground No.2(a) becomes academic. Reduction of returned loss offered by the assessee during the search & seizure proceedings - additional groud admission - Held that - We examined the objections raised by the Ld. DR for the Revenue and find there is need for investigation into the seized material and other documents that were discovered during the search and seizure operation and the reasons that led to the disclosure of ₹ 1.91 crores in general and ₹ 60 lakhs in particular for the year under consideration. In our view, this exercise falls in the zone of investigation of facts. Accordingly, the conditions mentioned by the Supreme Court in the case of NTPC Ltd. (1996 (12) TMI 7 - SUPREME Court) do not allow in this case for admission of the additional ground. Accordingly, the additional Ground No.2(b) raised by the assessee is not admitted. Disallowance being contribution to Group Gratuity Scheme - Held that - the order of CIT(A) on this issue is fair and reasonable as the scheme has not been approved till date, as admitted by the Ld. AR for the assessee. Hence, it does not call for any interference on this issue - Decided against assessee disallowance of Portfolio Management Fees - Held that - We find the claim of the assessee with regard to payment of PMS fees paid by the assessee is an allowable deduction from the capital gains. Therefore, we direct the AO to examine the facts of the present case and apply the ratio laid down by the Tribunal in the case of Serum Institute of India Ltd. (2018 (3) TMI 391 - ITAT PUNE).
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Contribution to Group Gratuity Scheme. 3. Set-off of contingency amount against disallowance under Section 14A. 4. Disallowance of Portfolio Management Scheme (PMS) Fees. 5. Additional grounds raised by the assessee. Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The assessee contested the disallowance under Section 14A made by the Assessing Officer (AO) during the search assessment under Section 153C, arguing that no incriminating material was found during the search to justify such disallowance. The Tribunal observed that the AO had already made a similar disallowance during regular assessment proceedings under Section 143(3), and no new incriminating material was found during the search to support the disallowance under Section 153C. Citing the decisions in "All Cargo Global Logistics Ltd. Vs. DCIT" and "Continental Warehousing Corporation (Nhava Sheva) Ltd.," the Tribunal held that such disallowance is not sustainable in non-abated assessments without incriminating material. Consequently, the Tribunal allowed the additional ground raised by the assessee, rendering the adjudication of the original ground academic. 2. Contribution to Group Gratuity Scheme: The assessee's claim for deduction of contributions to the Group Gratuity Scheme was disallowed by the AO due to the absence of documentary evidence and approval of the scheme. The Tribunal noted that the scheme had not been approved, and no supporting documents were provided. As the disallowance was not backed by any incriminating material found during the search, the Tribunal allowed the assessee's ground, stating that such addition is unwarranted in non-abated assessments. 3. Set-off of Contingency Amount against Disallowance under Section 14A: The assessee sought to set off the disallowance under Section 14A against a contingency amount disclosed during the search. The Tribunal referenced similar cases, such as "Adurjee & Brothers Pvt. Ltd.," where such set-offs were allowed. However, since the Tribunal had already granted relief on the legal issue of recording satisfaction before invoking Section 14A, the question of set-off became academic. 4. Disallowance of Portfolio Management Scheme (PMS) Fees: The assessee contested the disallowance of PMS fees from the sale consideration of shares while computing capital gains. The Tribunal referenced its decision in "Serum Institute of India Ltd." and held that PMS fees are an allowable deduction from capital gains. The Tribunal directed the AO to apply this ratio to the present case, thereby allowing the ground for statistical purposes. 5. Additional Grounds Raised by the Assessee: The assessee raised additional grounds, including the reduction of returned loss by the contingency amount disclosed during the search. The Tribunal noted that adjudicating this ground required investigating facts, such as the manner of disclosure and examination of seized material, which is not permissible at the appellate stage. Consequently, the additional ground was not admitted. Conclusion: - Appeals for A.Y. 2006-07 and A.Yrs. 2009-10 to 2011-12 were partly allowed. - Appeals for A.Yrs. 2007-08 and 2008-09 were dismissed. Order Pronounced on February 28, 2018.
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