2018 (5) TMI 138 - AT - Income Tax

Assessment proceedings u/s.153A - Held that - We had also deliberated on the judicial pronouncements cited by learned AR and DR during the course of hearing before us as well as relied on by the lower authorities while passing their respective orders. With regard to the ground No.1 taken by the Department we found that additions were deleted by CIT(A) which were found to be without any incriminating document, hence not sustainable in the assessment proceedings u/s.153A of the Act for non- abated assessment years. CIT(A) has relied on the decision of Mumbai Tribunal in the case of All Cargo Global Logistics Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) . Accordingly, CIT(A) was justified in deleting the additions made on issues other than those based on any incriminating material found during the course of search. CIT(A) for restricting the disallowance to the extent of 25% of total travelling expenses for want of verification and possible non business expenses. Adding the disallowance u/s.14A while computing book profit u/s.115JB is covered in favour of assessee by the decision of the Special Bench in the case of ITAT(Special Bench) in the case of M/s. Vireet Investment Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI .

Issues Involved:
1. Deletion of additions not based on incriminating material found during search.
2. Allowance of deduction on account of write-off of interest on Optionally Convertible Debentures (OCDs).
3. Treatment of loss on sale of shares as business loss instead of capital loss.
4. Allowance of foreign travel expenses.
5. Deletion of disallowance under Section 14A while computing book profits under Section 115JB.

Detailed Analysis:

1. Deletion of Additions Not Based on Incriminating Material Found During Search:
The Revenue contended that the CIT(A) was not justified in deleting the additions made on issues not based on any incriminating material found during the search, citing the Karnataka High Court decision in the case of M/s. Canara Housing Development Company. The Tribunal upheld the CIT(A)'s decision, referencing the Bombay High Court's ruling in CIT Vs. Murli Agro Products Limited and the Special Bench decision in All Cargo Global Logistics Ltd. vs. DCIT. It was established that the AO could not disturb the finalized assessment/reassessment unless the material gathered during the Section 153A proceedings indicated that the reliefs granted were contrary to the facts unearthed during the search.

2. Allowance of Deduction on Account of Write-off of Interest on OCDs:
The AO disallowed the assessee's claim for write-off of interest receivable on OCDs amounting to ?10,97,05,670/-. The CIT(A) deleted this addition, referencing the Tribunal's earlier decision in the assessee's own case, where it was held that the write-off of bad debts was justified following the Supreme Court's decision in TRF Ltd. vs. CIT. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in allowing the deduction.

3. Treatment of Loss on Sale of Shares as Business Loss:
The AO treated the profit on sale of shares as capital gains instead of business income. The CIT(A) allowed the assessee’s claim of business income on sale of shares, noting that the department had previously treated the income from the sale of shares as business income/loss in earlier assessment years. The Tribunal upheld the CIT(A)'s decision, emphasizing consistency in the treatment of income and finding no new material to justify a change.

4. Allowance of Foreign Travel Expenses:
The AO disallowed foreign travel expenses, which the CIT(A) allowed, stating that no incriminating material was found during the search to justify the disallowance. The Tribunal upheld the CIT(A)'s decision, referencing the Mumbai Tribunal's decision in Allcargo and noting the lack of incriminating material.

5. Deletion of Disallowance Under Section 14A While Computing Book Profits Under Section 115JB:
The AO added the disallowance under Section 14A while computing book profits under Section 115JB, which the CIT(A) deleted. The Tribunal upheld the CIT(A)'s decision, referencing the Special Bench decision in the case of M/s. Vireet Investment Pvt. Ltd., which held that disallowance under Section 14A cannot be added while computing book profits under Section 115JB.

Conclusion:
The Tribunal dismissed the Revenue's appeals for the assessment years 2005-06, 2006-07, 2008-09, 2009-10, 2010-11, and 2011-12, and allowed the assessee's appeals for the assessment years 2006-07, 2010-11, and 2011-12. The Tribunal's decisions were based on the lack of incriminating material found during the search, consistency in the treatment of income, and adherence to judicial precedents.

← Previous Next →