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2018 (12) TMI 1212 - AT - Income TaxAssessment u/s 153A - assessment as framed U/s 143(3) and within the time limit provided U/s 153B(1)(b) - Held that - A notice was issued by the AO u/s 153A and the Tribunal has decided the issue by considering that the Assessing Officer initiated the proceedings U/s 153A of the Act whereas in the case in hand the Assessing Officer issued a notice U/s 142(1) of the Act on 12/12/2014 because the assessee did not file any return of income U/s 139(1) of the Act. As apparent the facts in the case in hand are distinguishable and therefore the decisions relied upon by the assessee will not help the case of the assessee. Accordingly no substance or merits in the ground No. 1 of the assessee s appeal hence the same is dismissed. Disallowance of interest - Held that - Once the assessee has claimed the loss on account of interest then it is the primary onus of the assessee to prove and establish the allowability of the claim against the business income. To the extent of the interest which was paid on the fund used for investment the same cannot be allowed against the business income. The assessee has expressed his inability to segregate the details therefore in the facts and circumstances of the case we do not find any reason to interfere with the order of the CIT(A) hence this ground of assessee s appeal is dismissed. Addition in dairy business - N.P. determination - AO excluded the closing stock from the net profit declared by the assessee - Held that - Once the assessee has declared net profit which is to be taken for the purpose of income tax then the exclusion of closing stock from the net profit is not permissible. Even otherwise while computing the net profit as per the principle of accounting standards the opening and closing stock are very much part of the P 1, 475/- then no addition is called for. Therefore the net profit declared by the assessee excluding the interest income is 8.44% then even applying the deeming provisions of presumptive income U/s 44AD of the Act no addition is called for as the net profit declared by the assessee is more than 8% as provided U/s 44AD of the Act. Accordingly we delete the addition made by the Assessing Officer. Addition on account of unexplained investment in jewellery - Held that - Neither the AO nor the ld. CIT(A) has considered the jewellery which was declared in the revised return of income and further the purchases made by the assessee from 16/5/2011 to 30/1/2013 as per the purchase bills produced by the assessee. CIT(A) has turndown this explanation on the ground that the copies of the purchase bills were not found in the file of the Assessing Officer therefore if this claim of the assessee is found to be correct then no addition of 15.00 lacs is called for. Hence in the facts and circumstances of the case we set aside this issue to the record of the Assessing Officer to verify these facts of declaring the jewellery in the revised return of income as well as purchases made by the assessee from 16/5/2011 to 30/1/2013 as well as the jewellery recorded in the books of account. If the claim of the assessee is found to be true then no addition on this account is required to be made.
Issues Involved:
1. Validity of assessment framed under Section 143(3) read with Section 153B(1)(b) of the Income Tax Act, 1961. 2. Disallowance of interest of ?2,45,431. 3. Addition of ?94,809 in dairy business income. 4. Addition of ?15,00,000 for unexplained investment in jewelry. Issue-wise Detailed Analysis: 1. Validity of Assessment Framed Under Section 143(3) Read with Section 153B(1)(b): The assessee challenged the validity of the assessment on the ground that the assessment year under consideration pertains to the previous year in which the search was conducted, and thus, the provisions of Section 153A of the Act are not applicable. The assessee argued that the assessment could have been framed under Section 143(3) by issuing a notice under Section 143(2) of the Act, and hence, the assessment framed by the Assessing Officer is invalid and liable to be quashed. The Revenue contended that the assessment was framed under Section 143(3) after complying with the procedural conditions of issuing notice under Section 143(2). The Tribunal held that the notice issued under Section 142(1) was within the framework of the procedure for assessment, and the assessment was completed under Section 143(3) read with Section 153B(1)(b), thus finding no infirmity in the assessment order. The Tribunal dismissed the assessee's ground on this issue. 2. Disallowance of Interest of ?2,45,431: The Assessing Officer disallowed the interest claim of ?2,45,431 due to lack of supporting evidence from the assessee. The assessee argued that the interest income or loss was part of the business income and had been consistently treated as such in earlier years. The Tribunal noted that the assessee failed to provide a detailed explanation or segregation of interest payments and receipts. Therefore, the Tribunal upheld the disallowance made by the Assessing Officer and dismissed the assessee's appeal on this ground. 3. Addition of ?94,809 in Dairy Business Income: The Assessing Officer recomputed the net profit from the dairy business after excluding the bank interest and closing stock, resulting in an addition of ?94,809. The assessee contended that the closing stock is part of the business profits and should not be excluded. The Tribunal agreed with the assessee, stating that excluding the closing stock from the net profit is not permissible. The Tribunal found that the net profit declared by the assessee was more than 8% as provided under Section 44AD of the Act, and thus, no addition was warranted. The Tribunal deleted the addition made by the Assessing Officer. 4. Addition of ?15,00,000 for Unexplained Investment in Jewelry: During the search, jewelry worth ?1,72,21,146 was found, and the Assessing Officer added ?15,00,000 as unexplained investment. The assessee argued that the jewelry was declared in the revised return of income and supported by purchase bills. The Tribunal noted that the jewelry declared in the revised return and the purchases made between 2011 and 2013 were not considered by the Assessing Officer. The Tribunal set aside the issue to the Assessing Officer to verify the facts and, if found true, to delete the addition. The Tribunal directed the Assessing Officer to provide an appropriate opportunity of hearing to the assessee. Conclusion: The Tribunal dismissed the assessee's appeal on the validity of the assessment and disallowance of interest but allowed the appeal regarding the addition in dairy business income and set aside the issue of unexplained investment in jewelry for verification. The appeal was partly allowed.
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