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2019 (11) TMI 587 - AT - Income TaxProceedings u/s 153C without having the incriminating material - HELD THAT - In the instant case, there is no doubt that the assessee has filed the return of income on 30.09.2012 and the time limit for issue of notice u/s 143(2) was expired on 30.09.2013 prior to the date of transfer of the case to the AO having jurisdiction and the present AO had issued notice u/s 153C on 23.07.2014. By the time, the case was notified to the present AO, the assessment for the A.Y.2012-13 is unabated. Hence, the AO is not permitted to make any addition without having the incriminating material. In the instant case, the addition was made with reference to the rent paid by the assessee, which was accounted in the regular books of accounts and declared in the returns of income already filed and no incriminating material was found during the course of search. AO is not permitted to make any addition in the hands of the assessee relating to the rent paid by the assessee Accrual of interest income - method of accounting - HELD THAT - In the instant case, there is no dispute that the assessee had advanced the sums to the GSL Educational Society and also receiving the interest and received the substantial amount from GSL Educational Society as per the incriminating material found and seized. The said sums were not accounted in the books of accounts, therefore, the said sums were admitted as income in the hands of the assessee. No evidence found during the course of search with regard to write off of the advance. The letter was received by the assessee on 28.01.2016 relevant to the F.Y.2016-17 which has no relevance in the impugned assessment year. The assessment required to be made as per the incriminating material found during the course of search and method of accounting followed by the assessee each year independently. If the assessee accepts to forego the advance merely on the basis of letter it would take the character of donation but not the allowable expenditure. Merely because the GSL Educational Society is not inclined to make the payment, the same cannot be allowed as expenditure deduction. Therefore, we are unable to accept the contention of the assessee that on the basis of letter issued by GSL Educational Society to reduce the return of income. The assessee is free to follow the procedure laid down under the Income Tax Act to make efforts collect the outstanding dues and write off as bad debt n in the subsequent years as per law. Thus we, decline to interfere with the order of the CIT(A) and dismiss the appeal of the assessee.
Issues Involved:
1. Validity of addition made by the Assessing Officer (AO) under section 153C without incriminating material. 2. Addition of ?7,36,053/- towards rent paid for business premises. 3. Reduction of ?56,92,455/- from the returned income due to the inability of GSL Educational Society to make payment. Issue-Wise Detailed Analysis: 1. Validity of Addition under Section 153C Without Incriminating Material: The assessee filed a return of income for A.Y. 2012-13 on 30.09.2012. Subsequently, a search was conducted in the case of M/s G.S.L. Educational Society on 25.07.2013, during which incriminating material related to the assessee was found. The AO initiated proceedings under section 153C and issued a notice on 23.07.2014. The assessee argued that the assessment for A.Y. 2012-13 was concluded by 30.09.2013, and thus, the AO could not make additions without incriminating material. The Tribunal agreed, stating that the AO is not permitted to make additions without incriminating material in concluded assessments. The Tribunal set aside the order of the CIT(A) and deleted the addition made by the AO. 2. Addition of ?7,36,053/- Towards Rent Paid for Business Premises: The AO disallowed the deduction of ?7,36,053/- claimed under section 57 of the Act, as it was not an allowable deduction. The CIT(A) confirmed this disallowance. During the appeal, the assessee contended that the payment of rent was claimed in the regular return of income and no incriminating material was found during the search. The Tribunal, referring to the case of Y.V. Anjaneyulu Vs. DCIT, concluded that the AO could not make the addition without incriminating material and deleted the disallowance. 3. Reduction of ?56,92,455/- from Returned Income (A.Y. 2013-14): The assessee requested to reduce ?56,92,455/- from the returned income, arguing that GSL Educational Society expressed its inability to make the payment. The AO did not reduce the amount, and the CIT(A) upheld the AO's decision. The Tribunal noted that the assessee admitted the income based on incriminating material and that the income should be computed as per the provisions of the Act. The Tribunal held that merely because the society decided not to make the payment, the accrued income could not be reduced. The Tribunal dismissed the appeal, stating that the assessee should follow the procedure to collect the outstanding dues and write off as bad debt in subsequent years. 4. Reduction of ?56,92,455/- from Returned Income (A.Y. 2014-15): For A.Y. 2014-15, the AO completed the assessment accepting the income returned by the assessee. The assessee again requested to reduce ?56,92,455/-, but the CIT(A) dismissed the appeal as the AO did not make any addition. The Tribunal upheld the CIT(A)'s decision, stating that the issue was relevant to A.Y. 2013-14 and had no relevance for A.Y. 2014-15. Conclusion: - The appeal for A.Y. 2012-13 (I.T.A.No.546/Viz/2018) is allowed. - The appeals for A.Y. 2013-14 (I.T.A.No.547/Viz/2018) and A.Y. 2014-15 (I.T.A.No.548/Viz/2018) are dismissed. Order Pronounced: The order was pronounced in the open court on 8th November, 2019.
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