2021 (7) TMI 1182 - AT - Income Tax

Assessment u/s 153A - disallowance of claim of 80IA deduction - whether regular assessments in assessee's cases could be held to be pending as per section 153A(1) second proviso or not? - HELD THAT - We have not come across any such incriminating material relied upon by the learned lower authorities in A.Ys 2010-11 2011-12. We thus decline the Revenue s argument quoting EN Gopa Kumar Vs. CIT 2016 (11) TMI 72 - KERALA HIGH COURT and CIT Vs. Kesarwani Zarda Bhandar 2017 (4) TMI 57 - ALLAHABAD HIGH COURT and CIT Vs. Rajkumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT to hold that the impugned assessments are not sustainable in law since not based on any incriminating material found or seized during the course of search. The same stands quashed in the former twin assessment years 2010-11 and 2011-12. The assessee's corresponding appeals are accepted on the forgoing legal issue thereby rendering all other pleadings on merit being rendered infructuous. Treating the interest income(s) in these twin assessment years as income from other sources than eligible for section 80IA deduction as business income - HELD THAT - We prima facie notice that the assessee s income from other sources also included dividend from mutual funds and rental receipts, etc. There is no indication at all in the learned lower authorities orders as to whether the assessee had proved the corresponding receipt to have been derived from the eligible undertaking(s) or not. Faced with this situation, we deem it appropriate to restore the instant identical issue back to the AO to be examined afresh subject to the condition that it shall be the duty and responsibility of the tax payer only to prove the foregoing clinching direct nexus between its interest and other income derived from the eligible undertaking within three effective opportunities of hearing. Revision u/s 263 - exercise of the PCIT s revision jurisdiction holding the corresponding assessment dt.31.3.2015 as an erroneous one causing prejudice to the interest of Revenue on the ground that the AO had failed to compute 115JB section MAT qua assessee's provision for bad and doubtful debts of ₹ 1968.10 lakhs as per Expln.(1)(i) - HELD THAT - As submitted before us that the assessee had very well made simultaneous reduction from the loans and advances on the assets side of the Balance Sheet which amounted to write of of the said debts not hit by the foregoing statutory provision. Mr. Afzal quoted hon ble Gujarat high court s Full Bench decision in CIT Vs. Vodafone Essar Gujarat Limited 2017 (8) TMI 451 - GUJARAT HIGH COURT . We find no merit in the assessee's foregoing argument since it has not placed on record the corresponding books of account suggesting corresponding simultaneous reduction of the loans and advances on the asset side of the Balance Sheet. We thus quote hon'ble apex court landmark decision in Malabar Industrial Company Ltd. 2000 (2) TMI 10 - SUPREME COURT and hold that the learned PCIT has rightly exercised its 263 revision jurisdiction in the given facts and circumstances of the case.

Summary

Issues Involved:
1. Regular assessments pending under section 153A(1) second proviso.
2. Validity of assessments under section 153A without incriminating material.
3. Revision jurisdiction exercised by PCIT under section 263.
4. Treatment of interest income for section 80IA deduction.
5. Revision jurisdiction by PCIT for MAT computation.

Detailed Analysis:

1. The first issue pertains to the regular assessments pending under section 153A(1) second proviso for Assessment Years 2010-11 & 2011-12. The Tribunal observed that no assessment was pending as the time limit had expired before the search action. Citing relevant case laws, the Tribunal held that section 153A proceedings could only be initiated if incriminating material was found during the search, which was not the case here. Consequently, the assessments for these years were deemed unsustainable and quashed.

2. The second issue concerns the validity of assessments under section 153A without incriminating material for Assessment Years 2010-11 & 2011-12. The Tribunal found that the assessments were not based on any incriminating material and hence were not sustainable in law. The appeals related to these assessments were accepted based on this legal issue.

3. Moving on to the third issue, it involves the revision jurisdiction exercised by the PCIT under section 263 for Assessment Years 2010-11 & 2011-12. As the assessments had already been quashed in the earlier appeals, the Tribunal held that the PCIT's revision directions had no basis and were also rejected. The corresponding appeals were accepted accordingly.

4. The fourth issue revolves around the treatment of interest income for section 80IA deduction in Assessment Years 2012-13 & 2013-14. The Tribunal noted that the lower authorities had erred in treating the interest income as income from "other" sources instead of business income eligible for deduction. The matter was remanded back to the Assessing Officer to establish a direct nexus between the interest income and the eligible undertaking.

5. Lastly, the fifth issue relates to the revision jurisdiction exercised by the PCIT for MAT computation in Assessment Year 2012-13. The PCIT had deemed the assessment erroneous due to the failure to compute MAT regarding bad and doubtful debts. The Tribunal, however, upheld the PCIT's decision, emphasizing the lack of evidence regarding the simultaneous reduction of loans and advances. Consequently, the appeal for this assessment year was dismissed.

In conclusion, the Tribunal allowed certain appeals, partly accepted others for statistical purposes, and dismissed one appeal based on the detailed analysis of the various legal issues involved in the judgment.