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2021 (10) TMI 154 - AT - Income TaxAssessment u/s 153A - Search proceedings u/s 132 - HELD THAT - Since in this case search has taken place u/s 132, preceding six year assessments preceding from the date of search i.e. 29.04.2015 are to be done u/s 153A and accordingly assessment for A.Y. 2013-14 was also made u/s 143(3) / 153A. Therefore, we do not find merit in this contention for Ld. Counsel for the assessee. However, whether there was incriminating material found in respect of each of additions / disallowances made in the assessment order as per the arguments raised by Ld. Counsel may be relevant and we would consider this argument while discussing and adjudicating the grounds of appeal involving various additions / disallowances. Loss claimed by the assessee did not relate / accrue for the year under consideration - whether such loss is the loss of the year under appeal or not? - HELD THAT - The impugned loss which is the subject matter of the present appeal is integral to the main business of the assessee andhas been incurred in respect of the contracts entered into to safeguard the foreign exchange proceeds on export or foreign exchange payments in respect of the imports and other payables from exchange fluctuation loss and is thus not speculative loss but is normal business loss which is liable to be set off as per the provisions of the Income Tax Act. Since the agreement came to an end in Jan 2013 and March 2013 and agreed level could not be achieved and hence, as per the agreement the loss had crystallized on the expiry of the period of 5 years which fell in the year before us and hence the loss booked by the assessee is the loss of the year under appeal. Merely because the loss has got some connection with earlier year(s), it does not make the loss as the loss of those years. All that has to be seen the precise point of crystallization of the event leading to the loss which in our considered opinion fell in the year before us and hence the loss is the loss of the year under appeal. As CIT vs. West Chusick Coal Co. Ltd. 1980 (9) TMI 65 - CALCUTTA HIGH COURT , Metal Box Co of India Ltd. vs. Their workmen 1968 (8) TMI 53 - SUPREME COURT which lay down the guiding principles as to when a loss can be said to have been incurred. Thus, even on this score the loss which is the subject matter of appeal before us is the loss which is allowable in the previous year relevant to AY 2013-14. - Decided against revenue. Bogus expenses claimed to be incurred by the assessee company on account of job work done - HELD THAT - Contention of CIT (A) that evidence filed by the assessee selfserving documents and circumstantial evidence leads to the conclusion of A.O. that Sh. Mohinder Kumar Garg was an old employee of the assessee company cannot take the case of revenue anywhere. It would be enough for us to say that voluminous documentary evidences filed by the assessee considered by us are clearly establishing the genuineness of the job work expenses incurred in relation to M/s Sai Exports - For direct documentary evidences, how can the so called circumstantial evidences be relied. Documentary evidences filed by the assessee before the lower authorities which have been referred by CIT(A) at page 60 of his appeal order to which reference has also been made in the written submissions filed by the assessee and to which our attention was drawn clearly establish mentioned by us above that job work expense claimed by the assessee to have been paid to M/s Sai Exports are quite genuine and established. Non genuine purchases of fabric - HELD THAT - We do not want to burden our order by repeating the whole hosts of documentary evidences filed in this case which establish that the purchases made by the assessee from the above said two suppliers are genuine purchases. We have gone through the observations made by CIT(A) in his appeal order and we do not agree with them. Opening of the bank account by the suppliers in the same bank in which assessee had bank account is not something which is unusual as it may be necessary for the smoothness of the banking and avoid the loss of time in collecting the cheques etc. We find that the burden to prove purchases was very well discharged by the assessee - Decided in favour of assessee. Addition u/s 14A - Extent of exempt income - HELD THAT - In any case, there is exempt income only to the extent of ₹ 85,656/-and for this reason also, disallowance under section 14A could not have exceeded this amount in view of the decision of Delhi High Court in the case of Joint Investment Ltd 2015 (3) TMI 155 - DELHI HIGH COURT hence we uphold the order of CIT(A) to this extent. But, Since we have deleted the entire amount of disallowance made by AO, hence even the disallowance sustained by CIT(A) to the extent of ₹ 85,656/- is also not sustainable. In the result, ground no. 14 of the assessee s appeal is allowed.
Issues Involved:
1. Deletion of addition on account of bogus expenses. 2. Deletion of addition on account of deficit on settlement of forward contracts. 3. Deletion of disallowance of product development expenses. 4. Applicability of Section 14A of the Income Tax Act. 5. Jurisdiction under Section 153A. 6. Disallowance of expenses related to job work. 7. Disallowance of expenses related to bogus purchases. 8. Interest under Section 234B. Detailed Analysis: 1. Deletion of Addition on Account of Bogus Expenses: The Revenue challenged the deletion of ?17,992/- added by the AO for bogus expenses related to M/s Aam Bee Clothing. The CIT(A) deleted this addition, and the Tribunal upheld this decision, noting that the job work charges were allowed in the assessment order passed under section 143(3) for AY 2012-13 and that the job worker was assessed to tax. 2. Deletion of Addition on Account of Deficit on Settlement of Forward Contracts: The Assessee contested the disallowance of ?115,28,15,940/- out of a total of ?140,86,93,664/-, while the Revenue contested the relief of ?25,58,77,724/- allowed by the CIT(A). The Tribunal held that the loss incurred on foreign currency derivative contracts was a normal business loss and not speculative. The loss was held to be the loss of the year under appeal as the liability crystallized in the year under consideration. 3. Deletion of Disallowance of Product Development Expenses: The Revenue contested the deletion of ?11,63,14,122/- by the CIT(A). The Tribunal upheld the CIT(A)'s decision, relying on the ITAT’s order in the Assessee’s own case for AY 2007-08 & 2008-09 and the Delhi High Court’s order, confirming that the product development expenses were not deferred revenue expenses. 4. Applicability of Section 14A of the Income Tax Act: The AO made an addition of ?4,65,49,093/- under Section 14A, out of which ?85,656/- was confirmed by the CIT(A). The Tribunal deleted the entire disallowance, noting the absence of incriminating material found during the search and relying on the Delhi High Court’s decision in Joint Investment Ltd., which limits the disallowance to the amount of exempt income earned. 5. Jurisdiction under Section 153A: The Assessee argued that the assessment order under Section 153A was invalid as no incriminating material was found during the search. The Tribunal held that the assessment under Section 153A was valid as the search took place under Section 132, and assessments for the preceding six years were required to be made under Section 153A. 6. Disallowance of Expenses Related to Job Work: The Assessee contested the disallowance of ?1,29,01,751/- for job work done by M/s Sai Export and ?6,41,39,357/- for job work done by M/s Shri Ram Exports. The Tribunal deleted both disallowances, noting the absence of incriminating material and the substantial documentary evidence provided by the Assessee proving the genuineness of the job work. 7. Disallowance of Expenses Related to Bogus Purchases: The Assessee contested the disallowance of ?10,18,44,865/- for purchases from M/s Jindal Fashion and M/s Akansha Fashion and ?17,87,17,045/- for purchases from M/s Super Connection India P. Ltd. The Tribunal deleted both disallowances, noting the absence of incriminating material and the substantial documentary evidence provided by the Assessee proving the genuineness of the purchases. 8. Interest under Section 234B: The Assessee’s ground regarding interest under Section 234B was noted to be consequential in nature and did not require specific adjudication. Conclusion: The Tribunal provided a detailed analysis of each issue, considering the arguments and evidence presented by both parties. The Tribunal upheld the CIT(A)'s decisions on most counts, emphasizing the absence of incriminating material found during the search and the substantial documentary evidence provided by the Assessee. The Tribunal’s decisions were aligned with relevant legal precedents and statutory provisions.
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