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2021 (12) TMI 1194 - AT - Income TaxAssessment u/s 153A - Disallowance of interest expenditure u/s.37 - assessment of income from other sources u/s.68 r.w.s. 115BBE - HELD THAT - There is no reference to any seized material / incriminating material in respect of assessment of income from other sources u/s.68 r.w.s 115BBE of the Act. It is well settled principles of law by the decisions of various Courts, including decision of the Hon'ble Supreme Court in the case of PCIT Vs. Meeta Gutgutia Prop. M/s. Ferns N Petals 2017 (5) TMI 1224 - DELHI HIGH COURT that in absence of incriminating material found as a result of search u/s.132 or requisition u/s.153A of the Act, completed assessments cannot be disturbed in the assessment framed u/s.153A. Also see CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD., ALL CARGO GLOBAL LOGISTICS LTD. 2015 (5) TMI 656 - BOMBAY HIGH COURT and KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT . The sum and substance of ratios laid down by various High Courts is that unabated/completed assessments cannot be disturbed in absence of any incriminating material found as a result of search. As assessments for assessment years 2011-12 to 2014-15 are unabated / completed. Further, no reference of any incriminating material found as result of search in respect of additions made by the Assessing Officer towards disallowance of interest u/s.37 of the Act and for assessment of income from other sources u/s.68 r.w.s 115BBE of the Income Tax Act, 1961 - we direct the Assessing Officer to delete additions made towards interest u/s.37 of the Act and assessment of income from other sources u/s.68 r.w.s. 115BBE of the Act for all assessment years. - Decided in favour of assessee.
Issues involved:
- Disallowance of interest expenditure - Assessment of income from other sources - Validity of assessment order under section 153A Disallowance of interest expenditure: The assessee challenged the disallowance of interest expenditure made by the Assessing Officer. The Assessing Officer disallowed the interest paid on various loans on the ground that it was not wholly and exclusively expended for the purpose of income from the profession. The learned CIT(A) confirmed the disallowance of interest for all assessment years, stating that the assessee failed to establish a nexus between the interest paid on loans and professional income. The learned AR for the assessee argued that in the absence of incriminating material found during the search, no addition could be made to completed assessments under section 153A. The Tribunal noted that no incriminating material was found during the search regarding the disallowance of interest expenses. Citing various judicial precedents, including decisions by the Supreme Court and High Courts, the Tribunal held that completed assessments cannot be disturbed in the absence of incriminating material found as a result of the search. Consequently, the Tribunal directed the Assessing Officer to delete the additions made towards interest expenditure for all assessment years. Assessment of income from other sources: The Assessing Officer treated income disclosed under the head "income from other sources" as unexplained cash credit under section 68 of the Income Tax Act. The learned CIT(A) confirmed the assessment of income from other sources as unexplained cash credit. The Tribunal observed that there was no reference to any seized or incriminating material regarding the assessment of income from other sources. Relying on legal precedents, the Tribunal reiterated that completed assessments cannot be disturbed in the absence of incriminating material found during the search. Therefore, the Tribunal directed the Assessing Officer to delete the assessment of income from other sources as unexplained cash credit for all assessment years. Validity of assessment order under section 153A: The assessee challenged the validity of the assessment order passed under section 153A of the Income Tax Act. The learned CIT(A) upheld the validity of the assessment order, stating that once a search takes place, the Assessing Officer has the power to assess total income, including undisclosed income, for six assessment years preceding the year of the search. The Tribunal, after considering the arguments presented by both parties and examining the legal precedents, concluded that in the absence of incriminating material found during the search, completed assessments cannot be disturbed under section 153A. As the assessments for the relevant years were completed before the search took place, the Tribunal held that the additions made by the Assessing Officer could not be sustained. Therefore, the Tribunal allowed the appeals filed by the assessee for all assessment years. This detailed analysis of the legal judgment highlights the issues of disallowance of interest expenditure, assessment of income from other sources, and the validity of the assessment order under section 153A. The Tribunal's decision was based on the absence of incriminating material found during the search, leading to the direction to delete the additions made by the Assessing Officer for all assessment years.
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