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2023 (9) TMI 1217 - AT - Income TaxAssessment u/s 153A - AO disallowed 50% of the operational expenses as well as depreciation on aircraft and air strip - Whether any incriminating material found during the search? - HELD THAT - Since in the case on hand, the AO has not referred to any incriminating material found during the search while making the impugned disallowance, respectfully following Abhisar Buildwell (P) Ltd 2023 (4) TMI 1056 - SUPREME COURT we hold that no addition can be made in the absence of any incriminating materials. Further we make it clear that during the remand proceedings rejoinder the assessee itself/suo-moto accepted that the for inadequate of documentation company used the aircraft for personal use to the extent of 15% and 85% was used for the business purpose. Since it is agreed addition to the extent of 15% of the aircraft expenses by the assessee itself, therefore, we direct the AO to calculate the addition in above terms and rest addition should be deleted.
Issues Involved:
1. Validity of the assessment under section 153A. 2. Disallowance of aircraft expenses and depreciation. 3. Levy of interest under section 234B. 4. Excessiveness and arbitrariness of disallowances. Summary of Judgment: 1. Validity of the assessment under section 153A: The assessee challenged the assessment under section 153A, arguing that it was void ab initio as it was not based on any incriminating material found during the search. The Tribunal referred to the Supreme Court's judgment in PCIT v. Abhisar Buildwell (P) Ltd., which held that in the absence of any incriminating material, no addition can be made for completed assessments. The Tribunal noted that the AO did not refer to any incriminating material while making the disallowance and thus concluded that the assessment order was not valid. 2. Disallowance of aircraft expenses and depreciation: The AO disallowed 50% of the aircraft expenses and depreciation, suspecting personal use by directors and family members. The assessee contended that the aircraft was used solely for business purposes and had paid fringe benefit tax on the expenses. The CIT(A) confirmed the AO's disallowance. However, during the remand proceedings, the assessee accepted that 15% of the aircraft use was personal due to inadequate documentation. The Tribunal directed the AO to calculate the disallowance based on the agreed 15% personal use and delete the rest. 3. Levy of interest under section 234B: The assessee argued that the interest levied under section 234B was not discernible from the order as it did not indicate the rate, period, or quantum. The Tribunal did not specifically address this issue in the final judgment. 4. Excessiveness and arbitrariness of disallowances: The assessee claimed that the disallowances were excessive, arbitrary, and unreasonable. The Tribunal did not provide a detailed discussion on this issue as the primary focus was on the validity of the assessment under section 153A and the disallowance of aircraft expenses. Conclusion: The appeal was partly allowed, with the Tribunal directing the AO to recalculate the disallowance of aircraft expenses based on the 15% personal use agreed by the assessee and delete the rest. Other grounds raised by the assessee were left open as they were not argued.
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