2024 (1) TMI 792 - AT - Income Tax

Assessment u/s 153C/153A - disallowing spill-over additional depreciation u/s 32(1)(iia) - incriminating material found/unearthed during the course of search or not? - HELD THAT - We note that the aforesaid claim was considered and allowed by the AO in the original assessment order u/s 143(3)/144C(13). In such a scenario, the AO ought not to have reversed the decision of his predecessor, without the aid of any incriminating material found/unearthed during the course of search to suggest that the action of AO in the first round was vitiated/obtained by fraud/bogus claim. Assessment u/s 153C/153A when no case was pending for the related assessment year - un-abated assessment - HELD THAT - That is not the case of AO/Ld. DR, therefore, having found that for AY. 2008-09, the original assessment was passed u/s 143(3)/144C(13) of the Act on 21.11.2012, it has become final and not pending before AO (on date of search/centralization of assessee s case), therefore, for the purpose of assessment u/s 153C/153A of the Act, AY. 2008-09 is an un-abated assessment and therefore the action of AO reversing/withdrawing the claim allowed in the original assessment on same set-off facts without any incriminating/seized materials qua assessee qua assessment year is not legally sustainable and therefore we uphold the action of Ld. CIT(A) on the legal issue and hold that the AO s action of making disallowance of spill over depreciation is legally unsustainable. See Abhisar Buildwell (P.) Ltd 2023 (4) TMI 1056 - SUPREME COURT and Singhad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment orders under section 153C read with section 153A of the Income Tax Act.
2. Disallowance of spill-over additional depreciation under section 32(1)(iia).
3. Disallowance of excess negative realization on sale of Sulphuric Acid.

Summary of the Judgment:

Issue 1: Validity of the Assessment Orders under Section 153C r.w.s. 153A
The assessee contested the validity of the assessment orders under section 153C read with section 153A, arguing that the assessments for the years under consideration had attained finality and did not abate. The Tribunal admitted the additional grounds raised by the assessee, noting that it was a purely legal issue not requiring new facts examination. The Tribunal emphasized that for un-abated assessments, no new additions or disallowances could be made without incriminating materials found during the search. The Tribunal cited several precedents, including the Hon'ble Supreme Court's decision in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd., to support this view.

Issue 2: Disallowance of Spill-over Additional Depreciation
The assessee claimed additional depreciation under section 32(1)(iia) for assets put to use for less than 180 days in the preceding year. The AO disallowed this claim in the reassessment order under section 153C, but the Tribunal found that there was no incriminating material to support this disallowance. The Tribunal upheld the CIT(A)'s decision, which allowed the claim based on the Karnataka High Court's ruling in CIT Vs. Rittal India Pvt. Ltd. and the Madras High Court's decision in CIT Vs. Shri T.P. Textiles Pvt. Ltd. The Tribunal concluded that the AO's action of disallowing the spill-over additional depreciation without any incriminating material was legally unsustainable.

Issue 3: Disallowance of Excess Negative Realization on Sale of Sulphuric Acid
For AY 2009-10, the AO disallowed an amount for excess negative realization on the sale of Sulphuric Acid. The Tribunal found that this disallowance was also made without any incriminating material. The Tribunal upheld the CIT(A)'s decision to delete this disallowance, reiterating that no additions could be made in un-abated assessments without incriminating materials.

Conclusion:
The Tribunal dismissed the appeals of both the revenue and the assessee. It upheld the CIT(A)'s decisions, confirming that the AO's actions of making disallowances without incriminating materials in un-abated assessments were not legally sustainable. The Tribunal also noted that the pending appeals related to additions/disallowances made in the original assessments would be decided by the CIT(A) in accordance with the law.