9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (9) TMI 800 - AT - Income TaxDisallowance of commission - Contravention of rule 46A - Held that - there was a seized material found at the residence of the Director which has to be considered for making the assessment u/s 153A in the case of assessee company and on the basis of such seized material as far as it relates to the undisclosed income of the assessee the addition is required to be made. It is not the material, whether the seized material was found at the premises of the assessee or at the residence of the Director. The company is represented through its Directors, therefore, material found at the residence of the Director is relevant and has to be considered for making the assessments u/s 153A. As far as the scope of the assessment is concerned, we hold that wherever the issues have been considered u/s 143(3) and the assessment has been concluded prior to the initiation of the search the scope of assessment remains limited to the search material and other issues not considered at the time of making the assessment u/s 143(3) of the Act. Considering the totality of the facts and circumstances, we are unable to agree with the contention of the assessee that assessment u/s 153A has been made on the basis of outside the search material and after the change of opinion - Decided in favour of Revenue. Addition u/s 69C - Held that - . The Assessing Officer has not made any enquiry in respect of correctness of the contents of the correspondence by the brokers. There is no evidence found with regard to the payment of these bills from any source of income. The assessee s claim that payments of commission had been made by cheques and the necessary TDS were deducted had some force. In our considered view, no addition can be made merely on the basis of certain correspondence on the presumption when addition is to be made u/s 69C of the Income-tax Act while making the assessment u/s 153A of the Income-tax Act. No addition can be made under the scope of section 153A on presumption basis. The revenue has to bring certain corroborative evidence or supporting material by way of making investigation or enquiries. All the brokers were located in Delhi, however, the revenue has done nothing in this regard. Some of the brokers were even corporate assessees. Their records could have been easily verified. The seized material relied upon by the AO alone cannot be made a basis for driving adverse inference with regard to the undisclosed expenditure which can be added u/s 69 of the Income-tax Act. In our considered view, material relied upon by the AO for making the addition was merely a correspondence which alone cannot lead to the inference that assessee had incurred such expenditure. This cannot be made basis for addition made u/s 69 of the Income-tax Act while framing the assessment u/s 153A of the Income-tax Act, 1961. There is no evidence gathered by revenue from anywhere, which could establish a bit of the fact that assessee has paid anything more than whatever recorded in the books of account - Decided against Revenue. There is no new evidence or incriminating document found and seized during the search operation which can make the Assessing Officer to form a belief that income has escaped assessment on this account. In such circumstances, in absence of any evidence of any sort, such disallowances shall be only on the basis of change in the opinion and the same is not permissible in law. Further, on merits also, the assessee was having sufficient and adequate non-interest bearing funds by way of share capital, reserves and advances received from the booking of the plots. The revenue has failed to establish any nexus between the borrowed funds and interest free advances given to sister concerns - Decided against Revenue.
Issues Involved:
1. Validity of assessment framed outside the search material and after the change of opinion. 2. Deletion and sustenance of additions made under section 69C of the Income-tax Act, 1961. 3. Disallowance of commission expenses. 4. Disallowance of donation expenses. 5. Disallowance of interest on loans to sister concerns. 6. Admittance of additional evidence in contravention of Rule 46A of Income-tax Rules. Issue-wise Detailed Analysis: 1. Validity of Assessment Framed Outside the Search Material and After the Change of Opinion: The assessee challenged the validity of the assessment on the grounds that it was framed outside the search material and after a change of opinion. The search material was not found at the premises of the assessee but at the residence of the Director. The assessee argued that the material found was mere correspondence and not incriminating. The Tribunal held that the material found at the residence of the Director is relevant for making assessments under section 153A, as the company is represented through its Directors. The Tribunal concluded that the assessment was valid as it was based on the search material and not on a change of opinion. 2. Deletion and Sustenance of Additions Made Under Section 69C of the Income-tax Act, 1961: The revenue appealed against the deletion of Rs.17,27,327/- and the assessee appealed against the sustenance of Rs.1,29,52,063/- under section 69C. The Tribunal noted that the additions were based on bills found during the search at the residence of the Director. The Tribunal found that the revenue failed to provide corroborative evidence or verify the contents of the correspondence with the brokers. The Tribunal held that no addition can be made merely on the basis of correspondence without supporting evidence. Consequently, the Tribunal dismissed the revenue's appeal and allowed the assessee's appeal on this issue. 3. Disallowance of Commission Expenses: The CIT (A) had disallowed Rs.10,00,000/- out of Rs.30,14,662/- paid to M/s Omway Build Estates (P) Ltd. The assessee argued that the expense was wrongly capitalized in the Kamal project instead of the Jaipur project. The Tribunal agreed with the assessee and held that the expense should be allowed to be capitalized in the Jaipur project. The balance amount of Rs.20,14,662/- was transferred from the cost of the Kamal project to the Jaipur project, and the Tribunal found no fault in the CIT (A)'s deletion of this addition. 4. Disallowance of Donation Expenses: The CIT (A) deleted the disallowance of Rs.5,37,500/- made by the Assessing Officer, holding that the expenditure was in the nature of business promotion and advertisement. The Tribunal upheld the CIT (A)'s decision, stating that the expenditure was made for commercial expediency and directly or indirectly benefited the business of the assessee. 5. Disallowance of Interest on Loans to Sister Concerns: The CIT (A) deleted the disallowance of Rs.28,28,130/- made by the Assessing Officer. The Tribunal noted that the original assessment was completed under section 143(3) without such disallowance and that no new evidence or incriminating document was found during the search. The Tribunal held that the disallowance was based on a change of opinion, which is not permissible by law. Additionally, the assessee had sufficient non-interest-bearing funds, and the revenue failed to establish any nexus between the borrowed funds and the interest-free advances. Therefore, the Tribunal upheld the CIT (A)'s decision. 6. Admittance of Additional Evidence in Contravention of Rule 46A of Income-tax Rules: The revenue contended that the CIT (A) admitted additional evidence in contravention of Rule 46A. The Tribunal found that the relevant copies of the ledger accounts showing payments to various parties were part of the assessment record and were not new evidence. Therefore, there was no violation of Rule 46A, and the revenue's contention was not tenable. Conclusion: The Tribunal dismissed the revenue's appeal, allowed the assessee's cross-objection, and partly allowed the assessee's appeal. The Tribunal upheld the validity of the assessment under section 153A, deleted the additions made under section 69C, allowed the capitalization of commission expenses in the Jaipur project, upheld the deletion of donation expenses, and confirmed the deletion of disallowance of interest on loans to sister concerns. The Tribunal also found no violation of Rule 46A in admitting additional evidence.
|
