2014 (7) TMI 859 - AT - Income Tax

Dis-allowance of expenditure Depreciation of motor-car, mobile phone and computers as personal in nature to the extent of 25% - Held that - The assessee had already filed returns of the income for the AYs - at the time of search, the assessee had already filed returns for the AYs and assessments were completed - during search operations, no incriminating material was seized - The additions on account of dis-allowance of expenses and dis-allowance of depreciation were made from the documents already on record. Relying upon All Cargo Global Logistics Ltd., Vs. DCIT 2012 (7) TMI 222 - ITAT MUMBAI (SB) - where the assessments are completed and no assessment is pending at the time of assessment u/s.153A, reassessment can be made only if incriminating materials are collected in the course of search and the items included in the earlier AYs cannot be re-considered through re-assessment re-assessment of the concluded assessment is permitted in assessment u/s.153A only if incriminating material are found in the course of search no incriminating material was found during search operation so as to dis-allow expenditure Decided in favour of Assessee.

Summary

Issues Involved:
1. Disallowance of expenditure.
2. Disallowance of depreciation on motor-car, mobile phone, and computers as personal in nature to the extent of 25%.

Analysis:

Issue 1: Disallowance of Expenditure
The appeals were filed by the assessee challenging the Commissioner of Income Tax(A)(C)-II, Chennai's order for six Assessment Years. The CIT(Appeals) disallowed certain expenses due to lack of supporting evidence, and the assessee contested this decision. The Assessing Officer made additions on account of disallowance of expenses, and the CIT(Appeals) upheld this decision. However, the assessee argued that the additions were made without valid reasons or justification, especially since no incriminating material was found during the search. The Tribunal noted that the assessments for the respective years were already completed under section 143(1) before the search, and no new incriminating material was discovered. Relying on previous decisions, the Tribunal held that re-assessment is only permitted if incriminating material is found during the search. As no such material was found in this case, the Tribunal deleted the additions related to the disallowance of expenditure.

Issue 2: Disallowance of Depreciation
The second issue concerned the disallowance of depreciation on motor-car, mobile phone, and computers to the extent of 50% due to personal use. The CIT(Appeals) partially accepted the assessee's plea and restricted the disallowance to 25%. The assessee, dissatisfied with this decision, appealed to the Tribunal. The Tribunal, after considering the arguments from both sides and the absence of incriminating material during the search, concluded that the disallowance of depreciation was not justified. Citing precedents and legal principles, the Tribunal ruled in favor of the assessee and deleted the additions made on account of disallowance of depreciation.

In summary, the Tribunal allowed all six appeals of the assessee, emphasizing the importance of incriminating material for re-assessment under section 153A. The judgment highlighted that without such material, the re-assessment of concluded assessments is not permissible. The decision underscored the need for valid reasons and justification for any disallowances, ultimately ruling in favor of the assessee in both issues of expenditure and depreciation.