2014 (12) TMI 971 - AT - Income Tax

Assessment u/s 153A - Various disallowance made - No material whatsoever was found relating to the routine disallowance - whether these disallowances can be made or confirmed sans any incriminating material found during the course of search Held that - In CIT Vs. M/s. Murali Agro Products Ltd. 2010 (10) TMI 1052 - BOMBAY HIGH COURT it has been held that once it is held that the assessment finalized has attained finality, then the deduction allowed u/s 80HHC of the Income-tax Act as well as the loss computed under the assessment would attain finality - In such a case, the AO while passing the independent assessment order u/s 153A read with section 143(3) could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings u/s 153A to establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153 A proceedings - there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceeding which would show that the relief u/s 80HHC was erroneous thus, the disallowances which has been confirmed by the CIT(A) cannot be uphold - Decided in favour of assessee. Addition of bogus bills/purchases made for construction Held that - The AO has not only relied upon the admission of the Director, Mr. Viren Ahuja at the time of statement u/s 132(4), but also has analyzed the nature of transaction and carried out inquiry to find out that the claim of purchases made for construction were bogus - once the evidences and materials are indicating the non-genuineness of the expenditure, the onus is heavily upon the assessee to prove the contrary on the basis of concrete material or evidence - onus has not been discharged by the assessee at all and not only, that it has been categorically admitted by the assessee when it was confronted during the course of search that, the payments relating to purchases are bogus there was no merits in the contention raised by the assessee and the order of the CIT(A) is upheld Decided against assessee.

Issues Involved:
1. Confirmation of additions made by the Assessing Officer (AO) under section 153A read with section 143(3).
2. Violation of principles of natural justice.
3. Disallowance on account of diminution in value of investment.
4. Disallowance by invoking the provisions of section 14A.
5. Disallowance on account of personal usage of car expenses.
6. Non-credit of taxes paid/deducted while computing tax liability.
7. Levy of interest under sections 234A, 234B, and 234C.
8. Addition on account of alleged bogus bills/purchases.

Detailed Analysis:

1. Confirmation of Additions by AO:
The appeals were filed against the orders confirming the additions made by the AO under section 153A read with section 143(3) for A.Ys. 2006-07 and 2009-10. The appellant argued that the additions were illegal and bad in law. However, the tribunal found that the assessment for A.Y. 2006-07 had attained finality as no incriminating material was found during the search. The tribunal relied on the decision of the Hon'ble Rajasthan High Court in Jai Steel (India) Vs. ACIT, which stated that no addition can be made if no incriminating material is found during the search. Consequently, the disallowances confirmed by the CIT(A) for A.Y. 2006-07 were not upheld.

2. Violation of Principles of Natural Justice:
The appellant contended that the orders were passed without giving a proper opportunity of hearing, thereby violating the principles of natural justice. However, these grounds were not pressed by the appellant's counsel, and thus, were treated as dismissed.

3. Disallowance on Account of Diminution in Value of Investment:
The appellant challenged the confirmation of disallowance of Rs. 2,50,000/- on account of diminution in the value of investment. The tribunal held that since no material was found during the search, such disallowance could not be made in the assessment completed under section 153A. This ground was allowed.

4. Disallowance by Invoking Section 14A:
The appellant contested the addition of Rs. 54,195/- by invoking section 14A. The tribunal found that no incriminating material was found during the search and thus, such an addition was not justified. This ground was also allowed.

5. Disallowance on Account of Personal Usage of Car Expenses:
The appellant disputed the disallowance of Rs. 1,04,462/- estimated at 10% of total car expenses. The tribunal held that such disallowance could not be made without any incriminating material found during the search. This ground was allowed.

6. Non-Credit of Taxes Paid/Deducted:
The appellant claimed that credit for taxes paid/deducted was not given while computing tax liability. The tribunal directed the AO to examine the issue and give credit for the taxes paid/deducted by the appellant.

7. Levy of Interest:
The appellant challenged the levy of interest under sections 234A, 234B, and 234C. The tribunal treated this ground as consequential and thus, infructuous.

8. Addition on Account of Alleged Bogus Bills/Purchases:
For A.Y. 2009-10, the appellant challenged the addition of Rs. 27,80,33,410/- on account of alleged bogus bills/purchases. The tribunal noted that during the search, the Director admitted that the purchases were bogus. The tribunal upheld the findings of the AO and CIT(A) that the transactions were not genuine and confirmed the addition.

Conclusion:
The appeal for A.Y. 2006-07 was partly allowed with specific disallowances being overturned due to lack of incriminating material. The appeal for A.Y. 2009-10 was dismissed, with the tribunal confirming the addition of Rs. 27,80,33,410/- on account of bogus purchases. The tribunal also directed the AO to examine and give credit for taxes paid/deducted by the appellant. The levy of interest was treated as consequential.

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