2016 (1) TMI 987 - AT - Income Tax

Assessment u/s 153A - Deduction u/s 80IB denied - Held that - It is an admitted fact that no incriminating materials were found during the course of search by the revenue in order to disturb the claim of deduction u/s 80IB of the Act which is given by way of a categorical finding by the Learned CIT(A) in his appellate order and which is also not controverted by the revenue before us. In the instant case, no incriminating materials are found relating to Asst Years 2003-04 and 2004-05 and hence the action of the Learned AO in disturbing the claim of deduction u/s 80IB of the Act cannot be appreciated. Denial of deduction u/s 80IB of the Act in the assessments framed u/s 153A of the Act for the Asst Years 2003-04 and 2004-05 without any incriminating materials found during the course of search with respect to those assessment years is not warranted and held as not in accordance with law. Accordingly, the grounds raised by the revenue in this regard for the assessment years 2003-04 and 2004-05 are dismissed. - Decided in favour of assessee. Also no disallowance u/s 14A of the Act could be made for the Asst Year 2004-05 by the Learned AO in the assessment framed u/s 153A of the Act in the absence of any incriminating materials found during the course of search with regard to the relevant assessment year and with regard to the relevant issue.- Decided in favour of assessee.

Summary

Issues Involved:
1. Justification of rejection of deduction claim under Section 80IB for Assessment Years 2003-04 and 2004-05.
2. Justification of rejection of deduction claim under Section 80IB for Assessment Years 2007-08 and 2008-09.
3. Justification of disallowance under Section 14A for Assessment Year 2004-05.

Issue-wise Detailed Analysis:

1. Justification of Rejection of Deduction Claim under Section 80IB for Assessment Years 2003-04 and 2004-05:
The primary issue was whether the Assessing Officer (AO) was justified in rejecting the deduction claim under Section 80IB of the Income Tax Act for the Assessment Years (AY) 2003-04 and 2004-05 during assessments framed under Section 153A, despite no incriminating materials being found during the search. The Tribunal noted that a search and seizure operation was conducted, and subsequent notices under Section 153A were issued. The AO disallowed the deduction under Section 80IB, which had been previously granted in the original assessment proceedings under Section 143(3). The CIT(A) held that since no incriminating materials were found during the search, the deduction under Section 80IB, which had already been granted, could not be disturbed. The Tribunal upheld this view, emphasizing that the scheme of assessment under Section 153A does not permit disturbing concluded assessments unless incriminating materials are found. The Tribunal referenced the Bombay High Court's decision in CIT vs. Continental Warehousing Corporation, which supported this interpretation.

2. Justification of Rejection of Deduction Claim under Section 80IB for Assessment Years 2007-08 and 2008-09:
The Tribunal considered whether the AO was justified in rejecting the deduction claim under Section 80IB for AY 2007-08 and 2008-09. The Tribunal noted that once the deduction under Section 80IB is granted in the initial assessment year (AY 2003-04), it becomes automatic for subsequent years. Since the CIT(A) had already granted relief for AY 2003-04, the deduction for subsequent years was deemed automatic and academic in nature. The Tribunal dismissed the revenue's grounds on this issue, affirming that the eligibility conditions for Section 80IB need to be examined only in the initial assessment year.

3. Justification of Disallowance under Section 14A for Assessment Year 2004-05:
The Tribunal addressed whether the AO was justified in making a disallowance under Section 14A for AY 2004-05 during assessments framed under Section 153A, without any incriminating materials found during the search. The Tribunal held that no disallowance under Section 14A could be made in the absence of incriminating materials. This decision was consistent with the principle that concluded assessments cannot be disturbed under Section 153A without incriminating evidence.

Conclusion:
The Tribunal concluded that the AO's actions in rejecting the deduction claims under Section 80IB for AY 2003-04 and 2004-05 and making disallowances under Section 14A for AY 2004-05 were not justified due to the absence of incriminating materials found during the search. The Tribunal also held that the deduction under Section 80IB for AY 2007-08 and 2008-09 was automatic, following the initial grant in AY 2003-04. Consequently, the appeals of the revenue were dismissed, and the cross objections of the assessee were dismissed as withdrawn.