2019 (1) TMI 393 - AT - Income Tax

Assessment u/s 153A - proof of incriminating document found during the course of the search - Held that - The assessee has filed her return of income for the relevant assessment years only after the issuance of notice U/s.153C r.w.s. 153A of the Act. Hence on the earlier occasions there was no assessments U/s.143(3) of the Act made in the case of the assessee Provisions of Section 153A(b) specifically provides that in the case of search proceedings, assessment as well as re-assessment of the total income of the assessee can be made for six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted. Therefore during the course of reassessment the assessee is bound to produce the requisite documents to substantiate her claim of deduction. Hence the ground raised by the assessee with respect to jurisdiction U/s.153C r.w.s. 153A is devoid of merits. - Decided against assessee. Disallowance of interest earned from pawn broking business - Held that - From the facts of the case, it is evident that the Ld.AO had made addition based on presumptions. He has not made any independent enquiries to substantiate his presumptions. CIT(A) has also simply endorsed the view of the Ld.AO. We are of the view that this nature of additions made by the Ld.Revenue Authorities cannot be justified - direct the AO to delete the additions made towards excess interest income earned in the hands of the assessee. - Decided against revenue. Addition towards appraiser fee - Held that - The assessee herself had disclosed excess interest received which she could not disclose due to the Government regulations. Had she not disclosed such interest in her books, her profit would have been reduced and there would have been no necessity to claim deduction towards appraiser fee. However the assessee has disclosed the excess income diligently and also claimed the expense towards appraiser fee. The assessee has also furnished the details submitted by the appraisers before the Ld.AO in his remand proceedings. Revenue has come to the conclusion that the payment made by the assessee towards appraiser fee is not genuine just because on the summons issued by the Ld.AO certain appraisers failed to appear before him. We are not agreement with this action of the Ld. Revenue Authorities. It would have been appropriate to conduct further enquiry on the appraisers before coming to such conclusion. Considering the facts and circumstance of the case, we are of the considered view that the disallowance of appraiser fee is not appropriate. - Decided against revenue. Adhoc disallowance towards salary expense - Held that - Since we have held the issue with respect to appraiser fee in favour of the assessee on similar circumstance, in the case of disallowance of salary expense also, we are of the considered view that the Revenue was not justified in disallowing the salary expenditure. Therefore we hereby direct the Ld.AO to delete the addition. Decided against revenue. Levy of interest U/s.234A, 234B & 234C are consequential in nature.

Issues:
1. Jurisdiction under Section 153C read with Section 153A of the Income Tax Act for the assessment years 2006-07 to 2012-13.
2. Disallowance of interest earned from pawn broking business for the assessment years 2006-07 to 2013-14.
3. Addition towards appraiser fee for the assessment years 2006-07, 2007-08, 2008-09, 2009-10, and 2013-14.
4. Adhoc disallowance towards salary expense for the assessment years 2006-07, 2007-08, and 2008-09.
5. Levy of interest under Sections 234A, 234B, and 234C of the Act for the assessment years 2006-07 to 2013-14.

1. Jurisdiction under Section 153C read with Section 153A:
The appellant challenged the initiation of proceedings under Section 153C read with Section 153A, citing the absence of incriminating material. The tribunal rejected this argument, emphasizing that assessments can be made for preceding years in search proceedings. As the appellant filed returns only after receiving notices, the tribunal upheld the jurisdiction under Section 153C read with Section 153A.

2. Disallowance of interest earned from pawn broking business:
The appellant disclosed interest earned at 1.33% per month but was assessed at 2% by the Assessing Officer (AO). The tribunal found the AO's computation based on presumptions unjustified and lacking independent inquiries. Consequently, the tribunal directed the AO to delete the additions made towards excess interest income for all relevant assessment years.

3. Addition towards appraiser fee:
The AO disallowed the claimed appraiser fee, asserting that pawnbrokers act as appraisers. However, the tribunal disagreed, noting the genuine incurring of expenses by the appellant. The tribunal directed the AO to delete the addition made towards appraiser fee for all relevant assessment years.

4. Adhoc disallowance towards salary expense:
The AO made an adhoc disallowance of 20% towards salary expenses due to time constraints. The tribunal, similar to the appraiser fee issue, found the disallowance unjustified and directed the AO to delete the addition made towards salary expenses for the relevant assessment years.

5. Levy of interest under Sections 234A, 234B, and 234C:
The tribunal considered the levy of interest under these sections as consequential and found no merit in the appellant's challenge. Consequently, the appeals were partly allowed, with directions to delete the additions made in various categories for the relevant assessment years.

This judgment addressed multiple issues, including jurisdictional matters, income computation, expense disallowances, and interest levies, providing detailed analysis and rulings on each aspect raised by the appellant.

← Previous Next →