2019 (7) TMI 713 - HC - Income Tax

Revision u/s 263 - addition under Section 40A(3) and deposits made in Karur Vysa Bank - HELD THAT - Tribunal commented that the CIT(A) having given a clear finding on the above lines ought not to have adjudicated on the additions assailed by the assessee which additions emanated from the original assessment. We endorse the findings rendered by the Tribunal in this regard. The Tribunal was right in holding that the CIT(A) should have confined himself to the additions made by the AO in his order dated 28.11.2014 under Section 40A(3) and for the deposits made in Karur Vysa Bank. Tribunal held that the grounds raised by the revenue in the appeal before it, on the issues other than two additions, do not arise from the assessment order and accordingly rejected the same and dismissed the appeal. The finding of the Tribunal does not call for any interference. Whether the additions under Section 40A(3) was warranted and after taking note of the factual matrix held that the assessee could demonstrate business expediency which justified the payment made in cash. We find no reasons to dislodge the factual findings recorded by the Tribunal. Cash deposit made in Karur Vysa Bank, the Tribunal after considering the factual position affirmed the order passed by the CIT(A) that it was proceeds of the deposits made by the assessee in the assessment year 2005-06 and the assessee had accounted accrued interest of ₹ 77,188/- and the assessee did not raise any ground citing violation of Rule 6DD. The revenue has not made out any grounds to interfere with the said findings of the Tribunal. Similar is the matter concerning the assessment year 2009- 10 - Assessing Officer made a fresh addition under Section 40A(3) on the cash payment for land purchase. The Tribunal noted that the Assessing Officer committed similar mistake as was done in the assessment year 2008- 09 in computing the income of the assessee and consequently held that the CIT(A) having set aside the original assessment, there was no question of adjudicating upon any of the grounds raised by the assessee relating to the original assessment. After rendering such finding, the Tribunal endorsed the view of the CIT(A) that the disallowance under Section 40(3) of the Act could not have been done since they were genuine payments done due to business expediency. Accordingly, the appeal filed by the Revenue challenging the order passed by the CIT(A) for the assessment year 2009-10 was also dismissed. Tribunal while dismissing the appeals filed by the Revenue for the assessment year 2008-09, the cross objections were allowed for the assessment year 2008-09 and allowed for the assessment year 2009-10. We hold that the revenue has not made out any ground to interfere with the orders passed by the Tribunal. For the above reasons, the appeals filed by the revenue are dismissed and the substantial questions of law are answered against the revenue.

Summary

Issues:
1. Dismissal of grounds raised by Revenue in relation to computation of income.
2. Deletion of addition made under Section 40(3) of the IT Act.
3. Deletion of addition made without documentary evidence and opportunity for examination.
4. Allowance of Cross Objection based on original assessment additions.

Analysis:

Issue 1:
The Revenue questioned the correctness of the Appellate Tribunal's decision to dismiss the grounds raised regarding the computation of income from the returned income instead of the assessed income in the original assessment order. The Tribunal rightly held that the Assessing Officer could not have started from the originally assessed income but should have considered the returned income. This decision was based on the fact that the original assessment order was no longer in force during the fresh assessment proceedings following the order under Section 263 of the Act.

Issue 2:
Regarding the deletion of an addition made under Section 40(3) of the IT Act, the Tribunal found that the assessee demonstrated business expediency justifying the cash payment, thus warranting the deletion of the addition. The Tribunal's factual findings in this regard were upheld, indicating no reason for interference.

Issue 3:
The Tribunal also addressed the deletion of an addition made without documentary evidence and without providing an opportunity for the Assessing Officer to examine fresh evidence produced before the Tribunal. The Tribunal rightly held that the CIT(A) should have confined the assessment to the additions made by the Assessing Officer in the fresh assessment order, thereby rejecting the grounds raised by the Revenue on issues other than the specified additions.

Issue 4:
The Tribunal considered the allowance of Cross Objection by the assessee based on the original assessment additions. The Tribunal endorsed the view that the CIT(A) should not have adjudicated on additions from the original assessment, limiting the scope to specific additions made in the fresh assessment. Consequently, the appeals filed by the Revenue were dismissed for both assessment years, with the cross objections allowed.

In conclusion, the High Court upheld the Tribunal's findings, determining that the Revenue failed to establish grounds for interference with the Tribunal's orders. Therefore, the appeals filed by the Revenue were dismissed, and the substantial questions of law were answered against the Revenue.