2022 (5) TMI 851 - AT - Income Tax

Assessment u/s 153A - Addition made without any incriminating document or not - Accommodation entry - HELD THAT - As survey action which was commenced on 25.03.2014 at the premises of the assessee was converted into search action on 28.03.2014. During the course of search action several evidences were found which revealed that the assessee s claim of acquiring and installing certain assets at its factories was found to be non-genuine considering that the inword registers of such factories did not have any such entries of having received/installed the said assets. The details of such incriminating evidences of the order of the CIT(A) and the same was also corroborated by the statements recorded of the relevant persons at the time of search action. Similarly premises of Hasmukh Mehta who had acted as a broker for providing bogus accommodation entries to the assessee group was also covered in the search action and a diary was seized which had details of the various accommodation entries obtained by the assessee. During the course of appellate proceedings before us the ld.CIT(A) has elaborately discussed the incriminating evidences found from the premises of the assessee at page 12 of his order which clearly demonstrate that the assessee had availed accommodation entries in respect of capital assets as well as raw material purchases. Therefore we don t find any error in the decision of ld. CIT(A). Accordingly these 3 grounds of appeal of the assessee stand dismissed. Disallowance of interest u/s 36(1)(iii) - interest expenditure were related to bogus capital assets - HELD THAT - During the course of appellate proceedings before the ld. CIT(A) the assessee was asked to furnish the detail of the funds actually utilized in acquiring bogus capital assets however the assessee had failed to furnish the required details. Considering the detailed finding of the ld. CIT(A) showing that claim of interest expenditure were related to bogus capital assets and assessee was failed to prove contrary in spite of giving opportunity this ground of appeal of the assessee stand dismissed. Addition made u/s 69C being commission paid @ 1% for obtaining accommodation bills - HELD THAT - During the search action u/s 132(4) of the Act Shri Sudeep Dutta has admitted in his statement reproduced of the assessment order that assessee had obtained accommodation entries from various purchase parties and most of these accommodation entries were merely accounting entries based in the books of account without actually movement of material/capital goods and in most of the cases without corresponding payment/cheques. The assessee has also admitted that cheques for accommodation entries were issued to the bogus concern and subsequently the cheques were realized/converted by Shri Hasmukh G. Mehta into equivalent amount of cash after deducting his commission. In the light of the above facts and detailed finding of CIT(A) we don t find any infirmity in the order of the CIT(A). Accordingly this ground of appeal of the assessee stand dismissed.

Summary

Issues:
1. Validity of search and seizure action
2. Jurisdiction of Assessing Officer in completing assessment
3. Disallowance of interest under section 36(1)(iii)
4. Addition under section 69C for alleged commission paid
5. Disallowance of deduction under section 80IC

Issue 1: Validity of search and seizure action
The appellant challenged the initiation of search and seizure action by the investigation wing, claiming it was without evidence or material information and lacked the satisfaction required under section 132(1) of the Income Tax Act. The Tribunal found that during the search action, incriminating evidence was discovered, including bogus entries related to capital assets and raw material purchases. The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's grounds as the evidence clearly demonstrated the appellant's involvement in availing accommodation entries.

Issue 2: Jurisdiction of Assessing Officer
The appellant contested the completion of assessment under section 143(3) r.w.s 153A, arguing that no incriminating documents were found during the search at their premises. However, the assessing officer disallowed interest expenditure claimed for acquiring bogus capital assets, as the appellant failed to provide details of the funds used for such acquisitions. The Tribunal upheld the CIT(A)'s decision, stating that the appellant could not prove otherwise and hence dismissed this ground of appeal.

Issue 3: Disallowance of interest under section 36(1)(iii)
The assessing officer disallowed interest expenditure of Rs.17,51,188 claimed by the appellant for acquiring bogus capital assets. Despite opportunities, the appellant did not provide details of the loan funds utilized for these assets. The Tribunal found that the CIT(A)'s detailed findings supported the disallowance, as the interest expenditure was related to bogus assets and the appellant failed to substantiate their claim, leading to the dismissal of this ground of appeal.

Issue 4: Addition under section 69C for alleged commission paid
The appellant claimed commission payment to a broker for arranging accommodation entries. The assessing officer added Rs.74,495 under section 69C as estimated commission paid for availing such entries. The Tribunal noted that during the search action, it was revealed that the appellant obtained accommodation entries without actual movement of goods and issued cheques to bogus concerns. The Tribunal upheld the CIT(A)'s decision, dismissing the appellant's appeal on this ground.

Issue 5: Disallowance of deduction under section 80IC
The assessing officer disallowed a deduction claimed under section 80IC related to excise refund as other income. Following judicial precedents, the CIT(A) rejected the claim based on the Supreme Court decision in Sterling Food Limited case. The Tribunal found no error in the CIT(A)'s decision, leading to the dismissal of this ground of appeal.

In conclusion, the Tribunal dismissed all grounds of appeal raised by the appellant across multiple issues, upholding the decisions made by the CIT(A) and the assessing officer based on the evidence and findings presented during the proceedings.