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2022 (11) TMI 461 - AT - Income TaxAssessment u/s.153C - Additions towards purchases from unregistered dealers - As observed that when the survey was conducted u/s.133A of the Act, the AO cannot frame the assessment u/s.153C - HELD THAT - In this case, there is no dispute with regard to the fact that absolutely there is no incriminating material was found during the course of search in the case of M/s.BGAL, which pertains to the assessee and which shows undisclosed income pertains to these assessment years. Therefore, we are of the considered view that the AO ought not to have made assessment u/s.153C of the Act, and made additions towards purchases made from unregistered dealers. The Ld.CIT(A) has rightly apprised the facts and held that the action of the AO in framing the assessment u/s.153C of the Act, was only survey u/s.133A of the Act, conducted is legally incorrect. Additions made towards purchases from unregistered dealers - The assessee has declared purchases made from unregistered dealers in the VAT returns filed for the respect month and paid relevant VAT on said purchases. The assessee had also made 90% of payments against said purchase through proper banking channel. Although, the assessee has made small portion of payment by cash in excess of prescribed limit, but in our considered view, payment made by the assessee does not hit by provisions of Sec.40A(3) of the Act, because, any payment made to a cottage industry is excluded u/r.6DD(f) of IT Rules. Therefore, we are of the considered view that the AO is erred in invoking the provisions of Sec.40A(3) of the Act, for payments made in cash in excess of prescribed limit, even though, the case of the assessee comes u/r.6DD(f) of IT Rules. As regards remaining purchases on which payment made through proper banking channel, the assessee had filed complete details including name and address of the person from whom purchase was made, payment details and also filed relevant VAT returns to prove that said purchases were declared to Commercial Tax Authorities and paid applicable VAT - additions made by the AO cannot be sustained. CIT(A) after considering relevant facts has rightly deleted additions made by the AO and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue.
Issues Involved:
1. Validity of assessment orders passed under Section 143(3) read with Section 153C of the Income Tax Act. 2. Deletion of disallowance by the AO of purchases from unregistered dealers. 3. Jurisdiction and procedural compliance under Section 153C. 4. Admissibility and evaluation of additional evidence submitted by the assessee. Detailed Analysis: Issue 1: Validity of Assessment Orders under Section 143(3) read with Section 153C The Revenue challenged the CIT(A)'s decision to invalidate the assessment orders passed under Section 143(3) read with Section 153C. The CIT(A) held that the conditions precedent for invoking Section 153C were not satisfied, as no incriminating materials were found during the search that belonged to the assessee. The Tribunal upheld this view, noting that the search and survey were conducted simultaneously, and the AO did not record proper satisfaction for issuing notice under Section 153C. The Tribunal emphasized that the absence of incriminating material meant the AO could not proceed under Section 153C. Issue 2: Deletion of Disallowance by the AO of Purchases from Unregistered Dealers The AO disallowed purchases from unregistered dealers amounting to Rs. 5,25,66,330, claiming they were not genuine and unsupported by necessary evidence. The CIT(A) deleted this disallowance, noting that the assessee had declared these purchases to the Commercial Tax Authorities and paid VAT. The Tribunal upheld the CIT(A)'s decision, stating that the assessee had provided sufficient details, including invoices, payment proofs, and VAT returns. The Tribunal also noted that the assessee's payments to cottage industries were excluded under Rule 6DD(f) of the IT Rules, thus not violating Section 40A(3). Issue 3: Jurisdiction and Procedural Compliance under Section 153C The Tribunal scrutinized whether the AO met the jurisdictional requirements for invoking Section 153C. It found that no documents or materials belonging to the assessee were seized during the search of M/s. BGAL. The Tribunal referenced the Supreme Court's decision in CIT v. Sinhgad Technical Education Society, emphasizing that the failure to meet the jurisdictional requirements under Section 153C renders the proceedings null and void. The Tribunal concluded that the AO's actions were procedurally incorrect and lacked the necessary jurisdictional basis. Issue 4: Admissibility and Evaluation of Additional Evidence The assessee submitted additional evidence under Rule 46A of the Income Tax Rules during the appellate proceedings, which the CIT(A) forwarded to the AO for comments. The AO's remand report highlighted discrepancies, but the CIT(A) found the assessee's rejoinder satisfactory. The Tribunal agreed with the CIT(A)'s assessment, noting that the assessee had provided comprehensive details to substantiate the purchases from unregistered dealers, including VAT payments and banking transaction records. Conclusion: The Tribunal upheld the CIT(A)'s decision to invalidate the assessment orders under Section 143(3) read with Section 153C, delete the disallowance of purchases from unregistered dealers, and dismiss the Revenue's appeals. The Tribunal emphasized the importance of adhering to procedural requirements and the necessity of incriminating materials to justify actions under Section 153C. The appeals for the assessment years 2012-13 to 2014-15 were dismissed, affirming the CIT(A)'s findings and conclusions.
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