2024 (12) TMI 768 - AT - Income Tax

Assessment u/s 153C r.w.s. 153A - HELD THAT - We find that the Coordinate Bench of Delhi Tribunal in Goldies Trading Co. Ltd 2024 (6) TMI 419 - ITAT DELHI wherein held as per decision of Abhisar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT no addition can be made the assessment framed u/s. 153A dehors incriminating material found during the search. Thus, we set aside the orders of the authorities below and decide the issues in favour of the assessee.

Summary

Issues:
1. Jurisdiction of the assessing officer under section 153A r.w.s. 153C of the Income Tax Act.
2. Disallowance of expenses under section 14A of the Income Tax Act.
3. Disallowance of freight charges under section 37(1) of the Income Tax Act.
4. Characterization of loss incurred by the assessee as speculative in nature.
5. Adequate opportunity of being heard not provided by the assessing officer.

Analysis:

Jurisdiction Issue:
The appeals were against the order dated 22.02.2018 for assessment years 2011-12 & 2012-13 by the Ld. CIT(A)-2, Gurgaon. The appellant contested the jurisdiction of the assessing officer under section 153A r.w.s. 153C of the Act, arguing that the notice was issued in the name of a non-existing entity. The ITAT noted that similar additions in other cases were deleted due to the absence of incriminating material found during the search. Citing a Supreme Court decision, the ITAT held that no addition can be made in assessments framed under section 153A without incriminating material. Consequently, the ITAT set aside the orders of the authorities below and decided in favor of the assessee.

Disallowance of Expenses and Freight Charges:
The assessing officer had disallowed expenses under section 14A and freight charges under section 37(1) of the Income Tax Act. The ITAT referred to previous cases where identical disallowances were deleted by the Tribunal. Relying on the precedent set by the Hon'ble Supreme Court, the ITAT set aside the orders of the Ld. CIT(A) and decided in favor of the assessee for both assessment years 2011-12 and 2012-13.

Characterization of Loss and Opportunity of Being Heard:
The assessing officer characterized the loss incurred by the assessee as speculative and disallowed its set-off against future income. Additionally, the appellant claimed that adequate opportunity of being heard was not provided by the assessing officer. The ITAT, following the Supreme Court decision and consistent views in previous cases, allowed the appeals of the assessee, setting aside the orders of the authorities below.

Conclusion:
The ITAT allowed both appeals of the assessee, setting aside the orders of the authorities below and deciding in favor of the assessee on all issues. The ITAT emphasized the importance of incriminating material for additions under section 153A and upheld the assessee's contentions regarding disallowances and characterization of losses. The jurisdictional issues, disallowances, and lack of opportunity of being heard were all addressed and decided in favor of the assessee.