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TMI Blog2025 (2) TMI 860X X X X Extracts X X X X X X X X Extracts X X X X ..... n unabated year and there was no incriminating material before the AO for the year under consideration - Assessment year under consideration is an unabated year and there was no incriminating material before the AO for the year under consideration. Therefore, no addition can be made in the hands of the assessee in absence of any incriminating material. The similar issue had been dealt with by CIT Vs. Abhisar Buildwell (P) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] has held that, in case of unabated year, in search proceedings, no addition can be made in the hands of the assessee in absence of any incriminating material. Therefore as there was no incriminating material with the AO for the year under consideration, no addition can be made in the hands of the assessee by the Ld. AO. Accordingly, we delete the addition made by the Ld. AO. Validity of issue of notice u/s. 153C - We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have also gone through the copy of warrant and Panchanama submitted by the Ld. AR and found that, the same has not been issued / made on the name of the assessee. Therefore, we are of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of issue of notice u/s. 153C of the Income Tax Act, 1961 ('the Act'). The Ld. AR submitted that, additional ground so filed are admissible in view of judgment rendered by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). The prayer for admission of additional ground, which is not in memorandum of appeal, is being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that, objections raised in additional ground is legal in nature for which relevant facts are stated to be emanating from the existing records. 4. The brief facts of the case are that, the assessee is a company deriving income from execution of civil contract works, filed its Return of Income ("ROI") u/s.139 of the Act for all the years under consideration on different dates. Search and Seizure operation u/s.132 of the Act was carried out in the case of M/s. R.K. Infra Corp Pvt. Ltd. and others on 06.02.2020. As part of search operation, the business premises of the assessee was also covered. During the search operation, certain documents were found and seized from the business premises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satory and not penal in nature. The ld. CIT(A) held that interest paid under the provisions of the Act is not a deductible expenditure, not compensatory in nature. Thus, he confirmed the action of the Assessing Officer. The assessee submitted that the interest is compensatory in nature and a part of business operations of the assessee. Had the same amount has been taken as loan from a bank, the interest paid on the same anyway would have been allowed as deduction u/s. 36. The Revenue submitted that interest on late deposit of TDS is neither an expenditure wholly and exclusively incurred for the purpose of business and further it is a payment, which is in the form of tax so it is not an allowable expenditure. The ITAT dismissed the appeal of the assessee. 13. The Hon'ble Madras High Court in CIT Vs. Chennai Properties & Investment Ltd. (1999) 239 ITR 435 (Mad.) has held that interest under section 201(1A) paid by the assessee does not assume the character of business expenditure and also cannot be regarded as compensatory payment. 14. This decision of Hon'ble Madras High Court has also been followed by various benches of ITAT, specifically in Velankani Information Syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure only and exclusively incurred for the purpose of the business and therefore the same is not allowable as deduction u/s 37(1) of the Act." The above case law is squarely applicable to the case of the appellant and hence applied. It is important to note that the appellant is withholding somebody's due tax credit by depositing the same late and causing undue hardship to the third party. Interest on late deposit of TDS is neither an expenditure wholly and exclusively incurred for the purpose of business and further it is a payment, which is in the form of tax so it is not an allowable expenditure. In view of the above, the disallowances of Rs. 64,849/- and Rs. 12,198/- for A.Y. 2011-12 and 2012-13 respectively being interest paid on delayed deposition of TDS are upheld and the additions made by the A.O. are confirmed. Accordingly, the related part of the grounds no.9 for the A.Ys. 2011-12 & 2012-13 are dismissed." 7. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Ld. AR submitted that, the interest paid u/s.201(1A) of the Act is compensatory in nature and not in the nature of penalty, therefore, it should be allowable as an expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material with the Ld. AO for the year under consideration, no addition can be made in the hands of the assessee by the Ld. AO. Accordingly, we delete the addition made by the Ld. AO. 9.2 In the result, this ground of the assessee is allowed. 10. As far as the second issue of the assessee is concerned, the Ld. AR submitted that, the assessment proceedings in the case of the assessee has been completed u/s.153C of the Act. However, since the search and seizure operation was conducted at the premises of the assessee, the assessment proceedings should had been completed u/s.153A of the Act. Therefore, the assessment proceedings completed by the Ld. AO u/s.153C of the Act is bad in law and is liable to be quashed. In support of his submission, the Ld. AR filed before us the copy of search warrant and the copy of Panchanama. 11. Per contra, the Ld. DR relied on the order of Ld. CIT(A). 12. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have also gone through the copy of warrant and Panchanama submitted by the Ld. AR and found that, the same has not been issued / made on the name of the assessee. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justifying the source of cash in the hands of Smt. Latha Reddy. As far as the loan taken from Smt. Suseela, the Ld. AR drew our attention to page nos.126 to 128 containing the affidavit of Smt. Sushila regarding providing the cash loan of Rs. 62,99,490/- out of her past savings. Therefore, the Ld. AR submitted that, out of the addition of Rs. 1,28,72,052/- as sustained by Ld. CIT(A), the total amount of Rs. 90,25,490/- are from genuine sources as explained above and the addition to that extent are liable to be deleted. 17. Per contra, the Ld. DR relied on the decision of Ld. CIT(A) and prayed before the bench to dismiss this ground of appeal of the assessee. 18. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. As far as the first issue is concerned, the Ld. AR submitted that, the loan taken by the assessee during the Assessment Year 2012-13 includes loan of Rs. 27,26,000/- taken from Smt. Latha Reddy and Rs. 62,99,490/- from Smt. Suseela. He further submitted that, Smt. Latha Reddy had given loan to the assessee out of gold loan taken by her from Manappuran Finance. In support of his contention, the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the contention of the assessee that, there was no incriminating material before the Ld. AO is not acceptable. Accordingly, we dismiss the alternative argument of the assessee. 19.4 Accordingly, this ground of the assessee is dismissed. 20. As far as the third issue with regard to the validity of issue of notice u/s.153C of the Act is concerned, we have already decided the issue in ITA no.377/Hyd/2023 at para no. 12 above, which applies mutatis mutandis to this appeal also. Accordingly, this ground of appeal of the assessee is dismissed. 21. In the result, the appeal of the assessee in ITA No.378/Hyd/2023 is partly allowed. ITA No.379/Hyd/2023 for A.Y. 2018-19 (Assessee's appeal) 22. At the outset, the Ld. AR submitted that, only two issues are involved in this appeal. The first issue is related to addition of Rs. 20 lakhs and the second issue is related to validity of notice issued u/s.153C of the Act. 23. As far as the first issue is concerned, the Ld. AR submitted that, the facts with regard to the issue are that, copy of mobile chat of Sri Venkateswara Reddy, Accountant of the assessee was seized. From the seized document, the Ld. AO found that, the assessee had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e records, the contention of the assessee that the same amount has already been get included in the addition made by the Ld. AO for A.Y. 2012-13, can not be accepted. Accordingly, we dismiss this ground of the assessee on this count. 26.1 However, the alternate argument of the assessee is that, the cash balance of Rs. 10,17,86,420/- was available to the assessee on 12.08.2014 and the alleged amount of Rs. 22.40 lakhs will get subsumed in that cash balance available on 12.08.2014. We have gone through the page no.99 of the paper book and found that the cash balance as on 12.08.2014 as per cash book is Rs. 10,17,86,420/-. Therefore, we are of the considered opinion that, the assessee has sufficient cash balance to subsume the alleged amount of Rs. 22.40 lakhs. Therefore, we delete the addition of Rs. 22.40 lakhs. Accordingly, we allow this ground of the assessee. 27. As far as the second issue with regard to the validity of issue of notice u/s.153C of the Act is concerned, we have already decided the issue in ITA no.377/Hyd/2023 at para no. 12 above, which applies mutatis mutandis to this appeal also. Hence, this ground of appeal of the assessee is dismissed. 28. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in ITA No.380/Hyd/2023 is allowed. ITA No.383/Hyd/2023 for A.Y. 2017-18 (Revenue's appeal) 36. At the outset, the Ld. DR submitted that, only one issue is involved in this appeal. The facts with regard to the issue are that, during the course of search operation, Excel sheets were found from the mobile back up of Sri Venkateswar Reddy, Accountant of the assessee. The Ld. AO noted that, in those Excel sheets, the assessee has shown cash receipt of Rs. 130 lakhs and Rs. 50 lakhs from Smt. Jyothi Reddy on 10.11.2016 and 01.10.2016 respectively. The Ld. AO also noted that, other cash receipts of Rs. 153 lakhs was also there in the Excel sheets, out of which Rs. 111 lakhs was received from Smt. Jyothi Reddy; Rs. 39 lakhs from Smt. Geetha Reddy and Rs. 3 lakhs from Smt. Latha Reddy on 10.11.2016 and out of these cash receipts, cash payment of Rs. 1,52,50,000/- were made to various persons in cash, which were not accounted for by the assessee in their books of account. Accordingly, the Ld. AO made all the three additions of Rs. 130 lakhs Rs. 152.50 lakhs and Rs. 50 lakhs in the hands of the assessee. 37. Aggrieved with the order of Ld. AO, the assessee filed appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt. Geetha Reddy and Smt. Jyothi Reddy, who in turn had received the cash from their mother Smt. Suseela and Smt. Suseela had got the cash out of sale of her property and her past savings. In support of their submission, the Ld. AR drew our attention to page no.45 to 62 of the order of Ld. CIT(A), where the Affidavits of Sri K. Ravinder Kumar Reddy, Smt. Latha Reddy, Smt. Geetha Reddy and Smt. Jyothi Reddy accepting the cash transactions, has been reproduced. On going through all these documents, we also hold that, the transactions in these Excel sheets are the personal transactions of Sri K. Ravinder Kumar Reddy, Smt. Latha Reddy, Smt. Geetha Reddy and Smt. Jyothi Reddy. Further no materials/facts are brought before us by the Revenue contrary to the factual findings of the CIT(A). Accordingly, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly, we uphold the order of the Ld. CIT(A). 41. In the result, the appeal of the revenue is dismissed. ITA No.384/Hyd/2023 for A.Y. 2018-19 (Revenue's appeal) 42. At the outset, the Ld. DR submitted that, only one issue is involved in this appeal. The facts with regard to the issue are that, during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reliance on the order of Ld. CIT(A). 46. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. The Ld. CIT(A) at page nos.53 to 87 of his order have given the factual findings that, out of total addition of Rs. 3,51,30,000/- Rs. 2,83,00,000/- are recorded in the books of the assessee and held that, the same is liable to be deleted. Further no materials/facts are brought before us by the Revenue contrary to the factual findings of the CIT(A). Therefore, in our considered opinion, as Rs. 2,83,00,000/- are recorded in the books of the assessee, we hold that, the same is liable to be deleted. Accordingly, we delete the addition of Rs. 2,83,00,000/-. 46.1 On account of balance addition of Rs. 68,30,000/-(out of addition of Rs. 3,51,30,000/-), the Ld. AR submitted that, the cash balance of Rs. 10,17,86,420/- was available to the assessee on 12.08.2014 and the balance addition of Rs. 68,30,000/- will get subsumed in that cash balance available on 12.08.2014. We have gone through the page no.99 of the paper book and found that the cash balance as on 12.08.2014 as per cash book is Rs. 10,17,86,420/-. Therefore, we are o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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