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2022 (10) TMI 1112 - ITAT MUMBAIAssessment u/s 153A - incriminating material found during the course of search or not? - Deduction of interest expenditure u/s 57 - HELD THAT:- On reading of the assessment order, we do not find any material which was unearthed during the course of search on 13/7/2016 related to the adjustment made by the learned assessing officer with respect to the adjustment in the closing inventory of the assessee. Now it has been fairly concluded by the Honourable Supreme Court in Sinhgad technical education society [2017 (8) TMI 1298 - SUPREME COURT] that without reference to incriminating material seized during search, the concluded assessment cannot be enhanced. Therefore ground number 1 and 3, 4 of the appeal of learned assessing officer are dismissed. Net interest expenditure as cost of inventory is merely an academic in view of our decision in holding that there is no incriminating material with respect to the above adjustment, therefore there is no requirement of going into the merits of the addition. Therefore, ground number 2 is dismissed. Addition u/s 69A - addition made on account of seized material found during search - HELD THAT:- Therefore, as the amount has already been taxed in the settlement petition of the assessee group, making addition once again in the hence of this assessee will amount to double taxation of the same income. Therefore, ground number 5 – 7 of the appeal are dismissed. Addition of differential interest income - trust income offered in the return of income is less as per the form 26AS the same was shown - HELD THAT:- We find that with respect to the above addition was found during the course of assessment proceedings and the same was made only on the issue of 3 verification of form number 26AS. Therefore, for the same reasoning given by us that concluded assessment can only be tinkered with incriminating material found during the course of search. Same is absent with respect to this addition. Accordingly, ground number 3 of the appeal is dismissed. Claim of the interest expenditure and adjustment in value of the closing stock inventory - HELD THAT:- In the present case the return of income was filed on 26/11/2013 and search took place on 13/7/2016 and therefore the impugned assessment year is concluded assessment, which could have been upwardly adjusted only on account of incriminating material found during the course of search. We find that no such incriminating material has been referred to in the assessment order and no such incriminating material has been produced before us during the course of hearing. In view of this following our reasoning given in the appeal of the learned assessing officer for assessment year 2011 – 12 and 2012 – 13 as above, we dismiss ground number 1-4 of the appeal of the learned assessing officer for assessment year 2013 – 14. Addition of interest on loan - AO aggrieved that appellate authority failed to appreciate the fact that the assessee failed to substantiate with documentary evidence the business expediency of the loan given from which interest expenses was earned and therefore the same is allowable u/s 57 of the income tax act but not u/s 36 (1) (iii) - HELD THAT:- As stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue was replied before the learned CIT – A which is also placed - Therein also did not discuss any of the facts as stated before us with respect to the agreement entered into by the assessee. CIT – A has also did not give any justifiable reason to hold that the income and by the assessee on interest from fixed deposit receipt should be considered as business income but merely believed the written submission of the assessee. The arguments of AR with respect to the stalled project was not considered by any of the lower authorities as emanating from the assessment order or appellate order. We set-aside appeal of AO back to the file of the learned assessing officer for the purpose of determination whether the interest income earned by the assessee on fixed deposit receipt is a business income on income from other sources. The assessee is also directed to justify the same that interest on fixed deposit receipt should be considered as business income and consequently the deduction of interest expenditure is also required to be examined by the learned assessing officer. Accordingly ground number 1 – 4 of the appeal of the AO is restored back to the file of the learned assessing officer.
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