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2014 (12) TMI 1166 - AT - Income TaxDetermination of total income - disallowance of revenue expenditure incurred towards flooring and wiring in the assessee's hotel premises - 153A Assessment - contention of the assessee that since no incriminating evidence relating to this transaction was found in the course of search u/s.132 of the Act, the resultant disallowance was not called for in the assessment of income u/s.143(3) rws 153A - Held that:- Respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Canara Housing Development Co. ( 2014 (8) TMI 642 - KARNATAKA HIGH COURT ), we hold that once the assessment is reopened, the Assessing Officer can take note of the income disclosed in the earlier return, any undisclosed income found during the course of search and also any other income which is not disclosed in the earlier return of income OR which is not unearthed in the course of search under section 132 of the Act, in order to find out and determine what is the 'total income' of each year and then pass the order of assessment. Treatment of expenditure incurred on renovation and cost of improvement of building leased as capital expenditure - revenue disallowing the assessee's claim that the said expenditure be allowed as revenue expenditure - Held that:- Whenever an expenditure was incurred in the process of earning profits it has to be allowed as revenue expenditure. In such a case the expenditure incurred by the assessee would be out of the ambit and purview of the provisions of Explanation 1 to Section 32 of the Act of the Act. In the case on hand, it is not in dispute that the expenditure was incurred for renovation. These expenses were incurred only for the purpose of carrying on day to day business and earn profits and do not result in the bringing into existence of any capital asset. Therefore, in our view, the learned CIT (Appeals) was not right in upholding the disallowance of the expenditure by holding it as capital in nature. We, accordingly, reverse the findings of the authorities below on this issue and allow the assessee's claim for deduction of expenditure incurred towards renovation of plant design system, computer cabling, fire detection and alarm system, plumbing, air conditioning work, electrical works, interior work etc. on the hotel/building taken on lease. Interest under section 234B and 234C - Held that: - As the assessee has filed returns of income for the three assessment years 2008-09 to 2010-11 under section 153A of the Act declaring the additional income, disclosed/admitted in the partners statement under section 132(4) of the Act in the course of search, as its income. In view of the above discussion from para 9 to 9.5.4 of this order, we uphold the decision of the learned CIT (Appeals) confirming the action of the Assessing Officer in levying interest under section 234B and 234C of the Act. Quantum of profit on suppression of unrecorded sales - Held that:- We concur with the view of the learned CIT (Appeals) that the said additions made by the Assessing Officer on account of profits earned on suppressed sales for Assessment Years 2008-09 to 2010-11 are unsubstantiated and therefore uphold the order of the learned CIT (Appeals) deleting the said additions as the conclusions arrived at by the Assessing Officer are farfetched, and the additions made on account of profit on suppressed/undisclosed sales, are not substantiated by any material evidence
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