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2022 (4) TMI 1180 - AT - Income TaxAssessment u/s 153A - Whether disallowance was made without any incriminating material found during the search proceedings? - as per assessee AO has issued improper notice u/s 153A of the Act to initiate the unabated assessment year under consideration - HELD THAT:- We noticed from the submissions of the Ld AR that the notice issued u/s 153A by the Assessing Officer does not contain any details of incriminating material found during the search. In absence of such crucial details, whether the assessment made under section 143(3) r.w.s 153A is bad in law. As indicated earlier the notice issued u/s 153A does not contain any details of incriminating material or any reasons for which the assessment is reassessed u/s 153A of the Act, we observe that in the similar situation, the Hon’ble Bombay High Court in the case of Underwater Services Company Limited [2021 (10) TMI 1158 - BOMBAY HIGH COURT] held that issuance of notice is the preliminary step which enables the assessee to effectively deal with the case made out by the revenue. Section 153A provides that an assessment has to be made under the said section only on the basis of seized material u/s 132 or 132A, in the absence of such details in the notice issued under the said section, the assessee is not in a position to appreciate which return of income should be filed in response to the notice issued u/s 153A, whether the original return of income filed or revised return of income. As held that the Hon’ble Court held that nothing prevented the revenue from mentioning in the notice the basis for issuing the notice u/s 153A so that the assessee could comply with the same as prescribed. Thus the notice issued u/s 153A is bad in law and the assessment made by issue of improper notice is also bad in law - Decided in favour of assessee. Whether basis of reassessment is statement recorded of labour contractors and the statement recorded are prima facie not the incriminating materials? - As relying on LATE SH. RAJ PAL BHATIA & OTHERS [2010 (11) TMI 1010 - DELHI HIGH COURT] we are inclined to allow the ground raised by the assessee. The assessee has also made other propositions and we already deliberated two propositions i.e., additional ground and first proposition decided in favour of the assessee, the deliberation on the other propositions will lead to academic interest hence not adjudicated. Allowability of Labour contract expenses - HELD THAT:- Assessing Officer proceeded to make the addition merely relying on the statements, a perusal of the statement reveals that the four parties have admitted doing labour contract work for the assessee, however in the subsequent statements they have displayed ignorance of the activities are undertaken. In the statement they have disclosed that their spouses and their family members were involved in the running of the business, they clearly indicated that their family members or husband were in a position to explain the entire activities. Nowhere, they admitted that there is no business or they have received or provided accommodation entries. They have admitted that they provide labour and filed their returns of income but further details of the business were stated to be in the knowledge of their spouse/son who run their business, the assessee has provided the documentary evidences like payments, ledger copies financial statements etc. Ld CIT(A) observed that the undisputed facts are that the assessee is in the business of manufacturing and processing of fabrics and dealing in all kinds furbishing, maintaining the garden, engaging labour to do the mending works in embroidery are a part of the business activities for which the assessee had taken the services of the above mentioned four parties. The above parties have confirmed to have provided the services. However, AO has alleged that they have withdrawn the cash immediately depositing the cheques but there is no suspicious about this as the above said parties had to make the payments to the labour by cash Ld CIT(A) as well as submissions made by both parties that the Assessing Officer has made the addition merely on the basis of presumptions and surmises without there is any concrete evidence against the assessee. Objections raised by the Assessing Officer that there are no written contracts, the proprietors never visited the factory premises - We observe that Ld.CIT(A) has clearly addressed these concerns in his order that the absence of the written contracts will not make the transactions bogus and the ladies did not visit the factories because their spouses/son were carrying out the business and the respective spouse/son have already confirmed the same by filing proper affidavits. By considering the findings of the Ld.CIT(A) and facts on record, we have no hesitation to confirm the decision reached by the Ld.CIT(A). Therefore, we do not see any reason to interfere with the above findings and accordingly ground raised by the revenue is dismissed. Credit card payments - We observe that Assessing Officer has made the disallowance on the basis of adhoc without their being any basis, merely because the assessee incurred such huge expenses, it does not mean that it is not for the business. The Assessing Officer should have verified the same in detail before making any such disallowances. The courts have held that the adhoc disallowances cannot be made without their being any basis. The credit cards facilities are given to the Directors and other employees only facilitating payments of expenses to be made on behalf of the company. Therefore, we direct AO to allow the total expenses claimed by the assessee. Sale of Loom and commission expenditure - As we observe that the basis for making such addition is the findings of Investigation wing in the case of D’décor Home Fabrics Pvt. Ltd, which is owned and managed by Shri Ajay Arora. The findings is based on the statement of one of the employee of the above said company. However, the findings in the above case can only be applied in their group cases. The statement of the said employee cannot be applied the assessee since this company is owned and managed by Shri Sanjay Arora, even though they are brothers. Therefore, we are inclined to accept the findings of Ld.CIT(A) in deleting the additions including the alleged commission payments. Accordingly, grounds raised by the revenue in this regard are also dismissed.
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