2024 (3) TMI 208 - AT - Income Tax

Validity of assessment u/s 153A - revenue precisely claims that the CIT(A) was wrong in giving benefit of certain decisions of non-jurisdictional High Courts to assessee and at the same time ignoring the decision of Raj Kumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT favouring revenue - HELD THAT - As search was conducted on 01.06.2011 and the AY 2011-12 AY 2012-13 with which we are concerned in present-appeals were falling within the category of pending years as on the date of search whereas the decision in CIT Vs. Raj Kumar Arora (supra) was pertaining to completed/unabated years wherein it was held that the addition can be made in completed/unabated years even in absence of incriminating material. Ld. AR submitted that the Raj Kumar Arora decision has no relevance to assessee s case and the ground raised by revenue should not arise for AY 2011-12 and 2012-13 under consideration before us. Further the decision in Raj Kumar Arora is not valid after subsequent decision of Hon ble Supreme Court in PCIT Vs. Abhishar Buildwell Pvt. Ltd. 2023 (4) TMI 1056 - SUPREME COURT . Therefore the grounds raised by revenue are meritless and liable to be dismissed. Exemption u/s 11 - violation of section 13 - assessee-society has given its office premise on rent to concerns wherein the members of society were directors/shareholders/partners/substantially interested less than prevalent rates of rent - HELD THAT - The submission of Ld. DR for revenue that the assessee s submission in letter dated 24.03.2014 was self-serving is not convincing because of the reason that when the assessee made such a categorical submission it was the minimum duty of AO to discuss the assessee s submission in assessment-order and to rebut or contradict the same. But the AO has kept silence on assessee s submission and went ahead to make adjudication against assessee. In the situation we are inclined to accept CIT(A) s order which takes into account assessee s categorical submission and thereby hold that the rent charged by assessee was fair rather higher than prevailing rent and further holding that there was no violation of section 13 of the Act. Faced with this situation we are not inclined to make any interference with the order of CIT(A); the same is hereby upheld. These grounds are therefore dismissed. Addition u/s 69B on account of unexplained investments in buildings - AO has made these additions by making a reference to DVO u/s 142A and after taking into account the final report submitted by DVO to him on the basis of difference in the cost of construction recorded in books of account of assessee and the valuation thereof reported in DVO s report - CIT(A) deleted the addition - HELD THAT - CIT(A) correctly deleted addition by holding the reference made by AO u/s 142A as non- maintainable. The reasoning adopted by CIT(A) is that prior to amendment in section 142A from 01.10.2014 the AO could not have make such a reference without finding any defect in books of account and without rejecting books of account. In accepting this Ld. CIT(A) relied upon several judicial rulings including the decision of Hon ble Apex Court in Sargam Cinema Vs. CIT 2009 (10) TMI 569 - SC ORDER - Respectfully following the same we are inclined to uphold the order of CIT(A) and dismiss these grounds of revenue. Unexplained cash u/s 69A - CIT(A) deleted the addition - HELD THAT - We find that the search authorities have found petty amounts of cash with three different colleges at three different places which are not abnormal or unusual. Further the assessee has also submitted that the cash-balance is duly reflected in its cash-book. Considering these aspects the submission of assessee can be treated as bona fide and believable. Therefore we are not persuaded to upset the order passed by CIT(A) in this regard the same is hereby upheld. These grounds are also dismissed.

Summary

Issues Involved:
1. Deletion of additions based on non-jurisdictional High Court decisions.
2. Deletion of additions for alleged violation of Section 13 of the Income-tax Act, 1961.
3. Deletion of additions due to income over expenditure.
4. Deletion of additions under Section 69B for unexplained investments.
5. Deletion of additions under Section 69A for unexplained cash.
6. Non-adjudication of specific grounds by CIT(A).

Summary:

Issue 1: Non-Jurisdictional High Court Decisions
The revenue argued that the CIT(A) erred in relying on non-jurisdictional High Court decisions while ignoring the Allahabad High Court decision in CIT vs. Raj Kumar Arora. The Tribunal found that the Raj Kumar Arora decision pertained to 'completed/unabated years' and was not relevant to the assessee's case. The Tribunal also noted that the decision was not valid after the Supreme Court's decision in PCIT Vs. Abhishar Buildwell Pvt. Ltd. Consequently, these grounds were dismissed.

Issue 2: Violation of Section 13
The AO added Rs. 1,28,000/- and Rs. 1,44,000/- for AY 2011-12 and 2012-13 respectively, alleging that the assessee charged less rent to related parties, violating Section 13. The Tribunal upheld the CIT(A)'s decision, which found that only 1,200 square feet was rented out at market rates, not the entire 6,000 square feet as assumed by the AO. Therefore, the CIT(A)'s order was upheld, and these grounds were dismissed.

Issue 3: Income Over Expenditure
The AO denied exemption under Sections 11/12 due to alleged violation of Section 13, treating the net surplus as taxable income. The Tribunal found this issue to be consequential to the Section 13 violation issue. Since the Tribunal upheld the CIT(A)'s decision on Section 13, these grounds were also dismissed.

Issue 4: Unexplained Investments under Section 69B
The AO made additions based on a DVO report, alleging unexplained investments in buildings. The CIT(A) deleted these additions, holding that the reference to the DVO was non-maintainable without finding defects in the books of account. The Tribunal upheld this decision, citing the Supreme Court's ruling in Sargam Cinema Vs. CIT and ITAT Indore's decision in the assessee's own case. These grounds were dismissed.

Issue 5: Unexplained Cash under Section 69A
The AO added Rs. 2,35,474/- for unexplained cash found during a search. The CIT(A) deleted this addition, noting that the AO did not point out any specific errors in the cash book. The Tribunal found the cash amounts to be normal petty cash balances and upheld the CIT(A)'s decision. These grounds were dismissed.

Issue 6: Non-Adjudication of Specific Grounds
The assessee argued that the CIT(A) did not adjudicate certain grounds in the first appeal. The Tribunal directed the CIT(A) to adjudicate these grounds appropriately after giving the assessee an opportunity to be heard. Consequently, the assessee's cross-objections were allowed.

Conclusion:
The revenue's appeals were dismissed, and the assessee's cross-objections were allowed. The Tribunal upheld the CIT(A)'s decisions on all contested issues and directed the CIT(A) to adjudicate the remaining grounds raised by the assessee.