TMI Blog2019 (7) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the assessee. Further, in the reasons recorded for reopening we did not find anything which shows that there is a tangible material coming into the possession of the learned assessing officer to reopen the assessment - in the original assessment proceedings it has been stated that the profit u/s 80 HHC of the income tax act was computed in the original assessment proceedings, which is also the subject matter of appeal before the 1st appellate authority. Therefore, it is apparent that it is merely a change of opinion on a particular aspect of the computation of deduction u/s 80 HHC - Reopening of the assessment proceedings initiated by the learned assessing officer is not sustainable in law. Assessment u/s 153A - scope of section 153A - Delhi High Court in case of CIT vs Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] has held that in such assessment u/s 153A in concluded assessment, the addition can be made only on the basis of incriminating material found during the course of search. The learned departmental representative could not show us any material found during the course of search based on which the additions/disallowances other than the computation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer de-hors any material/document found during the course of search. 5. That the Commissioner of Income-tax (Appeals) erred on facts and in law in affirming the action of the assessing officer in relying upon erroneous findings given in the special audit report furnished under section 142(2A) of the Act, without judiciously appreciating thg details/ explanation furnished by the appellant. Without prejudice 5. That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining the disallowance of cash expenditure amounting to ₹ 8,620 under section 40A(3) of the Act. 5.1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that the actual amount of cash expenditure incurred by the appellant was only ₹ 25,000/- as against ₹ 43,102/- considered by the assessing officer. 5.2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining the disallowance of cash expenditure under section 40A(3) of the Act even though the said disallowance was made de-hors any document/material fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no default in filing the return of income under section 153A of the Act. 4. Brief facts of the case shows that the assessee is a company engaged in the business of manufacturing and trading of rice. It filed its return of income on 2/10/2003 declaring total income of ₹ 2555011/ after availing deduction u/s 80 HHC at INR 3 8289254/- and under section 80 G of INR 1 77500/ . This return was processed u/s 143 (1) of the income tax act on 20/1/2004 at the returned income. Assessment u/s 143 (3) of the act also completed on 29/3/2006 at the total income of INR 3 0933761/ by restricting the deduction u/s 80 HHC of INR 219273253/ . In the assessment, certain other additions were also made. The assessee preferred an appeal before the learned CIT (A) VII, New Delhi. He passed an order on 26/9/2006 and decided the certain issues in favor of the assessee and subsequently in appeal effect order dated 24/4/2007, income was reduced to INR 23513969/ . The revenue preferred an appeal before the coordinate bench who upheld the decision of the learned CIT A. The revenue also raised the issue before the honourable High Court. Subsequently the assessee filed an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that original assessment proceedings u/s 143 (3) of the income tax act was concluded as per order dated 29/3/2006 restricting the deduction claimed under section 80 HHC of the act. On appeal, CIT(A) vide order dated 24.04.2007 decided the issue of restriction of deduction under section 80HHC against the assessee and other issues in its favour. No further appeal preferred by assessee against the order of CIT (A). Thereafter, application dated 14.09.2007 filed by the assessee under section 154 of the Act for making additional claim of deduction under section 80HHC of the Act. Rectification application stood dismissed by the assessing Officer as well as confirmed by the learned CIT A and the coordinate bench. 9. He further submitted that after that, reassessment proceedings under section 148 of the act was initiated as per notice dated 15/11/2008 on the issue of excess deduction claimed under section 80 HHC of the act to the extent of INR 18,100,000. The above assessments stood abated pursuant to search proceedings in the case of the assessee. 10. He submits that now u/s 153A, if the reassessment proceedings are valid, then, whole assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as considered the decision with different aspect whereas in the assessment order the learned assessing officer has looked into the correct claim of the assessee u/s 80 HHC of the income tax act. He otherwise stated that the assessment proceedings under section 148 of the income tax act was pending at the time of the search and therefore the learned assessing officer has correctly recomputed the deduction allowable to the assessee u/s 80 HHC of the income tax act at Rs. Nil. He further stated that this is an appeal against the order of the learned assessing officer under section 153A of the income tax act and the assessee is raising that the 148 proceedings initiated by the learned assessing officer is invalid, which is not the subject matter of appeal and therefore it cannot be raised now. 15. We have carefully considered the rival contention and perused the orders of the lower authorities. There is no dispute with respect to the assessment proceedings under section 153A of the income tax act. The dispute is in the facts and circumstances of the present case what is the scope of section 153A of the act. Admittedly, reassessment proceedings u/s 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of the assessment the learned assessing officer has no where stated that what is the failure on the part of the assessee to fully and truly disclose the material facts for the computation of the total income. b. In the reasons recorded itself, the learned assessing officer has stated that there is a mistake in calculation, which has resulted in over statement of export the purpose of calculation of deduction u/s 80 HHC of the income tax act. Therefore, it is apparent that the learned assessing officer himself in stating that it is a mistake and there is no escapement of income because of failure on the part of the assessee. c. Further, in the reasons recorded for reopening we did not find anything which shows that there is a tangible material coming into the possession of the learned assessing officer to reopen the assessment. d. Further, in the original assessment proceedings it has been stated that the profit u/s 80 HHC of the income tax act was computed in the original assessment proceedings, which is also the subject matter of appeal before the 1st appellate authority. Therefore, it is apparent that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial found during the course of search, we reverse the order of the ld CIT (A) and direct the learned assessing officer to delete those additions/disallowances. 21. Accordingly, appeal filed by the assessee for AY 2003-04 is allowed. 22. Now we come to the appeals for AY 2004-05 preferred by both the parties against the order of the dl CIT (A) _ XXXIII, New Delhi dated 25/3/2013 wherein appeal of the assessee is partly allowed.. 23. The assessee has raised the following grounds of appeal in ITA No. 4161/Del/2013 for the Assessment Year 2004-05:- 1. That the search conducted under Section 132 is illegal, bad in law and without jurisdiction and the assessment made U/s 153A is also bad in law and without jurisdiction. 2. That the notice U/s 153A and the assessment order passed U/s 153A is illegal, bad in law and without jurisdiction. 3. That the CIT(Appeals) has in view of the facts and circumstances of the case, erred on facts and in law in not deleting the additions made by the AO since the AO has exceeded his power and jurisdiction in making additions that are totally unco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing payments of ₹ 3,59,252/- (Disallowance made @ 20% ₹ 71,850/-) U/s 40A(3) paid as freight and CIT(A) has erred in law and on facts in upholding the same. The CIT(A) has failed to appreciate that payment is made out of commercial expediency and is allowable expenditure. Addition on account of personal expenses 13. That the CIT(A) has in view of the facts and circumstances of the case, erred on facts and in law in upholding the additions made by the AO of ₹ 63,000/- on account of alleged personal expenses. Addition U/s 14A r/w Rule 8D 14. That in view of the facts and circumstances of the case and in law the A.O./CIT(A) has erred in making disallowance to the tune of ₹ 29,763/- u/s 14A read with Rule 8D of the Act. The disallowance made is unjust, unlawful and is also highly excessive. Disallowance of Deduction u/s 80HHC 15. That in view of the facts and circumstances of the case and in law the A.O./CIT(A) has erred in allocation of interest cost of ₹ 9.82,21,881/- as indirect cost attributable to the export of trading goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. 25. The brief facts of the case shows that original return of income was filed on 30/9/2005 declaring total income of INR 7928840/-. The assessee claimed deduction u/s 80 HHC of the act at INR 3 9392912/ . The return was processed u/s 143 (1) of the income tax act on 6/10/2004 on the returned income. Subsequently the return was revised on 31/3/2006 and the income declared therein was nil. In the revised return assessee claimed deduction u/s 80 HHC of the act at INR 3 9392912/ . Assessee also claimed deduction u/s 80 IB of the income tax act of INR 2 7527680/ . The assessment u/s 143 (3) of the act was completed on 15/12/2006 at the total income of INR 2 3188945/ . In the assessment proceedings, the disallowance of deduction u/s 80 HHC of the act was made however deduction u/s 80 IB of the act was allowed. However assessee mood an application under section 154 of the income tax act on 26/12/2006 which was adjudicated by the learned assessing officer on 15/2/2007 and thereafter no proceedings were pending. 26. Search took place on 10/2/2009. Thus on the date of search, assessment proceedings for this assessment year was co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in which could have resulted into making those additions. As held by the honourable Delhi High Court in CIT vs Kabul Chawla 380 ITR 573 that in case of concluded assessment the additions/disallowances can only be made on the basis of the incriminating material found during the course of search. Apparently, no such incriminating material has been found. Therefore, apparently the additions have been made in the concluded assessment proceedings for this year without having any incriminating material. Therefore the disallowance of payment in contravention is of the provisions of section 40A (3) of the income tax act of INR 1 3420/ , addition on account of personal expenses of INR 6 3000/ , disallowance u/s 14 A of the income tax act of ₹ 29763/ , the disallowance of deduction u/s 80 HHC of the income tax act are all made without having any incriminating material found during the course of search. Therefore, these additions cannot be sustained in assessment order passed u/s 153A of the income tax act. Hence we reverse the order of the learned CIT A in confirming the above additions. Accordingly, appeal of the assessee to that extent is allowed. 31. Now coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. That the CIT(A) has in view of the facts and circumstances of the case, erred on facts and in law in upholding the special audit report since the auditor had exceeded the points of reference while preparing and submitting the report to the revenue authorities. 8. That the CIT(A) has in view of the facts and circumstances of the case, erred on facts and in law in upholding the additions made by the AO on the basis of the special audit report. 9. That in view of the facts and circumstances of the case and in law the A.O. has erred in completing the assessment U/s 153A at a total income of ₹ 17,01,29,886/- as against returned income of ₹ 1,44,13,190/- when there is no seized material pertaining to this year. The additions made are unjust, unlawful, bad in law, without jurisdiction and are also highly excessive. Disallowance of payment in Contravention of Section 40A(3) 10. That, in view of the facts and circumstances of the case and in law, the A.O. and subsequently CIT(A) has erred in law and on facts in holding that the assessee has made cash payments to various concern which are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions made by the AO of ₹ 62,395/- on account of alleged personal expenses. 18. That the explanation given evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made. In any case the additions upheld by the CIT(A) are highly excessive. 19. That the various observations made by the CIT(A) are illegal, bad in law and factually incorrect and based on surmises and conjectures. 20. That the interest u/s 234A, 234B, 234D and 244A has been wrongly and illegally charged as there is no delay in Filling of return and there is no default of payment of Advance tax as the receipt / income is liable to TDS and it could not have anticipated such additions. In any case the interest charged has been wrongly worked out and is excessive. 21. That all the above grounds are independent to each other and mutually exclusive. 35. The revenue has raised the following grounds of appeal in ITA No. 4044/Del/2013 for the Assessment Year 2005-06:- 1. On the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24659/ . The assessee did not file any appeal against the order passed by the learned assessing officer u/s 143 (3) of the income tax act. 37. Subsequently search took place of on 10/2/2009. The notices u/s 153A of the income tax act was also issued to the assessee against which the assessee filed the return of income and consequently the assessment u/s 153A) of the income tax act was passed on 19/8/2011 wherein the learned assessing officer has made the disallowance is u/s 40A (3) of the income tax act as well as certain other disallowances. The total taxable income of the assessee was determined at INR 1 70129886/ . On appeal before the learned CIT A appeal of the assessee was partly allowed. Therefore, both the parties are in appeal before us. 38. Coming to the appeal of the assessee wherein it has been contested that the additions made by the learned assessing officer are bad in law as there is no incriminating material found during the course of search. It is further stated that the assessment proceedings to the concluded on the date of initiation of the search and therefore if any additions/disallowances are required to be made should be ma ..... 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