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TMI Blog2022 (7) TMI 740X X X X Extracts X X X X X X X X Extracts X X X X ..... peal and hence, they are taken up together and disposed of by this common order for the sake of convenience. 2. Both the parties mutually submitted that the appeal of the Revenue for the A.Y.2009-10 be taken up first. The Revenue has raised the following grounds of appeal for A.Y. 2009-10:- (i) "On the facts and circumstances of the case and in law, the learned CIT(A) has erred in deleting disallowance Rs.25,59,209/- [wrongly mentioned in CIT(A)'s order of as Rs.51,18,419/-] out of commission expense of Rs.51,18,419/-, by observing that since income has been estimated by rejecting the books of accounts, no separate addition can be made by disallowing expenses based on the same books of accounts ignoring the fact that the Assessing Officer had not estimated total income or Net Profit (N.P.) of the assessee but made addition @ 1% of the turnover over and above G.P. of 23.29% declared by the assessee in the books of accounts by rejecting book results and the disallowance of commission expenses claimed in the Profit & Loss account against G.P. was made as the assessee failed to furnish details in support of its claim." (ii) "On the facts and circumstances of the case and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(2) of the Act had not expired and hence, the assessment for A.Y.2009-10 becomes a pending proceedings which gets abated. Hence, there is absolutely no requirement of any incriminating material for the purpose of framing assessment u/s.153A of the Act for the said assessment year. 3.1. The assessee is engaged in the business of offset, screen and digital printing. The ld. AO observed that the assessee did not produce either the books of accounts or vouchers in support of the expenses claimed in the profit and loss account and items reflected in the balance sheet. The ld. AO rejected the book results of the assessee u/s 145(3) of the Act due to the following reasons:- a) The director of the assessee company in his statement dated 24/02/2010 had stated that assessee company had not maintained quantitative tally of consumption of raw material and production of finished goods. b) Non-production of books of accounts in the course of assessment proceedings. c) Non-production of sale bills / purchase bills and expense vouchers d) No evidence in support of delivery of goods e) Defects in maintenance of inward register 3.2. With these observations, the ld. AO proceeded to reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and upheld the addition made on account of bogus purchases thereon. 4.2. With regard to disallowance of 50% of commission expenses; 50% travelling and conveyance and disallowance of depreciation made by the ld. AO, the ld. CIT(A) observed that those three disallowances cannot be made in view of the fact that the ld. AO had already rejected the books results of the assessee u/s.145(3) of the Act and profit has been estimated @1%. Having done so, the ld. AO cannot look into the very same books and make separate disallowances thereon. 4.3. Aggrieved by the above, the Revenue is in appeal before us against the deletion of disallowance of commission expenses, travelling expenses and depreciation. The assessee has preferred cross objections before us on the legal issue of challenging the validity of search assessment that the same has not been framed in accordance with law and also challenging the addition made on account of bogus purchases. The assessee has also preferred cross objections on the ground that notice u/s.143(2) of the Act was not served on the assessee. The assessee has further raised yet another ground for disallowance of interest made by the ld. AO which has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,92,400/- is after considering the disputed purchases of Rs.84,38,546/-. The book results of the assessee had been rejected by the lower authorities for not addressing the defects pointed out by the lower authorities. Hence, once the book results are rejected as stated supra, there cannot be separate addition that could be made on account of purchases which are already reflected in the book results, based on alleged seized material. Hence, we direct the ld. AO to delete the addition made on account of bogus purchases in the sum of Rs.84,38,546/- as the said issue also gets subsumed in the net profit estimated at 1% of turnover. Accordingly, the ground Nos. 11 & 12 raised by the assessee in its cross objections are allowed. 5.3. The ground No.10 raised by the assessee in its cross objections is only supportive of the order of the ld. CIT(A) and hence, allowed. 5.4. The ground Nos. 6 raised by the assessee is challenging the validity of the search assessment on the ground that notice u/s.143(2) of the Act was not served. In this regard, we find that the ld. CIT(A) had categorically held in para 5.1 & 5.2 of his order that notice u/s.143(2) of the Act was issued to the assessee on 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been framed in violation of provisions of Section 153D of the Act. 5.6.1. We find that A.Y.2009-10 is an abated assessment as the time limit for issuance of notice u/s.143(2) of the Act in respect of original return of income filed by the assessee was very much available with the ld. AO as on the date of search. Hence, it is a pending proceeding which has got abated. In respect of abated assessment, the law is very well settled that there is no need for the ld. AO to determine the total income u/s.153A of the Act based on the incriminating materials found during the course of search. In other words, existence of incriminating materials found during the course of search would be relevant only in respect of concluded assessments and the said principle would not apply for abated assessments. Reliance in this regard is placed on the decision of the Hon'ble Jurisdictional High Court in the case of Continental Warehousing Corporation reported in 374 ITR 645 (Bom). 5.6.2. We find that assessee has raised an objection that the search assessment completed on 28/03/2013 is barred by limitation in terms of Section 153B of the Act. We find that this objection was also raised by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the net profit is estimated @1% of turnover, there cannot be further addition made on account of business income either by way of disallowance of interest on borrowed funds or by way of adding notional interest income on loans and advances. This is in view of the fact that the said interest addition would get subsumed in the determination of net profit @1% of turnover. Hence, we direct the ld. AO to delete the addition made in the sum of Rs.3,14,160/-. Accordingly, the ground Nos. 13 & 14 raised by the assessee in its cross objections are allowed. 7. The ground No.15 raised by the assessee in its cross objection is only challenging the order passed by the ld. CIT(A) on the ground that sufficient opportunity was not given to the assessee thereby violating the principles of natural justice. But we find from perusal of the order of the ld. CIT(A), sufficient opportunities were given to the assessee to buttress the various issues and the ld. CIT(A) had addressed the entire grounds raised before him in detail. Hence, we hold that ground No.15 raised by the assessee is completely devoid of merit and hence, dismissed. 8. The ground No.16 raised by the assessee in its cross objections ..... 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