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Facts
The assessee, a private limited company engaged in engineering and civil construction, filed their return of income. A search and seizure operation was conducted, leading to the issuance of a notice u/s. 153A of the Act. The assessee declared additional incomes to avoid litigation, and the AO made additions and disallowances, including under Section 14A. The CIT(A) dismissed the assessee's appeals.
Held
The Tribunal held that additions in assessment made u/s. 153A cannot be made without incriminating materials, especially for unabated assessments. The Tribunal also remitted the issue of telescoping benefit of excess income and the disallowance u/s. 14A for fresh consideration by the AO.
Key Issues
Whether additions made under Section 153A are valid without incriminating materials, the applicability of telescoping benefit for excess income, and the validity of disallowance u/s. 14A without proper satisfaction are the key issues.
Sections Cited
14A, 132, 132(4), 153A, 143(3), 234A, 234B, 234C, 8D, 139(1), 24
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER BENCH These are the four appeals filed by the assessee against the separate orders passed by the Ld.CIT(A) dated 28/03/2025 in respect of the A.Ys. 2015-16, 2016-17, 2017-18 and 2018-19.
2. The issues involved in all the appeals are common except for the A.Y. in which the additional issue of disallowance made u/s. 14A was involved and therefore for the sake of convenience, all the appeals are taken up together and the appeal in is taken as the lead to 1271/Bang/2025 case and the decision arrived in the said appeal would apply mutatis mutandis to the other appeals. The grounds raised by the assessee are extracted below:
“1. The appellate order passed by the learned Commissioner of Income-tax [Appeals]-15, Bengaluru, passed under Section 250 of the Act dated 28/03/2025 for the impugned assessment year 2015-16, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
2. The appellant denies itself liable to be assessed under section 143[3] r.w.s. 153A of the Act under the impugned order on the ground that:- [i]. The search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132[1][a], [b] & [c] of the Act: [ii]. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 [SC]] and consequent assessment under section 153A is null and void-ab-inito on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajith Jain, reported in 260 ITR 80. [iii]. The learned Commissioner of Income tax [Appeals] has not discharged the burden of proving that there is a valid search under section 132 [1] [a], [b] & [c] of the Act, and consequently the assumption of jurisdiction to make an assessment under section 153A of the Act is untenable in law.
3. The learned Commissioner of Income tax [Appeals] failed to appreciate that a valid search is a sine qua non for making a valid assessment under section 153A of the Act on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajit Jain, reported in 260 ITR 80.
4. The appellant is of the apprehension and contends that the learned Assessing Officer has failed to record the satisfaction regarding an inference of liability before the issuance of notice under section 153A of the Act and consequently the assessment is bad in law and liable to be cancelled, on the facts and circumstances of the case. to 1271/Bang/2025
Without prejudice, the appellant denies itself liable to be assessed on a total income of Rs.32,24,91,742/- as determined by the learned assessing officer and confirmed by the learned Commissioner of Income-tax [Appeals], as against the income returned by the appellant of Rs. 32,09,86,440/-, on the facts and circumstances of the case.
6. The learned Commissioner of Income tax [Appeals] is not justified in confirming the addition made of Rs. 4,10,433/- by the learned assessing officer on account of disallowance of proportionate lease rental expenses, on the facts and circumstances of the case.
7. The learned Commissioner of Income tax [Appeals] is not justified in confirming the addition made of Rs. 10,94,871/- by the learned assessing officer on account of disallowance of amortisation of lease expenses, on facts and circumstances of the case.
8. The learned Commissioner of Income-tax [Appeals] failed to properly appreciate that the addition made by the learned assessing officer on account of Lease rent of Rs. 4,10,433/- and amortisation of tease expenses of Rs. 10,94,871/ - in the impugned order of assessment passed for the impugned assessment year 2015-16, are not based on any incriminating materials seized during the course of search and consequently the said two additions could not have been made in a proceeding under section 153A of the Act without incriminating materials which requires to be deleted, on the facts and circumstances of the case. 9. The learned Commissioner of Income tax [Appeals] is not justified in confirming the addition made by the learned assessing officer on account of alleged unproved expenditure amounting to Rs. 72,25,966/- relating to various projects under taken by the appellant, on the facts and circumstances of the case. 10. Without prejudice the learned Commissioner of Income tax [Appeals] and the learned assessing officer were not justified in not giving the benefit of excess amount inadvertently declared in one year as against the shortfall in the income assessed in the other assessment years, without giving the telescoping effect to the credit of excess declaration made in one particular assessment year as against the short fall in other assessment years which has to 1271/Bang/2025 resulted in in double taxation which is against the canons of taxation and against the canons of taxation, on the facts and circumstances of the case.
11. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234A, 234B & 234C of the Income Tax Act, on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A, 234B & 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case.
12. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal
13. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.”
“1. The appellate order passed by the learned Commissioner of Income-tax [Appeals]-15, Bengaluru, passed under Section 250 of the Act dated 28/03/2025 for the impugned assessment year 2015-16, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
2. The appellant denies itself liable to be assessed under section 143[3] r.w.s. 153A of the Act under the impugned order on the ground that:- [i]. The search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132[1][a], [b] & [c] of the Act; [ii]. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 [SC]] and consequent assessment under section 153A is null and void-ab-inito on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajith Jain, reported in 260 ITR 80. to 1271/Bang/2025 [iii]. The learned Commissioner of Income Tax [Appeals] has not discharged the burden of proving that there is a valid search under section 132 [1] [a], [b] & [c] of the Act, and consequently the assumption of jurisdiction to make an assessment under section 153A of the Act is untenable in law.
3. The learned Commissioner of Income Tax [Appeals] to appreciate that a valid search is a sine qua non for making a valid assessment under section 153A of the Act on the parity of the ratio of the decision of the Hon' ble Apex Court in the case of Ajit Jain, reported in 260 ITR 80.
4. The appellant contends that the learned Assessing Officer has failed to record the satisfaction regarding an inference of liability before the issuance of notice under section 153A of the Act and consequently the assessment is bad in law and liable to be cancelled, on the facts and circumstances of the case.
5. Without prejudice, the appellant denies itself liable to be assessed on a total income of Rs.28,41,16,311/ - as determined by the learned Commissioner of Income [Appeals] as against the income returned by the appellant of Rs. 27,53,47,730/ -, on the facts and circumstances of the case.
6. The learned Commissioner of Income Tax [Appeals] is not justified in making a disallowance of Rs. 4,47,744/- towards the lease rental expenses, on the facts and circumstances of the case.
7. The learned Commissioner of Income Tax [Appeals] is not justified in making a disallowance of Rs. 10,94,871/ - towards the amortisation of lease expenses, on facts and circumstances of the case.
8. The addition made on account of Lease rent of Rs. 4,47,744/- and amortisation of lease expenses of Rs. 10,94,871/ - additions made by the learned Commissioner of Income tax [Appeals] in the impugned order of assessment is not based on any incriminating materials seized during the course of search and consequently no addition could be made in a proceeding under section 153A of the Act without the basis of incriminating materials is not justified, on the facts and circumstances of the case. to 1271/Bang/2025 9. The learned Commissioner of Income tax [Appeals] is not justified in making an addition on account of alleged unproved expenditure amounting to Rs. 72,25,966/ - relating to various projects under taken by the appellant on the facts and circumstances of the case.
10. Without prejudice the learned Commissioner of Income tax [Appeals] and the learned assessing officer were not justified in not giving the benefit of excess amount inadvertently declared in one year as against the shortfall in the income assessed in the other assessment years, without giving the telescoping effect to the credit of excess declaration made in one particular assessment year as against the short fall in other assessment years which has resulted in in double taxation which is against the canons of taxation and against the canons of taxation, on the facts and circumstances of the case.
11. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon’ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234A, 234B & 234C of the Income Tax Act, on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A, 234B & 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned Commissioner of Income tax [Appeals] on which interest is levied are not discernible and are wrong on the facts of the case.' 12. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal
13. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.”
“1. The appellate order passed by the learned Commissioner of Income-tax [Appeals]-15, Bengaluru, passed under Section 250 of the Act dated 28/03/2025 for the impugned assessment year 2015-16, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. to 1271/Bang/2025 2. The appellant denies itself liable to be assessed under section 143[3] r.w.s. 153A of the Act under the impugned order on the ground that:- [i]. The search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132[1][a], [b] & [c] of the Act; [ii]. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 [SC]] and consequent assessment under section 153A is null and void-ab-inito on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajith Jain, reported in 260 ITR 80. [iii]. The learned Commissioner of income Tax [Appeals] has not discharged the burden of proving that there is a valid search under section 132 [1] [a], [b] & [c] of the Act, and consequently the assumption of jurisdiction to make an assessment under section 153A of the Act is untenable in law.
3. The learned Commissioner of Income Tax [Appeals] failed to appreciate that a valid search is a sine qua non for making a valid assessment under section 153A of the Act on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajit Jain, reported in 260 ITR 80.
4. The appellant contends that the learned Assessing officer has failed to record the satisfaction regarding an inference of liability before the issuance of notice under section 153A of the Act and consequently the assessment is bad in law and liable to be cancelled, on the facts and circumstances of the case.
5. Without prejudice, the appellant denies itself liable to be assessed on a total income of Rs.32,43,98,167/- as determined by the learned Commissioner of Income [Appeals] as against the income returned by the appellant of Rs. 32,28,55,552/-, on the facts and circumstances of the case.
6. The learned Commissioner of Income Tax [Appeals] is not justified in making a disallowance of Rs. 4,47,744/- towards the lease rental expenses, on the facts and circumstances of the case.
7. The learned Commissioner of Income Tax [Appeals] is not justified in making a disallowance of Rs. 10,94,871/ - to 1271/Bang/2025 towards the amortisation of lease expenses, on facts and circumstances of the case.
The addition made on account of Lease rent of Rs. 4,47,744/- and amortisation of lease expenses of Rs. 10,94,871 /- additions made by the learned Commissioner of Income Tax [Appeals] in the impugned order of assessment is not based on any incriminating materials seized during the course of search and consequently no addition could be made in a proceedings under section 153A of the Act without the basis of incriminating materials is not justified, on the facts and circumstances of the case.
9. The learned Commissioner of Income Tax [Appeals] is not justified in not allowing the credit towards excess declaration made by the appellant of Rs. 1,14,55,000/- for the impugned assessment year against the shortfall in declaration made in other years, on the facts and circumstances of the case.
Without prejudice the learned Commissioner of Income tax [Appeals] and the learned assessing officer were not justified in not giving the benefit of excess amount inadvertently declared in one year as against the shortfall in the income assessed in the other assessment years, without giving the telescoping effect to the credit of excess declaration made in one particular assessment year as against the short fall in other assessment years which has resulted in in double taxation which is against the canons of taxation and against the canons of taxation, on the facts and circumstances of the case.
Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234A, 234B & 234C of the Income Tax Act, on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A, 234B & 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned Commissioner of Income tax [Appeals] on which interest is levied are not discernible and are wrong on the facts of the case.
12. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal. to 1271/Bang/2025
13. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.”
“1. The appellate order passed by the learned Commissioner of Income-tax [Appeals]-15, Bengaluru, passed under Section 250 of the Act dated 28/03/2025 for the impugned assessment year 2018-19, in so far as it is against the Appellant is opposed to taw, weight of evidence, probabilities, facts and circumstances of the Appellant's case.
The appellant denies itself liable to be assessed under section 143[3] r.w.s. 153A of the Act under the impugned order on the ground that:- [i]. The search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132[1][a], [b] & [c] of the Act; [ii]. That the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132[2] is bad in law [224 ITR 19 [SC]] and consequent assessment under section 153A is null and void-ab-inito on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajith Jain, reported in 260 ITR 80. [iii]. The learned Commissioner of Income tax [Appeals] has not discharged the burden of proving that there is a valid search under section 132 [1] [a], [b] & [c] of the Act, and consequently the assumption of jurisdiction to make an assessment under section 153A of the Act is untenable in law.
The learned Commissioner of Income tax [Appeals] failed to appreciate that a valid search is a sine qua non for making a valid assessment under section 153A of the Act on the parity of the ratio of the decision of the Hon'ble Apex Court in the case of Ajit Jain, reported in 260 ITR 80.
The appellant contends that the learned assessing officer has failed to record the satisfaction regarding an inference of liability before the issuance of notice under section 153A of the Act and consequently the assessment to 1271/Bang/2025 is bad in law and liable to be cancelled, on the facts and circumstances of the case.
5. Without prejudice, the appellant denies itself liable to be assessed on a total income of Rs.76,07,10,362/- as determined by the learned Commissioner of Income tax [Appeals] as against the income returned by the appellant of Rs. 73,64,30,580/-, on the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] is not justified in making a disallowance of Rs. 4,47,744/- towards the lease rental expenses, on the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] is not justified in making a disallowance of Rs. 10,94,871/- towards the amortisation of lease expenses, on facts and circumstances of the case.
8. The learned Commissioner of Income tax [Appeals] is not justified in disallowing a sum of Rs. 21,42,857/- by invoking the provisions of section 14A of the Act r.w. rule 8D[2][ii] of Income-tax Rules, on the facts and circumstances of the case.
9. Without prejudice, the disallowance made by the learned Commissioner of Income tax [Appeals] by invoking the provisions of provisions of section 14A of the Act r.w. rule 8D[2][ii] of Income-tax Rules is not in accordance with taw and further the disallowance if at all requires to be made then the said disallowance made by the learned Commissioner of Income tax [Appeals] requires to be reduced substantially, on the facts and circumstances of the case.
10. The learned Commissioner of income tax [Appeals] is not justified in making an addition on account of alleged unproved expenditure amounting to Rs. 2,05,94,310/- relating to various projects under taken by the appellant on the facts and circumstances of the case.
11. Without prejudice the learned Commissioner of Income tax [Appeals] and the learned assessing officer were not justified in not giving the benefit of excess amount inadvertently declared in one year as against the shortfall in the income assessed in the other assessment years, without giving the telescoping effect to the credit of excess declaration made in one particular assessment year as to 1271/Bang/2025 against the short fall in other assessment years which has resulted in in double taxation which is against the canons of taxation and against the canons of taxation, on the facts and circumstances of the case.
Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234A, 234B & 234C of the Income Tax Act, on the facts and circumstances of the case. The appellant contends that the levy of interest under section 234A, 234B & 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned Commissioner of Income tax on which interest is levied are not discernible and are wrong on the facts of the case.
13. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal
14. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered.”
3. The brief facts of the case are that the assessee is a Private Limited Company engaged in the business of Engineering and Civil construction activities. The assessee filed their return of income on 20/09/2015. Later on there was a search and seizure operation carried on in the premises of the assessee on 04/05/2018. The AO, therefore, issued a notice u/s. 153A of the Act on 25/03/2019. The assessee also filed their return of income pursuant to the notice issued u/s. 153A of the Act. The assessee declared additional incomes for all the four years based on the statement recorded u/s. 132(4) of the Act. The assessee declared the additional incomes in order to buy peace and protracted litigations. Thereafter the AO issued statutory notices and the assessee also submitted the replies and documents. The AO concluded the assessments by making certain additions and disallowances. In respect of the A.Y. 2018-19, the AO had also made a disallowance u/s. 14A of the Act. to 1271/Bang/2025 4. Aggrieved with the above orders of the AO, the assessee preferred appeals before the Ld.CIT(A). The assessee also raised several legal grounds and also raised grounds on merits. The Ld.CIT(A) had dismissed all the grounds and confirmed the additions and disallowances made by the AO.
5. As against the said orders, the present appeals were filed by the assessee before this Tribunal.
6. At the time of hearing, the Ld.AR submitted that the search is not a valid search and therefore the consequential assessment is bad in law. The Ld.AR reiterated the legal ground nos. 2, 3 and 4. Apart from that, the Ld.AR also submitted that the assessment for the disputed years were completed assessments and therefore without any incriminating materials seized at the time of search, no addition could be made. In the present case, addition in respect of the disallowance of lease rent and disallowance of amortisation of cost of building could not be made since it is an unabated assessment. Insofar as the disallowance u/s. 14A of the Act is concerned, the Ld.AR submitted that the same is not correct since the AO before disallowing the same, has not recorded his satisfaction for doing so. Further, the AO had taken the total average investments and arrived the disallowance u/s. 14A of the Act instead of taking the investments which has yielded exempt income during the year and therefore the addition made is not correct. The Ld.AR further submitted that the addition made in respect of the A.Ys. 2016-17 and 2018-19 on the ground that the assessee had voluntarily agreed to declare a sum of Rs. 9,00,00,000/- since the expenditures could not be explained, is not correct. The Ld.AR submitted that the M.D. of the company in order to put quietus to the issues as well as to buy peace, had agreed to offer the said amount approximately. The Ld.AR submitted that the AO had made the addition without considering the fact that the assessee had not accepted the addition based on the recovery of any materials but to buy peace only it was admitted. The Ld.AR further submitted that later on the assessee came to know that the incomes arrived based on the finding of the appraisal report are lesser when compared to the to 1271/Bang/2025 additional income offered by the assessee and therefore the excess income offered could be set off, as against the lesser income offered for the A.Ys. 2015-16 and 2017-18. The Ld.AR also relied on the order of this Tribunal in to 376 & 382/Bang/2024 dated 03/07/2024 in support of the above proposition.
7. The Ld.AR also filed a paper book and also filed the synopsis. The Ld.AR also filed the order dated 22/08/1997 in insofar as the issue of amortisation of cost of building is concerned. The Ld.AR filed the copy of the Lease Deed dated 02/03/2007 executed between the assessee and the landlord. The Ld.AR also relied on the Hon’ble Delhi High Court judgement reported in 453 ITR 554 in the case of Cargo Motors (P) Ltd. insofar as the disallowance u/s. 14A is concerned and finally prayed to allow the appeals.
8. The Ld.DR relied on the orders of the lower authorities and submitted that in Schedule 10 there was no claim of depreciation and prayed to dismiss the appeals.
We have heard the arguments of both sides and perused the materials available on record.
10. In the present appeal, the assessee had filed their return of income and assessment has been completed. Based on the search, the AO decided to disallow the lease rent and to disallow the amortisation of cost of building. Both these items were shown in the return of income and the amounts were accepted by the AO while making the assessment. The assessee contended that the lease rent was debited in the P&L account and the same was claimed as expenditure. A similar disallowance was made in the earlier years, which were confirmed by the Ld.CIT(A) as well as this Tribunal. Later on, pending the appeal before the Hon’ble High Court, the assessee settled the matter under the Direct Tax Vivad Se Vishwas Scheme, 2024. to 1271/Bang/2025
11. Similarly, the AO had disallowed the amortisation of cost of building on the ground that section 24 of the Act does not provide any deduction for the amortisation of cost of building. The assessee relied on the order of this Tribunal in dated 22/08/1997 wherein similar issue was considered and decided in favour of the assessee.
12. The Ld.CIT(A) had confirmed the disputes on merits. The Ld.CIT(A) had also not accepted the case of the assessee, including the plea that no addition could be made when there is no incriminating materials seized.
Before going into the merits of the issue, let us first decide about the plea that the additions in respect of the lease rent and the amortisation of cost of building could not be made in the assessment made u/s. 153A of the Act, when there are no incriminating materials seized at the time of search. We have considered the materials available including the assessment order. The AO in his order had observed that the assessment has been completed. Therefore it is an unabated assessment. No additions could be made on the assessment already completed. The revenue also not seized any incriminating materials for making the additions. The AO had made both the additions without any incriminating materials. Therefore the argument advanced by the Ld.AR has some force.
In the judgment rendered by the Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, it was held that unless incriminating material seized leads to an inference of undisclosed income, addition in the assessment u/s. 153A could not be made. This view was later on approved by the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd. reported in (2023) 149 taxmann.com 399. Even though this leg is a sound legal principle, the Ld.CIT(A) had not accepted the same and miserably failed to see the underlining principles laid by the Hon’ble Apex Court as well as the Hon’ble Delhi Court. to 1271/Bang/2025 15. We have perused the facts of the present case as well as the facts in the above judgments and the Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd. reported in (2023) 149 taxmann.com 399 which categorically held that the completed assessments can be interfered while making the assessment u/s. 153A, only on the basis of some incriminating material unearthed during the course of search which were not produced or not already disclosed or made known in the course of original assessment.
In the present case, there are two disputes, one about the disallowance of lease rent and the other about amortisation of cost of building. Both the issues are already disclosed in the return filed u/s. 139(1)of the Act and assessment has been completed. Therefore, as per the principles laid by the Hon’ble Supreme Court and Hon’ble Delhi High Court, the additions could be made if some incriminating materials are seized. There are no such incriminating materials found out by the revenue which were not produced or disclosed in the original assessment. In fact no materials were seized in respect of the above two issues, but utilising the opportunity to make assessment u/s. 153A of the Act, the AO disallowed the claims and made additions. We are of the view that in such circumstances, the AO cannot make any addition by disallowing the two issues. If the AO has any materials which were not produced or disclosed at the time of original assessment, addition could be made while making the assessment u/s. 153A of the Act.
Respectfully following the principles laid down by the Hon’ble Supreme Court as well as the Hon’ble Delhi High Court cited supra, we are not in agreement with the view taken by the Ld.CIT(A) and therefore we set aside the additions made in respect of lease rent as well as amortisation of cost of building on the ground that no incriminating materials were seized at the time of search and therefore additions could not be made in the completed assessments. We are allowing this portion of the appeal on the legal plea and therefore we are not adjudicating the other grounds raised
by the assessee including the legal grounds. to 1271/Bang/2025
18. The next addition is made based on the statement given by the M.D. of the company in which he accepted to add an adhoc amount of Rs. 9,00,00,000/- towards the unexplained expenditures for various assessment years. It is the contention of the assessee that there is no unexplained expenditure and therefore the adhoc addition could not be made for various assessment years. We have also gone through the submissions that the additional income was offered to buy peace with the department and also based on the suggestion given by the investigating officials. Further, the additional income was offered to various assessment years when there are no records seized to show that such additional income was not disclosed. We have also considered the submissions made by the assessee vide their letter dated 13/11/2020 in which the assessee has given the following tabular columns.
From the above tabular column, we are able to find that the income found out by the department as per the appraisal report is less than the income offered for the A.Ys. 2014-15 and 2016-17. The AO without considering the excess income offered in both the years had made an addition of Rs. 72,25,966/- and Rs. 2,05,94,310/- for the A/Ys 2015-16 and 2017-18 since the assessee had shown a lesser income than the income arrived based on the appraisal report. Therefore the contention of the assessee is that the excess income offered in the A.Ys. 2014-15 and 2016-17 should be set off as against the lesser income offered for A.Ys. 2015-16 and 2017-18. We have also perused the order of this Tribunal in to to 1271/Bang/2025 376 & 382/Bang/2024 dated 03/07/2024 in the case of Kesar Marble & Granites Ltd. vs. DCIT, wherein it was held as follows:
“13.2 Now the contention of the id. A.R. is that excessive income has been offered in other assessment years, which is not based on any incriminating material and the excess income offered in other assessment years to be telescoped out of the addition made by Id. AO in the assessment year at Rs.1,12,16,600/- and the addition to be sustained only to the extent of incriminating material found during the course of search otherwise it amounts to double addition.
14. The ld. D.R. fairly conceded that this may be examined at the end of Id. AO.
After hearing both the parties, we are of the opinion that the addition in these assessment years should be confined to the incriminating/ seized material found during the course of search action and if the assessee already offered additional income in any other assessment years, without any corresponding corroborative material, no addition could be made on this count. Further, also it was brought to our notice that assessee has offered excess additional income in the assessment year 2017-18 more than the seized material found during the course of search action and he drew our attention to page 72 of the CIT(A) order for the assessment year 201819 and submitted that there was seized material to the tune of Rs.2,43,83,000/-. However, additional income admitted by the assessee in assessment year 2017-18 was Rs.2,90,00,000/- and he sought telescoping benefit of excess income offered in assessment year 2017-18 in assessment year 2018-19, In our opinion, this required to be examined at the end of ld. AO. Accordingly, this issue is remitted to the file of ld. AO for fresh consideration to decide accordingly. Ordered accordingly. This ground of appeal
of the assessee is partly allowed for statistical purposes.”
20. Considering the order of the Coordinate Bench of this Tribunal, we are also in agreement with the same and set off should be granted on the anology that telescoping benefit should be granted since the assessee had offered only an adhoc amount and not based on any meterials. We therefore remit this issue to the AO for considering the telescoping benefit of excess income offered in assessment years 2014-15 and 2016-17 to the A.Ys. 2015- to 1271/Bang/2025 16 and 2017-18. In the result, this portion of appeal is partly allowed for statistical purposes.
Disallowance made u/s. 14A for the A.Y. 2018-19 (ITA No.1271/Bang/2025) 21. It is the case of the assessee that the AO should have taken the investments which has yielded exempt income during the year for the purpose of disallowing the expenditure u/s. 14A of the Act and not the total average investments made by the assessee in the mutual funds. Further, the assessee contended that no satisfaction was recorded by the AO before invoking the provisions.
We have also gone through the Hon’ble Delhi High Court judgment reported in 453 ITR 554 in the case of Cargo Motors P. Ltd. vs. DCIT in which it was held that, for the purpose of making disallowance of expenses u/s. 14A r.w. Rule 8D, only those investments were to be considered for computing average value of investments which yielded exempt income during the relevant year.
We have considered the facts of the present case and also the judgment of the Hon’ble Delhi High Court and to find out the correct computation, we are inclined to remit this issue to the AO for denovo consideration. We also made it clear that if there is no satisfaction recorded by the AO the entire disallowance could not be made u/s. 14A of the Act.
With the above observations, we remit this issue to the AO for considering the issue afresh including the recording of satisfaction, if any and pass order thereafter in accordance with law. to 1271/Bang/2025 25. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 26th November, 2025.