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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This is an assessee’s appeal directed against the order of CIT (A) – 11, Bengaluru dated 29.08.2016 for Assessment Year 2008 – 09.
Grounds raised
by the assessee are as under:- “Ground I: Review / re-examine any issue in the proceeding U/s 153A:
1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of Assessing Officer in determining total income at Rs.2,66,740/- as against the amount of returned loss of (-) RS.2,89,66,908/- under normal provisions on completion of assessment U/s 143(3) rws 153A of the IT Act, 1961.
2. The CIT(A) failed to appreciate and ought to have held that having regard to the second proviso to section 153A, the completed assessment(s) cannot be disturbed except only in the case where there is any undisclosed income found in the course of search or any incriminating documents pointing towards such undisclosed income is found in course of search or in the course of assessment proceedings U/s.153A of the Income Tax Act, 1961.
Page 2 of 14 3. He failed to appreciate and ought to have held that in the present case, no incriminating material has been found which requires re- examination/review of any of the items which were the subject matter of examination in course of original assessment proceedings or in the proceedings under section 153A read with section 143(3) / 143(1) of the Income-tax Act, 1961.
4. The Appellant therefore prays that the order passed by the Assessing officer U/s 143(3) rws 153A of the IT Act, 1961 is arbitrary, contrary to the provisions of law, and the settled legal position and hence is liable to be quashed. Ground II: Amortizing the amount of business expenditure and depreciation aggregating of Rs. 2,92,58,647/-:
1. 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of the Assessing Officer in amortizing the amount of business expenditure and depreciation aggregating of Rs. 2,92,58,647/- in ten installments on the ground that the business of the appellant yet to commence in as much as IPL season-I commenced from April 18th, 2008.
2. The Appellant prays that the Assessing Officer be directed to allow the claim of business expenditure of Rs.2,91,06,793/- and depreciation of Rs. 1,51,854/-. Since the activities undertaken by the appellant and on which such expenses were incurred after set up of business of the appellant immediately after award of franchise by BCCI. Ground III: Disallowance of claim of operating and administrative expenses ofRS.2,91 ,06,793/-: 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of Assessing Officer in determining the income at Rs.2,66,800/- as against the amount of returned business loss of Rs.2,89,66,908/- which was accepted and determined in the assessment completed U/s. 143(1) vide intimation dated January 17, 2011 as well.
2. He further erred in not considering that the said amount of business loss was allowed to be carried forward and set off against the income of assessment year 2010-11 vide rectification order dated April 16, 2013 during the course of original assessment proceedings.
3. He failed to appreciate and ought to have held that the business loss pertaining to the assessment year under consideration which was given set off in assessment year 2010-11 during the original assessment proceedings have attained finality and hence cannot be disturbed in the proceedings U/s. 153A of the Income tax Act, 1961.
4. The Appellant therefore prays that the Assessing Officer be directed to allow the claim of business loss of Rs.2,89,66,908/- and set off of same in subsequent assessment years as per the decision given in Page 3 of 14 original assessment proceedings. WITHOUT PREJUDICE TO THE ABOVE: Ground IV: Disallowance of claim of operating and administrative expenses of Rs.2,91 ,06,793/-:
1.
1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of Assessing Officer in not allowing deduction towards operating and administrative expenses of Rs.2,91,06,793/- and claim of depreciation as per income tax of Rs.1,51,854/- treating the same as enduring in nature instead of allowing deduction of same in the subsequent assessment year i.e. assessment year 2009-10 in which the IPL - First season took place as all the expenses incurred were revenue in nature and were incurred after set up of business so as to be ready to participate in IPL Season- 1 which took place from April 18, 2008 to June 1, 2008.
2. The Appellant therefore prays that the Assessing Officer be directed to allow deduction of operating and administrative expenses of Rs.2,91,06,793/- and claim of depreciation as per income tax of Rs.1,51,854/- in the subsequent assessment year i.e. assessment year 2009-10 since all these expenses were incurred after set up of business so as to be ready to participate in IPL Season -1 which took place from April 18, 2008 to June 1, 2008. Ground V: The Appellant craves leave to add, alter and/or amend all or any of the foregoing grounds of appeal
.”
3. Regarding Ground No. 1, it is submitted by the learned AR of the assessee that this issue is covered in favour of the assessee by the tribunal order rendered in the case of ACIT vs. M/s Cornerstone Properties Pvt. Ltd. in to 1717/bang/2013 dated 08.09.2017. He submitted a copy of this tribunal order. Learned DR of the revenue supported the order of CIT (A).
We have considered the rival submissions. We find that the issue regarding validity of the proceedings u/s 153A is discussed and decided by the learned CIT (A) in Paras 6.2.1 to 6.2.5 of his order and hence, for ready reference, these paras are reproduced herein below:-
As per these paras reproduced from the order of CIT (A), it is seen that there is no finding to the effect that any incriminating material was found in search. As per the assessment order also, there is no reference to any incriminating material found in search. Learned CIT (A) has decided the issue against the assessee on this basis that the judgment of Hon’ble Karnataka High Court rendered in the case of Canara Housing Development Co. vs. DCIT, 274 CTR 122 is applicable and not the subsequent judgment of Hon’ble Karnataka High Page 13 of 14 Court rendered in the case of CIT vs. Lancy Construction, 383 ITR 168 because in this later judgment, the earlier judgment rendered in the case of Canara Housing Development Co. vs. DCIT (Supra) was not considered. In the tribunal order cited by the learned AR of the assessee, both these judgments were duly considered and it was held that as per the earlier judgment rendered in the case of Canara Housing Development Co. vs. DCIT (Supra), this was not a ratio laid down that even if no incriminating material is found in search, section 153A can be invoked because in that case, incriminating material was found in search and invocation of section 153A was not in dispute. The co ordinate bench further held that as per the later judgment rendered in the case of CIT vs. Lancy Construction (Supra), in the absence of any incriminating material found in search, the assessment proceedings u/s 153A of the I. T. Act is bad in law. We feel that under these factual and legal position, the ld. CIT(A) should record a categorical finding as to whether any incriminating material was found in course of search or not. If it is found that no incriminating material was found in course of search then it should be held that the proceedings initiated by AO u/s. 153A are not valid by following the later judgement of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Lancy Construction (supra) and if it is found that any incriminating material was found in course of search, then these proceedings should be held valid and issue on merit should be decided afresh. In view of this decision, the other grounds raised
on merit are not required to be decided at this stage.
6. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.