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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI D.T. GARASIA
Per D.T. Garasia, Judicial Member:
The above titled appeals have been preferred by the assessee against the common order dated 27.01.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2009-10, 2010-11 & 2011-12.
The common ground in all these appeals taken by the assessee is as under: “On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the re-computation of deduction under section 10AA of the Income Tax Act, 1961 (‘the Act’) after excluding the other income earned by the appellant.”
Briefly stated facts are that assessee is a private limited company and is engaged in business of jewellery manufacturing and 2 2012 & 2013/M/2017 M/s. Uni Design Elite Jewellery Pvt. Ltd. exporting the same. The assessee is located at SEEPZ, Mumbai. In A.Y. 2009-10, 2010-11 & 2011-12 the assessee has claimed deduction under section 10AA of the Act. A search and seizure action under section 132(1) of the Act was conducted by DDIT (Inv) Unit-IX(3), Mumbai in the case of the Mahendra Brothers Exports P. Ltd. and related persons. The assessee being a sister concern also covered under section 132 of the Act. Subsequently, the assessment was completed under section 143(3) read with section 153A of the Act and Assessing Officer (hereinafter referred to as the AO) did not allow the deduction under section 10AA on following terms: i) Interest on security deposit of Rs.11,514/- ii) Sundry balance written back of Rs.55,607/-; and iii) Interest of fixed deposit of Rs.1,35,139/-
The Ld. CIT(A) has confirmed the same.
During the course of hearing, the Ld. A.R. has taken additional ground before me that the Department is not justified in not allowing the benefit of section 10AA of the Act. On the other income being interest on security deposit, interest on fixed deposit and sundry balances written back without any reference to seized material or any incriminating evidence found during the course of search. The assessee prayed that order passed by the AO by any law as jurisdiction under section 153A is vacillated.
Having heard both the parties, in my opinion this is a legal ground which goes to the root of the matter. As per the decision of 3 2012 & 2013/M/2017 M/s. Uni Design Elite Jewellery Pvt. Ltd. Hon’ble Supreme Court in the case of National Thermal Power Corporation 229 ITR 383 SC. Assessee is at liberty to take additional ground which goes to the root of the case and it is a law point. Therefore, I admit the same. During the course of hearing, the Ld. A.R. submitted the panchnama dated 09.08.2011 in case of assessee which shows in Column 5(a)(i), books of account and documents found and seized as per Annexure-A to panchnama in one sheet. The said annexure is also enclosed which shows the seizure of loose papers numbering 1 to 95. The statement of one Mr. Bhaskar Balkrishna Kambli was recorded and the question was put by it and in reply to question, assessee had submitted that page 54 to 95 are trial balance, financial statement for the period 01.04.09 to 8.8.2011 and sundry creditors from April 2007 to March 2010 and extract of purchase of registry from April 2009 to 31.03.11. It shows that nothing incriminating material was found. The Ld. A.R. submitted that AO also in the assessment order nowhere stated that any incriminating document was found during the course of search proceedings. Therefore, Ld. A.R. was of a view that section 153A is wrongly applied. Therefore, he prayed that the matter may be allowed for the three assessment years. He relied upon the Jurisdictional High Court judgment in the case of Alcargo Global Logistics 374 ITR 645 wherein Jurisdictoinal High Court has held that no addition can be made in assessments proceeding under section 153A of the Act only on the basis of material found during the course of search.
I have heard the rival contentions of both the parties. I find that Jurisdictional Bombay High Court in the case of CIT vs. Alcargo 374 ITR 645 has held as under: “Held, dismissing the appeals, (i) that the notice under section 153A was founded on search. If there was no incriminating material found during the search then the Tribunal was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision.”
Respectfully following the Jurisdictional High Court, I hold that no incriminating material was found in all the assessment years during the search. Therefore, AO is not justified in invoking section 153A in the assessment years.
In the result, all the appeals of the assessee are allowed.
Order pronounced in the open court on 08.01.2018.