BABITA MALKANI,MUMBAI vs. DCIT CC 25, MUMBAI

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ITA 3347/MUM/2015Status: DisposedITAT Mumbai03 January 2017AY 2007-084 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that routine disallowance under Section 14A could not be made as no incriminating material was found during the search and the original assessment had attained finality. The addition for undisclosed interest income was upheld due to lack of explanation from the assessee, and interest and penalty were considered consequential or premature.

What were the facts?

The assessee's assessment for AY 2007-2008 was completed under Section 143(3) r/w Section 153C following search operations. The Assessing Officer made additions for disallowance under Section 14A and undisclosed interest income, also initiating penalty proceedings and charging interest.

What were the issues?

Whether disallowance under Section 14A can be made in an assessment under Section 153C without incriminating material, and whether undisclosed interest income is taxable.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153C,Section 139(1),Section 14A,Section 234,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “K” BENCH, MUMBAI

Before: SHRI AMIT SHUKLA, JM & SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Ms. Malathi Shridharan (CIT) DR

Per Manoj Kumar Aggarwal (Accountant Member)

1.

The captioned appeal by assessee for Assessment Year [AY] 2007-2008 assails order of Ld. Commissioner of Income Tax (OSD), Mumbai [CIT(A)] dated 24/03/2015 qua two additions, charging of interest and initiation of penalty.

Babita Malkani Assessment Year 2007-2008 2. Facts, in brief, are that consequent to search operations u/s 132 on 16/12/2010 in the case of ‘M/s Patel Engineering Ltd.’ group of concerns, the assessee was subjected to assessment u/s 143(3) r/w Section 153C. The original return was filed u/s 139(1) on 28/10/2007 declaring total income of Rs.12,42,026/- and as per AO’s order, the same was subjected to assessment u/s 143(3). The same return was filed pursuant to Section 153C and assessment thereof was completed u/s 143(3) r/w Section 153C by Assessing Officer [AO] order dated 25/03/2013 wherein total income was determined at Rs.13,17,930/- after making certain disallowance and adjustments. The assessee earned exempt income of Rs.4,52,726/-. Invoking provisions of Section 14A, AO determined the disallowance @5% of exempt income of Rs.4,52,726/- which came to Rs.22,636/-. Further, upon perusal of AIR transactions, AO noted that the assessee earned interest from UTI Bank for Rs.6,939/- but the same was not disclosed in the return of income and hence added to the income of the assessee. The assessee preferred appeal before First Appellate Authority but remained unsuccessful vide order dated 24/03/2015. The assessee contended that routine disallowance of Section 14A could not be made in an assessment u/s 143(3) r/w Section 153C and no incriminating material in respect thereof was found during the search operations. As the original assessment had already attained finality, the same could not be disturbed in the absence of incriminating material. Further even on merits, the same could not be sustained as all investments were made in personal capacity and no expenses thereof were claimed in Profit & Loss Account. Rejecting the same, CIT(A) confirmed the additions, which has been assailed before us.

3.

None has appeared on behalf of assessee despite being provided with several opportunities and RPAD notice. It seems that the assessee is not serious in pursuing the appeal and hence we proceed to decide the issue on the basis of material available on record and hearing the LD. DR, who has relied upon the stand of lower authorities Babita Malkani Assessment Year 2007-2008 4. After perusing the material, we find that original return has been filed u/s 139(1) and AO noted that the same was subject to scrutiny assessment u/s 143(3). However, from CIT(A) order, it seems that the return was initially processed u/s 143(1) and not under Section 143(3). Further, the assessment year involved is 2007-2008 for which the time limit for issuance of notice u/s 143(2) had already expired on the date of search i.e. 16/12/2010. It also seems that no incriminating material was found during the course of the search. It is well settled by various judicial pronouncements that when an assessment has attained finality, the same could be disturbed only if some incriminating material was found during search operations and not otherwise. Therefore, we are of the considered opinion that routine disallowance u/s 14A could not made in this assessment. Even on merits, we find that the assessee has not claimed any expenditure in the Profit & Loss Account and this being the factual position, he could not suffer impugned disallowance.

5.

The assessee suffered another addition of Rs.6,939/- on the basis of AIR information which was a matter of reconciliation but the assessee did not offer any explanation towards the same and hence, we find no need to interfere with the same. The assessee has also assailed imposition of interest u/s 234. The same being, consequential and mandatory in nature, require no interference on our part. Also, the challenge to initiation of penalty u/s 271(1)(c), being too premature at this stage, require no interference.

6.

In nutshell Ground No. 1 of assessee’s appeal is allowed whereas rest of the ground is dismissed. Order pronounced in the open court on 3rd January, 2017. Sd/- Sd/- (Amit Shukla) (Manoj Kumar Aggarwal) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 03.01.2017 PS:- Pooja K.

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