ITAT Pune Judgments — January 2023

The Tribunal held that the assessment order passed under section 153C was not bad in law solely due to the absence of incriminating material, as the section itself provides for such assessments. However, it found that the disallowance of expenditure was not justified. The Tribunal reasoned that once an assessee opts for the presumptive taxation scheme under section 44AD, the income is computed at a fixed rate (8% of gross receipts), and all deductions under sections 30 to 38 are deemed to have been allowed. The assessee is not obligated to explain the source of expenditure in such cases. The deduction of TDS by Manisha Construction Company and the fact that the assessee offered income under section 44AD were considered. The Tribunal relied on the provisions of section 44AD and the High Court decisions in CIT vs. Surinder Pal Anand and Manohar Ram Chandra Patil vs. Union of India. The addition made by the Assessing Officer and confirmed by the CIT(A) was therefore unsustainable. The appeals were allowed.

The Tribunal held that the assessment order passed under section 153C was not bad in law solely due to the absence of incriminating material, as the section itself provides for such assessments. However, it found that the disallowance of expenditure was not justified. The Tribunal reasoned that once an assessee opts for the presumptive taxation scheme under section 44AD, the income is computed at a fixed rate (8% of gross receipts), and all deductions under sections 30 to 38 are deemed to have been allowed. The assessee is not obligated to explain the source of expenditure in such cases. The deduction of TDS by Manisha Construction Company and the fact that the assessee offered income under section 44AD were considered. The Tribunal relied on the provisions of section 44AD and the High Court decisions in CIT vs. Surinder Pal Anand and Manohar Ram Chandra Patil vs. Union of India. The addition made by the Assessing Officer and confirmed by the CIT(A) was therefore unsustainable. The appeals were allowed.

The Tribunal held that the assessment order passed under section 153C was not bad in law solely due to the absence of incriminating material, as the section itself provides for such assessments. However, it found that the disallowance of expenditure was not justified. The Tribunal reasoned that once an assessee opts for the presumptive taxation scheme under section 44AD, the income is computed at a fixed rate (8% of gross receipts), and all deductions under sections 30 to 38 are deemed to have been allowed. The assessee is not obligated to explain the source of expenditure in such cases. The deduction of TDS by Manisha Construction Company and the fact that the assessee offered income under section 44AD were considered. The Tribunal relied on the provisions of section 44AD and the High Court decisions in CIT vs. Surinder Pal Anand and Manohar Ram Chandra Patil vs. Union of India. The addition made by the Assessing Officer and confirmed by the CIT(A) was therefore unsustainable. The appeals were allowed.

The Tribunal held that the assessment order passed under section 153C was not bad in law solely due to the absence of incriminating material, as the section itself provides for such assessments. However, it found that the disallowance of expenditure was not justified. The Tribunal reasoned that once an assessee opts for the presumptive taxation scheme under section 44AD, the income is computed at a fixed rate (8% of gross receipts), and all deductions under sections 30 to 38 are deemed to have been allowed. The assessee is not obligated to explain the source of expenditure in such cases. The deduction of TDS by Manisha Construction Company and the fact that the assessee offered income under section 44AD were considered. The Tribunal relied on the provisions of section 44AD and the High Court decisions in CIT vs. Surinder Pal Anand and Manohar Ram Chandra Patil vs. Union of India. The addition made by the Assessing Officer and confirmed by the CIT(A) was therefore unsustainable. The appeals were allowed.

The Tribunal held that the CIT(A) had properly analyzed the notings found in the loose sheets during the search operations. The CIT(A) found that the assessee had incurred unexplained expenditure on the construction of its building. In the absence of any plausible explanation from the assessee, the CIT(A) confirmed the addition of Rs. 66,07,900/- (which appears to be a summation of the initial addition and the enhancement). The Tribunal found the CIT(A)'s order to be just, proper, and reasonable, not warranting any interference. Therefore, the Tribunal found no merit in the assessee's grounds of appeal. The operative direction was that the appeal filed by the assessee stands dismissed.

The Tribunal dismissed Ground No. 1 concerning the Jangli Maharaj Road property. The Tribunal noted that while the assessee claimed the property was partly used for professional purposes and received rent, the specific portion used as an office was not clearly demarcated before the AO, CIT(A), or the Tribunal. The total area of the house was also not specified. Given that the property was partly self-occupied, the CIT(A) rightly restricted the deduction under section 24(b) to Rs. 2,00,000/-, which is the maximum allowable for self-occupied property acquired with borrowed capital after April 1, 1999. The Tribunal allowed Ground No. 2 concerning the Sudatta Sankul property. The Tribunal agreed with the assessee's interpretation of the 'pre-construction period' as defined by the CBDT, which ends on March 31 immediately prior to the date of acquisition. Since possession was received in December 2015, the preceding March 31 was March 31, 2015. Therefore, the assessee was rightly entitled to claim the full interest amount of Rs. 4,24,363/- with reference to this property. The appeal was partly allowed.

The Tribunal held that the provisions of Section 153C of the Income-tax Act, 1961, were wrongly invoked in the case of the assessee. This decision was based on the precedent set by the Tribunal in the cases of 52 other companies from the same group, where it was held that the authorities were not justified in invoking Section 153C as no incriminating material pertaining to those assessees was found during the search. The Tribunal noted that the Hon'ble High Court had upheld the Tribunal's finding on this legal issue. Since the assessee in the present appeal is part of the same group and has similar facts and circumstances, the Tribunal respectfully followed the precedent. Consequently, no addition could be made based on the incorrect invocation of Section 153C. The issue on merits was left open in view of the finding on the preliminary legal issue. The impugned order of the CIT(A) was overturned.

The Tribunal held that the addition of Rs. 13.15 lakhs was not justified and directed its deletion. The Tribunal noted that the search dated 17.01.2018 led to the discovery of the bank passbooks of the assessee's family members/account holders, and the contents of these passbooks are presumed to be correct under Section 292C of the Act. However, the Tribunal found no reason to conclude that the assessee had opened all these bank accounts and made the deposits in his relatives' names. The Revenue's representative could not pinpoint any specific material, including deposit slips, to support the assessee's involvement in depositing the sums into his family members' accounts. Therefore, the Tribunal found no reason to sustain the addition. The appeal was allowed.

The Tribunal held that the current appeal filed by the assessee for AY 2006-2007 was superfluous and redundant. The reasoning was that the CIT(A) had already adjudicated upon the assessee's appeal against the Assessing Officer's order under Section 143(3) r.w.s. 153A(b) of the Act dated 28.03.2014 for AY 2006-07, vide an order dated 18.03.2016. Despite being provided an opportunity to respond and confirm the nature of the current appeal, the assessee failed to do so. The Tribunal found that the difference in the sections (143(3) versus 143(3) r.w.s. 153A(b)) did not alter the fact that the appeal was against the same Assessing Officer's order and had already been decided. Therefore, the current appeal was treated as superfluous and dismissed for statistical purposes. The assessee was granted liberty to pursue appropriate remedies.