Global Tech Park Pvt. Ltd Vs DCIT (ITAT Bangalore)
Assessment not abated – Block assessments must be based on seized incriminating material
Search & seizure operations were conducted on 01.02.2018 u/s 132. Assessments were completed u/s 153A r.w.s. 143(3)/153D for AYs 2012–13 to 2017–18. The appeals involved disallowance of depreciation on luxury cars & additions u/s 69 based on alleged unexplained investments.
Contentions of Asseessee before Tribunal were:
- Date of search was 1.2.2018 which was concluded on 29.3.2018. As on the date of search, the assessment for AY 2012-13 was not pending. The return of income was filed for that assessment year on 29.9.2012 & therefore if any addition is required to be made it could only have been made on the basis of incriminating material found during the course of search. AO has made the disallowance only on the basis of the statement of Managing Director u/s. 132(4), which cannot be considered as incriminating material. As there is absence of incriminating material found during the course of search relating to this disallowance, the issue is covered in favour of assessee by the decision in Abhisar Build well P. Ltd.(2023) 454 ITR 212 (sc)
- Mere statement u/s. 132(4) cannot be considered as any incriminating material found during search, based on which the concluded assessment for AY 2012-13 could be disturbed.
- Perquisite value was taxed in the hands of the director for the use of motor cars. AO further disallowed the above expenditure holding that on such perquisites no tax was deducted.
- When the perquisite value is taxed in the hands of the director, the addition in the hands of the company is not proper.
- When the recipient of income has already paid tax on the income, then disallowance u/s. 40(a)(ia) could not have been invoked.
- Even CIT(A) upholding the disallowance @ 50% is not reasonable who rejected the offer of Assessee of 20% disallowance without any reason.
- Merely for non-maintenance of log book in the case of company, disallowance could not have been made for personal use.
- There is no material available with AO that cars are not used for the purposes of business of Assessee.
In a consolidated ruling covering AYs 2012-13 to 2017-18, the ITAT held that disallowance of depreciation on luxury cars used by directors of Global Tech Park Pvt. Ltd. was unsustainable in assessments not pending as on date of search, in absence of incriminating material. Relying on Abhisar Buildwell (SC) & Best Infrastructure (Delhi HC), Tribunal held that a mere statement u/s 132(4) without supporting material does not qualify as incriminating. Accordingly, disallowances were deleted for AYs 2012-13 to 2016-17. Additionally, an addition u/s 69 for AY 2013-14 on alleged cash payment to aggregators was deleted as the seized material was part of regular books & duly reflected in audited financials, with no violation of Rule 46A. However, for AY 2016-17, an addition of ₹10 crore towards alleged cash component in property purchase was deleted due to lack of inquiry, corroboration, or nexus between the seized loose sheet & actual transaction, citing Sunil Kumar Sharma (Karnataka HC). Revenue’s appeal was dismissed.
