INCOME TAX ACT, 1961

Section 153A

Search and seizure - Assessment under section 153A - Disallowance of freight charges under section 37(1) - Absence of incriminating material found during search

Assessee was drawing income from business and profession. AO issued statutory notice under section 153C read with section 153A requiring assessee to file its return of income. Assessee in response to the said notice, filed return of income. AO noted that during search and survey operations carried out at various premises of a Group, large number of material was found and in post-search enquiries, it was found that said Group had created several companies just to book sales/purchase and to inflate expenses. Assessee was selling on rate to rate basis within the group companies without making any profit in the process and shown huge losses. AO noted that assessee had incurred freight charges and since assessee could not produce the requisite bills and vouchers in respect of freight charges, AO disallowed the same under section 37(1). Held: Though search was conducted in the case of assessee as well as the Group concern, but AO made disallowance of freight charges because the assessee could not produce the bills and requisite vouchers in respect of the claim of the freight charges. It was, therefore, clearly apparent that the disallowance of freight charges were made in the absence of any incriminating material found during the course of search. Therefore, following the decision in case of CIT (Central) -III v. Kabul Chawla (2016) 380 ITR 573 (Del.) : 2015 TaxPub(DT) 3486 (Del-HC) disallowance made by AO was liable to be set aside.

Followed:Pr. CIT v. Meeta Gutgutia, Prop. M/s. Ferns 'N' Petals 2017 TaxPub(DT) 1767 (Del-HC), Dayawanti Through v. CIT 2016 TaxPub(DT) 4888 (Del-HC), CIT (Central) -III v. Kabul Chawla (2016) 380 ITR 573 (Del.) : 2015 TaxPub(DT) 3486 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2008-09 & 2010-11

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