2015 (5) TMI 1051 - AT - Income Tax

Addition u/s 153A - Held that - Under new section 153A in a case where search is initiated u/s 132, the A.O. is obliged to call upon searched persons to furnish return for 6 assessment years immediately preceding the Assessment Year relevant to previous year in which search was conducted. Another feature of this section is that the A.O. is empowered to initiate the reassessment of total income of aforesaid years. This is a departure from earlier block assessment scheme in which block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved resulting into multiple assessments. The argument of Ld. A.R. that addition made u/s 153A on same set of facts and circumstances amount to change of opinion does not hold any force. The object of section 153A is to assess total income including the declared income as well as undeclared income unearthed during search. Therefore from the above, it follows that if during search proceedings, the search team finds some undisclosed income, then A.O. is bound to include this income in the assessment u/s 153A irrespective of the fact that earlier in proceedings u/s 143(3), the same was not considered. - Decided against assessee. Addition made in the absence of such incriminating material - Held that - There are different views of different high courts in this respect and in such a situation; the view favourable to the assessee is to be followed. In the absence of incriminating documents, no addition can be made. - Decided in favour of assessee.

Summary

Issues Involved:
1. Classification of Gold/Silver utensils as Capital Assets or Personal Effects.
2. Computation of Capital Gain on the sale of Gold/Silver utensils.
3. Jurisdiction and validity of assessment under Section 153A.
4. Carry forward of capital losses from one assessment year to another.
5. Levy of interest under Sections 234B and 234C.
6. Timeliness and admissibility of cross objections.

Detailed Analysis:

1. Classification of Gold/Silver Utensils as Capital Assets or Personal Effects:
The primary issue was whether gold and silver utensils sold by the assessee could be classified as personal effects or capital assets. The Assessing Officer (A.O.) classified these utensils as personal effects, thus disallowing the benefit of indexation and capital gains computation. The Ld. CIT(A) disagreed, holding that these utensils, made of precious metals, should be classified as capital assets, as per Section 2(14) of the IT Act, which includes items of jewellery under capital assets. The Tribunal upheld the Ld. CIT(A)'s view, emphasizing that the nature of the articles (gold and silver) inherently classifies them as capital assets, regardless of their form as utensils.

2. Computation of Capital Gain on the Sale of Gold/Silver Utensils:
The A.O. denied the benefit of indexation on the sale of gold and silver utensils, treating them as personal effects. The Ld. CIT(A) directed the A.O. to recompute the capital gains on these articles after allowing indexation benefits, referencing Section 2(14) which defines capital assets and excludes personal effects but includes jewellery. The Tribunal agreed with the Ld. CIT(A) that these items should be treated as capital assets, thus allowing the benefit of indexation.

3. Jurisdiction and Validity of Assessment under Section 153A:
The assessee argued that the assessment under Section 153A was invalid since the original assessment was completed under Sections 143(3) and 147 without any new material. The Tribunal noted that Section 153A mandates reassessment of total income for six years preceding the search, irrespective of any new material found. However, it was held that in the absence of incriminating material found during the search, completed assessments should not be disturbed. Thus, the Tribunal found that the reassessment under Section 153A without new incriminating material was not justified, and the addition made was invalid.

4. Carry Forward of Capital Losses:
The Revenue was aggrieved by the Ld. CIT(A)'s direction to allow the carry forward of capital losses from the assessment year 1998-99 to 1999-2000. Since the Tribunal decided that the reassessment under Section 153A was invalid, the question of carrying forward the capital loss did not arise, rendering the Revenue's appeal on this issue infructuous.

5. Levy of Interest under Sections 234B and 234C:
The assessee contended that the interest charged under Sections 234B and 234C was excessive and not calculated as per law. The Tribunal did not specifically address this issue in detail, focusing instead on the primary issues of classification and reassessment validity.

6. Timeliness and Admissibility of Cross Objections:
The Revenue objected to the timeliness of the assessee's cross objections. The Tribunal found that the cross objection for the assessment year 1998-99 was filed within time, while the cross objection for the assessment year 1999-2000 was delayed and dismissed due to the absence of an application for condonation of delay.

Conclusion:
The Tribunal dismissed the Revenue's appeals as infructuous and allowed the assessee's cross objection for the assessment year 1998-99, holding that the reassessment under Section 153A was invalid in the absence of incriminating material. The cross objection for the assessment year 1999-2000 was dismissed due to delay. The Tribunal upheld the classification of gold and silver utensils as capital assets, allowing the benefit of indexation for computing capital gains.