2014 (6) TMI 973 - AT - Income Tax

Validity of assessment - warrant of authorization issued for the search was in joint names of various individuals but separate order of assessment was passed for the assessee in whose name alone there was no search warrant - Held that - As one of the group members of the assessee, we do not find any merit in the contention of the assessee for holding that the order of assessment was invalid on the plea that warrant of authorization issued for the search was in joint names of various individuals but separate order of assessment was passed for the assessee. Penalty u/s.271(1)(c) - addition on account long term capital gains - Held that - We found that on protective basis, the AO has also assessed the capital gain in the assessment year 2007-08, since the amount was added in the assessment year 2006-07, the AO imposed penalty for concealment of particulars in the assessment year 2006-07. It is clear from the record that assessee had declared arbitration award in the return filed in assessment year in assessment year 2006-07 and 2007-08. Due to dispute regarding taxability of capital gain in assessment year 2006-07 & 2007-08, the AO has assessed the capital gain in assessment year 2006-07 and also on protective basis in the assessment year 2007-08 and AO also observed that the issue is debatable and the AO himself was not sure as to whether the capital gain is to be assessed in assessment year 2006-07 & 2007-08. In view of these facts, the CIT(A) recorded a finding to the effect that the assessee has not concealed the amount of capital gain which is declared in the AY 2007-08 in view of the fact that possession was received in financial year 2006-07 only. Since the AO has taken the view that transfer of assets was in the AY 2006-07, capital gains was also assessed in the AY 2006-07. Since there was no concealment of particulars in the return but the issue was debatable and two opinions were possible as admitted by the AO, the CIT(A) has deleted the penalty. Hence, we do not find any infirmity in the order of CIT(A) for deleting the penalty insofar as issue was debatable as per the observation of the AO himself and since the possession was received in the financial year 2006-07, capital gain was offered in the assessment year 2007-08.

Summary

Issues Involved:
1. Addition made under Section 68 of the Income Tax Act.
2. Validity of assessment made under Section 143 read with Section 153A based on a search warrant issued under Section 132.
3. Addition on account of long-term capital gains.
4. Imposition of penalty under Section 271(1)(c).

Detailed Analysis:

1. Addition made under Section 68:
The appeals concern the addition made under Section 68 for the assessment years 2001-02 and 2004-05. The assessee's representative conceded that the issue is covered by the Tribunal's order in a similar case involving a group member. The lower authorities had made additions under Section 68 for bogus gifts received by the assessee, which were confirmed by CIT(A). Following the Tribunal's precedent, the bench found no reason to interfere with the CIT(A)'s order confirming these additions.

2. Validity of assessment made under Section 143 read with Section 153A:
The assessee argued that the assessment made under Section 143 read with Section 153A based on a search warrant issued under Section 132 was invalid because the warrant was in joint names, but separate assessments were made. The Tribunal referenced its earlier decision in a related case, which upheld the validity of assessments made on individuals even when the search warrant was issued in joint names. The Tribunal concluded that a common warrant does not necessitate a joint assessment and dismissed the assessee's legal plea, confirming the validity of the individual assessments.

3. Addition on account of long-term capital gains:
For the assessment year 2006-07, the assessee contested an addition of Rs. 27,50,000 on account of long-term capital gains. The assessee's representative acknowledged that this issue is also covered by a previous Tribunal order involving a group member. The Tribunal found no infirmity in the CIT(A)'s order confirming the addition and dismissed the appeal.

4. Imposition of penalty under Section 271(1)(c):
The Revenue appealed against the CIT(A)'s order deleting the penalty imposed under Section 271(1)(c) for the assessment year 2006-07. The penalty was initially levied for discrepancies in short-term capital gains on mutual funds and long-term capital gains from an arbitration award. The CIT(A) observed that the issue of capital gains was debatable, with the assessee declaring the gains in different assessment years based on the timing of possession. The Tribunal agreed with the CIT(A) that there was no concealment of income, as the issue was subject to differing interpretations. Consequently, the Tribunal upheld the deletion of the penalty.

Conclusion:
All appeals filed by the assessee and the Revenue were dismissed, with the Tribunal affirming the decisions of the lower authorities on the issues of additions under Section 68, validity of assessments under Section 143 read with Section 153A, and the deletion of penalties under Section 271(1)(c). The order was pronounced in the open court on June 10, 2014.