2011 (7) TMI 252 - HC - Income Tax

Finalization of assessment u/s 153A - search and seizure - Whether the issue of notice under Section 143(2) of the Income Tax Act is mandatory for finalization of assessment under Section 153A - Held that - No specific notice was required under section 143(2) of the Act when the notice in the present case as required under Section 153 (A) (1) (a) of the Act was already given. In addition, the two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him. Ownership of cash - seized money - it is noted that the amount was seized on 20.04.2003 as seen from the telegram sent by Thana Prabhari, GRP, Bhopal, whereas the claim of ownership was made on 23.01.2008, much after the date of seizure - Held that - there is no plausible explanation given by the assessee as to why his employee was found in possession of cash. No detail has been filed about the land sought to be purchased by him. In these circumstances, the Tribunal was right in holding that the claim made by Shri Sudhir Chadha is an afterthought to accommodate the assessee. Had the money really belonged to him, he would have made the claim soon after its seizure. - Decided in favor of assessee.

Summary

Issues Involved:
(a) Mandatory issuance of notice under Section 143(2) for finalization of assessment under Section 153A.
(b) Justification of addition of Rs.10 lakh cash seized from Mr. D.S. Rawat in the hands of the Assessee.

Issue-wise Detailed Analysis:

(a) Mandatory issuance of notice under Section 143(2) for finalization of assessment under Section 153A:

The appeal concerns whether the issuance of notice under Section 143(2) of the Income Tax Act is mandatory for finalizing assessments under Section 153A. The appellant argued that the issuance of notice under Section 143(2) is a mandatory requirement, citing the Supreme Court's decision in Hotel Blue Moon v. DCIT, which held that notice under Section 143(2) is essential for assessments under Section 158BC. However, the court noted that Section 153A does not explicitly require notice under Section 143(2). The court distinguished the case from Hotel Blue Moon, explaining that Section 158BC expressly requires following the provisions of Section 143(2), while Section 153A does not. The court also referenced other cases, such as CIT v. Madhya Bharat Energy Corpn., where it was held that the issuance of notice under Section 143(2) is not mandatory in the absence of specific provisions under Section 147. The court concluded that the words "so far as may be" in Section 153A cannot be interpreted to mandate notice under Section 143(2), especially when a specific notice under Section 153A(1)(a) has already been issued.

(b) Justification of addition of Rs.10 lakh cash seized from Mr. D.S. Rawat in the hands of the Assessee:

The second issue pertains to the addition of Rs.10 lakh under Section 69A, which was seized from Mr. D.S. Rawat, an employee of the assessee, at Bhopal Railway Station. The assessee contended that the money belonged to his nephew, Mr. Sudhir Chadha, who had sent it for a property transaction. To support this, the assessee filed a copy of a recovery suit by Mr. Sudhir Chadha. The CIT(A) and the Tribunal both rejected this explanation, noting the lack of immediate action by Mr. Sudhir Chadha to claim the money and the absence of supporting evidence. The Tribunal found that the claim by Mr. Sudhir Chadha was an afterthought to accommodate the assessee, as no steps were taken for almost five years until after the assessment order was passed. The court agreed with the findings of the CIT(A) and the Tribunal, emphasizing the lack of a plausible explanation for the employee's possession of the cash and the belated claim by Mr. Sudhir Chadha.

Conclusion:

The court dismissed the appeal, deciding both issues in favor of the Revenue. It held that the issuance of notice under Section 143(2) is not mandatory for assessments under Section 153A, and upheld the addition of Rs.10 lakh in the hands of the assessee due to the lack of credible evidence supporting the claim that the money belonged to the nephew.