2012 (7) TMI 532 - AT - Income Tax

Search and seizure operation u/s 132 - orders of block assessment - Held that - The income allegedly offered by the assessee in the statement recorded u/s 132(4) should not be relied on alone by AO for making addition in the assessments which stands modified/ withdrawn, unless there is corroborative evidence linking the statement with the undisclosed /unearthed incomes - This issue was already considered twice by the ITAT when the orders were set aside earlier. AO need to complete the assessment only on the basis of incriminating material if any, after considering assessee s explanation with reference to the papers seized and transactions/investments found by the Department. Benami Assessee - As already evidenced on record that Smt. Sushila Malge has been filing the returns much before the search and they were scrutiny assessments in her case as well. Just because her affairs are being looked after by her husband, it does not mean that she is benami. In case AO has to hold that she is benami, it should be based on evidence and burden is on the Revenue. Unless there is evidence, no addition should be made in the hands of Shri Suresh Malge on mere conjectures, surmises and presumptions - AO should pay the cost of Rs. 20,000/- to Shri Suresh Babu Malge for making him come again in appellate proceedings - in favour of assessee.

Summary

Issues Involved:
1. Adequate opportunity of hearing.
2. Independent application of mind by the Assessing Officer (AO).
3. Legality of protective assessment in block assessment.
4. Treatment of assessee as benamidar.

Detailed Analysis:

1. Adequate Opportunity of Hearing:
The assessee argued that the AO erred in passing the assessment order without providing sufficient and adequate opportunity of hearing. The statement recorded during the search was only furnished on 22/12/2011, and the AO asked the assessee to furnish details by 23/12/2011, providing only one day for compliance. The Tribunal found that the AO did not adhere to principles of natural justice by not allowing sufficient time for the assessee to respond, leading to the setting aside of the assessment.

2. Independent Application of Mind by AO:
The assessee contended that the AO merely copied findings from earlier orders, which had been set aside by the ITAT twice, and failed to consider submissions and details filed on 29/12/2011. The Tribunal noted that the AO repeated the same conclusions without independent application of mind, relying solely on the statement under section 132(4), which had been modified/withdrawn. The Tribunal emphasized that the assessment should be based on incriminating material, not just on the statement.

3. Legality of Protective Assessment in Block Assessment:
The assessee argued that no assessment could be made on a protective basis in the block assessment scheme. The AO treated the assessee as a benamidar and made protective assessments. The Tribunal highlighted that assessments should be based on evidence and not on presumptions or protective measures. The burden of proof was on the Revenue to establish benami transactions, which was not adequately discharged.

4. Treatment of Assessee as Benamidar:
The AO treated the assessee as a benamidar of her husband without appreciating her independent tax assessments over the last ten years. The Tribunal noted that the AO failed to provide sufficient evidence to support the benami claim. The Tribunal directed the AO to examine the books of account, seized material, and bank statements to determine undisclosed income accurately. The Tribunal also instructed that the AO should not rely solely on the statement under section 132(4) unless corroborated by evidence.

Conclusion:
The Tribunal set aside the AO's orders dated 30/12/2011 and directed a fresh assessment, emphasizing adherence to principles of natural justice and proper examination of evidence. The Tribunal imposed costs on the AO for procedural lapses and non-compliance with previous ITAT directions. The Tribunal also directed immediate commencement of reassessment proceedings and cooperation from the assessees. The appeals were allowed for statistical purposes, with a clear warning that repeated non-compliance would result in quashing the orders.