2013 (7) TMI 850 - HC - Income Tax

Addition u/s 153A - Tribunal deleted addition made by A.O. due to lack of evidence - Held that - on the basis of search carried out in the premises of the son of the assessee and diary seized and on the basis of noting in the said diary, the assessee made disclosure for the A.Y. 2006-07 with respect to the sale transactions which took place during the A.Y. 2006-07 and applying same ratio and ratio relating to A.Y. 2006-07 and A.Y. 2007-08, the Assessing Officer determined the income for the A.Y. 2005-06 and considering the fact that the regular assessment was framed under section 143(3) and there was no any seized material with respect to A.Y. 2005-06, considering the aforesaid fact and observing that no incriminating material was found with respect to A.Y. 2005-06 and during the assessment, the Assessing Officer did not find any defect in the books of accounts maintained by the assessee and considering the fact that even no any material was found during the search relating to assessment year - Assessing Officer can reopen and/or reassess the return with respect to six preceding years. However, there must be some incriminating material available with the assessing officer with respect to the sale transactions in the particular assessment year - Decided against Revenue.

Summary

Issues:
1. Interpretation of provisions of section 153A of the Income Tax Act for reopening assessment.
2. Justification for making an addition to undisclosed income on the sale of land.
3. Applicability of the decision of the Andhra Pradesh High Court in a similar case.
4. Validity of the addition made by the Assessing Officer based on disclosed income from a subsequent year.

Analysis:
1. The appellant challenged the judgment and order passed by the Income Tax Appellate Tribunal (ITAT) regarding the reopening of assessment for Assessment Year (A.Y.) 2005-06 under section 153A of the Income Tax Act. The Assessing Officer reopened the assessment based on a search action under section 132 at the son of the assessee's premises. The ITAT dismissed the appeal by confirming the order of the Commissioner of Income Tax (Appeals) [CIT(A)] in deleting the addition made by the Assessing Officer. The appellant contended that the provisions of section 153A permit the reopening of assessments for six preceding years, justifying the addition of undisclosed income on the sale of land in A.Y. 2005-06.

2. The Assessing Officer added undisclosed income on the sale of land in A.Y. 2005-06 based on the disclosure made by the assessee for subsequent years, 2006-07 and 2007-08. The CIT(A) partly allowed the appeal and deleted the addition, which was further challenged by the revenue before the ITAT. The ITAT upheld the CIT(A)'s decision, emphasizing the lack of incriminating material or corroborating evidence for the addition. The ITAT reasoned that without direct or corroborating evidence for on-money receipts in the preceding year, the addition made by the Assessing Officer could not be sustained.

3. The appellant argued that the decision of the Andhra Pradesh High Court in the case of Gopal Lal Bhadruka was not properly considered by the ITAT. The ITAT distinguished the facts of the case before the Andhra Pradesh High Court, noting that in that case, the land sale transaction was in the same assessment year as the search. The ITAT concluded that the decision of the Andhra Pradesh High Court was not applicable to the present case due to the absence of incriminating material specifically related to the assessment year in question, i.e., 2005-06.

4. The ITAT, while confirming the order of the CIT(A), emphasized the importance of incriminating material and corroborating evidence for making additions to undisclosed income. The tribunal highlighted that the subsequent years' evidence of on-money receipts could not be a valid basis for assuming similar receipts in the preceding year without direct or corroborating material. The ITAT's decision was based on the lack of specific evidence for the assessment year in question and the fluctuating nature of land prices, concluding that the addition made by the Assessing Officer was not sustainable. Consequently, the High Court upheld the ITAT's decision, dismissing the appeal as no substantial question of law arose.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive understanding of the legal arguments and conclusions reached by the courts involved.