2013 (10) TMI 604 - AT - Income Tax

Proceedings u/s 153C - Incriminating documents against assessee - Held that - A bare reading of section 153C makes manifestly clear that the assessing officer has to satisfy himself that any money bullion jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A. Section 153C makes it very clear that the proceedings under that section has to be initiated only in case the material found during the course of search operation relates to the person other than searched person. Therefore for initiation of the proceedings the material found during the course of search operation is relevant for initiation of proceedings u/s 153C of the Act. In the case before us only for the assessment year 2005-06 a balance as on 31-03-2005 was found which relates to the present assessee. Apart from this a sale deed was also found. However no addition was made on the basis of the sale deed. Therefore the only document available on record is the balance-sheet as on 31-03-2005 which relates to assessment year 2005-06 - addition can be made only on the basis of the material available on record. In respect of other years there cannot be any addition in the absence of any material. When there is a customary practice in this part of the country to give and receive gifts on the occasion of marriage in the absence of any other investigation carried out by the department on the basis of the list of donors filed by the assessee disallowing any part of the gift may not be justified. Accordingly the orders of the lower authorities are set aside and the addition of Rs.5 lakhs is deleted. In the absence of any other material to show that the assessee has received on money over and above that disclosed in the sale deed this Tribunal is of the considered opinion that there cannot be any presumption that the assessee has received any on money. Moreover the sale of land was disclosed in the regular return of income filed on 27-04-2004 and the assessment proceedings were not pending. Therefore in the absence of any further material found during the course of search operation no proceedings could be initiated u/s 153C of the I.T. Act. Therefore the CIT(A) has rightly deleted the addition. Telescoping of investment in the unaccounted profit of the firm - Held that - the document SSA- 29 discloses capital contribution by the assessee to the firm M/s P.A. Kuriakose Jewelleries. It is also an admitted fact that unaccounted income was determined in the hands of Ms P.A. Kuriakose Jewellers on the basis of material found during the course of search operation. Therefore there is an obvious nexus between the investment shown in the balance-sheet found during the course of search operation and the unaccounted income determined in the hands of M/s P.A. Kuriakose Jewellers - Following decision of Sinhagad Technical Education Society Versus Commissioner of Income Tax 2012 (3) TMI 262 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings under Section 153C of the Income Tax Act.
2. Validity of additions made in the absence of search material.
3. Validity of agricultural income and gift claims.
4. Validity of the addition on account of on-money received on the sale of land.
5. Telescoping of investment in unaccounted profit of the firm.

Detailed Analysis:

1. Validity of Proceedings under Section 153C:
The assessee challenged the initiation of proceedings under Section 153C on the grounds that no material was found during the search that pertained to him. The Tribunal noted that for proceedings under Section 153C to be valid, there must be material found during the search that relates to the person other than the one searched. In this case, documents such as a registered sale deed and a balance sheet were found, but no addition was made based on the sale deed. The Tribunal concluded that the initiation of proceedings under Section 153C was valid only for the assessment year 2005-06, where the balance sheet showed undisclosed investment.

2. Validity of Additions in the Absence of Search Material:
The Tribunal emphasized that additions under Section 153C could only be made based on search material. For the assessment years 2001-02, 2003-04, 2004-05, and 2005-06, the assessee had filed returns before the search, and the assessment proceedings had concluded. Therefore, without any new material found during the search, these assessments could not be reopened. The Tribunal referenced the decisions of other benches, which supported this view.

3. Validity of Agricultural Income and Gift Claims:
The Tribunal addressed the disallowance of agricultural income and marriage gifts. It noted that the assessee had disclosed agricultural income in regular returns and that the Inspector's report, which disallowed the income, was from a later period. The Tribunal found that the disallowance of the entire agricultural income was not justified and estimated the income at Rs. 40,000 for each assessment year. Regarding the marriage gifts, the Tribunal accepted the assessee's claim, noting the customary practice of giving gifts during marriages and the lack of further investigation by the assessing officer.

4. Validity of Addition on Account of On-Money Received:
The revenue appealed against the deletion of the addition related to on-money received on the sale of land. The Tribunal found that the sale consideration was clearly disclosed in the sale deed and that there was no material to show that the assessee received on-money. The sale of land was disclosed in the regular return before the search, and the assessment was not pending. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition.

5. Telescoping of Investment in Unaccounted Profit:
The revenue challenged the telescoping of the investment in unaccounted profit of the firm. The Tribunal found a direct nexus between the unaccounted income determined in the hands of the firm and the investment shown in the balance sheet. It referenced the judgment of the Punjab & Haryana High Court, which supported the telescoping of such additions. The Tribunal upheld the CIT(A)'s decision to telescope the addition.

Conclusion:
The Tribunal allowed the assessee's appeals for the assessment years 2001-02, 2003-04, 2004-05, and 2005-06, partly allowed the appeals for the assessment years 2006-07 and 2007-08, and dismissed the revenue's appeals. The judgment highlighted the necessity of having specific search material to justify proceedings under Section 153C and the importance of adhering to legal provisions and precedents in tax assessments.