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2014 (1) TMI 1228 - AT - Income TaxValidity of assessment and assumption of jurisdiction under section 153A r.w. 143(3) of the Act Addition made on entrance fee collected - Held that - The decision in Jai Steels India, Jodhpur v/s ACIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT followed - If no incriminating material has been found, then no addition can be made in the assessment completed under section 153A which has not been abated - The assessments were not pending and had attained finality and thus, the assessments completed in the assessment years will not get abated - Once that is so, the legal position as of now is that the additions over and above the assessed income cannot be made dehors the incriminating material found at the time of search while completing the assessment under section 153A. Incriminating material - Whether the statement recorded under section 132(4) or the Annexure-B which has been referred to by the learned Departmental Representative can be said to be incriminating material Held that - The assessee has clearly stated that it has claimed the membership fee as capital receipt based on the decision of the Hon ble Jurisdictional High Court and such a claim has also been accepted by the Assessing Officer in scrutiny proceedings - Neither in the question nor in the answer thereto, there is any reference to any document or seized material, much less any incriminating material to show that the assessee s claim which was allowed by the Department has been negated - this claim is purely based on legal principle as upheld by the Hon ble Jurisdictional High Court. The statement as such cannot be said to be incriminating material so as to infer that any addition is warranted on this issue while completing the assessment under section 153A, when the earlier assessments have attained finality at the time of search - the document does not show that the assessee s claim for capital receipts will automatically be inferred as revenue receipt - The period of membership of 25 years also is a part of the record and no new information or material can be said to have come into picture as a result of search - Thus, neither the statement recorded under section 132(4) nor the document mentioned at Annexure-B can be inferred as incriminating material for the purpose of making addition under section 153A Decided in favour of Assessee.
Issues Involved:
1. Taxability of entrance fees collected by the appellant. 2. Validity of assessment and assumption of jurisdiction under section 153A. 3. Incriminating material found during search. Issue-wise Detailed Analysis: 1. Taxability of Entrance Fees Collected by the Appellant: The appellant contested the addition of Rs. 27,75,000/- made by the Assessing Officer (AO) on account of entrance fees collected, arguing that these were capital receipts. The learned Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's action, rejecting the appellant's reliance on the Bombay High Court decision in CIT v. Diners Business Services P. Ltd. [(2003) 263 ITR 1 (Bom)], on the grounds that the fees were not one-time but composite, including annual fees. The CIT(A) concluded that the fees were revenue in nature and taxable in the year of receipt. 2. Validity of Assessment and Assumption of Jurisdiction Under Section 153A: The appellant raised an additional legal ground, challenging the validity of the assessment under section 153A, arguing that no incriminating material was found during the search to warrant a change in the original assessment. The Tribunal admitted this ground, noting it was purely legal and did not require fact investigation. The Tribunal observed that the original assessments for the years under appeal had attained finality before the search, and no assessment was pending. It held that additions could not be made in the absence of incriminating material found during the search, as per the Special Bench decision in All Cargo Global Logistics v. DIT and the Rajasthan High Court decision in Jai Steels India, Jodhpur v. ACIT. 3. Incriminating Material Found During Search: During the search, a statement was recorded from the Managing Director, admitting that the membership fees could be taxed as revenue receipts on a deferred basis over 25 years. The AO relied on this statement and a document listing membership details to treat the fees as revenue receipts. However, the Tribunal found that neither the statement nor the document constituted incriminating material. The statement was based on a legal interpretation, and the document merely reiterated information already on record. The Tribunal concluded that no new material emerged from the search to justify the addition. Conclusion: The Tribunal ruled that the additions made by the AO for the assessment years 2003-04, 2004-05, and 2005-06 were invalid due to the lack of incriminating material found during the search. It emphasized that assessments completed and finalized before the search could not be disturbed without new incriminating evidence. Consequently, the appeals were allowed, and the additions were cancelled. The Tribunal did not adjudicate on the merits of the taxability of entrance fees, as the legal ground was sufficient to decide the case. Order Pronounced: The order was pronounced in the open Court on 22nd January 2014.
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