2015 (1) TMI 97 - AT - Income Tax

Addition in assessment u/s 153A - Addition u/s 68 - No relevant or incriminating material or evidence was found or seized during the course of search reflecting undisclosed income Held that - The search action was carried on in case of M/s K Sera Sera Productions Ltd, wherein the husband of the assessee Mr. Parag Sanghavi was director, therefore search operation was also carried out at his residence, however, during the course of the search at the resident of the assessee no incriminating documents, jewellery, cash, unaccounted bank accounts, undisclosed property, etc. were found and hence there was no seizure except some loose papers which were duly explained during the assessment proceedings and no addition was made with regard to these documents - the fact regarding assessee having received gift of ₹ 97 lakhs from Vijay Bhansali was found only during the course of assessment proceedings - Nowhere the AO has referred any incriminating material found during the course of search, based on which addition had been made in M/s ALL CARGO GLOBAL LOGISTICS LTD Versus DEPUTY COMMISSIONER OF INCOME TAX 2012 (7) TMI 222 - ITAT MUMBAI(SB) - addition u/s.153A can be made on the basis of incriminating material which in the context of relevant provisions means books of accounts and other documents found in course of search - summary assessment was done u/s.143(1) in respect of return of income filed on 29-3-2006 - The time limit for issue of notice u/s.143(2) was expired on 31st March, 2007 i.e 12 months from the end of the month in which return was furnished - the time limit for issue of notice u/s.143(2) has already expired on 31-3-2007, which is much prior to the date of search i.e. 12-9-2007 - no incriminating material with regard to alleged gift/loan was found during the course of search so as to empower the AO to make addition u/s.153A with regard to such gift/loan there was no merit in the addition so made by AO u/s.153A without referring any incriminating material having found during the course of search, when the time limit for issue of notice u/s.143(2) had expired much prior to date of search. Assessee has discharged its burden of proof u/s.68 of the Act by proving identity of the loan creditor, Genuineness of the loan transaction and Credit worthiness of the loan creditor - the addition made by the AO without giving any finding otherwise is not justified - There is no dispute that in case of loan transaction assessee is not only required to prove the identity of the loan creditor but also the genuineness of the loan transaction as well as creditworthiness of the loan creditor - since the assessee has proved by the above documents that the loan creditor is a long and good friend of the assessee s husband and the interest free loan was given to help the assessee to purchase of a residential flat in Bombay for which loan was actually utilized - the credit worthiness of the loan creditor is also proved by filing the Net Worth Certificate from Chartered Accountant firm of Dubai - AO also made addition of ₹ 65,000/- on account of foreign travelling expenses - during the year assessee along wither her husband and mother-in-law has shown withdrawal of ₹ 16,08,971/-, which has not been disputed by the AO - as the assessee could not furnish the details of expenses, the AO estimated the same and made addition of ₹ 65,000/- The tickets expenditure was estimated at ₹ 30,000/- the addition is restricted to ₹ 30,000/- u/s 69C. Addition u/s 69C with respect to credit card expenses Held that - Nothing positive material was brought on record in support of the allegation that assessee has actually used the credit card - assessee had made personal drawings from her bank account which was sufficient for her regular expenses and, therefore, any further estimation on account of credit card expenses is not justified without bringing any cogent material on record the addition is directed the AO to delete the addition Decided partly in favour of assessee.

Issues Involved:
1. Validity of additions under Section 153A without incriminating material.
2. Addition of Rs. 97,00,000 on account of loan received from NRI.
3. Addition of Rs. 65,000 on account of foreign travel expenses.
4. Addition of Rs. 50,000 on account of credit card expenses.
5. Imposition of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Validity of Additions under Section 153A without Incriminating Material:
The assessee challenged the additions made under Section 153A, arguing that no incriminating material was found during the search and the time limit for issuing a notice under Section 143(2) had expired. The Tribunal referred to the decision in Alcargo Global Logistic Ltd., which states that if no assessment is pending, additions under Section 153A can only be made based on incriminating material found during the search. Since the assessment had been completed under Section 143(1) and the time limit for issuing a notice under Section 143(2) had expired before the search, the Tribunal concluded that no incriminating material was found during the search to justify the additions. Therefore, the Tribunal held that the AO had no jurisdiction to make the additions under Section 153A.

2. Addition of Rs. 97,00,000 on Account of Loan Received from NRI:
The assessee contended that the amount of Rs. 97,00,000 received from Mr. Vijay Bhansali, an NRI, was a loan and not a gift, as initially shown in the capital account. The assessee provided confirmation letters, bank certificates, and a Chartered Accountant's certificate to prove the identity, genuineness, and creditworthiness of the loan creditor. The Tribunal found that the assessee had discharged its burden of proof under Section 68 by providing sufficient documentary evidence. The Tribunal held that the addition made by the AO was not justified as the assessee had proved the loan transaction's authenticity and the creditor's creditworthiness.

3. Addition of Rs. 65,000 on Account of Foreign Travel Expenses:
The AO estimated foreign travel expenses at Rs. 65,000 and made an addition under Section 69C. The assessee argued that the total withdrawals made by her, her husband, and her mother-in-law amounted to Rs. 16,08,971, which was sufficient to cover the travel expenses. The Tribunal found that the AO had not disputed the withdrawals and had estimated the expenses without concrete evidence. Therefore, the Tribunal restricted the addition to Rs. 30,000 under Section 69C, considering the totality of the facts and circumstances.

4. Addition of Rs. 50,000 on Account of Credit Card Expenses:
The AO estimated credit card expenses at Rs. 50,000 under Section 69C, alleging that the assessee had five credit cards. The assessee contended that she had sufficient personal drawings amounting to Rs. 3,95,396 to cover her regular expenses and had not used any credit cards. The Tribunal found that the AO had not brought any positive material on record to support the allegation of credit card usage. Therefore, the Tribunal directed the AO to delete the addition of Rs. 50,000.

5. Imposition of Penalty under Section 271(1)(c):
As the Tribunal deleted the additions made by the AO, the penalty imposed under Section 271(1)(c) also had no basis. The Tribunal directed the AO to delete the penalty imposed under Section 271(1)(c).

Conclusion:
The Tribunal allowed the appeals of the assessee in part, deleting the additions made under Section 153A for lack of incriminating material and insufficient evidence. The Tribunal also deleted the penalty imposed under Section 271(1)(c). The order was pronounced in the open court on 19/12/2014.

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