2015 (1) TMI 1117 - AT - Income Tax

Justification to the proceedings u/s 153C - unaccounted and in genuine gifts - Held that - The total income shall be determined in respect of assessment year for which original assessments have already been completed on the date of search by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abate in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. As already observed that no incriminating material has been found relating to the year in which the assessee has received gifts. Therefore, in our opinion, no addition on account of the gifts can be sustained. Accordingly, on this basis itself, we delete the addition on account of gifts. We accordingly allow the additional grounds. Since we have deleted the addition on the basis of the additional grounds taken by the Assessee, therefore, in our opinion, the grounds taken by the Assessee on merit does not require adjudication. - Decided in favour of assessee.

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the addition of Rs. 90 lakhs as undisclosed income.
3. Admission of additional grounds.
4. Assessment under Section 153C and its implications.
5. Confirmation of the addition by CIT(A).
6. Levy of interest and its reasonableness.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was delayed by 19 days due to the Assessee's husband being imprisoned, which preoccupied the staff. The Tribunal condoned the delay, acknowledging the sufficient cause for the late filing.

2. Validity of the Addition of Rs. 90 Lakhs as Undisclosed Income:
The Assessee received Rs. 90 lakhs as a gift from Harish Wadhava, confirmed by the donor. The AO deemed the gift non-genuine based on circumstantial evidence and human probabilities, adding the amount under Section 68. The CIT(A) upheld this addition, but the Tribunal found no incriminating material during the search to justify the addition under Section 153C.

3. Admission of Additional Grounds:
The Assessee raised additional grounds questioning the legality of the addition under Section 153C. The Tribunal admitted these grounds, citing precedents that legal grounds can be raised at any stage, as seen in National Thermal Power Co. Ltd. vs. CIT and other cases.

4. Assessment under Section 153C and Its Implications:
Section 153C allows the AO to assess income based on documents belonging to a person other than the one searched. The Tribunal noted that the section does not require documents to be incriminating. However, following the Special Bench decision in All Cargo Global Logistics Ltd vs. DCIT, additions under Section 153A must be based on incriminating material found during the search. Since no such material was found, the addition of Rs. 90 lakhs was deemed unsustainable.

5. Confirmation of the Addition by CIT(A):
The CIT(A) confirmed the AO's addition, but the Tribunal found that the original assessment had already addressed the genuineness of the gift. The Tribunal emphasized that without new incriminating evidence from the search, the addition could not be justified.

6. Levy of Interest and Its Reasonableness:
The Assessee contested the interest levy as arbitrary and excessive. However, since the Tribunal deleted the addition based on the additional grounds, the issue of interest became moot and did not require further adjudication.

Conclusion:
The Tribunal allowed the Assessee's appeal, deleting the addition of Rs. 90 lakhs and rendering the grounds on merit unnecessary for adjudication. The order was pronounced in the open court on 9.12.2014.

← Previous Next →