2015 (10) TMI 476 - AT - Income Tax

Validity of search warrant - Block Asstt. Order - whether there was no individual search warrant in the name of the appellant, no Block Asstt. Order could be passed in his case? - Held that - We refer to provision of Section 292CC of the Act. We find that this section was inserted by Finance Act, 2012 with retrospective from 01.04.1976. As per this Section, it is provided that notwithstanding that the authorization for search has been issued in joint names, assessment or reassessment shall be made separately in the names of each of the persons mentioned in such authorization. Hence, as per this retrospective amendment in the Income Tax Act, the issue in dispute in the present case has to be decided in favour of the Revenue and against the assessee. Addition relating to alleged commission/interest - Held that - Even as per assessment order, only amount received is commission amount of 5% in respect of accommodation entries said to have been provided by family members of the assessee. It may be that the amount in fact was paid by the Bajaj Group to the assessee because the assessee was working with Bajaj Group and since the alleged accommodation entries are admittedly in the name of family members of the assessee, such commission income for providing accommodation entries in fact belongs to respective family members and such family member is already accounting for interest income in respect of the alleged accommodation entries and such interest income already taken into account by the family members is at the rate of 12% whereas the commission is said to have been received at the rate of 5% only. Under this factual position, we are of the considered opinion that separate addition made in the hands of the assessee on account of alleged payment in respect of alleged accommodation entries is not justified because even if the loan provided by the family members of the assessee to Bajaj Group is not actual loan and is only accommodation entry then also, the commission on such accommodation entry belongs to the respective family member and that family member has already included in his income interest @ 12% and alleged commission payment of 5% is not in addition to interest of 12%. We, therefore, delete this addition in the present case - Decided in favour of assessee. Addition in respect of alleged Salary - Held that - The assessee has received salary of ₹ 84,000/- for AY 2000-01 and ₹ 1,02,000/- for AY 2001-02. But in both these years, assessee has shown salary income of only ₹ 62,400/- per year. On this basis, Ld. CIT(A) has confirmed the addition of the difference in salary income received by the assessee as per seized material and declared by the assessee in return of income of ₹ 21,600/- in AY 2000-01 and ₹ 39,600/- AY 2001-02. Ld. AR of the assessee could not controvert this finding of the Ld. CIT(A) by establishing that the amount of salary received by the assessee in these two assessment years as per seized material and as per return of income filed by the assessee for these two years is same. Hence, we do not find any reason to interfere in the order of the CIT(A) on this issue. - Decided against assessee.

Summary

Issues Involved:
1. Validity of Block Assessment Order due to the absence of a valid search warrant.
2. Additions related to alleged commission/interest and salary in the Block Assessment.

Issue-wise Detailed Analysis:

1. Validity of Block Assessment Order due to the absence of a valid search warrant:

The assessee argued that the Block Assessment Order should be quashed as there was no valid search warrant in the appellant's name, and the provisions of Block Assessment were not applicable. The assessee cited judgments from the Hon'ble Allahabad High Court in the cases of CIT Vs. Smt. Vandana Verma and CIT Vs. Madhu Chawla, where it was held that individual assessments in the names of husband and wife were invalid if the warrant of authorization for search was issued in joint names. The Revenue countered this by referencing a larger bench judgment in CIT Vs. Devesh Singh, which held that as per Section 292CC of the Income Tax Act, assessments can be made individually even if the warrant of authorization was issued jointly. The Tribunal concluded that due to the retrospective amendment by Finance Act, 2012, the issue was covered in favor of the Revenue, and the individual assessment was valid. Consequently, Grounds No. 1 and 2 raised by the assessee were rejected.

2. Additions related to alleged commission/interest and salary in the Block Assessment:

a. Addition relating to alleged commission/interest:

The assessee argued that the commission received was not over and above the interest provided by the borrower Bajaj Group, and the respective family members had already considered such interest income in their returns. The Revenue maintained that the addition was proper as the commission was received by the assessee as per seized material. The Tribunal found that the commission income for providing accommodation entries belonged to the respective family members who had already accounted for interest income at 12%, and the commission was not in addition to this interest. Therefore, the Tribunal deleted the addition on account of alleged commission payment, allowing Ground 3a in favor of the assessee.

b. Addition in respect of alleged Salary:

The Tribunal noted that the seized material indicated the assessee received higher salary amounts than declared in the returns for the assessment years 2000-01 and 2001-02. The assessee failed to controvert this finding. Consequently, the Tribunal upheld the addition of the difference in salary income, rejecting Ground 3b.

Conclusion:

In summary, the Tribunal upheld the validity of the Block Assessment Order and confirmed the addition related to the alleged salary but deleted the addition related to the alleged commission/interest. The appeal of the assessee was partly allowed.