2016 (2) TMI 1214 - AT - Income Tax

Assessment u/s 148 v/s 153C - search operation conducted - sale of bus after expiry of bus route permit - Held that - This is the second round of search conducted by the Revenue authorities subsequent to the material found in the case relatable to the assessee. In the first round of litigation, the search was conducted in the premises of Velmurugan group of companies where the material relating to the assessee was found. Therefore, assessment u/s 153C was completed on 31.12.2008. Since the block assessment was already completed, AO, on the basis of material found during the search operation on 18.03.2010 in the case of Shri K. Paneerselvam, reopened the block assessment completed on 31.12.2008 by issuing notice under Section 148. Therefore, by issuing notice under Section 148 AO reopened the block assessment which was completed on 31.12.2008 under Section 153C of the Act. In fact, after reopening, the block assessment was made only under Section 153C of the Act. In view of the above factual situation, this Tribunal do not find any reason to interfere with the order of the lower authority. On merit of the addition the agreement for sale of bus is a composite one, including the route permit. Merely because there was a time gap for renewal of the route permit, this Tribunal is of the considered opinion that it cannot be construed as what was sold by the assessee is only the bus and not route permit. Though renewal was initially rejected by the Regional Transport Authority, the same was subsequently renewed by the Appellate authority. Therefore, the legal presumption is that the route permit continues without any interruption. Tribunal is of the considered opinion that the assessee sold the bus along with route permit for a sale consideration of ₹ 70,75,000/-. It may be a case of the assessee that the entire sum of ₹ 70,75,000/- was not received and what was received was only ₹ 50,00,000/- as per the receipt found during the search operation. As rightly observed by the CIT(Appeals), the assessee followed mercantile system of accounting, therefore, the right to receive the balance amount out of ₹ 70,75,000/- is accrued to the assessee, therefore, the same has to be taken as income for computation. Accordingly, after deducting ₹ 3,50,000/- declared by the assessee, AO has rightly added ₹ 67,25,000/- which was confirmed by the CIT(Appeals) - Decided against assessee

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income-tax Act, 1961.
2. Merit of the addition made by the Assessing Officer regarding the sale of a bus.

Analysis:

Issue 1: Reopening of assessment under Section 147
The appellant contested the reopening of assessment under Section 147, arguing that as per the provisions of Section 153 of the Act, the Assessing Officer should have initiated proceedings under Section 153C instead of issuing a notice under Section 148. The appellant relied on a decision of the Amritsar Bench of the Tribunal to support the contention that the provisions of Section 153 exclude the application of Sections 147 and 148 when material is found during a search operation. The appellant emphasized that the earlier assessment under Section 153C was reopened without justification. However, the Departmental Representative argued that the Assessing Officer rightly reopened the assessment under Section 147 after finding undisclosed income during the search operations. The Departmental Representative highlighted that the block assessment under Section 153C did not preclude the reopening of assessment under Section 147. The Tribunal upheld the Assessing Officer's decision to reopen the assessment under Section 147 based on the material found during the search operations.

Issue 2: Merit of the addition made by the Assessing Officer
Regarding the addition made by the Assessing Officer, the appellant contended that the bus was sold for a lower amount due to the expired route permit, and the addition of a substantial amount was unjustified. The Departmental Representative argued that the sale of the bus included the route permit, and the entire sale consideration should be assessed as income. The Departmental Representative pointed out that the route permit was eventually renewed, indicating that the sale was for the full amount. The Tribunal agreed with the Departmental Representative, stating that the sale of the bus along with the route permit constituted a composite transaction. The Tribunal held that the appellant's right to receive the full consideration accrued under the mercantile system of accounting, justifying the addition made by the Assessing Officer. Therefore, the Tribunal confirmed the addition of the substantial amount as capital gain for the relevant year.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the reopening of assessment under Section 147 and the addition made by the Assessing Officer regarding the sale of the bus. The decision was pronounced on 12th February 2016 in Chennai.