2015 (11) TMI 1854 - AT - Income Tax

Validity of assessment order passed u/s 153C - Mandation Recording of satisfaction - HELD THAT - There is nothing in the assessment order or otherwise to show that the satisfaction as envisaged u/s.153C was ever recorded by the A.O. Considering it the A.O. did not assume jurisdiction to complete assessment u/s.153A and therefore the assessment order passed by him is invalid. He pleaded that even when there is same Assessing Officer for searched person and where 153C action is taken then also recording of satisaction in both the cases is necessary in view of decision of the Hon ble jurisdictional High Court in the case of Mechman 2015 (7) TMI 538 - MADHYA PRADESH HIGH COURT The harmonious construction of entire provision would lead to an irresistible conclusion that the term assessment has to be read in the context of abated assessments and the term reassessment has been used in the context of unabated assessments. In the case of completed assessments income has to be re-assessed in terms of Sec.153A. The re-assessment requires belief of assessing officer regarding escapement of income from assessment. The belief should be founded on existence of appropriate material or information. It should be rational belief held in good faith and not arbitrary subjective or a mere pretence. The material or information in his possession should have direct nexus with his belief regarding escapement of income. The absence of such nexus shall render the re-assessment proceedings invalid. Thus the re-assessment of income u/s.153A cannot be made sans any incriminating material or merely on change of opinion in relation to material already considered. - Decided in favour of assessee. Unexplained investment - HELD THAT - There is no evidence regarding any unaccounted transaction with relation to shares acquired transferred and re-acquired by various family members of Sangla family and associate concerns. The revenue s claim that no promoter would divest with such a huge holding at a very nominal profit is without any basis and only a guess work. The assessee s contention that the promoters were intended to go for public issue is well established by the fact that expenditure incurred in this regard has been debited in the books of accounts of Adroit Industries Ltd. therefore the revenue s contention that the promoters were not intended to go for public issue is not correct. In our considered view all such allegations are wild and without any basis. Revenue has even failed to bring anything on record to establish that any unaccounted transaction in any form was done by any of the persons of this group and associates. There is no evidence against the assessee with regard to transfer and reacquisition of shares of Adroit Industries Ltd. during the relevant period to the assessment years 2007-08 2008-09 and 2010-11 respectively. The revenue s allegations are general and not supported by any evidence. In our considered view no addition could be sustained only on the basis of guess work or in the absence of any positive evidence. In view of this factual matrix we find no merit in the addition made in the assessment year 2008-09 on the transfer of shares of Adroit Industries Limited and also the addition made for unexplained investment on account of reacquisition of shares of Adroit Industries Ltd. during the financial year 2010-11. We direct to delete the same. Assessee claimed deduction u/s 80C and 80D filing the return of income u/s 153A/153C - HELD THAT - Since we have already allowed the appeal of the assessee on the ground of issue of recording satisfaction prior to issue of notice u/s 153C of the Act and also on the ground that no incriminating document was found and seized therefore there is no question of allowing such deduction to the assessee. Further we would also like to state that the provisions of section 153A/153C are not made for the benefit of the assessee. Return filed in response to notice u/s 153A/153C of the Act is not substitute of revised return for the claim of such benefits. Apex Court in the case of Goetze (India) Ltd 2006 (3) TMI 75 - SUPREME COURT ruled out that a fresh claim before the Assessing Officer can be made only by filing a revised return and not otherwise. Therefore whatever claim the assessee has not made while filing the return u/s 139(1)/139(4) of the Act he cannot make fresh claim by filing the return u/s 153A/153C of the Act and reduce the taxable income originally declared - this ground of the assessee s appeal stands dismissed.

Summary

Issues Involved:
1. Validity of assessments under Section 153A/153C of the Income-tax Act, 1961.
2. Treatment of sale proceeds of shares as unexplained income.
3. Addition on account of unexplained investment in shares.
4. Rejection of legal claims for deductions under Sections 80C and 80D.

Detailed Analysis:

1. Validity of Assessments under Section 153A/153C:
The Tribunal examined whether the assessments made under Sections 153A and 153C were valid. It was noted that the Assessing Officer (AO) must record satisfaction before issuing a notice under Section 153C. The Tribunal referenced the case of CIT vs. Mechmen, where it was held that satisfaction of the AO is essential to assume jurisdiction. It was observed that no incriminating material was found during the search that could justify the additions made in completed assessments. Therefore, assessments under Sections 153A/153C were invalid if no incriminating material was found. The Tribunal cited multiple judgments supporting the view that completed assessments can only be interfered with based on incriminating material found during a search.

2. Treatment of Sale Proceeds of Shares as Unexplained Income:
The AO treated the sale proceeds of shares of Adroit Industries (India) Ltd. as unexplained income. The Tribunal noted that the source of investment in the shares was not disputed and that the transactions were recorded in the books of accounts. The AO's contention that the transactions were sham and involved paper companies was not supported by evidence. The Tribunal held that no addition could be made based on mere suspicion or guesswork without concrete evidence. Consequently, the addition of Rs. 13,23,220/- for the sale proceeds of 32,875 shares was deleted.

3. Addition on Account of Unexplained Investment in Shares:
The AO made additions on account of unexplained investment in shares of Adroit Industries (India) Ltd., treating the difference between the fair market value and the reacquisition cost as unexplained investment. The Tribunal observed that the AO's determination of fair market value was arbitrary and not supported by evidence. The Tribunal emphasized that no evidence was found during the search to indicate any unaccounted transactions. Therefore, the addition of Rs. 93,37,094/- for unexplained investment in 3,27,675 shares was deleted.

4. Rejection of Legal Claims for Deductions under Sections 80C and 80D:
The assessee claimed deductions under Sections 80C and 80D while filing returns pursuant to notices under Section 153C. The AO rejected these claims, stating that fresh claims for deductions cannot be made in returns filed under Section 153C. The Tribunal upheld this view, citing the Supreme Court's decision in Goetze (India) Limited vs. CIT, which ruled that fresh claims can only be made through revised returns. The Tribunal also referenced the Rajasthan High Court's decision in Jai Steels (India) vs. ACIT, which supported the view that Section 153A/153C proceedings are not for the benefit of the assessee. Consequently, the rejection of deductions was upheld.

Conclusion:
The Tribunal allowed the appeals of the assessees where the additions were based on invalid assessments under Sections 153A/153C and unsupported by incriminating material. Additions for unexplained income and investments were deleted due to lack of evidence. However, the Tribunal upheld the rejection of fresh claims for deductions under Sections 80C and 80D in returns filed under Section 153C. The final decision resulted in a mix of allowed and dismissed appeals based on the specific issues and evidence presented.