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2015 (11) TMI 1878 - AT - Income TaxValidity of assessment u/s. 153A - requirement of issue and service of notice u/s 143(2) - HELD THAT - We find that the judgment of Hon'ble Allahabad High Court in the case of Rajeev Sharma 2010 (5) TMI 600 - ALLAHABAD HIGH COURT is in the context of assessment u/s 147 whereas the judgment of Hon ble Delhi High Court in the case of Ashok Chaddha 2011 (7) TMI 252 - DELHI HIGH COURT is in the context of assessment u/s 153A and in this judgment, it was held that the requirement of issue and service of notice u/s 143(2) is not applicable in the assessment made in compliance to notice u/s 153A. We also find that in the case of Rajeev Sharma 2010 (5) TMI 600 - ALLAHABAD HIGH COURT the decision of Hon'ble Allahabad High Court is in favour of the assessee but the same is in the context of section 147 of the Act - Thus in the present case also, we follow the judgment of Hon'ble Delhi High Court and decide the issue against the assessee. Accordingly, ground No. 3 4 of the assessee are also rejected. Whether no incriminating material having been found during the course of search seizure action under section 132(1)? - We find that it was held by Hon'ble Allahabad High Court in the case of Raj Kumar Arora 2014 (10) TMI 255 - ALLAHABAD HIGH COURT that the reasons given by the Tribunal that no material was found during search cannot be sustained and it is also held by Hon'ble Allahabad High Court that the Assessing Officer has the power to reassess the income of the assessee not only for the undisclosed income which was found during search but also with regard to the material that was available at the time of original assessment. Respectfully following this judgment of Hon'ble Allahabad High Court, we hold that there is no merit in ground and the same is also rejected. Addition of sums as had been borrowed from various persons - HELD THAT - This is undisputed fact that as per the assessment order, it is held by the A.O. that deduction being interest on this very loan is allowable and he made addition of only ₹ 83,058/- after reducing this amount from the amount of ₹ 2.40 Lacs brought to tax by him as notional interest on loan given by the assessee of ₹ 20 Lacs. We are aware that it is held by learned CIT (A) that this notional interest of ₹ 2.40 Lacs cannot be brought to tax but this is immaterial because if the assessee actually received interest on this loan given by the assessee at any point of time, the same can be taxed only after reducing deduction allowed by the A.O. himself on account of interest paid by the assessee on this very loan. Having allowed deduction on account of interest on this very loan of ₹ 20 Lacs, the A.O. cannot say that the loan is unexplained and add the same u/s 68 because the A.O. cannot blow hot and cold together. We, therefore, delete this addition. Addition on alleged ''low withdrawals for meeting household expenses - HELD THAT - Neither the Assessing Officer nor the CIT(A) has given any basis for holding that the house hold withdrawal shown by the assessee is not sufficient. Hence, we delete this addition - This ground is allowed. Addition of cash payment - as per a hand written signed agreement between the assessee and Shri Ashok Dayal (partner Sunder Talkies) and Shri Shailendra Kumar Singh regarding deal the assessee has made cash payment - HELD THAT - The cash in hand available on 24/07/2004 in the cash book of the assessee was ₹ 5,34,145/-. But on subsequent dates, the cash balance as per cash book has fallen and the minimum balance was ₹ 3,95,885/- on 03/03/2005 as can be seen on page No. 43 of the paper book. In the cash of HUF also, the balance has gone down. Under these facts, the assessee does not deserve any benefit on this account because, the cash balance has fallen down on later dates and therefore, if the same cash was used for paying ₹ 6.25 Lacs, then from where the subsequent payments were made as noted in the cash books. Moreover, even for the lowest balance in cash books after search date, the assessee says that this much cash was available with him on that date after the search date. Then how it can be accepted that the same cash was used to pay ₹ 6.25 lacs before search date. Hence, this ground is rejected. Addition on account of receipts from guest house - HELD THAT - A clear finding has been given by CIT(A) that this addition was made by the Assessing Officer on the basis of suspicion, conjectures and surmises and this categorical finding of CIT(A) could not be controverted by Learned D. R. of the Revenue. We also find that this finding is also given by learned CIT(A) that even as per the seized material, receipt of ₹ 1.50 lac is seen. This receipt of ₹ 1.50 lac has been duly shown by the assessee in its income but the Assessing Officer has stated that the receipts from Gopalaya has to be considered at ₹ 6 lac without giving any basis for such estimation. Considering these facts, we find no reason to interfere in the order of CIT(A). Ground No. 1 is rejected. Addition on account of interest accrued from ICICI Bond - HELD THAT - We find that this addition has been deleted by learned CIT(A) on the basis that as per Notification No.F.4(9)-W M of 2003 dated 13/03/2003 reported interest on 6.5% savings bonds 2003 is tax exempt. In view of this factual and legal position, no interference is called for in the order of CIT(A) on this issue. Accordingly, ground No. 2 is rejected. Unexplained cash payment - CIT-A deleted the addition admitting the additional evidence produced before him during the course of appellate proceedings - whether it is violation of Rule 46A of the IT Rule 1962 and without affording any opportunity to the AO or calling for a remand report? - HELD THAT - We find force in the submissions of Learned D. R. of the Revenue that CIT(A) should not have given such direction to Assessing Officer for making verification and deleting the addition and instead of this, he should have obtained remand report and should have decided the issue. But considering this fact that already more than 2 years have passed after the date of order of CIT(A) being 05/03/2013, no useful purpose will be served by obtaining remand report from the Assessing Officer by Tribunal or restoring the matter back to CIT(A) for fresh decision after obtaining remand report from the Assessing Officer and therefore, under these facts, we hold that the Assessing Officer should verify this contention of the assessee that this payment has apparently been made by cheque by Smt. Laxmi Agarwal vide cheque dated 14/07/2005 and if this contention is found correct then this addition should be deleted. Accordingly, ground No. 3 stands disposed of. Income from house property - because of encroachment, the property is not even identifiable at the site and no income has been realized nor realizable in relation to the said property and therefore, no income is assessable u/s 22 - CIT(A) has accepted these claims of the assessee and deleted the addition made by the Assessing Officer - HELD THAT - Revenue could not show that these contentions of the assessee accepted by CIT(A) are not correct. Under these facts, we find no reason to interfere in the order of CIT(A). Accordingly, ground No. 4 is also rejected.
Issues Involved:
1. Jurisdiction to issue notice under section 153A. 2. Validity of assessment order without notice under section 143(2). 3. Addition based on incriminating material found during search. 4. Addition of borrowed sums under section 68. 5. Addition on account of low household withdrawals. 6. Addition based on loose papers and cash payments. 7. Deletion of additions by CIT(A) and subsequent verification. Issue-wise Detailed Analysis: 1. Jurisdiction to Issue Notice under Section 153A: The assessee contended that the Assessing Officer (AO) lacked jurisdiction to issue notice under section 153A as the appellant was not subjected to a valid search under section 132(1). The tribunal rejected this ground, noting that the issue was covered against the assessee by the judgment of Hon'ble Delhi High Court in the case of Ashok Chaddha vs. CIT [2011] 337 ITR 399, which was preferred over the judgment of Hon'ble Allahabad High Court in the case of Rajeev Sharma [2011] 336 ITR 678 due to the specific context of section 153A. 2. Validity of Assessment Order without Notice under Section 143(2): The assessee argued that the assessment order was void ab initio as no notice under section 143(2) was served after filing the return in compliance with section 153A. The tribunal upheld the AO's action, citing the Delhi High Court's ruling in Ashok Chaddha's case, which clarified that the requirement of issue and service of notice under section 143(2) is not applicable in assessments made under section 153A. 3. Addition Based on Incriminating Material Found During Search: The assessee claimed that no incriminating material was found during the search to justify the additions made. The tribunal referred to the judgment of Hon'ble Allahabad High Court in the case of Raj Kumar Arora, which established that the AO has the power to reassess income not only based on undisclosed income found during the search but also on material available at the time of the original assessment. Consequently, this ground was rejected. 4. Addition of Borrowed Sums under Section 68: The AO made additions of Rs. 20,00,000/- as unexplained cash credits under section 68. The tribunal noted that the AO had accepted the interest paid on these very loans as a deductible expense, which implied acknowledgment of the loans' existence. Consequently, the tribunal held that the AO could not simultaneously treat the loans as unexplained and deleted this addition. 5. Addition on Account of Low Household Withdrawals: The AO estimated higher household expenses and made additions for low withdrawals. The tribunal found no basis for the AO's and CIT(A)'s estimates and deleted the additions of Rs. 15,000/- and Rs. 20,000/- for the respective assessment years, as the household withdrawals shown by the assessee were deemed sufficient. 6. Addition Based on Loose Papers and Cash Payments: The AO made additions based on loose papers indicating cash payments. The tribunal upheld the addition of Rs. 6.25 lakhs, noting that the assessee's cash books did not support the availability of sufficient cash for the payments. However, it found no basis for the addition of Rs. 7.25 lakhs, which was claimed to be paid by cheque, and directed the AO to verify this claim. 7. Deletion of Additions by CIT(A) and Subsequent Verification: The Revenue's appeal contested the deletion of various additions by CIT(A). The tribunal upheld CIT(A)'s deletions, including Rs. 4,64,310/- on account of guest house receipts and Rs. 4,67,921/- on account of interest accrued from ICICI Bond, as the Revenue failed to provide contrary evidence. For the addition of Rs. 7.25 lakhs, the tribunal directed the AO to verify the payment made by cheque and delete the addition if verified. Conclusion: The tribunal partly allowed the assessee's appeals, deleting several additions made by the AO, while dismissing the Revenue's appeal. The tribunal emphasized adherence to legal precedents and factual accuracy in its deliberations.
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