2016 (4) TMI 336 - HC - Income Tax

Scope of assessment u/s 153A - Addition on account of the undisclosed turnover - Held that - We find that the issue raised herein is no longer open to debate as it is covered by the decision of this Court in the case of All Cargo Global Logistics Ltd. (2012 (7) TMI 222 - ITAT MUMBAI(SB)). It dealt with both pending assessment as well as completed assessment. In the above case, three years out of six assessment years were pending assessment for the purpose of Section 153A of the Act. Therefore, the decision of this Court in All Cargo Global Logistics Ltd. (supra) would apply to the present facts even if one accepts the stand of the revenue that the assessment is not complete as no notice under Section 143(2) of the Act had been issued. So far as the next submission on behalf of the Revenue viz. of extrapolation of evidence found during search is concerned, this Court in All Cargo Global Logistics Ltd. (supra) had negatived the revenue s submission before it that the assessment under section 153A of the Act is not to be restricted only to the incriminating material found during the course of search but would extend to other material also. Therefore in the facts of present case this issue is covered by the decision of this Court in All Cargo Global Logistics Ltd. (supra) in favour of the respondent-assessee inasmuch as it restricts the assessment to be made only to the incriminating material found during the course of search. The reliance upon the decision of the Supreme Court in H.M. Esufali H.M. Abdulali (1973 (4) TMI 49 - SUPREME Court) is inappropriate. This is so as it was passed under the sales tax law and it proceeded the basis of best judgment assessement i.e. disregarding the assessee s books of account. It is not so in this case. - Decided in favour of assessee

Issues:
1. Interpretation of Section 260A of the Income Tax Act regarding the Tribunal's order.
2. Validity of the Assessing Officer's reliance on undisclosed turnover for the Assessment Year 2006-07.
3. Determination of undisclosed turnover based on loose papers found during search.
4. Commissioner of Income Tax (Appeals) decision on reliance of loose papers.
5. Tribunal's decision on undisclosed sales for August-September 2005.
6. Scope of assessment under Section 153A in completed assessments.
7. Extending the scope of assessment beyond incriminating material found during search.
8. Consideration of material other than found during search for assessment of undisclosed income.

Analysis:

1. The appeal under Section 260A of the Income Tax Act challenged the Tribunal's order regarding the undisclosed turnover for the Assessment Year 2006-07. The main question raised was whether the Tribunal was justified in directing the Assessing Officer to consider the turnover of the Assessee for the months of August 2005 to September 2005.

2. A search operation under section 132 of the Income Tax Act was conducted on the respondent-assessee in 2007. The Assessing Officer relied on loose papers found during the search, which recorded transactions not reflected in the assessee's books of accounts. The total income was determined based on these findings, leading to a dispute regarding the undisclosed turnover.

3. The Commissioner of Income Tax (Appeals) partly allowed the respondent-assessee's appeal, directing the Assessing Officer to determine the aggregate unaccounted sales recorded in the Register during August-September 2005 and apply the average sales per month for the subject assessment year.

4. Both the revenue and the respondent-assessee filed appeals and cross objections to the Tribunal. The Tribunal allowed the respondent-assessee's appeal, stating that only undisclosed sales for August-September 2005 should be considered for determining the income, citing a Special Bench decision.

5. The High Court dismissed the appeal, referencing a previous case related to completed assessments under Section 153A of the Act. It was held that the assessment should be restricted to incriminating material found during the search, and the reliance on other material for assessment of undisclosed income was not permissible.

6. The Court emphasized that the assessment should be limited to the incriminating material found during the search, as per the decision in the previous case. The argument for extrapolating evidence found during the search for the entire assessment year was rejected.

7. The decision of the Andhra Pradesh High Court allowing consideration of material other than what was found during the search for assessing undisclosed income was deemed irrelevant. The High Court upheld that the assessment should only be based on incriminating material found during the search, as per the established legal precedent.

In conclusion, the High Court's judgment upheld the restriction of assessment to incriminating material found during the search, dismissing the appeal and emphasizing adherence to legal precedents in determining undisclosed income for the Assessment Year 2006-07.

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