2016 (4) TMI 571 - AT - Income Tax

Bogus gifts - assessment u/s 153A - Held that - As apparent from the order of the CIT(A) that the statement u/s 132(4) has been recorded in the case of the husband of the assessee and not in the assessee s case. The husband of the assessee has admitted the gifts received by him to be bogus. However, there has been no such statement of the assessee that has been recorded during the search proceedings. Further it is observed that the ld. AO had not seized any documents/incriminating material, to substantiate the addition made. The addition was based on the income declared in the return of income filed u/s 153A which is very clear from the questionnaire raised by the ld. AO on 18/12/2009. To our mind the ld. AO has completed the assessment and crossed his jurisdiction by way of involving himself into a reassessment proceedings rather than completing the assessment on seized material, if any, thereby making the entire proceedings as invalid and beyond the scope of sec. 153A of the Act. Following the jurisdictional High Court in the case of CIT vs. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT set aside the assessment made by the ld. AO u/s 153A of the Act. - Decided in favour of assessee

Summary

Issues:
1. Addition made on account of Gift received by the assessee.
2. Validity of assessment proceedings under section 153A.
3. Adequate opportunity of being heard to the appellant.
4. Jurisdiction of the Assessing Officer.

Analysis:

Issue 1: Addition made on account of Gift received by the assessee
The assessee received a gift of Rs. 4 lacs, which the Assessing Officer (AO) added to her income as there was no proof of relationship between the donor and the assessee. The gift deed submitted was deemed incomplete. The ld. CIT(A) upheld the addition based on the husband of the assessee admitting that gifts received by him were bogus. However, the assessee argued that the gift was from her first cousin and provided documents to prove the creditworthiness of the donor. The Tribunal noted that no incriminating material was seized to support the addition, and the AO did not verify the documents submitted by the assessee. Relying on the decision in CIT vs. Kabul Chawla, the Tribunal allowed the appeal, stating that the addition lacked substantiation and was beyond the scope of the assessment.

Issue 2: Validity of assessment proceedings under section 153A
The assessment was initiated under section 153A based on a search and seizure operation. The AO did not rely on seized material but assessed the income based on the return filed under section 153A. The Tribunal found that the AO exceeded his jurisdiction by not completing the assessment on seized material, rendering the entire proceedings invalid and beyond the scope of section 153A. Citing the decision in CIT vs. Kabul Chawla, the Tribunal set aside the assessment made by the AO under section 153A.

Issue 3: Adequate opportunity of being heard to the appellant
The appellant raised concerns about not being afforded adequate and reasonable opportunity to be heard by the Revenue Authorities during the assessment and appellate proceedings. While this issue was mentioned in the grounds of appeal, the judgment did not provide detailed analysis or findings related to this specific issue.

Issue 4: Jurisdiction of the Assessing Officer
The jurisdiction of the Assessing Officer was questioned by the appellant, alleging that the AO wrongly initiated and completed the assessment proceedings by involving himself in reassessment proceedings instead of relying on seized material. The Tribunal agreed with the appellant, stating that the AO crossed his jurisdiction by not completing the assessment on seized material, making the entire proceedings invalid and beyond the scope of section 153A.

Overall, the Tribunal allowed the appeal, setting aside the assessment made by the AO under section 153A, emphasizing the importance of relying on incriminating material and following proper procedures during assessment proceedings.