2016 (12) TMI 109 - AT - Income Tax

Addition on disbelieving gift received - assessment u/s 143(3) r.w.s. 153A - Held that - Addition made qua the gift received by the assessee de hors any material found during the course of search, cannot be roped in the assessment made under section 143(3) r.w.s. 153A of the Act by the AO. Accordingly, the addition of ₹ 2.25 crores made by the AO u/s 68 is to be deleted as the AO has no jurisdiction u/s 153A of the Act and the additional ground filed by the assessee is allowed. In view of our findings given above, we are not going into the merits of the case and addition as discussed by the AO as well as by the ld.CIT(A) as they have become purely academic. - Decided in favour of assessee

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act.
2. Legality of the addition of ?2,25,00,000/- as unexplained income under Section 68 of the Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) under Section 153A of the Income Tax Act:

The primary issue raised by the assessee was the jurisdiction of the AO to make additions under Section 68 by treating the gift received as unexplained income, which was already reflected in the return of income filed under Section 139. The assessee argued that the addition was beyond the scope of assessment under Section 153A as it was not based on any incriminating materials found during the search. The assessee had filed its return on 31.07.2001, and no notice under Section 143(2) was issued within the prescribed time, making the assessment final. A search was conducted on 06.01.2006, and a notice under Section 153A was issued to file returns for six assessment years prior to the search, including the year under consideration. The AO, during the search proceedings, added the gift of ?2,25,00,000/- to the total income as income from other sources under Section 68.

The Tribunal, after considering the rival contentions and the material on record, found that the issue of jurisdiction was purely legal and technical, emanating from the facts available on record. The Tribunal admitted the additional ground raised by the assessee, following the ratio laid down by the Supreme Court and the jurisdictional High Court in the cases of National Thermal Power Co Ltd vs. CIT and All Cargo Global Logistics Ltd vs. Dy. CIT.

The Tribunal observed that the return of income filed by the assessee had attained finality on the date of the search, and no incriminating material was found during the search regarding the gift. The Tribunal relied on the decisions of the Bombay High Court in CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. and CIT vs. Murli Agro Products Ltd., which held that in the case of completed assessments, additions could only be made based on seized material. The Tribunal concluded that the AO had no jurisdiction to make the addition under Section 153A without any incriminating material found during the search.

2. Legality of the Addition of ?2,25,00,000/- as Unexplained Income under Section 68 of the Act:

The AO had added the gift of ?2,25,00,000/- received by the assessee from Mr. N. K. Rajgharia as unexplained income under Section 68, disbelieving the explanation provided by the assessee. The AO's addition was challenged before the first appellate authority, which sustained the addition.

The Tribunal noted that the gift was duly disclosed in the original return of income filed on 31.07.2001. The Tribunal emphasized that in the case of completed assessments, additions could only be made based on incriminating material found during the search. Since no such material was found, the addition made by the AO was without jurisdiction.

The Tribunal relied on the decisions of the Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. and Murli Agro Products Ltd., which clarified that the AO could not disturb the assessments that had attained finality unless incriminating material was found during the search. The Tribunal also referred to the decision of the co-ordinate Bench in Jignesh P Shah vs. DCIT, which held that additions in completed assessments could not be made without incriminating material.

The Tribunal concluded that the addition of ?2,25,00,000/- made by the AO under Section 68 was beyond the scope of Section 153A and was to be deleted. The Tribunal allowed the appeal filed by the assessee, holding that the AO had no jurisdiction to make the addition without any incriminating material found during the search.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, holding that the addition of ?2,25,00,000/- made by the AO under Section 68 was without jurisdiction and beyond the scope of Section 153A, as no incriminating material was found during the search. The Tribunal emphasized that in the case of completed assessments, additions could only be made based on seized material, following the decisions of the jurisdictional High Court and the Supreme Court.

← Previous Next →