2017 (7) TMI 916 - AT - Income Tax

Validity of order u/s. 153C - Held that - In the instant case, it is not the case of the assessee that the documents seized from the premises of searched person did not belong to assessee, rather the said document, i.e., sale deed unequivocally shows the purchase of property mentioned therein, by the assessee. It is also an admitted fact that the AO of searched person and that of the assessee is one and the same. Therefore, in view of the above decision of Hon ble jurisdictional High Court, and in peculiar facts and circumstances of the present case, the impugned order u/s. 153C of the Act cannot be said to be legally invalid or without jurisdiction. Hence, this issue is decided against the assessee. Unexplained share application money and unsecured loans - admission of additional evidence - Held that - In the remand proceedings, the AO has made no comments on the authenticity of these evidences, but commented only on their admissibility u/r. 46A. The additions have also been made without any material unearthed during any enquiry from the creditors. In the totality of all these facts, in our considered opinion, the assessee should be given one more opportunity to substantiate its claim before the AO by laying cogent evidences in support. We accordingly remit the issue back to the Assessing Officer for examining the confirmations of the creditors and to decide the matter afresh after making thorough enquiries as he thinks fit. Needless to say, the assessee shall be given reasonable opportunity of being heard and the assessee is directed to render full cooperation to the AO. Accordingly, the appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of the order under Section 153C of the Income Tax Act.
2. Justification of sustaining the additions without admitting and examining additional evidence under Rule 46A.

Issue-wise Detailed Analysis:

1. Validity of the Order under Section 153C:

The primary issue was whether the order under Section 153C was legally valid, given that it was allegedly passed without proper jurisdiction. The appellant contended that the Assessing Officer (AO) failed to record the necessary satisfaction that certain documents found during the search belonged to the assessee, a prerequisite for invoking Section 153C. The appellant argued that this issue had been previously decided in their favor by the ITAT for the assessment year 2008-09, referencing the Supreme Court decision in M/s. Calcutta Knitwears.

The respondent countered by asserting that the AO of both the searched person and the assessee was the same, and the satisfaction note was indeed recorded by the AO in the capacity of the AO of the searched person. The satisfaction note indicated that documents belonging to the assessee were found during the search of the premises of Shri Mukesh Gupta.

Upon examining the satisfaction note, the Tribunal found that its language suggested it was recorded in the case of the searched person. The Tribunal referenced the jurisdictional High Court's decision in Principal CIT vs. M/s. Super Malls Pvt Ltd., which held that if the AO of the searched person and the third party are the same, the requirement of a separate satisfaction note should not be interpreted too literally. Consequently, the Tribunal concluded that the order under Section 153C was legally valid and dismissed the appellant's contention.

2. Justification of Sustaining Additions Without Admitting Additional Evidence:

The second issue was whether the CIT(A) was justified in sustaining the additions of ?9,50,000 and ?1.50 crores without admitting and examining additional evidence submitted under Rule 46A. The appellant argued that the share applicants and creditors were income tax assessees with PANs, and their confirmations were submitted as additional evidence to the CIT(A). The appellant claimed that they were prevented by sufficient cause from submitting these confirmations earlier due to the illness of a director, which the Tribunal had accepted as a reasonable cause in a penalty appeal.

The respondent argued that the appellant had sufficient opportunity to submit evidence during the assessment stage but failed to do so. The respondent also contended that the appellant did not meet the exceptions under Rule 46A for admitting additional evidence.

The Tribunal noted that the additional evidence was crucial for examining the appellant's claims and that the AO had not commented on the authenticity of these evidences during remand proceedings. The Tribunal decided that the appellant should be given another opportunity to substantiate their claims before the AO. The issue was remitted back to the AO for a fresh examination of the confirmations and other relevant evidence, with instructions to provide the appellant with a reasonable opportunity to be heard.

Conclusion:

The Tribunal upheld the validity of the order under Section 153C but remitted the issue of sustaining additions back to the AO for a thorough re-examination of the additional evidence. Both appeals were allowed for statistical purposes, with instructions for the AO to conduct a detailed inquiry and provide the appellant with a fair hearing.