2018 (2) TMI 191 - HC - Income Tax

Assessment u/s 153A - Can the Assessing Officer rely on materials already available with him (much prior to the search) in a proceeding under Section 153A? - computation of capital gains - Held that - The mere fact that without proceeding under Section 147 read with Sections 148 and 149, the Department proceeded under Section 153A would not by that alone absolve the assessee from making good the tax relating to the income which has escaped assessment. The mere fact that the provision under which the Department proceeded was not proper, would not vitiate the entire proceedings especially since there is no procedural requirement distinguishing a notice under Section 148 or one under Section 153A. The first transaction, transferring half of the right in the property, was made by execution of a sale deed on 01.07.1998 after which the purchaser Abdul Hameed was found to have withdrawn ₹ 50,50,000/-. Hence, there was clear evidence as to the total consideration received, being ₹ 1,01,00,000/- in the two transactions; establishing the information as disclosed from the copy of the consent letters received along with the Tax Evasion Petition. The first transaction took place in the financial year 1998-1999, in which the assessee admitted receipt of only ₹ 44,00,000/- and after the execution of the first sale deed, there was a withdrawal of ₹ 50,50,000/- from the purchaser s account. This obviously was for the second transaction, the sale deed of which was executed on 10.05.1999, at the commencement of the next financial year 1999-2000. The exact amount of income escaped from assessment is supported by ample evidence. We do not see any reason to interfere with the orders of the Tribunal. The questions of law are answered in favour of the Revenue and against the assessee. The appeal is rejected affirming the order of the Tribunal. The computation of capital gains shall be proceeded with by the Assessing Officer and finalised expeditiously; if not already done. The parties are left to suffer their respective costs.

Summary

Issues Involved:
1. Validity of assessment year 1999-2000 under Section 153A of the Income Tax Act.
2. Reliance on materials not seized during the search for proceedings under Section 153A.
3. Computation of capital gains.

Detailed Analysis:

1. Validity of Assessment Year 1999-2000 under Section 153A:

The appellant contended that the assessment year 1999-2000 should not be considered for block assessment as it falls beyond the six-year period provided under Section 153A of the Act. The argument was based on the premise that the last search was conducted on 20.04.2005, and the block years should be computed from the date of the panchnama prepared during the last search.

The court rejected this argument, clarifying that Sections 153A and 153B deal with different aspects of the same proceedings. Section 153A enables assessment or reassessment of the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted. The limitation for finalization of assessments under Section 153B does not apply to the computation of the block period under Section 153A. Since the first search was conducted on 02.03.2005 in the assessment year 2005-2006, the six preceding assessment years, including 1999-2000, were valid for assessment. Thus, the court answered the question of limitation against the assessee and in favor of the Revenue.

2. Reliance on Materials Not Seized During the Search:

The appellant argued that the proceedings under Section 153A were invalid as they were based on materials (consent letters) obtained through a Tax Evasion Petition and not seized during the search. The appellant cited the Delhi High Court decision in CIT v. Kabul Chawla, which held that additions under Section 153A should be based on evidence found during the search.

The court acknowledged the legal position in Kabul Chawla but noted that the facts in the present case were more complex. The Department received a Tax Evasion Petition with copies of consent letters, which were incriminating by themselves and led to the search. Although no further incriminating materials were found regarding the land deal, the search revealed rental income from a flat in Bangalore and other financial irregularities. The court found that the Department was within its authority to proceed based on the consent letters and the additional evidence unearthed during the search, including unaccounted consideration from the purchaser and transactions through nominees of the assessee.

The court concluded that even if there was no incriminating material seized during the search, the Department could have proceeded under Section 147 based on the materials received with the Tax Evasion Petition. The court found no procedural distinction between notices under Section 148 and Section 153A that would vitiate the proceedings.

3. Computation of Capital Gains:

The court reviewed the assessment orders and found substantial evidence supporting the Department's findings. The purchaser had issued cheques to individuals close to the assessee, who admitted on oath that the proceeds were handed over to the assessee's husband. The proceeds of these cheques were credited to the undisclosed bank account of the assessee. The total consideration received from the land deal was ?1,01,00,000/-, corroborating the information from the consent letters.

The court affirmed the Tribunal's order, rejecting the appellant's contentions and directing the Assessing Officer to proceed with the computation of capital gains as per the returns filed pursuant to the notice under Section 153A. The court concluded that the questions of law were answered in favor of the Revenue and against the assessee, and the appeal was rejected. The parties were left to bear their respective costs.