2018 (4) TMI 121 - AT - Income Tax

Assessment u/s 153A - Held that - In all the three assessment years i.e. 2005-06 to 2007-08, the date for issuing notice under section 143(2) of the Act already stands expired and no notice under section 143(2) of the Act was issued prior to the date of search, thus, the assessment under section 143(1) of the Act attained finality and, therefore, all the three assessment years are treated as completed assessments. In respect of assessment years 2005-06 to 2007-08, the assessments had already attained finality before the date of search and no incriminating material was found or seized from the premises of the assessee, and, thus, respectfully following the finding of the Hon ble Delhi High Court in the case of Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) no addition could have been made in these assessment years. As no additions could have been made, other grounds of appeal challenging the merit of the addition, both in the appeal of the assessee as well as in the appeal of the Revenue, are rendered infructuous. Treating the agricultural income earned by the appellant as unexplained income - Held that - CIT(A) has not appreciated the facts and circumstances of the case properly and rejected the entire claim of agricultural income of the assessee, ignoring the land holding of the assessee. In our opinion, in view of land holding and Land Revenue records of sowing crops over the land, some agricultural income cannot be denied and in such circumstances, we have no alternative other than estimation of agricultural income. Keeping in view the facts and circumstances of the case, we feel it appropriate to restrict agriculture income of ₹ 10,000 per acre and, thus, according to the land holding of approx. 15 acres, the agriculture income of the assessee is restricted to ₹ 1,50,000/- and balance agriculture income shown by the assessee is held as undisclosed income of the assessee. The grounds No. 1 to 3 of the appeal are accordingly partly allowed. Addition on unexplained entries appearing in bank account and deemed dividend - admission of additional evidence by CIT-A- Held that - CIT-(A) has not complied with the provisions of Rule 46A(3) of the Rules and accepted the genuineness of the explanation of the assessee on the basis of inference drawn on the submission of the Assessing Officer in the remand report. We find that the Assessing Officer clearly asked for opportunity to examine the additional evidences, which the Ld. CIT-A did not allow to the Assessing Officer - we feel it appropriate to restore the issue to the file of the Ld. CIT-(A) for complying the provisions of Rule 46A(3) of the Rules

Summary

Issues Involved:
1. Agriculture income shown by the assessee held as undisclosed income.
2. Credit entries in bank accounts held as undisclosed income.
3. Deemed dividend under section 2(22)(e) of the Act.
4. Validity of assumption of jurisdiction by the AO under section 144 of the Act without issuing statutory notice.

Issue-wise Detailed Analysis:

1. Agriculture Income as Undisclosed Income:
The assessee declared agricultural income in various assessment years which was treated as unexplained income by the AO due to lack of sufficient proof. The Ld. CIT-(A) upheld the addition, citing inadequate documentation to substantiate the agricultural activities. The Tribunal noted inconsistencies in the evidence provided by the assessee and restricted the agricultural income to ?1,50,000 based on the land holding of approximately 15 acres, while treating the balance as undisclosed income. This decision was based on the insufficiency of evidence supporting the expenses and the agricultural produce sold.

2. Credit Entries in Bank Accounts as Undisclosed Income:
The AO added unexplained credit entries in the bank accounts of the assessee as undisclosed income. The Ld. CIT-(A) deleted most of the additions after examining the explanations and supporting documents provided by the assessee, except for amounts related to agricultural income. The Tribunal found that the Ld. CIT-(A) did not comply with Rule 46A(3) of the Income Tax Rules, which requires giving the AO a reasonable opportunity to examine the additional evidence. Consequently, the Tribunal restored the issue to the Ld. CIT-(A) for compliance with Rule 46A(3) and a fresh decision.

3. Deemed Dividend under Section 2(22)(e):
The AO treated loans received by M/s Nagar Dairy Private Limited from M/s Aims Promoter Private Limited as deemed dividend, attributable to the assessee due to his substantial interest in both companies. The Ld. CIT-(A) partly upheld the addition, excluding amounts related to rent reimbursement but maintaining the addition for other advances. The Tribunal found that the Ld. CIT-(A) did not allow the AO sufficient opportunity to examine the additional evidence and thus restored the issue for compliance with Rule 46A(3) and a fresh decision.

4. Validity of Assumption of Jurisdiction under Section 144:
The assessee contended that the AO assumed jurisdiction under section 144 without issuing the necessary statutory notice. The Ld. CIT-(A) upheld the AO’s jurisdiction. The Tribunal did not specifically address this issue in detail, as it was not pressed by the assessee during the hearing.

Conclusion:
The Tribunal allowed the assessee's appeals for assessment years 2005-06 to 2007-08 partly, and dismissed the Revenue's appeals for these years. For assessment years 2008-09 to 2011-12, the Tribunal restored the issues related to credit entries in bank accounts and deemed dividend to the Ld. CIT-(A) for fresh adjudication after complying with Rule 46A(3). The appeals of the assessee and Revenue for these years were allowed for statistical purposes. The Tribunal emphasized the necessity of following procedural rules and providing adequate opportunities for examination of evidence by the AO.