2018 (10) TMI 1091 - AT - Income Tax

Assessment u/s 153A - Unexplained gifts - assessee has challenged assumption of jurisdiction for framing the assessment under section 153A read with section 143(3) - Held that - The assessee has filed regular return of income for AY 2001-02 on 02.03.2009, wherein the gift received from the above said parties of ₹ 11.23 lakhs has been disclosed in the capital account which is enclosed with the return of income. The bank balances of the saving bank account No. 5222 mentioned with the State Bank of Bikaner and Jaipur is also disclosed in the balance sheet as on 31.03.2001 and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) - The assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying on the decision in the case of Continental Warehouse Corporation 2015 (5) TMI 656 - BOMBAY HIGH COURT is clearly applicable in respect of undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search - Decided against revenue. Addition on account of unexplained cash credit - Held that - the assessee has filed regular return of income for AY 2005-06 on 01.09.2005 under section 139 of the Act and along with the return of income the assessee has disclosed this amount of ₹ 25,000/- in the balance sheet being liability in the name of Shri Gulab Adnani. Further, we also find that there is no proceeding pending before the AO on account of regular assessment and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, we delete the addition. Revision u/s 263 - undisclosed gift received - Held that - We find from the assessment order and the order of PCIT revising the assessment, that there is no incriminating material found during the course of search which reveals that this gift amount is undisclosed. The assessment framed by AO is neither erroneous nor prejudicial to the interest of the Revenue and hence, the PCIT cannot assume jurisdiction under section 263 of the Act for revising the assessment. Accordingly, we quash the revision order passed by PCIT under section 263 of the Act and allow the appeal of the assessee.

Issues Involved:
1. Legitimacy of additions made by the AO under section 153A read with section 143(3) of the Income Tax Act.
2. Validity of the assumption of jurisdiction under section 153A in the absence of incriminating material.
3. Confirmation and enhancement of assessments by CIT(A) based on unexplained gifts and cash credits.
4. Legitimacy of the revision order under section 263 of the Act.

Issue-wise Detailed Analysis:

1. Legitimacy of Additions Made by AO:
The primary issue revolves around the additions made by the AO under section 153A read with section 143(3) of the Income Tax Act for various assessment years. The AO had added amounts on account of unexplained gifts and cash credits. For instance, in AY 2001-02, the AO computed the undisclosed income at ?4,68,431/- based on deposits in a bank account, which was contested by the assessee. The CIT(A) further enhanced the assessment by adding unexplained gifts of ?11.23 lakhs, eventually retaining an addition of ?4,54,569/-.

2. Validity of Assumption of Jurisdiction under Section 153A:
The assessee challenged the jurisdiction assumed under section 153A, arguing that no incriminating material was found during the search. The Tribunal noted that the original returns were filed, and the assessments were unabated. In the absence of incriminating material, the Tribunal relied on the decision of the Hon’ble Bombay High Court in CIT vs. Continental Warehouse Corporation (2015) 374 ITR 645 (Bombay), which held that additions under section 153A cannot be made if no incriminating material is found during the search. Consequently, the Tribunal deleted the additions made by the AO for AYs 2001-02, 2003-04, 2004-05, and 2005-06.

3. Confirmation and Enhancement of Assessments by CIT(A):
The CIT(A) had confirmed and enhanced the assessments by adding unexplained gifts and cash credits. For AY 2003-04, the CIT(A) confirmed the addition of ?6,62,000/- and further enhanced the assessment by adding ?2,00,000/- for the maturity amount of a fixed deposit and ?86,855/- for the redemption of ULIP. The Tribunal, however, found that these amounts were disclosed in the original returns, and no incriminating material was found during the search. Thus, the Tribunal deleted these additions.

4. Legitimacy of the Revision Order under Section 263:
The revision order under section 263 for AY 2002-03 was contested by the assessee. The CIT(A) had revised the assessment, alleging non-disclosure of gifts received by the assessee’s minor children. The Tribunal observed that no incriminating material was found during the search concerning these gifts and referred to the Delhi High Court’s decision in Pr. CIT vs. Shri Mahesh Kumar Gupta, which held that in the absence of incriminating material, the revision under section 263 is not justified. Consequently, the Tribunal quashed the revision order and allowed the appeal.

Conclusion:
The Tribunal allowed the appeals of the assessee for AYs 2001-02, 2003-04, 2004-05, and 2005-06, deleting the additions made by the AO and CIT(A) due to the absence of incriminating material. The revision order under section 263 for AY 2002-03 was quashed, and the consequential assessment was set aside. The matter regarding the unexplained cash credit of ?4.97 lakhs for AY 2006-07 was remanded back to the AO for verification. The Tribunal’s decision emphasized that additions under section 153A require incriminating material found during the search, and without such material, the assessments and revisions cannot be sustained.

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