2018 (10) TMI 1444 - AT - Income Tax

Assessment u/s 153C - not providing the seized material to the assessee well in advance to analyze and file the return of income - Held that - There is no mention with regard to the date of requesting the seized material and supply of the seized material by the AO. AR did not furnish the date of requisition of the copies of the seized material and the date of supply of copies of the seized material to the assessee. Having received the copies of the seized material from the AO during the assessment proceedings, at the time appeal also the assessee did not make any effort to analyse the seized material and to present his case before the CIT(A) is the assessee who has not cooperated with the department and failed to furnish the required information in spite of several notices and opportunities provided by the AO as well as the CIT(A). This ground was not raised by the assessee before the CIT(A) and during the appeal hearing, the AR did not make any argument to support the ground. Therefore, we do not find any merit in the ground raised by the assessee and this ground is dismissed. Cash deposits made in the bank account unexplained - there was no compliance from the assessee to explain the sources of cash deposits made in the bank account - assessee contended that the deposits were made out of the withdrawals - Held that - As evident from the bank account, there are frequent cash deposits and withdrawals which required to be considered in totality of the facts but not the deposits alone. Since the assessee has assured that he would submit the entire information required for the purpose of completion of the assessment, we are of the considered opinion that in the interest of justice the issue should be remitted back to the file of the AO to arrive at the true and correct income. The assessee must submit the necessary information explaining the sources of deposits, and the application of withdrawals before the AO to consider the issue on merits. Assessment made on the basis of bank deposits instead of the seized material - assessee submitted addition made on the basis of deposits made in the bank accounts without having any seized material - Held that - In this case, the assessee has not filed the regular returns of income. During the appeal hearing the Ld.A.R did not furnish any evidence having filed the regular returns of income by the assessee. No assessments were made u/s 143(3)/143(1) in the hands of the assessee. Thus, the bank accounts found during the course of search are not declared by the assessee and constitute the incriminating material for the purpose of initiating the proceedings u/s 153C. Accordingly, we uphold the action of the AO in initiating the proceedings u/s 153C and the resultant actions of the AO and dismiss the appeals of the assessee on this ground. - Appeal decided partly in favour of assessee.

Issues Involved:
1. Non-provision of seized material to the assessee.
2. Addition of cash deposits as undisclosed income.
3. Verification of records and assessment orders of Smt. U Rajya Lakshmi.
4. Assessment based on bank deposits instead of seized material.

Issue-wise Detailed Analysis:

1. Non-provision of seized material to the assessee:
The assessee contended that the assessment under section 144 was invalid as the seized material was not provided with sufficient time to analyze and file the return under section 153C. The Tribunal noted that the assessee did not cooperate with the department despite several notices and opportunities provided by the AO and CIT(A). The assessee failed to raise this issue before the CIT(A) and did not argue it during the appeal hearing. Consequently, the Tribunal found no merit in this ground and dismissed it for all assessment years (2008-09 to 2011-12).

2. Addition of cash deposits as undisclosed income:
The AO found substantial cash deposits in the assessee's bank accounts during the search and seizure operations. The assessee claimed these deposits belonged to his brother and Smt. U Rajya Lakshmi, but failed to provide any supporting evidence or confirmation letters. The AO treated the cash deposits as undisclosed income for the respective assessment years. The CIT(A) upheld the AO’s decision, stating the assessee was non-cooperative and did not provide credible evidence to support his claim. The Tribunal, however, acknowledged the frequent cash deposits and withdrawals and remitted the issue back to the AO to consider the peak deposits as income, allowing the assessee to submit necessary information.

3. Verification of records and assessment orders of Smt. U Rajya Lakshmi:
The assessee argued that the CIT(A) should have verified the records and assessment orders of Smt. U Rajya Lakshmi. However, this ground was withdrawn by the assessee during the appeal hearing. Consequently, the Tribunal dismissed this ground as withdrawn for all assessment years (2008-09 to 2011-12).

4. Assessment based on bank deposits instead of seized material:
The assessee contended that the assessment was made based on bank deposits without any seized material, making it unsustainable. The Tribunal noted that the AO issued the notice under section 153C based on incriminating material found during the search in the case of Shri D. Sampath, which included the assessee’s undisclosed bank accounts. Since the bank accounts were not declared by the assessee and constituted incriminating material, the Tribunal upheld the AO's action in initiating proceedings under section 153C and dismissed the assessee's appeals on this ground for all assessment years (2008-09 to 2011-12).

Conclusion:
The appeals of the assessee were partly allowed, with the Tribunal remitting the issue of cash deposits back to the AO for fresh consideration, while dismissing other grounds. The order was pronounced in the open court on 26th October, 2018.

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