2019 (8) TMI 893 - AT - Income Tax

Jurisdiction u/s 153C - satisfaction note based on bank balance certificate found in search is a incriminating evidence - bank account was already disclosed in return - HELD THAT - It is not the case of the revenue that such bank account is not disclosed by the assessee to the income tax department. Is the contention of the revenue is upheld, then it would imply that any document found during the course of search on other person belonging to the 3rd person, whether it contains any details of unaccounted income of 3rd person or not, the concluded assessment of the 3rd person will be disturbed and any addition can be made in the hands of 3rd person even if, in the seized document no reference of unaccounted income is found. Thus, such a view, will render the distinction between concluded assessment and abetted assessment meaningless. Thus, we cannot uphold the view of the revenue. We do not have any hesitation in holding that the impugned bank certificate is not an incriminating document based on which the concluded assessment in the case of the assessee can be disturbed. We hold that no addition can be made in the hands of the assessee in absence of any incriminating evidence leading to any unaccounted income unearthed during the course of search. Accordingly, ground number 1 3 of the appeal of the assessee is allowed. Addition u/s 68 - transfer of equity share by way of gift - gifted share still appearing in balance sheet of donor - HELD THAT - Merely because the affidavit is not on the non-judicial stamp paper, the learned CIT A has rejected the affidavit of the donor. Even for a minute, it is believed that the affidavit of the donor is not proper, the content of the affidavit needs to be looked into in view of the overwhelming evidence produced by the assessee, which supports the affidavit. Rejecting an evidence on technical grounds by the learned CIT(A) to uphold the addition in the hands of the assessee cannot be approved. With respect to the payment of sale transfer stamps paid by the appellant of INR 5 7500/ on the share transfer forms, the learned CIT(A) found that no such withdrawal/drawings are found in the books of the donor. That may be the case of any addition if at all in the hands of the donor and not in the hands of the Donee. With respect to the dematerialization of the shares, CIT(A) unnecessarily referred to the correspondence of dematerialization, wherein the company itself who shares are transferred is confirming the date of the transfer producing the share transfer deed as well as confirming the same by way of a separate letter. Thus merely because the dematerialization request made by the assessee on 16/12/2007 it cannot be said that the share transfer did not happen on 23/1/2006 when the donee and the donor both confirmed the same along with the certificate of the company whose shares are transferred. It is also not the case of the revenue about the fact that donor was not having the shares. Thus, the lower authorities have wrongly made the addition of ₹ 28261091/ in the hands of the assessee u/s 68.

Summary

Issues Involved:
1. Assumption of jurisdiction under section 153C of the Income Tax Act.
2. Addition of ?2,82,61,091/- on account of alleged undisclosed income from a gift.

Issue-wise Detailed Analysis:

1. Assumption of Jurisdiction under Section 153C:
The primary contention of the assessee was that the jurisdiction assumed by the Assessing Officer (AO) under section 153C was erroneous. The assessee argued that the material found during the search did not pertain to the alleged undisclosed income. Specifically, the only document found was a bank certificate from Vijaya Bank, which merely confirmed the existence and balance of a disclosed bank account. The Tribunal examined the satisfaction note and the seized document and concluded that the bank certificate did not indicate any unaccounted income. It was held that the certificate was not incriminating as it did not reveal any undisclosed income. The Tribunal referenced several judicial precedents, including the Supreme Court's decision in COMMISSIONER OF INCOME-TAX v. SINHGAD TECHNICAL EDUCATION SOCIETY, which established that jurisdictional issues could be raised at any stage of the appeal if no new facts needed investigation. The Tribunal concluded that the assumption of jurisdiction under section 153C was incorrect as the bank certificate did not qualify as incriminating material.

2. Addition of ?2,82,61,091/- on Account of Alleged Undisclosed Income from a Gift:
The second issue was the addition of ?2,82,61,091/- made by the AO, which was confirmed by the CIT (A), on account of a gift received by the assessee. The assessee claimed to have received 23,00,000 shares of Negolice India Ltd from her sister-in-law, supported by a gift deed, share transfer details, and confirmations from the donor. The AO disbelieved the gift, primarily because the shares still appeared in the donor's balance sheet for the subsequent year. However, the Tribunal noted that the assessee provided substantial evidence, including the share transfer deed, company certificates confirming the transfer, and the donor's affidavit. The Tribunal found that the AO's reliance on the donor's balance sheet was misplaced, as it could have been an accounting error. The Tribunal emphasized that the donor's confirmation and the company's records substantiated the transfer. The Tribunal concluded that the addition made under section 68 was unjustified and directed the AO to delete the addition.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the assumption of jurisdiction under section 153C was incorrect due to the lack of incriminating material. Additionally, the Tribunal found that the addition of ?2,82,61,091/- on account of the alleged undisclosed income from a gift was not supported by evidence and directed its deletion. The Tribunal's decision was pronounced in the open court on 19/08/2019.