2019 (10) TMI 718 - AT - Income Tax

Assessment u/s 153A and 153C - HELD THAT - As well as applicability of section 153A and 153C in case of assessee and his wife respectively where it has been alleged that search action under 132 itself was invalid. It has been submitted that search initiated was without assuming jurisdiction to make assessment under section 153A and 153C of the Act in respective cases. Admittedly, both sides submitted that this issue is no longer res integra, by virtue of Explanation to Section 132 (1), being introduced with retrospective effect by Finance Act 2017. Accordingly, grounds raised by both assessee challenging validity of search under section 132 stands dismissed. The issue raised by assessee is on merits is regarding peak credits in unaccounted bank accounts of assessee s. As submitted that peak credit has to be computed on the basis of actual deposits and withdrawal and not on the basis of cash deposit alone. Accordingly, we set aside the issue back to Ld. AO for re-computing peak credit, taking into account both deposits as well as withdrawal during relevant period for assessment years under consideration in case of both assessee is before us. Accordingly, grounds raised by assessee s on merits stands allowed for statistical purposes.

Issues Involved:
1. Validity of search under Section 132 of the Income Tax Act.
2. Application of Section 153A and 153C for assessment.
3. Addition of peak credits in unaccounted bank accounts.
4. Denial of reasonable opportunity of hearing.
5. Levy of interest under Sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Validity of Search under Section 132:
The appellant challenged the legality of the search conducted under Section 132, arguing that it was illegal and ultra vires, not based on prior information or material but purely on suspicion. The appellant cited the Supreme Court's decisions in Ajith Jain (260 ITR 80) and other cases to support their claim. However, the Tribunal noted that this issue is no longer res integra due to the retrospective effect of the Explanation to Section 132(1) introduced by the Finance Act 2017. Consequently, the grounds challenging the validity of the search were dismissed.

2. Application of Section 153A and 153C for Assessment:
The appellant contended that the authorities did not comply with the mandatory conditions to invoke jurisdiction under Sections 153A and 153C, rendering the assessments invalid. They argued that the reasons for issuing notices under these sections were not provided, violating the principles established in GKN Driveshafts (India) Ltd. (259 ITR 19) and Manish Maheshwari (289 ITR 341). The Tribunal, however, upheld the validity of the proceedings under Sections 153A and 153C, dismissing the grounds raised by the appellants.

3. Addition of Peak Credits in Unaccounted Bank Accounts:
The appellants disputed the addition of peak credits, arguing that the peak credit should be computed based on actual deposits and withdrawals, not solely on cash deposits. The Tribunal agreed with this contention and set aside the issue to the Assessing Officer (AO) for re-computation of peak credits, taking into account both deposits and withdrawals during the relevant period for the assessment years in question.

4. Denial of Reasonable Opportunity of Hearing:
The appellants claimed that the orders were bad in law as they were denied a reasonable opportunity of hearing, violating the principles of natural justice. The Tribunal did not specifically address this issue in the judgment, implying that the procedural aspects were deemed to be in compliance with the law.

5. Levy of Interest under Sections 234A, 234B, and 234C:
The appellants contested the levy of interest under Sections 234A, 234B, and 234C, arguing that the computation of interest, including the amount, period, and interest rate calculations, was not explained. The Tribunal did not provide a detailed analysis on this issue, suggesting that the levy of interest was upheld as per the provisions of the Act.

Conclusion:
The appeals filed by the appellants for the assessment years under consideration were partly allowed for statistical purposes. The Tribunal upheld the validity of the search and the application of Sections 153A and 153C but directed the AO to re-compute the peak credits based on actual deposits and withdrawals. The grounds challenging the validity of the search and the procedural aspects of the assessment were dismissed. The order was pronounced in the open court on 10-10-2019.

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