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2020 (3) TMI 572 - AT - Income TaxAssessment u/s 153C - No discovery of any assets/documents in course of search conducted in the case of any person that belongs to the appellant - non abated assessment - HELD THAT - We find that the return of income was filed on 30.09.2013 and notice under section 143(2) could be issued up to 30.09.2014 for making scrutiny assessment in this case. However, the search was conducted on 09.10.2014 hence, on the date of search no proceeding were pending for assessment year 2013-14, hence, the assessment is not abated on the date of search. Therefore, no addition under section 153C could be made for the assessment year under consideration, where no incriminating material was found in search relating to that assessment year. Accordingly, addition in business income sustained on account of estimation @ 8.5% of gross receipts is therefore, deleted - Decided in favour of assessee. Charging of interest under section 234A 234B and 234C - HELD THAT - Hon' ble Supreme Court in the case of CIT v. Anjum M. H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT , therefore, we upheld the same. However, we held that the assessee is entitled to consequential relief if any as arise out on giving effect to this order if any. Rejection of books of accounts - estimation of income - Income supported by the audited financial statement while reducing the estimation of business income to 8.5% of the gross receipts as against 12% of the gross receipts adopted by the Ld. AO, which is very highly excessive and liable to be reduced - HELD THAT - We find that the assessee could not produce books of accounts and supporting vouchers of expenses and there was huge expenses debited in Profit Et Loss Account. Hence, we are of the considered opinion that the AO has rightly rejected book result under the provisions of section 145 Estimation of percentage at 8.5% - rate of gross profit is disclosed at 8.94% in A.Y. 2011-12, 8.98% in A.Y. 2012-13 , 7.43% in A.Y. 2013-14, 7.12% in A.Y. 201415 and 7.12% in A.Y. 2015-16 of which average comes to 7.918%. CIT(A) was not justified adopting rate at 8.5% of gross receipts by upholding the addition on this account. Since, the average gives a rate of 7.918%, which is almost equal presumptive rate of 8% under section 44AD in the case of non-maintenance of books of accounts. Therefore, on careful consideration of facts and taking a reasonable approach, it would be met end of justice, if the profit rate were applied to 8% being equal to presumptive rate under section 44AD of gross receipts as against estimation @ 8.5% by Ld. CIT (A). The AO is, therefore, directed to recalculate the addition of business income by adopting 8% of gross receipts. Addition in respect of 1/3rd cash seized at the time of search - HELD THAT - We find that the assessee has withdrawn cash of ₹ 7 Lakh on 01.10.2W014, hence, this cash might be available with the assessee on the date of search. As against this, the addition made by the AO is ₹ 3.93 lakhs only. We further note that the assessee has been showing substantial income over the years and nature of business requires holding cash in hand for making weekly payments to pourakarmikas, diesel etc. Considering these facts, it can be assumed that cash of ₹ 3.93 Lakh was available out of known sources, which can be considered as explainable out of cash withdrawals made prior a week of search date. Therefore, we are of the view the AO was not justified in making this addition. Addition in respect of 1/3rd of gold seized at the time of search - HELD THAT - Jewellery of all family members was kept together at one place and assessee was jointly residing therein. The inventory so made during search is also reflecting this fact. The assessee has filed a list of 19 person to whom this jewellery was found during search. The list of 19 person to whom jewellery belonged was submitted during the course of assessment proceedings, which is placed at Paper Book Page No. 262, according to which the assessee has owned jewellery of 261 grams, which reflected in balance sheet - no justification in making addition in the case of the assessee - no addition can be made in the hands of the assessee by treating 1 /3rd of seized jewellery in his hand as jewellery was belonging to entire family members. Therefore, if at all if any addition to be made it is to be equally divided among family member - the assessee has only claimed jewellery of 261 grams as belonging to him, which has been reflected in balance sheet as on 31.03.2011 hence, no addition could be made in the hands of the assessee - considering the CBDT Circular which provides jewellery holding by female member and male members and children in particular quantity as not be served meaning thereby as explained, we are of the considered opinion that no addition can be sustained on this account. Accordingly, 1/3rd addition made in the case of the assessee on account of jewellery is deleted.
Issues Involved:
1. Validity of proceedings initiated under Section 153C of the Income Tax Act. 2. Justification of estimation of business income at 8.5% of gross receipts. 3. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act. 4. Sustaining addition of cash and gold seized during the search. Detailed Analysis: 1. Validity of Proceedings Initiated Under Section 153C: The assessee challenged the initiation of proceedings under Section 153C, arguing that the conditions precedent to invoke the provisions were not satisfied. The assessee contended that no documents or assets belonging to them were discovered during the search. The search was conducted at a common residence, and the seized cash and jewelry did not solely belong to the assessee. The CIT(A) verified the assessment records and found that the AO had recorded the necessary satisfaction for initiating proceedings under Section 153C. The Tribunal upheld the CIT(A)’s findings, stating that the AO was duty-bound to issue notice under Section 153C once material belonging to the assessee was found, and the proceedings were validly initiated. 2. Justification of Estimation of Business Income: For the assessment years 2013-14, 2014-15, and 2015-16, the AO estimated the business income at 12% of the gross receipts due to the non-maintenance of books of accounts. The CIT(A) reduced this estimation to 8.5%, considering the average income reported in previous years and the presumptive rate under Section 44AD. The Tribunal further reduced the estimation to 8%, aligning it with the presumptive rate under Section 44AD, as the average gross profit rate over the years was 7.918%. The Tribunal directed the AO to recalculate the business income based on this rate. 3. Charging of Interest Under Sections 234A, 234B, and 234C: The assessee contested the charging of interest under Sections 234A, 234B, and 234C. The Tribunal upheld the charging of interest, citing the Supreme Court's decision in CIT v. Anjum M. H. Ghaswala, which held that charging interest is mandatory. However, the Tribunal allowed for consequential relief arising from the recalculated income. 4. Sustaining Addition of Cash and Gold Seized During the Search: The AO added 1/3rd of the seized cash and jewelry to the assessee’s income, attributing it to them. The assessee argued that the cash withdrawal of ?7 lakhs before the search should be considered, and the jewelry belonged to the entire family. The Tribunal found that the cash withdrawal could explain the cash found, and the nature of the business required holding cash. Therefore, the addition of ?3.93 lakhs was deleted. Regarding the jewelry, the Tribunal noted that it belonged to 19 family members, and the assessee had only 261 grams reflected in their balance sheet. The Tribunal deleted the addition of ?16,42,900, considering the CBDT Circular on jewelry holdings. Conclusion: The Tribunal partly allowed the appeals for the assessment years 2013-14, 2014-15, and 2015-16, making adjustments to the estimation of business income and deleting the additions related to cash and jewelry seized during the search. The charging of interest under Sections 234A, 234B, and 234C was upheld, with provisions for consequential relief.
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