2020 (5) TMI 108 - AT - Income Tax

Assessment u/s 153A - determination of undisclosed income - HELD THAT - Hon ble Rajasthan High Court in the case of Jai Steel India vs. ACIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT has categorically held that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. Observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the Assessing Officer is empowered to issue warrant and consequential assessment u/s 153A have to be undertaken. Section 153A proceedings were validly undertaken by the revenue authorities. Bogus share application money - The entries in the incriminating documents seized during the search and mentioned in the assessment order are not specifically adjudicated by the Ld. CIT (A). Furthermore, the observations of ld. CIT (A) that the assessee has furnished all the confirmations and details regarding share capital / share premium are not adjudicated in the light of incriminating materials appearing / mentioned in the assessment order. The assessment order clearly states that the assessee failed to prove the identity, genuineness and creditworthiness of the investors. In view of the above discrepancies found in the order of the CIT(A), we deem it fit and proper to set-aside such incomplete and cryptic order of the ld. CIT(A) and restore the matter back to his file to take due cognizance of all the specific evidences mentioned in the assessment order and pass a reasoned and speaking order. Accordingly, the grounds in Cross Objection by the assessee on merits are therefore restored to the file of the ld. CIT(A) as indicated hereinabove and the appeal of the Revenue is allowed for statistical purposes.

Summary

Issues Involved:
1. Legality of assessment under Section 153A of the Income Tax Act.
2. Disallowance of expenses amounting to ?66,30,177/-.
3. Addition of ?90,00,000/- as undisclosed income regarding share application money and share premium.
4. Addition of ?3,78,25,000/- as undisclosed income.
5. Charging of interest under Sections 234A and 234B of the Income Tax Act.

Detailed Analysis:

1. Legality of Assessment under Section 153A:
The assessee argued that the assessment under Section 153A was invalid due to the absence of incriminating material. The Tribunal, however, held that the assessment under Section 153A was valid, citing the legal proposition that the Assessing Officer (AO) is obligated to issue notice for the earlier six years even without incriminating material. The Tribunal referenced the judgment in Jai Steel India vs. ACIT, which supports the AO's power to reassess total income, including undisclosed income unearthed during the search. Thus, the objection raised by the assessee was dismissed.

2. Disallowance of Expenses:
The Revenue challenged the CIT(A)’s deletion of the disallowance of expenses amounting to ?66,30,177/-, arguing that these were not genuine and incurred for paper transactions. The Tribunal directed the AO to re-examine the applicability of a previous Tribunal order in the assessee’s own case (ITA No.392/NAG/2017 for A.Y. 2011-12) and decide the issue after hearing the assessee.

3. Addition of ?90,00,000/- as Undisclosed Income:
The Revenue contested the CIT(A)’s deletion of the addition of ?90,00,000/- as unexplained share application money and share premium. The AO had found incriminating documents indicating that the share application money and premium were routed through paper companies controlled by Mr. D.P. Sarda, an accommodation entry provider. The Tribunal found that the CIT(A) did not specifically address these documents and ordered a remand for fresh adjudication by the CIT(A), directing a reasoned and speaking order.

4. Addition of ?3,78,25,000/- as Undisclosed Income:
The Revenue also challenged the deletion of ?3,78,25,000/- as undisclosed income. The AO had cited incriminating materials showing that this amount was routed through bogus entities. The Tribunal noted that the CIT(A) failed to specifically address the incriminating documents and ordered a remand for fresh adjudication by the CIT(A).

5. Charging of Interest under Sections 234A and 234B:
The assessee objected to the interest charged under Sections 234A and 234B. The Tribunal did not provide a specific ruling on this issue in the summary but included it in the remand for fresh adjudication by the CIT(A).

Conclusion:
The Tribunal allowed the Revenue's appeals for statistical purposes and partly allowed the assessee's cross-objections for statistical purposes. The CIT(A) was directed to re-adjudicate the issues, specifically addressing the incriminating documents and providing a reasoned and speaking order. The Tribunal's decision applies to all assessment years under consideration (2006-07, 2007-08, 2008-09, and 2009-10).