2020 (12) TMI 385 - AT - Income Tax

Reopening of assessment u/s 147 - salary paid to the assessee along with other two persons was found recorded in seized documents, which was not recorded in the books of accounts of the said company - HELD THAT - On the very same documents, the additions have been made in assessment years 2009-10 in 2010-11 respectively in the case of the assessee. In the case of the Modern Dairy Ltd., the addition was made for salary expenditure incurred out of the books of accounts, whereas in the case of the assessee addition has been made for salary received and not reported in the return of income. In our opinion, when the very basis of the addition made has been deleted by the Tribunal, the addition made on the basis of those documents in the case of the assessee cannot survive. Accordingly, we delete the additions in assessment years 2009-10 and 2010-11 respectively. The grounds of both the appeals of the assessee are accordingly allowed.

Summary

Issues:
1. Validity of reopening assessment under section 147 of the IT Act after search proceedings.
2. Addition of undisclosed income based on seized documents.
3. Condonation of delay in filing the appeal.

Issue 1: Validity of Reopening Assessment under Section 147:
The appeals were directed against a common order passed by the CIT(A) for assessment years 2009-10 and 2010-11. The appellant contended that the AO erred in issuing notices under section 148 of the IT Act as the assessments were framed consequent to search proceedings, which could only be reopened under section 153A read with section 153C of the Act. The CIT(A) confirmed the action of the AO, upholding the additions made. The Tribunal examined the reasons recorded for reopening the assessments and noted that they were based on information from the Assessing Officer of M/s Modern Dairy Ltd. regarding salary details not recorded in the company's books. However, the Tribunal observed that the additions made in the case of M/s Modern Dairy Ltd. based on the same seized documents had been deleted by the Chandigarh Bench. Consequently, the Tribunal held that since the very basis of the additions had been negated, the additions made in the appellant's case could not stand. Therefore, the Tribunal allowed the appeals, deleting the additions in both assessment years.

Issue 2: Addition of Undisclosed Income Based on Seized Documents:
The Assessing Officer had made additions in the appellant's case for undisclosed income based on seized documents showing salary payments not recorded in the books of M/s Modern Dairy Ltd. The CIT(A) upheld these additions, stating that the appellant failed to refute the evidence presented by the AO. However, the Tribunal, after considering the Tribunal's decision in the case of M/s Modern Dairy Ltd., where similar additions were deleted, found that the additions made in the appellant's case could not be sustained. The Tribunal highlighted that the documents used to justify the additions were the same, and since the basis for the additions had been discredited in the related case, the additions in the appellant's case were unjustifiable. Consequently, the Tribunal allowed the appeals and deleted the additions made for both assessment years.

Issue 3: Condonation of Delay in Filing the Appeal:
The assessee filed an application for condonation of a seven-day delay in filing the appeal, which was contested by the Tribunal. The delay was attributed to the acknowledgment of the appeal documents by the Tribunal beyond the stipulated time limit. However, the Tribunal, after examining the timeline of events, found that the appeal was filed within the 60-day period from the date of the CIT(A)'s order. The Tribunal concluded that there was no fault on the part of the assessee and thus decided to condone the delay in filing the appeal.

In conclusion, the Tribunal allowed the appeals, ruling in favor of the assessee by deleting the additions made for undisclosed income in both assessment years. The Tribunal also condoned the delay in filing the appeal, finding no fault on the part of the assessee in meeting the prescribed deadline.