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2020 (12) TMI 823 - AT - Income TaxValidity of reopening of assessment u/s 147 - recording reasons for reopening of assessment based on the same seized material found during the course of search against the assessee - HELD THAT - It is not a denying fact that during the course of search several material was found against the assessee which clearly indicated that there was an escapement of income in the case of the assessee. A.O. framed the original assessment on the basis of the same seized material found during the course of search, but, such assessment order under section 143(3) was quashed by the Ld. CIT(A) because of non-service of notice under section 143(2) therefore, the same seized material found during the course of search could be the basis for reopening of the assessment under section 147/148 - There is no illegality in the action of the A.O. in recording reasons for reopening of assessment based on the same seized material found during the course of search against the assessee. Following the above decisions in the case of Krishna Developers Co 2018 (2) TMI 607 - SC ORDER we do not find any reason to quash the reopening of the assessment in the matter merely because the Departmental appeal was pending before the Tribunal when reasons for reopening of the assessment were recorded. If the A.O. would not have recorded reasons for reopening of the assessment on 28.03.2013, then, the period of limitation in favour of the Revenue would have expired to initiate re-assessment proceedings. Thus, the A.O. was justified in reopening of the assessment in the matter. Unrecorded sales from business of sale of gold jewellery - gross profit rate determination - unrecorded sales by applying the gross profit rate of 18% - HELD THAT - Since the assessee from the beginning have denied the contents of the seized Diary that he did not deal in trading of gold jewellery, therefore, onus was upon the A.O. to prove that assessee actually deal in gold jewellery. The assessee has shown the business income and income from other sources which have not been doubted by the authorities below. Since this similar seized document have been considered in earlier A.Y. 2005-2006 and similar addition have been deleted, therefore, the issue is covered in favour of the assessee by the aforesaid decision of the Tribunal in favour of the assessee. In the absence of any corroborative evidence to suggest that assessee dealt with trading of gold jewellery, there were no justification to presume from the contents of the Diary that assessee was in fact dealing in gold jewellery - No justification to sustain any addition against the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Addition on the basis of loose paper found during the course of search - assessee had incurred a sum on the birthday party function of his grand-son at Soubhagya Banquet, Preet Vihar, New Delhi - HELD THAT - Addition is not warranted in the hands of the assessee. The seized paper do not indicate the name of the assessee if he has incurred any expenditure. The assessee is grand father of Mr. Ayush, therefore, presumption would be that father of the boy must have incurred the expenditure. Otherwise, there is no liability of the grand father to incur any expenditure on the occasion of birthday of his grandson. There is no evidence available on record to suggest that the assessee has incurred any expenditure on the birthday of his grand-son. No further enquiries have been made from the owner of the Banquet Hall or any other person whose name is appearing in the seized paper to verify as to who has incurred the expenditure for the party of the grand-son of the assessee - addition is made merely on presumption and as such, there is no justification to make addition in the hands of the assessee. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee. Addition towards bank deposits - assessee claimed before A.O. that deposits are made out of assessee s brokerage income - HELD THAT - The authorities below failed to note that assessee has filed return of income showing business income and income from other sources - whatever income is declared in the return of income some amount accumulated in earlier year could have been available to the assessee so that entire addition is unjustified. We accept the alternative claim of assessee and whatever business income is declared by assessee on account of brokerage, available to the assessee. Addition could be sustained to the extent of ₹ 1,58,859/- only considering the income declared in the return of income and other income available to the assessee on account of accumulation of income - we set aside the Orders of the authorities below and restrict the addition to ₹ 1,58,859/- only.
Issues Involved:
1. Initiation of re-assessment proceedings under section 147/148 of the Income Tax Act, 1961. 2. Addition of ?61,16,740/- on alleged unrecorded sales. 3. Application of profit rate of 18% for computing business income. 4. Addition of ?20,000/- based on loose paper. 5. Addition of ?2,89,500/- towards bank deposits. Issue-wise Detailed Analysis: 1. Initiation of Re-assessment Proceedings under Section 147/148: The assessee challenged the reopening of the assessment on the grounds that no new material was available to the Assessing Officer (A.O.) for recording reasons for initiation of the reassessment proceedings, and the appeal of the Department was pending before the Tribunal. The A.O. had recorded reasons for reopening to safeguard the interests of Revenue, as the earlier assessment order was declared void ab initio due to non-service of notice under section 143(2). The Tribunal found that the same seized material from the search could be the basis for reopening the assessment and upheld the A.O.'s action. The Tribunal relied on the decision of the Gujarat High Court in Krishna Developers & Co. vs. DCIT, which was confirmed by the Supreme Court, stating that the A.O. could reopen the assessment based on the same material found during the course of the search. Therefore, Ground Nos. 1 to 9 of the appeal were dismissed. 2. Addition of ?61,16,740/- on Alleged Unrecorded Sales: The assessee contended that he was not in the business of trading in gold, and the documents (Annexure-A Diary) found during the search did not pertain to him. The A.O. made the addition based on these documents, which the assessee disowned. The Tribunal noted that the incriminating documents were not confronted to the assessee during the search or post-search enquiries. Additionally, the Tribunal observed that a similar addition made in the preceding assessment year (2005-2006) was deleted by the ITAT. The Tribunal concluded that there was no material to suggest that the seized Diary pertained to the assessee and deleted the entire addition of ?61,16,740/-. Consequently, Ground No. 10 of the appeal was allowed, and Ground No. 11 became infructuous. 3. Application of Profit Rate of 18%: The Tribunal did not specifically address this issue separately as it became infructuous following the deletion of the entire addition of ?61,16,740/- on alleged unrecorded sales. 4. Addition of ?20,000/- Based on Loose Paper: The A.O. made an addition of ?20,000/- based on a loose paper indicating expenditure on a birthday party. The assessee argued that the expenditure might have been incurred by his son, and the loose paper did not indicate his name. The Tribunal found that there was no evidence to suggest that the assessee incurred the expenditure and noted that the addition was made merely on presumption. Therefore, the Tribunal deleted the entire addition of ?20,000/-. Ground No. 12 of the appeal was allowed. 5. Addition of ?2,89,500/- Towards Bank Deposits: The A.O. made an addition of ?2,89,500/- towards unexplained bank deposits. The assessee claimed that the deposits were from his brokerage income. The Tribunal noted that the assessee had declared business income and income from other sources in his return. Considering the income declared and the possibility of accumulated income from earlier years, the Tribunal restricted the addition to ?1,58,859/-. Ground No. 13 of the appeal was partly allowed. Conclusion: The appeal of the assessee was partly allowed. The Tribunal upheld the reopening of the assessment but deleted the additions of ?61,16,740/- on alleged unrecorded sales and ?20,000/- based on loose paper. The addition towards bank deposits was restricted to ?1,58,859/-.
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