2021 (1) TMI 90 - AT - Income Tax

Assessment u/s 153A - enhancement of assessment towards cash credit and interest income - HELD THAT - No doubt, it is well settled principle of law by the decision of various High Courts and Hon ble Supreme Court that in absence of any incriminating material, no addition can be made in the assessment framed u/s.153C /153A, if such assessments are unabated as on the date of search. But, fact remains that in the present case facts with regard to abatement and unabatement of assessments was not forthcoming from the records as well as additions made towards enhancement of assessment and cash credit and interest income was on the basis of bank account which was the basis for making additions on peak credit and hence, arguments of the assessee that enhancement made by the learned CIT(A) is not on the basis of any incriminating material found during the course of search is unfounded. Therefore, we reject the ground taken by the assessee. Addition to cash deposits - Where the AO during the remand proceedings has recorded categorical finding that although assessee claimed that source for cash deposits is out of cash received from M/s.Saravana Global Holdings Ltd., but account statement of assessee does not vouch the same, whereas the assessee claims that source for three cash deposits was from M/s. Saravana Global Holdings Ltd., for which account statement of the party has been furnished before the AO. Facts are not clear insofar as source of income for cash deposits. Therefore issue needs to be re-examined by the Assessing Officer in light of account statement furnished by the assessee to explain source for three cash credits found on three dates . Interest on fixed deposits - Assessing Officer during the remand proceedings observed that the assessee has received interest income on fixed deposits and credited in the same bank account . However, on perusal of return of income filed for the year, the same was not offered for taxation. Therefore, we are of the considered view that this issue also needs verification by the Assessing Officer.

Issues Involved:
1. Jurisdiction and legality of assessment under Section 153C/153A.
2. Enhancement of assessment by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. Condonation of delay in filing the appeal.
4. Addition of unexplained credits and interest income.
5. Requirement of incriminating material for additions under Section 153C/153A.

Detailed Analysis:

1. Jurisdiction and Legality of Assessment under Section 153C/153A:
The assessee argued that the enhancement of the assessment by ?15,000 and ?47,053 by the CIT(A) was without jurisdiction, barred by limitation, and contrary to the provisions of law. The CIT(A) should have found that no addition can be made under Section 153C except on the basis of material seized during the search. The jurisdiction to make an assessment under Section 153C read with Section 153A can only be assumed by the Assessing Officer (AO) based on seized documents or books of account. The assessee cited several cases, including decisions from the Kerala High Court and the Supreme Court, to support their claim that the enhancement was without authority of law.

2. Enhancement of Assessment by the CIT(A):
The CIT(A) enhanced the assessment by adding ?15,000 as unexplained credits and ?47,053 as interest income, which were not based on any material seized during the search. The CIT(A) relied on the bank statement produced before the AO during the remand hearing. The assessee argued that the CIT(A) erred in enhancing the assessment without providing an opportunity to file objections and that the enhancement was based on a new source of income, which is beyond the powers of the CIT(A) under Section 251(1)(b) of the Act.

3. Condonation of Delay in Filing the Appeal:
The assessee filed the appeals 14 days late, explaining that the delay was due to the appeal papers being mixed up with other documents. The Tribunal condoned the delay, considering it a reasonable cause under the Act, and admitted the appeals for adjudication.

4. Addition of Unexplained Credits and Interest Income:
The AO made additions towards unexplained credits found in the bank account on a peak credit basis. The CIT(A) deleted the addition of ?8,90,00,000 but enhanced the assessment by ?15,000 for three credits of ?5,000 each and ?47,053 for interest on fixed deposits. The assessee argued that these enhancements were not based on any seized material and were beyond the jurisdiction of the CIT(A). The Tribunal found that the issue of the source for cash deposits and interest income needed further verification by the AO.

5. Requirement of Incriminating Material for Additions under Section 153C/153A:
The Tribunal noted that the assessee had not taken any specific ground challenging the issue before the AO or CIT(A) when the AO made additions towards cash credit of ?8,90,00,000 based on the same bank account. The Tribunal rejected the assessee's argument that the enhancement was not based on any incriminating material found during the search, as the facts regarding the abatement and unabatement of assessments were not clear from the records.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the AO to re-examine the issues regarding the source of cash deposits and interest income. The Tribunal emphasized the need for verification of the account statements and reconciliation provided by the assessee. The appeals were set aside to the file of the AO for further examination and decision in accordance with the law.

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