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2022 (4) TMI 231 - AT - Income TaxAssessment u/s 153C - Addition u/s.68 on account of loans received - proof of incriminating materials/documents belonging to the assessee - HELD THAT - As in the case of the assessee before us no incriminating materials/documents belonging to the assessee were found during the course of search conducted on 23.02.2006 at the premises of Shri. Ramesh Kedia and others therefore the Assessing Officer had wrongly assumed jurisdiction and framed assessment in the hands of the assessee u/s.143(3) r.w.s 153C. We are unable to uphold the assessment framed by the Assessing Officer u/s.143(3) r.w.s.153C of the Act for want of jurisdiction on his part. We thus quash the assessment for want of jurisdiction on the part of the Assessing Officer. - Decided in favour of assessee.
Issues Involved:
1. Addition of ?10,00,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961. 2. Addition of ?2,52,000/- as unexplained cash credit under Section 68 on account of gifts received. 3. Legality of invoking Section 153C and the validity of the assessment order. Detailed Analysis: Issue 1: Addition of ?10,00,000/- as unexplained cash credit under Section 68 The Assessing Officer (AO) observed that the assessee had claimed unsecured loans aggregating to ?10 lacs from ten persons. During the search operations, it was found that the bank accounts of these persons were used to launder the assessee's unaccounted money. The AO concluded that the loans were unexplained cash credits under Section 68. The CIT(A) upheld this addition, noting that the lenders were of no financial means and the bank accounts were used to route unaccounted money. The Tribunal, however, quashed the assessment on the grounds that the AO had wrongly assumed jurisdiction under Section 153C, as no incriminating material "belonging" to the assessee was found during the search. Issue 2: Addition of ?2,52,000/- as unexplained cash credit under Section 68 on account of gifts received The AO added ?2,52,000/- to the assessee's income, claiming that the gifts were bogus transactions intended to introduce undisclosed income. The CIT(A) upheld this addition, noting that the gift deeds were neither notarized nor registered, and the donors had insufficient income to justify the gifts. The Tribunal did not delve into the merits of this addition, as it quashed the assessment on jurisdictional grounds. Issue 3: Legality of invoking Section 153C and the validity of the assessment order The Tribunal focused on whether the AO had validly assumed jurisdiction under Section 153C. It noted that for assessments prior to the amendment effective from 01.06.2015, the seized documents must "belong" to the assessee. The Tribunal cited various judicial pronouncements, including CIT Vs. Arpit Land (P) Ltd. and PCIT Vs. Index Securities Pvt. Ltd., to support its view that the AO had wrongly assumed jurisdiction. The Tribunal concluded that the assessment was invalid as no incriminating material "belonging" to the assessee was found during the search. Separate Judgment for A.Y. 2005-06 For the assessment year 2005-06, the AO disallowed ?96,000/- as interest on the unsecured loans deemed bogus in the previous year. The CIT(A) upheld this disallowance. The Tribunal applied its reasoning from the 2004-05 assessment and quashed the assessment for 2005-06 as well, citing the same jurisdictional issue under Section 153C. Conclusion The Tribunal quashed the assessments for both the years 2004-05 and 2005-06 due to the AO's lack of jurisdiction under Section 153C, as no incriminating material "belonging" to the assessee was found during the search. Consequently, it did not address the merits of the additions made by the AO.
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