2022 (6) TMI 1013 - AT - Income Tax

Validity of assessment u/s 153C r.w.s. 153A - proof of incrementing material found in search - Disallowance of interest payment - HELD THAT - We find that as per the provisions of Sec.153C, where AO is satisfied that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of Section 153A, if that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. As the proviso further provide that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under Section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. Therefore, applying the same to facts of the present case, Ld. AO would have jurisdiction to assess the income u/s 153C from AYs 2009-10 onwards and not before that since the relevant AY in the present case is 2015-16 as noted by us in preceding para-4. Therefore, we have no hesitation to hold that the assessment was bad-in-law and the same would have no legs to stand. We order so. Another factor to be noted is that the additions are not based on any incriminating material and therefore, this being non-abated year, the additions are necessarily to be based on certain incriminating material found by the search team that belong to the assessee. However, we find that the sole addition as made in assessment order is not based on any incriminating material. Addition of cash receipts - Appeal for AY 2012-13 - We find that impugned order take note of the fact that sale of jewellery was reflected in the return of income and the assessee had submitted cash flow statement which has been extracted in the impugned order. The sale transaction has not been disturbed by the revenue and the explanation has been rejected on mere allegation that the transaction was after-thought and self-serving. However, the said allegation has no basis and no evidence has been brought on record to disprove the transaction of the assessee. In such a case, the assessee s explanation of cash receipt was to be accepted. By deleting the impugned addition we allow the grounds thus raised by the assessee. In the result, the appeal stands partly allowed.

Issues:
1. Jurisdiction under section 153C r.w.s. 153A for Assessment Year (AY) 2008-09.
2. Validity of assessment proceedings and satisfaction note under section 153C r.w.s. 153A for AY 2008-09.
3. Addition of interest payment disallowed by the Assessing Officer for AY 2008-09.
4. RTI application seeking information related to possession of documents during search operations.
5. Jurisdiction and assessment under section 153C r.w.s. 153A for AY 2012-13.
6. Addition of cash amount in the hands of the assessee for AY 2012-13.
7. Rejection of cash receipt explanation and confirmation of addition for AY 2012-13.

Jurisdiction under section 153C r.w.s. 153A for AY 2008-09:
The appeal for AY 2008-09 challenged the jurisdiction under section 153C r.w.s. 153A, contending that there was no incriminating material belonging to the assessee, and no satisfaction note was provided. The Assessing Officer (AO) centralized the case to Circle 3(4) based on transactions with a searched group of companies. The disallowed interest payment of Rs.1.71 Lacs was contested, and the RTI application revealed the possession of documents by the jurisdictional officer on 20/10/2014, falling under AY 2015-16. The Tribunal held that the assessment was bad-in-law as the AO lacked jurisdiction for AYs before 2009-10, and the additions lacked incriminating material, rendering them unsustainable.

Addition of interest payment disallowed by the AO for AY 2008-09:
The AO disallowed interest payment of Rs.1.71 Lacs in the assessment for AY 2008-09. The AO's decision was confirmed by the Commissioner of Income Tax (Appeals), leading to further appeal. However, the Tribunal found that the disallowance lacked a basis in incriminating material and was not sustainable, as non-abated years required additions based on such material. Consequently, the grounds challenging the assessment were allowed, rendering other grounds academic in nature.

RTI application seeking information related to possession of documents during search operations:
The assessee filed an RTI application seeking information on the possession of documents during search operations. The response indicated that the jurisdictional officer received the documents on 20/10/2014, falling under AY 2015-16. This information was crucial in determining the jurisdiction and timing of the assessment under section 153C r.w.s. 153A for the relevant assessment years.

Jurisdiction and assessment under section 153C r.w.s. 153A for AY 2012-13:
The appeal for AY 2012-13 challenged the assessment under section 153C r.w.s. 153A, specifically contesting the addition of Rs.14.90 Lacs. The addition stemmed from cash introduction with a company, where the assessee failed to provide sufficient evidence for a portion of the amount. The Tribunal noted the submission of a cash flow statement and sale of jewellery reflected in the return of income, ultimately allowing the grounds raised by the assessee and partly allowing the appeal.

Rejection of cash receipt explanation and confirmation of addition for AY 2012-13:
The rejection of the cash receipt explanation for the addition of Rs.14.90 Lacs in AY 2012-13 was based on the timing of the cash receipt post-search, deemed self-serving and an afterthought. However, the Tribunal found no basis for this rejection, as the sale transaction was declared in the return of income and supported by a cash flow statement. Consequently, the Tribunal deleted the addition, emphasizing the acceptance of the assessee's explanation and partly allowing the appeal for AY 2012-13.

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