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2022 (7) TMI 1204 - AT - Income TaxAssessment u/s 153A - Whether any incriminating material found during the course of search? - AY 2009 -10 - HELD THAT - As mentioned in the judgement of jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. 2021 (11) TMI 928 - KARNATAKA HIGH COURT it is clear that, in case of persons searched, the assessment for those assessment years where the assessments are concluded as on the date of search, cannot be disturbed unless incriminating material pertain to such assessment year is found and seized during the course of search. Hence, in our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2009-10 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. Accordingly, we quash the assessment for the assessment year 2009-10. For AY-2010-11 and AY 2011-12 - Addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2011-12 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. AY 2012-13 - In this assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid. Unexplained opening balance - HELD THAT - In this case, the addition was made only on the reason that opening capital has not been explained by the assessee in the relevant assessment year. In our opinion, AO cannot make any addition on the basis of carry forward opening balance. In case had he any doubt, he could have questioned only in the earlier assessment year prior to assessment year 2007-08 not in the assessment year 2007-08. Accordingly, addition made by AO is deleted. Treatment of agricultural income as taxable income in assessment year 2007-08, 2008-09 2011-12 - HELD THAT - AO not brought any material to suggest that the income declared by the assessee as an agricultural income is earned from any other unknown sources. AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties. In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi 2022 (3) TMI 899 - ITAT DELHI it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of search. Since the decision of the assessment officer to treat the agricultural income as income from other sources which is not based on incriminating material seized during the course of search action, no addition or disallowance could be made. Adhoc disallowance of expenditure debited to the P L account - HELD THAT - As carefully gone through the cash book for these assessment years and also ledger extracts filed by the assessee before us. Admittedly, these are the regular books of accounts maintained by assessee produced before the AO and only after going through the P L account, the AO disallowed these expenditures debited to the P L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals. Correct head of income - treating of income offered under head Capital Gain OR business income - HELD THAT - In this case, admittedly assessee treated the purchase of agricultural land as capital asset and on relinquishment of the same in favour of Shri Kempegowda, the income resulted was treated as Capital gain. However, the AO without any material came to conclusion of the assessee holding the property as stock in trade and arrived at business income instead of capital gain disclosed by the assessee. If there was no material in the hands of AO to consider as this transaction as adventure in the nature of trade, we are of the opinion that the land was held by assessee as capital asset for investment, the income generated from this transaction on entering into a relinquished deed, the income has to be considered as short term capital gain and not as business income. This view of ours is supported by the order of the coordinate bench of Hyderabad in the case of M/s. SSPLL Ltd. 2013 (7) TMI 18 - ITAT HYDERABAD - Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us. Loss on sale of property - loss has not been treated as capital loss - HELD THAT - In case of another property situated at Gollahalli whereas the assessee has sold 21 sites for a total consideration of Rs.92,11,500/-The assessee computed the short term capital gain of Rs.25,64,072/-. The AO treated it as business income. The income generated is treated as business income. The assessee filed additional evidence for this assessment year producing the ledger account of development expenses and copy of vouchers and prayed that the issue may be remitted. Without prejudice to our finding on legal issue for the purpose of completion of the proceedings, we remit this issue to the file of AO for fresh consideration relating to both transactions as discussed in earlier para in this order in earlier assessment years under consideration. Unexplained investment - HELD THAT - The assessee has taken this plea before lower authorities that the payment is accounted in his books of accounts. However, Ld. CIT(A) sustained the addition. In our opinion, there is no necessity of making such addition when the transaction is duly reflected in the books of accounts as shown in the ledger extract in page no.170 of the paper book. Accordingly, we delete this addition. Unexplained cash credit addition - HELD THAT - After hearing both the parties, we are of the opinion that this issue was not properly examined of the addition and proper enquiry has not been made. Hence, the issue may be remitted to the file of AO. We accede to the request of the assessee s counsel. Accordingly, this issue remitted to the AO to decide afresh after making proper enquiry and giving opportunity of hearing to the assessee. Addition based on seized document in search - HELD THAT - The suspicion in the minds of the revenue authorities that the assessee made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Validity of assessments under Section 153A. 3. Treatment of agricultural income as taxable income. 4. Ad hoc disallowance of expenditure. 5. Treatment of capital gains as business income. 6. Unexplained investments. 7. Unexplained cash credits. 8. Unexplained expenditure based on seized documents. Detailed Analysis: 1. Condonation of Delay in Filing Appeals: The appeals were filed with a delay of 34 days due to the appellant being occupied with post-search proceedings. The Tribunal condoned the delay, finding the reasons provided as good and sufficient. 2. Validity of Assessments under Section 153A: - Assessment Year 2007-08: The Tribunal upheld the assessment under Section 153A as there was seized material (an agreement of sale) found during the search. - Assessment Year 2008-09: The Tribunal upheld the assessment, noting that the seized material from a related party (N.C. Mahesh) was validly used for the assessment. - Assessment Years 2009-10, 2010-11, and 2011-12: The Tribunal quashed the assessments as there were no incriminating materials found during the search, and these were concluded assessments. - Assessment Year 2012-13: The assessment was upheld as it was pending and abated due to the search. 3. Treatment of Agricultural Income as Taxable Income: - The Tribunal deleted the additions made by the AO for treating agricultural income as non-agricultural income in the assessment years 2007-08, 2008-09, and 2011-12, noting the absence of seized material to support such treatment. 4. Ad Hoc Disallowance of Expenditure: - The Tribunal deleted the ad hoc disallowance of 50% of the expenditure debited to the profit and loss account in all the assessment years, finding that the AO had no material evidence to disbelieve the expenditures claimed by the assessee. 5. Treatment of Capital Gains as Business Income: - Assessment Year 2007-08: The Tribunal remitted the issue to the AO to decide whether the property was held as a capital asset or stock-in-trade. - Assessment Year 2008-09: Similar to the previous year, the issue was remitted to the AO for fresh consideration. - Assessment Years 2009-10, 2010-11, and 2011-12: Without prejudice to the findings on the legal issue, the Tribunal remitted these issues to the AO for fresh consideration based on additional evidence. 6. Unexplained Investments: - Assessment Year 2007-08: The Tribunal remitted the issue to the AO to consider additional evidence regarding the alleged unexplained investment of Rs.2 crores. - Assessment Year 2009-10: The Tribunal deleted the addition of Rs.20 lakhs as unexplained investment, noting that the transaction was duly reflected in the books of accounts. 7. Unexplained Cash Credits: - Assessment Year 2008-09: The Tribunal remitted the issue of Rs.2,36,34,000/- to the AO for fresh consideration based on additional evidence. - Assessment Year 2009-10: The Tribunal remitted the issue of Rs.78,97,764/- to the AO for fresh consideration based on additional evidence. - Assessment Year 2010-11: The Tribunal remitted the issue of Rs.82,66,804/- to the AO for fresh consideration. - Assessment Year 2012-13: The Tribunal remitted the issue of Rs.1,70,00,000/- to the AO for fresh consideration. 8. Unexplained Expenditure Based on Seized Documents: - Assessment Year 2008-09: The Tribunal remitted the issue of Rs.3,55,00,250/- to the AO for fresh consideration, noting that the addition cannot be made solely based on notings on loose slips without corroborative evidence. Conclusion: - Partly Allowed for Statistical Purposes: ITA Nos. 307/Bang/2020, 308/Bang/2020, and 312/Bang/2020. - Allowed: ITA Nos. 309/Bang/2020, 310/Bang/2020, and 311/Bang/2020.
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