2023 (11) TMI 1043 - AT - Income Tax

Addition towards cash found and seized during the course of search - assessee explained that it is out of past savings from salary income - CIT(A) deleted the addition - HELD THAT - The assessee being a highly paid employee, the possibility of keeping cash to the extent of Rs. 1,32,340/- out of his declared income cannot be ruled out. Therefore, we cannot find fault with reasons given by the ld. CIT(A) to delete additions made towards cash found to the extent of Rs. 1,32,340/-. As regards balance amount As per the explanation furnished by the assessee, Smt. Padmavathamma kept a sum of Rs. 5 lakhs with the appellant for safe keeping of the money as she was proceeding to USA. This fact has been confirmed by Smt. Padmavathamma, through e-mail. AO never disputed these facts. Therefore, once the Assessing Officer not disputed the fact that a sum of Rs. 5 lakhs belongs to Smt. Padmavathamma and she had admitted to have given cash to the appellant, the AO ought to have verified the admission of third party by exercising power provided under the Act. Since, the AO does not believed the claim of the assessee, in our considered view, he cannot make addition only on the basis of admission in the statement recorded u/s. 132(4) of the Act and therefore, we are of the considered view there is no error in the reasons given by the ld. CIT(A) to delete additions made towards cash found and seized during the course of search. Unexplained jewellery u/s 69B - assessee has declared jewellery in wealth tax returns filed for relevant assessment years and there is an excess jewellery - HELD THAT - As in the present case, no such exercise was carried out by the Department. Further, during the course of assessment proceedings, the assessee has filed details of jewellery belongs to his wife and other family members and also reconciled jewellery found during the course of search with wealth tax returns filed by his wife Smt. B. Kusuma kala, for assessment year 2012-13. As per the details filed by the assessee, the family members of the appellant including his married daughter and un-married daughter are having jewellery within the limit specified by the CBDT for the purpose of seizure during the course of search. Further, if you consider the jewellery owned by other family members, then there is no excess jewellery as quantified by the Department during the course of search. CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer towards unexplained investment in jewellery - Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the revenue. Undisclosed income on the basis of statement recorded u/s. 132(4) - HELD THAT - It is a well established principle of law from the decision of Kashmira Singh 1952 (3) TMI 37 - SUPREME COURT where it has been clearly held that, the admission should not be the foundation of assessment, instead, independent evidence should form the basis of assessment, while admission supplements it. The CBDT has very clearly emphasized the need to focus on gathering evidences during the course of search/survey, rather than obtaining admission. Also in the case of Pullangode Rubber Produce Co Ltd vs State of Kerala 1971 (9) TMI 64 - SUPREME COURT held that although admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. Thus admission in a statement u/s. 132(4) of the Act, cannot be taken as conclusive evidences unless said admission is supported by evidence. In the present case, from the statement recorded from the assessee, we find that the Department has taken a confession statement from the assessee towards undisclosed income, without there being any material found during the course of search, which satisfies undisclosed income in any kind of asset or investment. CIT(A), after considering relevant submissions of the assessee and also taking note of various facts has rightly deleted additions made by the Assessing Officer towards undisclosed income, on the basis of admission in the statement recorded u/s. 132(4) of the Act. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds taken by the revenue. Validity of assessment order passed by AO u/s. 143(3) r.w.s. 153(1)(b) - HELD THAT - It was the categorical findings of the ld. CIT(A) that, although the Assessing Officer referred to notice u/s. 153A in Para 3 of assessment order, but no such notice was issued to the assessee as per assessment records. It was further observed that, the AO inadvertently mentioned in the assessment order that notice u/s. 153A of the Act was issued instead of notice u/s. 142(1) of the Act. In our considered view, the observation of the AO in para 3 of assessment order appears to be typographical error in so far as the pre-assessment notice issued for taking up the case for scrutiny assessment. Therefore, we are of the considered view that, when the substantive issue of assessment is subject matter of search operation conducted u/s. 132 of the Act and also the impugned assessment year is the year of search, which falls outside the scope of provisions of section 153A /153C of the Act, in our considered view, the question of issue of notice u/s. 153A of the Act does not arise. Thus when the assessment records clearly shows that no such notice was issued u/s. 153A, then mere reference to section in the assessment order does not nullify the whole assessment proceedings. Therefore, we are of the considered view that, there is no merit in the ground taken by the assessee challenging the validity of assessment order.

Summary

Issues Involved:
1. Deletion of addition towards cash found and seized during the course of search.
2. Deletion of addition towards unexplained jewellery.
3. Deletion of addition towards undisclosed income based on the statement recorded u/s. 132(4) of the IT Act.
4. Validity of assessment order passed u/s. 143(3) r.w.s. 153(1)(b) of the IT Act.

Summary:

1. Deletion of Addition Towards Cash Found and Seized:
The first issue is the deletion of the addition towards cash found and seized during the course of search amounting to Rs. 6,32,340/-. The appellant explained that Rs. 1,32,340/- was from past savings and Rs. 5 lakhs belonged to his aunt, Smt. Padmavathamma. The CIT(A) deleted the additions made by the Assessing Officer, and the Tribunal upheld this decision, noting that the explanation provided by the appellant was supported by bank statements and confirmation from the aunt.

2. Deletion of Addition Towards Unexplained Jewellery:
The second issue concerns the deletion of additions towards unexplained jewellery amounting to Rs. 16,93,524/-. The appellant explained that the jewellery belonged to family members and reconciled the excess jewellery with wealth tax returns. The CIT(A), considering the CBDT Circular and the explanation provided, deleted the additions. The Tribunal upheld this decision, noting that the jewellery was within the limits specified by the CBDT and belonged to family members.

3. Deletion of Addition Towards Undisclosed Income:
The third issue is the deletion of the addition of Rs. 2.70 crores made towards undisclosed income based on the statement recorded u/s. 132(4) of the IT Act. The appellant argued that the loose sheets found during the search did not contain any undisclosed income and explained the investments through bank statements. The CIT(A) deleted the additions, stating that without corroborative evidence, the admission in the statement u/s. 132(4) cannot be taken as conclusive. The Tribunal upheld this decision, emphasizing that admission alone cannot be the foundation of assessment without independent evidence.

4. Validity of Assessment Order:
The fourth issue is the validity of the assessment order passed u/s. 143(3) r.w.s. 153(1)(b) of the IT Act. The appellant challenged the assessment order, arguing that the notice issued u/s. 153A was not valid. The CIT(A) observed that the reference to notice u/s. 153A was a typographical error and that the correct notice u/s. 143(2) was issued. The Tribunal upheld the CIT(A)'s findings, stating that the reference to section 153A in the assessment order does not nullify the entire proceedings.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue and the cross objection filed by the assessee, upholding the CIT(A)'s decisions on all issues. The order was pronounced in the court on 30th August 2023 at Chennai.