2023 (12) TMI 1285 - AT - Income Tax

Assessment u/s 153A - Addition u/s 69 for unexplained investments in land - addition made being in respect of entry appearing in the assessee s accounts - HELD THAT - The assessee stating that no incriminating material was found during search is without basis on facts. Notice u/s. 153A r/w s. 153C in case of a person other than the persons searched, as the assessee in the instant case, can only be on the basis of a satisfaction recorded as to the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of another person. That is, the jurisdiction to frame an assessment u/s. 153A r/ws. 153C, can, as the law always stood and explained, is only on the basis of such material, i.e., incriminating in nature. This jurisdiction has not been assailed at any stage, including before us, i.e., the second round before the Tribunal. The challenge to the satisfaction note, on the basis of which the assumption of jurisdiction could be questioned, is conspicuous by its absence, even as Sri. Mathew, the ld. counsel for the assessee, was specifically queried in its respect during hearing. It is the assessments in case of the person searched, that the Hon ble Apex Court has in Abhishar Buildwell ( 2023 (4) TMI 1056 - SUPREME COURT ) reading down the provision held as obtaining only on the strength of incriminating material, which was always the case for an assessment u/s. 153A r/w s. 153C, i.e., in case of a person other than the person searched. In other words, the said decision impacts only an assessment u/s. 153A, i.e., in the case of the person searched, and reliance thereon is misplaced qua a s. 153C, which obtains in the instant case. The assessee is merely trying to take advantage of the said decision, clearly inapplicable in the facts of it s case. No books of account were found maintained during search or even produced during assessment proceedings. In fact, in the absence of the returns filed, as indeed accounts, the entire material found during the search is liable to be regarded as incriminating. In concluding whether the income would or would not have disclosed, reliance, it explained, is to be placed on the surrounding facts and circumstances of the case. The only manner for disclosing income, it went on to explain, on the part of the assessee, is filing a return as stipulated in the Act. The non-filing of the return by the assessee was thus regarded by it as a fair inference as to the satisfaction of the condition that the income would not have been disclosed. Applicability of section 68 or 69 is, again, contrived and, in any case, of no consequence, even as clarified by the courts, as in Namdev Arora 2016 (8) TMI 219 - PUNJAB AND HARYANA HIGH COURT as and when this issue came up before them. No books of account were found during the search, nor indeed presented during the original assessment proceedings. That produced in the set aside proceedings in 2013 incorporating the investment in properties, documents in respect of which were found during the search, is, thus, only aruse so as to bring the additions in their respect in assessment under, as against section 69, under section 68, so as to be able to contend, on that basis, that the investment is recorded in the books. In the absence of any explanation as to the source thereof, the basis of the addition continues to be the unexplained nature and the source of the investment. Interest u/s. 234A(1) r.w.s 234A(4) up to the date of assessment in the set aside proceedings, i.e., 31.07.2014, is equally without merit. In absence of furnishing any return of income up to the date of assessment on 28.12.2010, the same is the date of regular assessment, up to which therefore the interest u/s. 234A(1), which is for the delayed filing of return of income, is to extend. This interest is to be on the tax as finally assessed, i.e., as per the assessment dated 31.7.2014 (as may be further modified in appeal, which would therefore only be subsequent to), but that would not operate to extend the date up to which the interest is to be charged. The Revenue s reliance on Mahesh Investment 2020 (10) TMI 428 - KARNATAKA HIGH COURT is misplaced. Assessee s appeals are partly allowed.

Summary

Issues Involved:
1. Condonation of Delay
2. Legality of Additions under Section 69 and Section 68
3. Jurisdiction under Section 153C
4. Interest under Section 234A

Condonation of Delay:
The appeals were filed with a delay of 27 days, justified by personal reasons in an affidavit by the Managing Trustee. The Revenue did not dispute these reasons. The Tribunal accepted the application for condonation of delay and admitted the appeals.

Legality of Additions under Section 69 and Section 68:
The principal addition sustained for both years was under Section 69 for unexplained investments in land. The assessee argued that the addition should not be under Section 68 as it pertains to credits in the books of account. The Tribunal observed that despite the assessee's claims, the addition was correctly made under Section 69 due to unexplained investments. The Tribunal emphasized that the routing of investments through books of account is irrelevant if the source remains unexplained.

Jurisdiction under Section 153C:
The assessee's challenge to the jurisdiction under Section 153C was dismissed. The Tribunal noted that the jurisdiction was based on material seized during the search, which was incriminating in nature. The Tribunal clarified that the decision in Abhishar Buildwell, which restricts additions to incriminating material for the person searched, does not apply to cases under Section 153C.

Interest under Section 234A:
The Tribunal addressed the issue of interest under Section 234A, concluding that interest should be charged up to the date of the first assessment (28.12.2010) and not the date of the reassessment (31.07.2014). The Tribunal found the Revenue's reliance on Mahesh Investments misplaced and ruled in favor of the assessee on this ground.

Conclusion:
The assessee's appeals were partly allowed, with the Tribunal upholding the additions under Section 69 and ruling in favor of the assessee regarding the period for charging interest under Section 234A. The order was pronounced on November 14, 2023.