2024 (2) TMI 1166 - AT - Income Tax

Assessment u/s 153A - Addition of cash deposits in bank account and savings bank account interest - additions based on the bank account statement furnished by the assessee - HELD THAT - Considering the fact that assessment for the impugned assessment year did not abate on the date of search and seizure operation, the Assessing Officer could not have made any addition in absence of any incriminating material. This is so because of the ratio laid down by the Hon ble Supreme Court in case of PCIT vs Abhisar Buildwel (P.) Ltd. 2023 (5) TMI 587 - SUPREME COURT . Before us, the Revenue was unable to bring on record any material to establish that the aforesaid two additions were made based on any incriminating material found as a result of search. In view of the aforesaid, we delete the additions. Addition applying peak theory - We find the addition has been enhanced by FAA by applying peak theory. However, how the peak amount was arrived at is not discernible from the order of FAA - we are inclined to restore this issue to the file of the AO for examining afresh and decide it after providing due and reasonable opportunity of being heard to assessee. Penalty u/s 271(1)(c) - HELD THAT - While dealing with the quantum appeal of assessee (supra), we have deleted few additions and restored back to the AO for deciding afresh. Thus, at present, there is no surviving additions against the assessee. That being the factual position on record, the penalty imposed u/s 271(1)(c) of the Act cannot survive. Accordingly, we delete the penalty imposed u/s 271(1)(c). Addition cash deposits in bank account - HELD THAT - As the proximity between cash withdrawal and deposit is quite close. Further, the Departmental Authorities have not brought any material on record to establish that the cash withdrawals were utilized for any other purpose and not available with the assessee for re-deposit. Thus we hold that the source of cash deposit has been explained by the assessee. Accordingly, we delete the addition. Penalty imposed u/s 271AAA to be deleted.

Summary

Issues Involved:
1. Legality of jurisdiction and notice under section 153A of the Income Tax Act.
2. Additions made on account of cash deposits, bank interest, and undisclosed investments.
3. Penalty proceedings under section 271(1)(c) and 271AAA.

Summary:

1. Legality of Jurisdiction and Notice under Section 153A:
The assessee challenged the jurisdiction and issuance of notice under section 153A of the Act. The Tribunal noted that the assessment for the impugned year did not abate on the date of search and seizure operation. Therefore, the Assessing Officer could not have made any addition in the absence of incriminating material, as per the ratio laid down by the Hon'ble Supreme Court in PCIT vs Abhisar Buildwel (P.) Ltd. [2023] 150 taxmann.com 257 (SC). Consequently, the additions of Rs. 17,20,000/- and Rs. 1,340/- were deleted.

2. Additions on Account of Cash Deposits, Bank Interest, and Undisclosed Investments:
- Assessment Year 2008-09: The Tribunal deleted the additions of Rs. 17,20,000/- (cash deposits) and Rs. 1,340/- (bank interest) due to lack of incriminating material. The addition of Rs. 22,98,414/- (undisclosed investments in shares) was remanded back to the Assessing Officer for fresh examination, as the First Appellate Authority did not provide detailed working of the peak amount.
- Assessment Year 2011-12: The Tribunal deleted the addition of Rs. 13,50,000/- (cash deposits) after noting the proximity between cash withdrawals and deposits, and the lack of evidence showing the cash was used for other purposes.
- Assessment Year 2012-13: The Tribunal deleted the addition of Rs. 7,22,000/- (cash deposits) as the assessee had sufficient opening cash balance and withdrawals to justify the deposits, and there was no evidence that the cash was used elsewhere.

3. Penalty Proceedings under Section 271(1)(c) and 271AAA:
- Assessment Year 2008-09: The Tribunal deleted the penalty of Rs. 12,41,689/- under section 271(1)(c) as the related additions were either deleted or remanded for fresh consideration.
- Assessment Year 2011-12: The Tribunal deleted the penalty under section 271(1)(c) following the deletion of the related addition.
- Assessment Year 2012-13: The Tribunal deleted the penalty under section 271AAA as the related addition was deleted.

Conclusion:
The appeals for quantum additions (ITA No.2811/Del/2018 and ITA No.2814/Del/2018) were partly allowed, and the penalties (ITA No.2994/Del/2022, ITA No.2996/Del/2022, and ITA No.2997/Del/2022) were deleted. The appeal for the addition in Assessment Year 2011-12 (ITA No.2813/Del/2018) was allowed.