2024 (10) TMI 468 - AT - Income Tax

Assessment u/s 153C - Profit estimation on-money received for new construction and redevelopment projects - extrapolation of the income for the search period - assessee contended that in absence of any incriminating material seized from the premises of Shri Ishwardev Shukla qua, the assessment year under consideration no addition could have been made in the hands of the assessee under u/s 153C - HELD THAT - Without going into the controversy raising doubt on search action , we are of the view that AO in impugned order has no where considered or held the cash found as unexplained cash of the assessee and same can t be automatically considered as subsumed in the addition in relation to on-money , without express finding by the ld AO. AO has made addition in relation to on-money, on the basis of material impounded during the survey and not under search action, therefore no addition could have been made by the AO in assessments completed for AY 2013-14 to AY 2016-17 invoking section 153C/153A of the Act. Even for a moment, it is presumed that cash found was undisclosed income for AY 2017-18 i.e. the year in which cash was found, no addition can be made in AY 201314 to AY 2016-17. Therefore, additions made without there being any incriminating material found in search, are deleted. Decided in favour of assessee. Validity of assessment proceedings 153C/153A beyond period of limitation - selection of initial assessment year - determination of six assessment years - contention of the assessee is that six preceding assessment years for invoking section 153C have been taken by the AO from AYs 2016-17 to AY 2010-11, corresponding to six assessment years, preceding the assessment year in which search was conducted on searched person - HELD THAT - Hon ble Supreme Court in the case of CIT vs Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT has held that six assessment years in case of other person i.e. person other than searched person, are to be reckoned from the assessment year, preceding to assessment year in which seized material was handed over to the AO of other person We hold that in the case of assessee, the assessment year 2017-18 falls within the six assessment years, which should be assessed u/s 153C r/w sec 153A but the AO has wrongly assessed the same under section 143(3) which being an invalid action, same is not sustainable in law, hence quashed. The additional ground of appeal of the assessee is allowed.

Issues Involved:

1. Validity of assessment proceedings under Section 153C for AY 2013-14 to 2016-17.
2. Validity of assessment proceedings under Section 143(3) for AY 2017-18.
3. Legality of additions made based on extrapolation technique for on-money received.
4. Profit estimation on on-money received for new construction and redevelopment projects.
5. Addition under Section 43CA for AY 2017-18.
6. Initiation of penalty proceedings under Section 274 r.w.s 271AAB(1A) and 271(1)(c).
7. Levy of interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Validity of Assessment Proceedings under Section 153C for AY 2013-14 to 2016-17:
The assessee challenged the jurisdiction of the Assessing Officer (AO) under Section 153C, arguing that the proceedings were initiated without any incriminating material pertaining to the relevant assessment years. The Tribunal noted that the cash seized from Shri Ishwardev Shukla was not treated as unexplained by the AO, and the addition was based on materials impounded during a survey, not during the search. Citing the Supreme Court's decision in CIT v. Sinhgad Technical Education Society, the Tribunal held that the absence of incriminating material related to the assessment years in question invalidated the proceedings under Section 153C. Thus, the assessments for AY 2013-14 to 2016-17 were quashed.

2. Validity of Assessment Proceedings under Section 143(3) for AY 2017-18:
The assessee contended that the assessment for AY 2017-18 should have been conducted under Section 153C, not Section 143(3), as the satisfaction note for invoking Section 153C was recorded on 16.07.2018. The Tribunal, referencing the Supreme Court's ruling in CIT v. Jasjit Singh, agreed that the assessment year 2017-18 fell within the six years to be assessed under Section 153C. Consequently, the assessment under Section 143(3) was deemed invalid and was quashed.

3. Legality of Additions Based on Extrapolation Technique for On-Money Received:
The AO used an extrapolation technique to estimate on-money received across various years, which the assessee contested. The Tribunal found the AO's method of extrapolation without direct evidence to be inappropriate, particularly as the basis for addition was impounded material from the survey, not the search. The Tribunal's decision to quash the assessments effectively nullified these additions.

4. Profit Estimation on On-Money Received for New Construction and Redevelopment Projects:
The AO estimated profits at 36% for new projects and 16% for redevelopment projects, which the assessee argued was excessive compared to the industry standard of 8% to 10%. The Tribunal did not specifically address this issue on merits due to the quashing of the assessments but noted the lack of direct evidence for such estimations.

5. Addition under Section 43CA for AY 2017-18:
The AO made an addition under Section 43CA for differences between the sale price and stamp duty value. Although the Tribunal quashed the assessment for AY 2017-18, it did not specifically address this addition due to the broader decision on the validity of the assessment.

6. Initiation of Penalty Proceedings under Section 274 r.w.s 271AAB(1A) and 271(1)(c):
The assessee challenged the initiation of penalty proceedings. The Tribunal's decision to quash the assessments rendered the penalty proceedings moot, as there was no valid assessment to support the penalties.

7. Levy of Interest under Sections 234A, 234B, and 234C:
The Tribunal did not specifically address the issue of interest levies due to the quashing of the assessments, which eliminated the basis for such interest charges.

Conclusion:
The Tribunal allowed the appeals for AY 2017-18 and AY 2013-14 to 2016-17, quashing the assessments due to procedural and jurisdictional deficiencies, particularly the improper invocation of Section 153C and the invalidity of the assessment under Section 143(3). The decision underscores the necessity of adhering to statutory requirements for valid assessment proceedings.

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