2025 (2) TMI 700 - AT - Income Tax

Assessment u/s 153A - variation between the returned income and assessed income as made up of credit card payment - as alleged AO did not bother to even cross check the information so gathered from the AIR whether they were a revenue receipt in the form of profit/income fit to be added as income or there were only transactions happened during the course of time - HELD THAT - Assessee is a salaried employee who has income from salary capital gain and other sources. Being a salaried employee he does not have a books of account or a fund flow statement to explain the source of payments made. We also note that the payments for HDFC Credit card are small ranging from Rs 415/- to Rs 30, 000/-. The source explained are borrowings salary cash in hand recovery of loan etc. In such a situation we are of the opinion that the CIT(A) should have examined the bank account and salary statement before rejecting the assessee s explanation completely. Therefore we are of the considered view that the AO/CIT(A) have not properly examined the assessee explanation for the source of payment for the HDFC and ICICI credit card. Payment for ICICI credit card we find that the payments ranges from Rs 1000/- to Rs 35, 000/- the source of which is explained as payments out of cash in AY 2013. For AY 2014- 15 he has explained as borrowings salary cash in hand recovery of loan etc. Considering the assessee being a salaried employee without any books of account or fund flow statement it was incumbent upon the AO as well as the CIT(A) to examine the explanation of the assessee thoroughly. Thus we find it expedient to remit the issue back to the file of the AO to examine the assessee explanation for the credit cards payments with reference to his bank statement regarding source being borrowings salary cash in hand recovery of loan. Non issue of notice u/s 143(2) - As decided in the case of Ashok Chadda 2011 (7) TMI 252 - DELHI HIGH COURT has held that there is no requirement of issuing notice u/s 143(2) for finalization of assessment u/s 153A. Addition as undisclosed income under the provision of section 292C on the basis of seized material found during the course of search - HELD THAT - The presumption u/s 292C of the Act is rebuttable presumption and when the assessee denies knowledge of the contents of the document the onus shifts to the AO to corroborate the documents with evidence. As held in Godwin Construction Pvt. Ltd. 2023 (1) TMI 415 - ITAT DELHI case that provisions of section 292C of the Income Tax Act is only a deeming provision and the deeming provision cannot be applied mechanically ignoring the facts of the case and surrounding circumstances. In the facts of the instant case we find that there is no whisper of any examination/investigation by the AO to show that amount mentioned in the document is undisclosed income of the assessee especially considering the fact that the assessee was only a salaried employee of SVIL having income from salary interest and capital gain. Thus we hold that there is failure on the part of the Assessing Officer in discharging the onus that was shifted towards him by the assessee of conducting further investigation into the seized documents and link it with the assessee. No addition of the impugned amount is called for and we direct the deletion of the additions made by AO and upheld by CIT(A).

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in these appeals were:

1. Whether the search and seizure operations conducted under Section 132 of the Income Tax Act were valid, given the appellant's challenge to the authorization and the absence of incriminating material.

2. Whether the additions made by the Assessing Officer (AO) under Section 153A, based on credit card payments and alleged unexplained income, were justified.

3. Whether the AO's failure to issue a notice under Section 143(2) rendered the assessment orders void.

4. Whether the addition of Rs. 18,00,000 as undisclosed income, based on a document found during the search and presumed under Section 292C, was valid.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Search and Seizure Operations under Section 132

The appellant challenged the legality of the search and seizure operations, arguing that there was no material to justify the "reason to believe" required under Section 132. However, the Tribunal dismissed these grounds as not maintainable before the ITAT, referencing precedents that limit such challenges at this stage.

2. Additions Based on Credit Card Payments

The AO added amounts related to credit card payments, treating them as unexplained expenditure. The appellant contended that these payments were made from explained sources such as salary, borrowings, and cash in hand. The Tribunal noted that the AO and CIT(A) did not adequately verify these explanations and remitted the issue back to the AO for a thorough examination of the appellant's explanations against bank statements and other evidence.

3. Non-Issuance of Notice under Section 143(2)

The appellant argued that the assessment orders were void due to the non-issuance of notice under Section 143(2). The Tribunal dismissed this ground, citing the Delhi High Court decision in Ashok Chadda v. ITO, which held that such a notice is not required for finalizing assessments under Section 153A.

4. Addition of Rs. 18,00,000 as Undisclosed Income

The addition was based on a document found during the search, presumed under Section 292C. The appellant argued that the document did not belong to him and was not in his handwriting. The Tribunal found that the AO failed to corroborate the presumption with further evidence or investigation, such as examining the person named in the document. The Tribunal emphasized that the presumption under Section 292C is rebuttable and requires corroboration when challenged. Consequently, the Tribunal directed the deletion of this addition.

SIGNIFICANT HOLDINGS

The Tribunal established several core principles:

- Challenges to the validity of search operations under Section 132 are not maintainable before the ITAT.

- The presumption under Section 292C is rebuttable and requires corroboration with evidence when challenged.

- The AO must thoroughly examine explanations for credit card payments, considering the appellant's financial background and available evidence.

- Non-issuance of notice under Section 143(2) does not invalidate assessments under Section 153A, as per the precedent set by the Delhi High Court.

In conclusion, the Tribunal partly allowed the appeals, remitting the issue of credit card payments back to the AO for further examination and directing the deletion of the addition of Rs. 18,00,000 as undisclosed income.

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