2013 (4) TMI 268 - AT - Income Tax

Unexplained share application money - notice u/s 153C - as contested by assessee that the share application money was brought forward from the previous year, therefore, what is appearing in the balance sheet is only opening balance - Held that - It appears from the order of CIT(A) that he has proceeded on the footing that an assessment u/s 153C has to be made only on the basis of materials found as a result of search operation. As per the CIT(A), AO while completing the assessment order u/s 153C has to confine himself to the seized material and cannot examine any other material relying on case of Vijaybhai N. Chandrani V/s ACIT (2010 (3) TMI 770 - GUJARAT HIGH COURT). However, as find that in the case of Gopal Lal Bhadruka V/s. DCIT, 2012 (6) TMI 657 - ANDHRA PRADESH HIGH COURT it is held that while completing assessment u/s 153C AO will not be confined to the seized materials only but can consider all the material as may be available before him. In this view of the matter, the conclusion arrived at by the CIT(A) is not to be accepted. However, it appears from the order of the CIT(A) that the assessee has raised a specific contention that Rs.5,00,000/- which was added on account of unexplained share application money are only opening balances as they continued from previous year. Similarly, the CIT(A) has also not gone into the merits of the addition made on account of loan creditors and disallowance of expenses on the basis of evidences produced before him or as may be available on record as he has deleted the additions only on the ground that the assessment u/s 153C has to be on the basis of seized material. Therefore, considering the totality of the facts and circumstances remit the matter back to the file of the AO, who shall reconsider the issue afresh on the basis of all the materials available on record including the seized material.

Summary

Issues:
- Appeals filed by revenue against CIT(A) orders for assessment years 2002-03 to 2004-05
- Addition of unexplained share application money, loan creditors, and disallowance of expenses
- Whether additions made by Assessing Officer under section 153C valid based on seized material
- CIT(A) directing deletion of additions without seized material
- Jurisdictional High Court and Tribunal decisions on scope of assessment under section 153C

Issue 1: Appeals against CIT(A) orders
The three appeals filed by the revenue were directed against separate orders of CIT(A)-VII, Hyderabad for the assessment years 2002-03 to 2004-05. Due to identical issues, the appeals were clubbed and heard together, resulting in a common order for convenience.

Issue 2: Addition of unexplained share application money, loan creditors, and disallowance of expenses
The Assessing Officer added amounts of unexplained share application money and loan creditors to the total income of the assessee due to lack of evidence and explanations provided. Additionally, expenses claimed under various heads were disallowed. The assessee, during the appeal before CIT(A), contended that these were part of the original return of income accepted by the department during scrutiny assessment.

Issue 3: Validity of additions under section 153C based on seized material
The CIT(A) accepted the assessee's argument that the additions made by the Assessing Officer under section 153C were invalid as he lacked seized material or evidence to support them. The CIT(A) directed the Assessing Officer to delete the additions.

Issue 4: CIT(A) directing deletion of additions without seized material
The learned Departmental Representative disagreed with the CIT(A)'s decision, citing a Tribunal decision. The CIT(A) believed that assessments under section 153C should be based solely on seized material, but the Tribunal disagreed based on previous court decisions.

Issue 5: Jurisdictional High Court and Tribunal decisions on scope of assessment under section 153C
The Tribunal, following the jurisdictional High Court's decision, held that the Assessing Officer is not restricted to seized material while completing assessments under section 153C. The Tribunal disagreed with the CIT(A)'s conclusion and remitted the matter back to the Assessing Officer for reconsideration based on all available materials and evidence.

Conclusion
The Tribunal allowed all three appeals for statistical purposes, remitting the matter back to the Assessing Officer for a fresh assessment considering all evidence and materials. The Assessing Officer was directed to afford a reasonable opportunity for the assessee to be heard. The orders of CIT(A) were set aside, and the issue of expenditure claimed under various heads was to be re-examined.