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2013 (7) TMI 220 - AT - Income TaxAssessment in case of search or requisition - AO treated the income shown under the head Income from agriculture income as income from other sources - CIT(A) did not admit the assessee additional evidence in the form of original lease agreements, original affidavits of farmers, original affidavits of assessee affirming deriving of agricultural income, original Khasra, Khatauni and Form No. P-2 and original receipt of payment of lease rent & confirmed the addition - Held that - Since the documents submitted with CIT(A) were necessary to determine the correct nature of income having been offered by the assessee, the CIT(A) was not justified in not accepting these documents which goes to the root of the issue. As per record, the claim of assessee was that the agricultural operation of the assessee was being looked after by Ajab Singh, who was employed by the assessee & in-spite of making request to AO and CIT(A) none of the authorities have called Ajab Singh to verify the work and correctness of agricultural income having been earned by the assessee - restore the matter to the file of AO for deciding afresh after considering the documents filed before CIT(A) under rule 46A. Addition on account of deemed dividend u/s 2(22)(e)- Held that - Additions made u/s 2(22)(e) while framing assessment u/s 153A, was not justified in so far as no incriminating material was found during the course of search. As per the finding recorded by AO in the assessment order u/s 153A, the fact that advances having not been made for business purposes by the alleged company to the assessee came to the notice of Department only during the assessment and not during course of search - the additions made u/s 2(22)(e) in the assessment years 2003-04 to 2006-07 are restored back to the file of A0 for deciding afresh. It appears that the AO has made cumulative addition u/s 2(22)(e) without reducing addition made on account of deemed dividend in earlier years. AO has made addition on account of deemed dividend in excess of accumulated profits in RHPL, which is in violation of provisions of Section 2(22)(e). It appears that the AO has not reduced deemed dividend assessed in the hands of assessee shareholder in past assessment year from the surplus while determining the accumulated profit in the hands of company in the next year. However, while deciding the issue afresh as directed above, the AO should take this in to account. Unexplained investment made in purchase of house no. HIG 38, Old Subhash Nagar, Bhopal - Held that - As the assessee has filed additional evidence under rule 29 in the form of letter of Housing Board regarding transfer of house from Prabhakar Dwivedi to the assessee and also agreement with Prabhakar Dwivedi for purchase of house matter is restored back to the file of AO for deciding afresh after examining the ledger account indicating respective payments having been made through account payee cheque and the additional evidences filed under rule 29. Addition on account of cash and jewellery found during course of search - Held that - Cash of ₹ 15,350/- found that the assessee was duly explained and the same was very reasonable in view of various incomes shown by the assessee in his return of income in the past. Similarly, jewellery of ₹ 1,712,740/- was deleted by the CIT(A) in terms of CBDT circular No.1916 & also recorded a finding to the effect that gold ornaments found was explained, accordingly, no addition is required. There is no infirmity in the order of CIT(A) on the issue. Addition made in respect of House No. E-3/10, Arera Colony, Bhopal - Held that - As per the finding recorded by the CIT(A) vis- - vis documents placed on record, it is clear that entire investment in this house came out of the books of M/s. Raj Homes Private Limited and Minal Builders Private Limited. Accordingly, the direction issued by the CIT(A) for examining the source of investment in the hands of these two companies are fully justified and no interference is required therein. Unexplained investment in House No. A-1304, Vinayaka Hiranandani Complex, Mumbai - Held that - CIT(A) that property belongs to M/s. Raj Homes Private Limited, hence investment for this property is required to be examined in the hands of the said company and no addition is warranted in the hands of the assessee in his individual capacity. Addition made on account of contract receipt - Contention of assessee that only 8 % of contract receipt should be taxed on presumptive basis - Held that - Nothing could be produced to conclude that alleged amount was actually on account of some work undertaken by the assessee, therefore, no reason to interfere in the order of lower authorities for treating the entire contract receipt as assessee s income from other sources. Unexplained expenditure on marriage of niece - Held that - As nothing was found during the course of search to indicate expenditure was incurred on marriage by the assessee no infirmity in the order of CIT(A) for deleting addition made in the hands of the assessee. Unexplained expenditure as mentioned in diary BS-3 found and seized from residential premises at HIG 38, Old Subhash Nagar, Bhopal - Held that - Keeping in view cash flow statement filed before AO to substantiate the cash deposits in bank account wherein assessee was having surplus cash in hand to verify repetitive nature of entry and the expenditure which was found in the diary also found recorded in the regular books of account and the surplus cash found available with assessee restore the matter to the file of Assessing Officer. Unexplained expenditure in diary A-3 - Held that - entries were found to the effect that payments were made for purchase of Open Car. The entry was done in the handwriting of the assessee. After giving due opportunity, the Assessing Officer made addition with regard to the payment so made and the same was confirmed by the ld.CIT(A). Nothing was brought to our notice by ld. Authorized Representative to persuade us to deviate from the finding recorded by the lower authorities additions confirmed. Cash deposited in the bank account - Held that - As at the beginning of each of the assessment year, the cumulative cash available with the assessee was more than the amount deposited in the Bank during that year. Accordingly, no addition is warranted in any of the year. Levy of interest u/s 234B - Held that - In view of decision of Lakshmikanthan ( 2011 (1) TMI 1187 - Kerala High Court ), AO is directed to recompute the interest u/s 234B which provides that where original assessment completed u/s 143 is revised either u/s 147 or u/s 153A, then interest for non-payment or short payment of advance tax is payable only for the period mentioned in Section 234B(3) which provides for interest from the date of completion of regular assessment u/s 143(1) till the date of completion of reassessment. Framing of assessment in individual capacity in place of AOP - Held that - Neither any AOP was existing nor any warrant was issued in the name of AOP, therefore, no search was possible in the case of AOP, which did not exist. Since the warrant have been issued in the individual cases, the assessments have been properly done in the capacity of individuals. Accordingly, we do not find any infirmity in the order of Assessing Officer for making assessments in individual capacity rather than in capacity of AOP.
Issues Involved:
1. Validity of assessment under section 153A. 2. Treatment of agricultural income. 3. Addition on account of deemed dividend under section 2(22)(e). 4. Addition on account of unexplained expenditure. 5. Addition on account of cash deposits in bank accounts. 6. Addition on account of investment in properties. 7. Addition on account of unexplained cash and jewelry found during search. 8. Levy of interest under section 234B. 9. Framing of assessment in individual capacity instead of AOP. Detailed Analysis: 1. Validity of Assessment under Section 153A: The Tribunal upheld the validity of assessments under section 153A, noting that unexplained cash deposits found during the search constituted incriminating material. The assessments were validly framed as per the provisions of section 153A. 2. Treatment of Agricultural Income: The Tribunal restored the issue of agricultural income to the Assessing Officer (AO) for fresh consideration. It was noted that the assessee had filed additional evidence under Rule 46A, which the CIT(A) did not admit. The Tribunal directed the AO to consider these documents, which go to the root of the issue, and to verify the agricultural operations and income claimed by the assessee. 3. Addition on Account of Deemed Dividend under Section 2(22)(e): The Tribunal addressed several aspects of deemed dividend: - Assessment Year 2004-05: The issue was restored to the AO to determine if any incriminating material was found during the search indicating contravention of section 2(22)(e). - Assessment Year 2007-08: The addition was partly confirmed and partly restored to the AO for fresh consideration, particularly regarding the share application money which was argued to be outside the purview of section 2(22)(e). - Assessment Years 2008-09 and 2009-10: The additions were confirmed, noting that the advances were not for business purposes and the assessee held substantial interest in the payer company. 4. Addition on Account of Unexplained Expenditure: The Tribunal partially restored the issue to the AO to verify repetitive entries and expenditures recorded in regular books. It was directed that the AO should consider the cash flow statement and ensure no double addition occurs. 5. Addition on Account of Cash Deposits in Bank Accounts: The Tribunal found that the cash deposits were explained by the agricultural income and contract receipts already brought to tax. It directed the AO to verify the cash flow statements and ensure no double addition. The Tribunal also noted that the total addition under section 2(22)(e) should not exceed the accumulated profits. 6. Addition on Account of Investment in Properties: The Tribunal upheld the CIT(A)'s finding that the investments in properties were made by the companies (Raj Homes Pvt. Ltd. and Minal Builders Pvt. Ltd.) and not by the individual assessee. The source of investment was to be examined in the hands of the companies. 7. Addition on Account of Unexplained Cash and Jewelry Found During Search: The Tribunal confirmed the deletion of the addition by the CIT(A), noting that the cash and jewelry found were reasonable given the assessee's socio-economic status and within the limits prescribed by the CBDT circular. 8. Levy of Interest under Section 234B: The Tribunal directed the AO to recompute the interest under section 234B, following the decision in the case of B. Lakshmikanthan, where interest should be charged on incremental income only. 9. Framing of Assessment in Individual Capacity Instead of AOP: The Tribunal upheld the assessments framed in the individual capacity, noting that the warrants were issued in the names of individuals and not in the name of any AOP. Conclusion: The Tribunal provided detailed directions for the AO to reconsider various issues, particularly those involving additional evidence and the nature of transactions. The assessments were largely upheld, with specific issues restored for fresh consideration to ensure accurate and fair taxation.
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