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2014 (5) TMI 427 - AT - Income TaxAddition of block assessment proceedings u/s 153A or 153B of the Act Held that - Following CIT Vs. Anil Kumar Bhatia 2012 (8) TMI 368 - DELHI HIGH COURT - in the block assessment, no addition can be made unless some incriminating material is found during the search in behalf of additions - while making the assessment or reassessment, in block assessment u/s 153A or 153C no addition can be made in the absence or reference to any incriminating material qua the addiitons. Estimation of net profits @ 5% of gross sale of shares - Admission of additional evidence Contravention of Rule 46A of the Act Held that - Assessee s books of accounts are duly audited and no specific or general fault has been found - CIT(A) has rightly held that there is no scope for rejecting the books and estimating the profits without any incriminating evidence or giving any cogent reasons in this behalf the AO has not referred and least of all not indicated to any incriminating material for rejecting the books and estimating the profits - Thus, the additions in questions are bereft of any support or relevance to any incriminating material whatsoever the view of the CIT(A) in admitting the additional evidence is perfectly valid and tenable - No infirmity thereto can be found - the AO cannot sit over the requisition of a superior appellate authority - CIT(A) for submitting the directed remand report - the record reflects that no adverse comments are offered by the assessing officer on the additional evidence and merits - the books of accounts are duly audited - no specific or general fault is indicated by the AO - there is no reliance on any incriminating material there was no infirmity the order of CIT(A) in deleting the additions Decided against Revenue.
Issues Involved:
1. Legality of the notice issued under Section 153C and the subsequent assessment framed under Section 153A/144 of the Income Tax Act. 2. Validity of the addition of Rs. 22,17,375/- (for A.Y. 2003-04) and Rs. 23,37,125/- (for A.Y. 2004-05) made by the Assessing Officer on account of estimation of net profit at 5% of the gross sale of shares. 3. Admission of additional evidence by CIT(A) in contravention of Rule 46A of the Income Tax Rules, 1962. Detailed Analysis: 1. Legality of the Notice Issued Under Section 153C and Subsequent Assessment: The assessee challenged the validity of the notice issued under Section 153C and the assessment framed under Section 153A/144, arguing that the statutory preconditions were not satisfied. The assessee contended that no money, bullion, jewelry, or other valuable articles or documents belonging to the appellant were seized during the search on the Rajdarbar Group, making the notice under Section 153C illegal and unsustainable. The CIT(A) rejected this contention, holding that the block assessment envisages dual assessment-one for undisclosed income found as a result of the search and the other for regular assessment as per the normal provisions of the Act. The CIT(A) relied on several judicial precedents to support this view, including: - Taru Lata Shyam vs. CIT 108 ITR 345 - Keshavji Raoji & Co. Vs. CIT 183 ITR 1 - Guru Devdutta VKSS Maryadit Vs. State of Maharashtra IR 2001 SC 1980 - CIT Vs. Anjum M.H. Ghaswala 252 ITR (Constitution Bench) - Mr. Gopal Lal Bhadruka Vs. DCIT 2012-TIOL-357-HC-AP-IT 2. Validity of the Addition of Rs. 22,17,375/- and Rs. 23,37,125/-: The Assessing Officer made the additions based on an estimation of net profit at 5% of the gross sale of shares without reference to any incriminating material. The assessee argued that the additions were made outside the scope of the search materials and were therefore illegal. The CIT(A) admitted additional evidence under Rule 46A to support the assessee's book results and found that the Assessing Officer did not provide any comments despite several reminders. The CIT(A) allowed the assessee's claim, noting that the appellant had submitted documents, evidence of purchase and sales, bank statements, and audit reports. The CIT(A) concluded that the provisions of Section 44AF could not be applied as the turnover exceeded the specified limits and the books were duly audited. The CIT(A) also referenced judicial precedents, including: - CIT v. R.M.L. Mehrotra (2010) 320 ITR (All HC) - Fort Projects (P) Ltd vs DCIT [(2011) 145 TTJ 340] 3. Admission of Additional Evidence by CIT(A): The CIT(A) admitted additional evidence on the grounds that the assessee was prevented by sufficient cause from producing the evidence during the assessment proceedings. The Assessing Officer's failure to respond to the remand report requisition was noted as insubordination. The CIT(A) found that the additional evidence was necessary for a fair adjudication of the issues and that the Assessing Officer had not provided any adverse comments on the merits of the additional evidence. The Tribunal upheld the CIT(A)'s decision to admit the additional evidence, finding no infirmity in the order. Conclusion: The Tribunal concluded that the Assessing Officer's additions were not based on any incriminating material and were therefore not permissible under Section 153C. The Tribunal also upheld the CIT(A)'s decision to admit additional evidence and found that the Assessing Officer's estimation of income was not justified. Consequently, the Tribunal dismissed the revenue's appeals and allowed the assessee's cross-objections. The order was pronounced in open court on 30-4-2014.
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