2015 (1) TMI 465 - AT - Income Tax

Undisclosed income - Additions made the basis of seized material - jurisdiction of the AO to assess the income of the assessee under section 153C read with section 143(3) of the Act challenged - Held that - This case was earlier heard on 26.08.14 and the matter was reserved for orders. However, in the meantime, the Ld. D.R. Shri S.D. Srivastava, moved an application dated 27.08.14 contending that the date of assignment of the case written in the assessment order as 28.03.07 was a typographical mistake. In fact, case of the assessee was assigned to DCIT, CC-1, Thane on 13.03.08. The case of the partners of the assessee firm namely Shri Amritlal Hirachand Sanklesha (Mutha) and Shri Ramesh Hirachand Sanklesha (Mutha) was in fact assigned on 28.03.07. The reference mentioned on the satisfaction note is pertaining to financial year 2007-08 and even the notice to the assessee was also issued on 27.03.08. Since the Ld. A.R. for the assessee after going through the record produced by the Revenue regarding the typographical error occurred as to the date mentioned on the satisfaction note, could not controvert the plea taken by the Revenue in this respect - - Decided against the assessee. Assessment made u/s 153A - Whether no incriminating material was found during the search against the assessee? - Held that - The assessee firm had never raised any objection that no incriminating material was found against it, rather has returned the additional income in pursuance to the notice issued to it. Under such circumstances, the assessee had no case that any incriminating material was not found against it or that the satisfaction recorded by the concerned AO was wrong or vitiated. In the absence of such a case, how can it be said that any right of the assessee has been infringed or affected by mere not mentioning the section 153C in the body of the notice which has been duly issued as per the provisions of section 153A as prescribed therein under the provision of section 153C itself. - Decided against the assessee. Unaccounted income from money lending - Held that - The interest of justice will be best served if the additions are reduced considering the submission of the assessee that it is not possible that the assessee had been charging same rate of interest from all the borrowers in the past. We accordingly reduce the addition made by the lower authorities on this issue to the extent of 50% of the added amount. - Decided partly in favour of the assessee. Unaccounted stock of Gold/ jewellery - Held that - Uphold the decision of lower authorities that assessee had brought unaccounted gold jewellery into business during the previous year relevant to A.Y.2004-05 and the same was added to the income as undisclosed income of the assessee firm. Nothing was brought on record by ld. AR to deviate from the findings recorded by the lower authorities to the effect that no gold was given by Karigar to the assessee in the year 2003. No reason to interfere in the findings recorded by lower authorities to justify the alleged deposit of 2300 gms of gold by karigars. Non explanation by the assessee for excess jewellery valued at ₹ 23,70,079/-, which was added to the total income as unaccounted stock. - Decided against the assessee. Enhancement of income on the basis of torn papers - Held that - The Ld. CIT(A) has observed that the document seized from the premises of Shri Ramesh H. Sanklesha, one of the partners of the assessee firm represents the receipt and payment arising out of the business of firm which was the unaccounted payment to the partners by the firm. Once it is held that entries so recorded was actually income of the firm, we do not find any infirmity in the order of CIT(A) for enhancing the income of the assessee firm after giving benefit of telescoping in respect of similar income assessed in the assessment year 2003- 04 amounting to ₹ 7,46,544/-. The detailed finding recorded by the CIT(A) are as per material on record, therefore, do not require any interference on our part. Accordingly, we confirm the action of CIT(A) in enhancing the income of assessee firm by ₹ 10,05,568/- in the assessment year 2003-2004. - Decided against the assessee.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) under sections 153C/153A read with section 143(3).
2. Validity of assessment under section 153A without incriminating material.
3. Addition of income on account of unaccounted interest from money lending.
4. Addition of income on account of unaccounted stock of gold/jewellery.
5. Enhancement of income based on torn papers found during the search.
6. Telescoping benefit in the assessment of income.

Issue-wise Detailed Analysis:

1. Jurisdiction of the AO under sections 153C/153A read with section 143(3):
The assessee challenged the jurisdiction of the AO under section 153C read with section 143(3) on the grounds of improper satisfaction recording and typographical errors in the assignment date. The AO's satisfaction note was dated 27.03.07, one day before the case assignment on 28.03.07. The Revenue clarified the case assignment was actually on 13.03.08, and the date on the satisfaction note was a typographical error. The Tribunal found no evidence to counter the Revenue's explanation and decided this issue against the assessee.

2. Validity of assessment under section 153A without incriminating material:
The assessee argued that no incriminating material relevant to A.Y. 2004-05 was found during the search, making the assessment under section 153A invalid. The Tribunal noted that the search was conducted on the partners, not the firm directly, and that the firm had filed a return in response to the notice. The Tribunal held that the AO had followed the prescribed procedure, and the assessment under section 153C was valid despite the notice being issued under section 153A. This issue was decided against the assessee.

3. Addition of income on account of unaccounted interest from money lending:
The AO added Rs. 4,07,918/- based on documents found during the search indicating suppressed interest income. The CIT(A) upheld the addition. The Tribunal noted that the AO correlated entries for only six persons out of 500-600 borrowers. It reduced the addition to 50% of the amount, considering the lack of evidence that the assessee charged double interest from all borrowers. This ground was partly allowed in favor of the assessee.

4. Addition of income on account of unaccounted stock of gold/jewellery:
The AO added Rs. 16,96,044/- for unaccounted gold/jewellery based on discrepancies between the stock register and the return of income. The assessee claimed the difference was due to gold received under loan schemes and security deposits from karigars. The AO and CIT(A) disbelieved these claims due to lack of evidence and the dubious nature of the documents. The Tribunal upheld the addition, finding the explanations unconvincing and the agreements an afterthought. This ground was decided against the assessee.

5. Enhancement of income based on torn papers found during the search:
The CIT(A) enhanced the firm's income by Rs. 10,05,568/- based on a torn slip found during the search, which was initially added to the partners' income. The Tribunal upheld the CIT(A)'s decision, noting that the partners had taken contradictory stands in their cases and the firm's case. The Tribunal found no merit in the argument that the document was a dumb document and upheld the enhancement. This ground was decided against the assessee.

6. Telescoping benefit in the assessment of income:
The Revenue appealed against the telescoping benefit given by the CIT(A) for A.Y. 2003-04 while enhancing the firm's income. The Tribunal upheld the CIT(A)'s decision to allow telescoping benefit, finding no infirmity in the order. The Revenue's appeal on this ground was dismissed.

Separate Judgments:
The Tribunal delivered a common order for all appeals, addressing each issue comprehensively and consistently across different assessment years. The judgments were not separated by judge names but were collectively analyzed and decided.

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