2015 (3) TMI 802 - AT - Income Tax

Validity of assessment framed under Section 153A read with section 143(3) - A.Ys. 2001-02 to 2006-07) - Held that - Considering the undisputed fact emerging in the assessment for the assessment years 2001-02 to 2006-07 are that no addition other than the addition on account of difference in construction as shown by the assessee in its books of account and as estimated by the D.V.O. in his report has been made which impliedly supports the contention of the assessee that no incriminating material was found during the course of search proceedings at the premises of the assessee. It is also an un-rebutted fact that on the date of search, assessments based on the return of income originally filed for the assessment years under consideration were not pending as the returns of income filed for these assessment years and processed under Section 143(1) of the Act had reached finality in the absence of issuance of notice under Section 143(2) of the Act within the prescribed time limit. Thus in view of cited decisions by the Learned AR that is in the cases of All Cargo Global Logistics Ltd. vs. CIT (2012 (7) TMI 222 - ITAT MUMBAI(SB)) and others, we are of the opinion that the assessments framed under sec. 153A for the assessment years under consideration are not valid. - Decided in favour of the assessee. Validity of addition made on undisclosed investment in construction - basis of valuation report of the D.V.O. to make additions - Held that - Sole addition made in these assessment years under consideration is on account of difference in construction as shown by the assessee in its books of account and as estimated by the D.V.O. in his report is also not sustainable in view of the decision of Hon ble Supreme Court in the case of Sargam Cinema Vs. CIT (2009 (10) TMI 569 - Supreme Court of India ) holding that the Assessing Authority could not have referred the matter to the D.V.O. without the books of account being rejected. It was held that reliance placed on the report of the D.V.O. is misconceived. The additions made on account of undisclosed investment in the construction based on the valuation report of the D.V.O. are thus held as not justified - Decided in favour of the assessee. Validity of assessment framed under Section 153A - (A.Y. 2007-08) - Held that - As during the course of search in the premises of the assessee several documents including prima facie incriminating material were found and seized. Thus, it cannot be said that there was no incriminating material found during the course of search to concur with the contention of the assessee that the assessment framed under Section 153A of the Act was not valid. - Decided against assessee. Addition as undisclosed income - addition of undisclosed stock - A.O. in bringing to tax the assessee s share out of the alleged surrender of ₹ 1.6 crores - Held that - find substance in the contention of the Learned AR that an addition cannot be made solely on the basis of surrendered amount dehors evidence in corroboration and ignoring subsequent retraction thereto by the assessee with valid reason. Here the case before us is that when surrendered income was objected by the assessee with sufficient reason then the same should have been duly considered by the Assessing Officer and Learned CIT(Appeals) while making and upholding the additions. The assessee vide several letters including letter dated 17.10.2008, 22.10.2008, 13.11.2008, 05.12.2008, 24.12.2008, 26.12.2008, wrote to the Assessing Officer and with written submissions dated 28.1.2010, 24.1.2011 before the CIT(Appeals) tried to point out many discrepancies in the stock taking and working out the undisclosed sales and profit by the Assessing Officer but the same have been ignored without assigning any reason. The Learned CIT(Appeals) has also not dealt with the contents of the above letters. We thus to meet the end of justice set aside the issues raised to the file of the Assessing Officer to decide these afresh after verifying the contents of these letters after affording adequate opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes. Addition on account of cash receipt - incorrect facts have been recorded - Held that - the authorities below have justified decoding of those figures by making addition of zero to the figure where after recording the figure, a zero was mentioned after putting decimal e.g., if ₹ 1,000 was written as ₹ 1000.0, the Assessing Officer had decoded the figure as ₹ 10,000. Learned CIT(Appeals) upheld this action of the Assessing Officer. But he did not agree with the Assessing Officer for adopting similar decoding of figure where ₹ 1,000 was written and thereafter no decimal with zero was put. We, however, find substance in the contentions of the learned AR that there was no concrete basis for doing so by the authorities below for the decoding of the figure. The additions in question are thus not sustainable in absence of any basis particularly in a search proceedings under sec. 153A of the Act. These additions are accordingly deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment framed under Section 153A read with Section 143(3) of the Income-tax Act, 1961.
2. Validity of addition made on account of alleged undisclosed investment in construction under Section 69B of the Act based on the valuation report of the D.V.O.
3. Non-granting of the benefit of telescoping.
4. Charging of interest under Sections 234A, 234B, and 234C of the Act.
5. Validity of addition on account of undisclosed income.
6. Validity of addition on account of undisclosed stock.
7. Validity of assessment framed without assuming jurisdiction as per law and without serving valid notices.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 153A read with Section 143(3):
The assessee questioned the validity of the assessment framed under Section 153A read with Section 143(3) on the grounds that no incriminating material was found during the search, and no assessment based on the originally filed return was pending on the date of the search. The Tribunal found that no addition other than the difference in construction costs was made, supporting the assessee's contention that no incriminating material was found. Hence, the assessments framed under Section 153A were deemed not valid. The Tribunal cited several decisions, including All Cargo Global Logistics Ltd. vs. CIT and others, to support this conclusion.

2. Validity of Addition under Section 69B based on D.V.O. Report:
The addition made on account of undisclosed investment in construction based on the D.V.O.'s valuation report was challenged. The Tribunal held that the A.O. could not refer the matter to the D.V.O. without rejecting the books of account, as per the Supreme Court's decision in Sargam Cinema Vs. CIT. Thus, the addition based on the D.V.O. report was deemed not justified, and the A.O. was directed to delete the addition.

3. Non-granting of the Benefit of Telescoping:
The issue of non-granting of the benefit of telescoping was raised by the assessee. The Tribunal found that this issue had not been adequately addressed by the CIT(A) and remanded the matter to the A.O. to address the issue after affording an opportunity of being heard to the assessee.

4. Charging of Interest under Sections 234A, 234B, and 234C:
The charging of interest under Sections 234A, 234B, and 234C was questioned, which was deemed consequential in nature and did not require independent adjudication.

5. Validity of Addition on Account of Undisclosed Income:
The addition of Rs. 24,00,000 as undisclosed income was questioned. The Tribunal found that there was no concrete basis for the addition, as it was made on the basis of surrendered income without corroborative evidence. The matter was remanded to the A.O. for fresh consideration after verifying the contents of the letters submitted by the assessee.

6. Validity of Addition on Account of Undisclosed Stock:
The addition of Rs. 72,00,000 on account of undisclosed stock was questioned. The Tribunal found that the A.O. had not dealt with the discrepancies pointed out by the assessee regarding the stock valuation. The matter was remanded to the A.O. for fresh consideration after verifying the submissions made by the assessee.

7. Validity of Assessment without Assuming Jurisdiction as per Law:
The validity of the assessment framed without assuming jurisdiction as per law and without serving valid notices was questioned. The Tribunal found no substance in this ground and rejected it.

Separate Judgments Delivered:
The Tribunal delivered separate judgments for the appeals relating to the assessment years 2001-02 to 2006-07 and the assessment year 2007-08. For the assessment years 2001-02 to 2006-07, the appeals were allowed, and for the assessment year 2007-08, the appeals were partly allowed. The Tribunal directed the A.O. to delete the additions made on account of the difference in construction costs and remanded other issues for fresh consideration.

Summary:
The appeals relating to the assessment years 2001-02 to 2006-07 were allowed, and those relating to the assessment year 2007-08 were partly allowed. The Tribunal directed the A.O. to delete the additions made on account of the difference in construction costs and remanded other issues for fresh consideration after verifying the submissions made by the assessee and affording an opportunity of being heard. The decision was pronounced in the open court on 13.03.2015.