2015 (4) TMI 595 - AT - Income Tax

Addition made u/s.68 - assessment u/s.153A - Held that - A perusal of the impugned order reveals that the additions have been made pursuance to assessment proceedings under section 153A of the Act merely on the basis of assumptions and presumptions holding that the assessee had failed to discharge the burden relating to genuineness of gifts. We may point out here that the present proceedings were not the original assessment proceedings under section 143(3) of the Act where the initial burden was upon the assessee to prove the genuineness of the transaction. In the proceedings under section 153A, there must be some incriminating material indicating that the income of the assessee in the original assessment proceedings had escaped assessment. On the basis of that incriminating material, the assessment proceedings can be initiated under section 153A. The initial burden is upon the Revenue under section 153A to prove that there is an incriminating material which shows that the claim made by the assessee in its original return was not correct. Once there does not exist any such incriminating evidence, the additions on the basis of mere suspicion about the genuineness of the transactions cannot be held to be justifiable. Thus the assessment proceedings made under section 153A in this case are held to be bad in law and the same are set aside and the consequential additions made are also accordingly ordered to be deleted.

Issues Involved:
1. Legality of addition under section 68 in the assessment order passed under section 153A.
2. Validity of the evidence and statements used to justify the addition.
3. Examination of the genuineness and creditworthiness of the gift transaction.
4. Reassessment and the requirement of incriminating material for invoking section 153A.
5. Compliance with legal requirements for a valid gift under the Transfer of Property Act and the Income Tax Act.

Detailed Analysis:

1. Legality of Addition under Section 68 in the Assessment Order Passed under Section 153A:
The appellant argued that the addition of Rs. 1,25,00,000 under section 68 in the assessment order passed under section 153A was unjustified and should be deleted. The appellant contended that no incriminating material or evidence was found during the search action to justify the addition. The assessment for AY 2004-05 was already completed and the issue had been duly examined in the assessment order passed under section 143(3), which did not get abated as it was not pending on the date of the search.

2. Validity of the Evidence and Statements Used to Justify the Addition:
The AO relied on the statement of the assessee's son recorded during the search action, which suggested that there was no close relationship between the donor and the donee, thus questioning the genuineness of the gift. However, the appellant argued that the statement was recorded under duress and during a lengthy cross-examination session, which led to inconsistent answers. The AO's conclusions were based on presumptions rather than concrete evidence.

3. Examination of the Genuineness and Creditworthiness of the Gift Transaction:
The appellant provided various documents to substantiate the gift, including a notarized declaration of gift, certificates from exchange centers, bank confirmations, and the donor's passport. The AO initially accepted these documents during the assessment under section 143(3), confirming the identity of the donor, the creditworthiness, and the genuineness of the transaction. The reassessment under section 153A did not bring any new incriminating evidence to contradict the earlier findings.

4. Reassessment and the Requirement of Incriminating Material for Invoking Section 153A:
The Tribunal noted that no incriminating material was found during the search to justify the reassessment under section 153A. The Special Bench in "All Cargo Global Logistics Ltd." held that assessment under section 153A should be based on incriminating material found during the search. Similarly, the Rajasthan High Court in "Jai Steel (India) v. ACIT" stated that reassessment of concluded assessments should only occur if incriminating material is found. The Tribunal concluded that the reassessment in this case was not justified as it was based on assumptions and not on tangible evidence.

5. Compliance with Legal Requirements for a Valid Gift:
The Tribunal examined the legal requirements for a valid gift under section 122 of the Transfer of Property Act, which include the donor, the donee, and the acceptance of the gift during the donor's lifetime. Additionally, under the Income Tax Act, the identity of the donor, the financial capacity, and the genuineness of the transaction must be established. The appellant had complied with all these requirements, and the initial assessment had accepted the gift as genuine. The reassessment did not provide any new evidence to challenge this conclusion.

Conclusion:
The Tribunal held that the reassessment proceedings under section 153A were invalid as they were not based on any incriminating material found during the search. The additions made were based on conjectures and presumptions rather than concrete evidence. Consequently, the assessment proceedings under section 153A were set aside, and the additions were ordered to be deleted. The appeals filed by the different assessees were allowed.

← Previous Next →