2015 (7) TMI 119 - AT - Income Tax

Legality of assessment u/s.153A - Held that - There are certain additions made by the Assessing Officer on the basis of information which was available with the assessing authorities in the form of earlier returns of income and financial statement attached thereof. In our opinion, additions could be made in the case of completed assessments (assessment years which were not abated) only on the basis of incriminating material found during the course of search. Admittedly, the Assessing Officer did not found any incriminating material warranting addition. Being so, we are inclined to direct the Assessing Officer to make addition only on the basis of incriminating material if any found during the course of search. Further, regarding addition on account of cash disclosed by Sheeba Prince for the assessment year 2011-12, if the said cash belongs to her family members, addition cannot be made in the hands of the assessee (Sheena Prince) if it is disclosed in their respective return of income. Regarding jewellery, we make it clear that if the assessee has already disclosed jewellery in the regular return of income, it cannot be considered for addition in assessment completed u/s.143(3) of the Act r.w.s.153A of the Act. Accordingly, we direct the Assessing Officer to pass fresh order in the light of the order of the Special bench in the case of All Cargo Global Logistics Ltd (2012 (7) TMI 222 - ITAT MUMBAI(SB) ). With these observations, all these appeals filed by the assessees are remitted to the Assessing Officer to make addition only on the basis of seized material found during course of search action in these cases. Decided partly in favour of assessee for statistical purposes. Penalty u/s.271(1) (c) - genuineness of the gift unproved - Held that - In this assessment year, the assessee said to have received cash of I5,30,000/- as gift in the name of minor sons (i.e I2,65,000/- each from his sons Joseph Prince and Antony Prince). The assessee was not able to properly explain the source. The Assessing Officer stated that the gift has been received by the assessee from a person who is a close relative to him. According to the Assessing Officer, the assessee filed a gift deed on the stamp paper of I20/- which was purchased on 27.05.2006 and this document does not have complete address of the donor and the gift which was issued in the form of cash only. The assessee explained that he received the gift from Shri. T.P. Joseph who is his close relative. After verifying original return of income, it was clear that there is no incriminating material found in the course of search. Being so, in our opinion that the assessment cannot be made u/s.153A of the Act without any incriminating material found during the course of search and levying of penalty on the basis of some record which was filed by the assessee is not proper. Being so, in our opinion levy of penalty is not justified consequent to assessment u/s.143(3) r.w.s 153A of the Act. Accordingly, the penalty is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of additions made by the Assessing Officer (AO) without incriminating material during the search.
2. Legality of penalty levied under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Legality of Additions Made by the Assessing Officer Without Incriminating Material During the Search:

The primary issue raised by the assessees was that the Commissioner of Income Tax (Appeals) erred in confirming the additions made by the AO when no incriminating material was found during the course of the search action under Section 132 of the Income Tax Act. The assessees argued that the issue is covered by the order of the Special Bench in the case of All Cargo Global Logistics Ltd. 137 ITD 287 (Mum) (SB).

The brief facts of the case involve a search action on 2.11.2010, leading to the issuance of a search notice under Section 153A and subsequent assessments. The assessees contended that the additions were based solely on the particulars disclosed in their original returns, filed before the search, and not on any incriminating material found during the search. The assessees cited several judgments, including Mariam Aysha vs. CIT 104 ITR 381, which held that consent of the assessee cannot confer jurisdiction to the AO, and the taxing authorities can act only if there is statutory power to do so.

The Departmental Representative argued that the reassessment was based on the discovery of excess cash and jewelry, and unexplained credits and investments during the search.

The Tribunal observed that additions could be made in completed assessments only on the basis of incriminating material found during the search. Since no such material was found, the Tribunal directed the AO to make additions only if incriminating material was found. Regarding the cash disclosed by Sheeba Prince for the assessment year 2011-12, the Tribunal stated that if the cash belonged to her family members and was disclosed in their respective returns, it could not be added to her income. Similarly, jewelry disclosed in regular returns could not be considered for addition in assessments completed under Section 143(3) read with Section 153A.

The Tribunal remitted the cases to the AO to make additions based only on seized material found during the search, thereby partly allowing the appeals for statistical purposes.

2. Legality of Penalty Levied Under Section 271(1)(c) of the Income Tax Act:

The issue in ITA No.2745/Mds/2014 concerned the levy of penalty under Section 271(1)(c) of the Act. The AO observed that the assessee's minor sons received gifts in cash from Mr. T.P. Joseph, but the assessee failed to substantiate the gifts with supporting evidence, leading to an addition of Rs. 5,30,000 to the assessee's total income and the initiation of penalty proceedings.

The Commissioner of Income Tax (Appeals) confirmed the penalty, noting that the assessee failed to provide satisfactory evidence regarding the gifts. The Commissioner held that the AO's conclusions were based on facts and sound logic, and the penalty was justified under Section 271(1)(c), which penalizes concealment of income or furnishing inaccurate particulars.

The Tribunal, however, noted that the assessment was made under Section 153A without any incriminating material found during the search. The Tribunal held that the levy of penalty based on records filed by the assessee was not proper and deleted the penalty, allowing the appeal.

Conclusion:

The Tribunal concluded that the appeals concerning the additions made by the AO were partly allowed for statistical purposes, directing the AO to make additions only based on incriminating material found during the search. The appeal concerning the penalty under Section 271(1)(c) was allowed, deleting the penalty imposed on the assessee. The order was pronounced on June 25, 2015, at Chennai.