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2015 (10) TMI 1514 - AT - Income TaxReopening of assessment - order of assessment passed under section 147 instead of section 153C - whether the assessment framed under section 147 is not without jurisdiction as no sanction has been taken from the authorities, as envisaged in section 151, before assuming jurisdiction? - Held that - Hon ble Gujarat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2010 (3) TMI 770 - Gujarat High Court) the condition precedent for issuing notice under section 153C is that the money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such other person. If the above requirement is not satisfied recourse cannot be heard to the provisions of section 153C. The Hon ble High Court has further observed that though in the loose papers recovered during the search proceedings, there was a reference to the petitioner in as much as his name was reflected in the list. However, the loose papers did not belong to the petitioner. The Hon ble High Court, therefore, has held that under such circumstances, the condition precedent for issuance of notice under section 153C was not fulfilled and any action taken under section 153C of the Act stood vitiated. The Hon ble Delhi High Court in the case of Pepsico India Holding (P.) Ltd. vs. ACIT (2014 (8) TMI 898 - DELHI HIGH COURT) has held that the AO should not confuse the expression belongs to with the expression relates to or refers to . The Hon ble High Court has held that unless it is established that the document in question does not belong to the searched person the question of invoking section 153C does not arise. Admittedly, the documents in the case in hand belonged to the searched person. Under such circumstances the reopening in the case in hand has rightly been done under section 147 of the Act by the AO. So far as the contention that the limitation period had expired for reopening of assessment under section 147 of the Act is concerned, we do not find any merit in the said contention. The income which the AO believed to have escaped assessment was above ₹ 1 lakh i.e. ₹ 5 lakh which is more than ₹ 1 lakh. As per the provisions of section 149, the reassessment can be done beyond the period of six years from the end of the relevant assessment year if the income chargeable to tax which has escaped assessment amounts to ₹ 1 lakh or more. Under such circumstances, this contention of the Ld. A.R. is not acceptable. - Decided against assessee. Addition u/s 68 - Held that - In the case of the assessee before us, the AO has not pointed out about any direct or material evidence against the assessee to hold that the share transactions were not genuine. The assessee had furnished before the AO all the necessary details and evidences relating to the share transactions in question. The AO did not raise any query or doubt about the genuineness of the details and evidences submitted by the Assessee. The AO has made additions on the basis of general statement of Mr. Chokshi made before the investigation wing. The name of the assessee did not appear specifically in any of the statements of Mr. Chokshi. The assessee was not provided opportunity to confront Mr. Chokshi in relation to transactions related to the assessee. The assessee before the CIT(A) has also submitted the confirmation of Sh. Mukesh Chokshi about the share transactions done through his share broking company. The AO in the remand proceedings, however, insisted to produce said Mr. Chokshi for examination as a witness before him. The assessee though could request Mr. Chokshi to appear before the AO, however had no authority or power to force Mr. Chokshi to appear before the AO. On the other hand, the AO u/s 131 of the Act has been given powers as are vested in a civil court to summon and enforce the attendance of witnesses or to compel the production of records before him. Hence under such circumstances, merely because the assessee could not produce Mr. Chokshi before the AO, that itself is not a sufficient ground for the confirmation of the additions. If the AO required the presence of Mr. Chokshi before him, he could have exercised his powers under the Act to secure the presence of Mr. Chokshi before him. Even the Ld. AO, in his remand report, has not controverted the evidences filed by the assessee. Thus we hold that additions made by the AO u/s 68 are not warranted in this case and are accordingly ordered to be deleted. - Decided in favour of assessee. Disallowance of set off of business loss being consequential to the addition made u/s 68 of the profits from sale of shares is accordingly decided in favour of the assessee.
Issues Involved:
1. Reopening of assessment under section 147 instead of section 153C. 2. Addition of Rs. 41,25,550/- under section 68 as unexplained credits. 3. Disallowance of set off of business loss by applying explanation to section 73(4). 4. Validity of assessment framed under section 147 without jurisdiction due to lack of sanction from authorities as per section 151. Detailed Analysis: 1. Reopening of Assessment under Section 147 Instead of Section 153C: The assessee contended that the reopening should have been done under section 153C, not section 147, as the search was conducted on a third party, and no documents belonging to the assessee were found. The Tribunal held that the documents found during the search belonged to the searched person and not the assessee. The name of the assessee appeared in the list of persons provided accommodation entries by the searched person. The Tribunal cited the Gujarat High Court's decision in Vijaybhai N. Chandrani vs. ACIT and the Delhi High Court's decision in Pepsico India Holding (P.) Ltd. vs. ACIT, which clarified that section 153C applies only when seized documents belong to the other person. Thus, the reopening under section 147 was justified. 2. Addition of Rs. 41,25,550/- Under Section 68 as Unexplained Credits: The assessee argued that the transactions were genuine, supported by contract notes, purchase and sale invoices, and payments received through cheques. The CIT(A) upheld the addition as the assessee failed to produce Mr. Mukesh Chokshi, who allegedly provided accommodation entries. The Tribunal noted that the AO did not raise any queries on the documents submitted by the assessee and relied solely on the general statement of Mr. Chokshi. The Tribunal emphasized that the AO had the power to summon Mr. Chokshi under section 131 but did not exercise it. The Tribunal referred to precedents where similar additions were deleted due to lack of direct evidence against the assessee. Consequently, the addition under section 68 was deleted. 3. Disallowance of Set Off of Business Loss by Applying Explanation to Section 73(4): This issue was consequential to the addition made under section 68. Since the Tribunal deleted the addition, the disallowance of set off of business loss was also decided in favor of the assessee. 4. Validity of Assessment Framed Under Section 147 Without Jurisdiction: The assessee claimed that no sanction was obtained from the authorities as required by section 151. The Tribunal observed that this issue was not raised before the lower authorities and lacked specific evidence. Therefore, the Tribunal did not find merit in this contention. Conclusion: The Tribunal concluded that the reopening under section 147 was valid, but the addition under section 68 was unwarranted due to lack of corroborative evidence. The disallowance of set off of business loss was reversed, and the appeal was allowed in part.
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