2015 (11) TMI 993 - AT - Income Tax

Assessment under section 153A - assessment of HUF - Held that - Name of the HUF, who is separate taxable entity, is no where available in the Panchnama. It is also pertinent to note that all the members of the HUF were not covered under the search action. In section 153A, nowhere it has been provided that if the search is conducted on the partners, in their individual cases, then the firm would automatically deem to have been covered under search action. Similarly, there cannot be any implied search action on the HUF merely on the ground that some of the individual members of the HUF were covered under the search action. For invoking jurisdiction, there cannot be any implied operation of law. It should be specific and direct. Thus, no search was conducted on the HUF, and therefore, no order under section 153A ought to be passed. - Decided in favour of assessee. Addition under section 69B - claim of long term capital gain exempt from tax rejected - Held that - Once the assessee has been pleaded that it has made purchase of shares through Swan Securities Pvt. Ltd. and Swan Securities Pvt. Ltd. has trust in the assessee of payment, then actual payment not made before 31st March would not create any dent in the transaction of the assessee. The ld.AO failed to point out any defect in the confirmation of Swan Securities Pvt. Ltd. or any documents furnished to him in response to his query under section 133(6) of the Act. The shares have actually been sold by the assessee. It means it must have been purchased. The purchase and sale both happen before the date of search. There cannot be any specific reason for the assessee to make such a claim after the search, because nothing discriminatory qua this transaction was found. If the Swan Securities Pvt. Ltd. has confidence of recovery of its amount incurred for purchase of shares at the instructions of the assessee, then, merely on account of the reason that payment was outstanding, transaction cannot be doubted. The payment has been subsequently made reflects the relationship between Swan Securities Pvt. Ltd. and the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 153A of the Income Tax Act.
2. Validity of assessment orders under Section 143(3) r.w.s. 153A.
3. Double taxation of on-money payment.
4. Addition of unexplained investment in shares.
5. Validity of long-term capital gains claim.

Detailed Analysis:

1. Jurisdiction under Section 153A of the Income Tax Act:
The assessee argued that the assessment orders framed under Section 143(3) r.w.s. 153A were void ab initio because no search was carried out upon the assessee, thereby questioning the jurisdiction of the AO to initiate proceedings under Section 153A. The search and seizure operation was conducted at the residential premises of the Karta of the HUF, who was part of the Laxmipati group. The AO issued a notice under Section 153A based on this search. The assessee contended that no authorization was issued for carrying out the search on the HUF, and all members of the HUF were not covered by the search.

2. Validity of Assessment Orders under Section 143(3) r.w.s. 153A:
The Tribunal noted that the Hon'ble Gujarat High Court, in the case of CIT Vs. Ramesh D. Patel, had held that in the absence of a search warrant, the AO has no jurisdiction to assess under Section 153A. The Tribunal observed that the Panchnama did not include the name of the HUF, and not all members of the HUF were covered under the search action. Therefore, the search was not conducted on the HUF, making the assessment orders under Section 153A invalid.

3. Double Taxation of On-Money Payment:
The AO taxed the on-money payment of Rs. 73,19,460/- in both the assessment years 2006-07 and 2009-10. The CIT(A) deleted the addition for the assessment year 2009-10, citing double taxation. The Tribunal upheld the CIT(A)'s decision, noting that the payment was made in the accounting period relevant to the assessment year 2009-10, as confirmed by the statements of various individuals involved.

4. Addition of Unexplained Investment in Shares:
For the assessment year 2007-08, the AO added Rs. 28,58,402/- as unexplained investment in shares. The assessee argued that the shares were purchased from Swan Securities Pvt. Ltd. and sold through M/s. Motilal Oswal Securities Ltd., with all transactions being genuine and supported by documentary evidence. The Tribunal found that the AO's objections were peripheral and did not substantiate the claim of unexplained investment. The Tribunal referred to a similar case involving Manojkumar Sarawagi-HUF where the ITAT had deleted a similar addition, thereby allowing the assessee's claim.

5. Validity of Long-Term Capital Gains Claim:
The assessee claimed long-term capital gains of Rs. 7,61,589/- as exempt. The AO rejected this claim, citing doubts about the genuineness of the transactions due to delayed payments and lack of initial balance sheet submission. The Tribunal, however, found that the transactions were genuine, supported by confirmations from brokers, and payments were made through account payee cheques. The Tribunal directed the AO to accept the assessee's claim of long-term capital gains.

Conclusion:
The Tribunal quashed the assessment orders under Section 153A due to lack of jurisdiction, upheld the deletion of double taxation of on-money payments, and allowed the assessee's claims regarding unexplained investment in shares and long-term capital gains. The appeals of the assessee and the Revenue were allowed, with directions to adjust the taxable income accordingly.