2015 (12) TMI 345 - AT - Income Tax

Validity of search conduced in the hands of the assessee under section 132 - Held that - We notice that the only reason on which the assessee is questioning the validity of search is that the search action has not resulted in unearthing of any incriminating material or undisclosed income. Validity of search could not be questioned on the above said ground. It is not necessary that the search action should always result in unearthing of any incriminating material or undisclosed income. Even if no incriminating material or undisclosed income was unearthed, the search would be valid, if one of the three conditions prescribed u/s 132(1) was complied with. Under these set of facts, the view that there is no merit in the contentions of the assessee on this issue and hence, the same is liable to be dismissed. Validity of accepting the additional income disclosed by the assessee in the return of income filed u/s 153A - Held that - In the instant case, the assessee has voluntarily offered certain credits found in his bank account as additional income, since he felt that the source of those credits could not be explained by him. Hence, the basis of offer of additional income is the bank account of the assessee. There should not be any dispute that the availability of undisclosed income, if any, will be within the personal knowledge of the assessee, even if no incriminating material was found during the course of search. The provisions of section 153A nowhere states that the assessee is precluded from offering such kind of undisclosed income in the return of income from out of his bank account and voluntarily offered the same for taxation u/s 153A of the Act. Hence, in my view, the assessee was not entitled to contend for exclusion of the same, since the undisclosed income has been identified by the assessee himself. The filing of return of income and payment of tax is called self assessment and hence the tax paid u/s 140A of the Act is called self assessment tax. The assessee, herein, has voluntarily identified the undisclosed income from out of his bank account, though the same has not come to the notice of the search officials. Accordingly, after having identified the undisclosed income and voluntarily offered the same, the assessee is precluded from putting a claim for exclusion of the same. The basis for offering the additional income is the bank account of the assessee and hence it is not correct to say that there is no basis or material for the additional income so offered. Accordingly, no merit on the second ground also.

Summary

Issues:
1. Validity of search conducted under section 132 of the Act.
2. Validity of accepting additional income disclosed by the assessee in the return of income filed u/s 153A of the Act.

Validity of Search Action:
The appellant challenged the search action under section 132 of the Act, claiming it did not result in unearthing incriminating material or undisclosed income. The appellant argued that the search was initiated without meeting the conditions of section 132. However, the tribunal held that the validity of the search should be upheld if one of the conditions under section 132(1) was met, which the appellant failed to prove otherwise. The tribunal emphasized that the absence of incriminating material does not invalidate a search if statutory conditions are fulfilled. Citing legal precedents, the tribunal dismissed the appellant's contentions on this issue.

Validity of Additional Income Disclosure:
The appellant contested the acceptance of additional income without incriminating material, citing that concluded proceedings do not allow for assessments without such material. The appellant voluntarily disclosed additional income in both years under consideration. The tribunal noted that the appellant offered the income based on bank account credits, stating the source was not readily available. The tribunal emphasized that the appellant, under section 153A, must disclose all income, even if not found during the search. The tribunal held that the appellant, having voluntarily identified undisclosed income from the bank account, cannot later claim exclusion. Legal precedents were cited to support the decision that self-assessment tax requires full disclosure, and the appellant's voluntary offer precludes exclusion. Consequently, the tribunal upheld the CIT(A)'s decision on both issues, dismissing the appeals filed by the assessee.

This detailed analysis of the judgment addresses the issues of the validity of the search action and the acceptance of additional income disclosed by the assessee comprehensively, incorporating legal interpretations and relevant case law references.