2017 (4) TMI 176 - AT - Income Tax

Assessment u/s 153A - unexplained cash deposits - Held that - In this case, the assessment for the assessment year 2003-04, 2004-05 & 2006-07 are already concluded and there is no proceedings pending for those assessment years. The time limit for issue of notice u/s 143(2) of the Act has been expired. The A.O. has made additions towards unexplained cash deposits found in the bank account, unexplained loans and advances and unexplained credits in apital account without any incriminating materials. Therefore, we are of the view that the A.O. has no jurisdiction to make additions for the assessment years 2003-04, 2004-05 & 2006-07 in the absence of any incriminating materials. In this case, the A.O. has made additions towards unexplained cash credits, unexplained advances and unexplained credits in capital accounts based on the books of accounts which were already part of regular return filed by the assessee u/s 139(1) of the Act, but not based on any incriminating materials. Hence, we are of the considered view that, the A.O. has no jurisdiction to make additions towards any income in the absence of seized materials for the assessment years which are concluded as on the date of search. Accordingly, we direct the A.O. to delete additions made for the assessment year 2003-04, 2004-05 & 2006-07. Additions towards cash found during the course of search for the assessment year 2009-10 we find force in the arguments of the assessee for the reason that the assessee has filed necessary evidences in the form of the confirmation letter from the debtor who has confirmed repayment of advance of Rs. 7 lakhs. We further observed that the debtor Shri P.N. Raju has given the deposition before the A.O., wherein he has confirmed that he has repaid the advance. The A.O. made additions by stating that the assessee has failed to prove the genuineness of transactions and creditworthiness of the debtor. We find no merits in the findings of the A.O., for the reason that once the debtor repaid the amount in the capacity as debtor to the assessee, the necessity of proving the creditworthiness, identity and genuineness is not on the assessee as it is only amount received back out of advance made in the earlier period and shown in the return. The CIT(A) without appreciating the facts, simply confirmed additions based on the remand report of the A.O., wherein the A.O. has reiterated its stand at the time of assessment proceedings. Therefore, we direct the A.O. to delete additions made towards cash found during the course of search. - Assessee appeal allowed.

Issues Involved:
1. Validity of search proceedings and consequent assessment proceedings under Section 153A of the Income Tax Act.
2. Additions made by the Assessing Officer (A.O.) towards unexplained cash deposits in bank accounts, unexplained loans and advances, and unexplained credits in the capital account.
3. Admission of additional ground challenging the additions made by the A.O. in the concluded assessments for the assessment years 2003-04 to 2006-07.

Issue-wise Detailed Analysis:

1. Validity of Search Proceedings and Consequent Assessment Proceedings under Section 153A of the Act:
The assessee challenged the initiation of proceedings under Section 153A of the Act, arguing that the warrant was issued in the name of another individual, Shri G. Manoj Kumar, and not the assessee. The CIT(A) rejected the claim regarding the validity of search proceedings but partly allowed the appeal for the assessment years 2003-04 to 2009-10. During the hearing, the assessee did not press the legal grounds challenging the validity of search proceedings and consequent assessment proceedings under Section 153A of the Act for all four assessment years. Hence, the Tribunal dismissed the legal ground challenging the validity of the assessment as not pressed for all the assessment years.

2. Additions Made by the A.O. Towards Unexplained Cash Deposits, Loans, and Credits:
The assessee contended that the A.O. had no jurisdiction to make additions towards unexplained cash deposits in completed assessments in the absence of incriminating materials. The Tribunal considered the decision of the ITAT, Visakhapatnam in the case of L. Suryakantham Vs. ACIT, which held that the A.O. has no jurisdiction to make additions under Section 153A for assessments not pending as of the date of the search. The Tribunal concluded that the A.O. cannot make additions for the assessment years 2003-04, 2004-05, and 2006-07 without any incriminating materials. The Tribunal directed the A.O. to delete the additions made for these assessment years.

3. Admission of Additional Ground Challenging Additions in Concluded Assessments:
The assessee filed a petition for the admission of an additional ground on 17.3.2017, raising a legal issue regarding the scope of additions that can be made in an assessment under Section 143(3) read with Section 153A. The Tribunal admitted the additional ground, noting that the facts necessary for adjudication were already on record. The Tribunal found that the A.O. made additions based on the books of accounts already part of the regular return filed by the assessee under Section 139(1) of the Act, not based on any incriminating materials. Consequently, the Tribunal directed the A.O. to delete the additions made for the assessment years 2003-04, 2004-05, and 2006-07.

Specific Case for Assessment Year 2009-10:
For the assessment year 2009-10, the A.O. made an addition of Rs. 3,50,000 towards cash seized by the I.T. Department on 9.1.2009. The assessee claimed that the source of the cash deposit was the repayment of a debt of Rs. 7 lakhs received from Shri P.N. Raju. The Tribunal found that the assessee provided necessary evidence, including a confirmation letter from the debtor and deposition confirming the repayment. The Tribunal held that the A.O.'s requirement to prove the genuineness of the transaction and creditworthiness of the debtor was unfounded, as the amount was a repayment of an advance made in an earlier period. The Tribunal directed the A.O. to delete the addition made towards the cash found during the search.

Conclusion:
The appeals filed by the assessee were allowed, with the Tribunal directing the deletion of additions made by the A.O. for the assessment years 2003-04, 2004-05, 2006-07, and 2009-10. The Tribunal emphasized that the A.O. has no jurisdiction to make additions in the absence of incriminating materials for concluded assessments as of the date of the search.

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