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2017 (9) TMI 177 - AT - Income TaxJurisdiction of the assessment made u/s 153A - addition on account of unexplained investment - burden of proof - Held that - The assessee has created an asset and the value of the same was not taken in the work in progress. Though the asset was constructed without the approval, the assessee has incurred the expenditure for construction of the shop and the asset created out of the same was not declared in the balance sheet which constitutes the asset outside the books of accounts. The value of Sri Ram Residency shop should to be brought to the books of accounts in the stock in trade or work in progress. In this case, the assessee failed to disclose the value of the asset in the balance sheet. The only evidence available which was found at the time of search was the loose sheet indicating the value of the shop at ₹ 10 lakhs. The loose sheets were found in the residence of the assessee and the burden is cast on the assessee to prove the contents of the loose sheets were not correct as per section 292C of the Act. The assessee has not established that the value of the asset was less than ₹ 10 lakhs and the fact that the assessee has constructed a shop in the Sri Ram Residency is an undisputed fact. The assessee has not furnished details of the expenditure incurred for construction of the shop. Therefore, in the absence of any evidence to show that the value of the asset was less than ₹ 10 lakhs, we do not find any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. This ground of appeal is dismissed. - Decided against assessee. Addition towards unexplained creditors - Held that - The issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee s return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/s 153A of the Act. - Decided in favour of assessee. Unexplained cash credit - Held that - Though the assessee has explained that the loans were wrongly categorized as unsecured loans instead of advances still the assessee has to prove the capacity, credit worthiness and the identity of the creditors since the credits were introduced in the books of accounts in the year under consideration. The assessee failed to establish that the amount outstanding was in fact advances and got adjusted against the sale of flats. In nutshell, the assessee failed to offer any explanation with regard to the credits introduced during the financial year. Therefore, the A.O. rightly brought the unexplained credits u/s 68 of the Act, which the CIT(A) has upheld the order of the A.O. and we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. The appeal of the assessee is dismissed. Unexplained investment and jewellery - course of search investigation wing found the gold and jewellery weighing around 1044 gms and the Silver articles weighing 5840 gms in the premises of the assessee - Held that - In this case, the assessee has stated in his statement recorded at the time of search and subsequently during the post search operation and enquiries during the assessment proceedings that the gold weighing around 640 gms. and silver articles were not belonging to him but belonging to his father and sister. The lockers from the gold and silver found were also not belonging to the assessee as stated by him. The assessing officer has not made any enquiry with regard to the ownership of the gold and silver articles found at the time of search and to rebut the claim made by the assessee that the articles were belonging to his father and sister. When the fact that lockers were not belonging to the assessee is accepted and the assessee explains that the gold and silver articles were not belonging to him but belonged to his father and sister the burden shifts to the department and the onus is on the department to prove that the articles were belonging to the assessee. In this case, the department has not discharged the onus by conducting the necessary enquiries. When assessee has given a submission that the gold and silver articles were belonging to his father and sister, the same required to brought to tax or examine the sources in the hands of his sister and father but not in the hands of the assessee. Accordingly, the addition made by the A.O. in the hands of the assessee cannot be sustained and we set aside the order of lower authorities and delete the addition made by the A.O. The appeal of the assessee is allowed.
Issues Involved:
1. Jurisdiction of assessment under Section 153A of the Income Tax Act, 1961. 2. Addition of ?10 lakhs as unexplained investment in a shop. 3. Addition of ?2.5 lakhs as unexplained creditors. 4. Addition of ?15 lakhs as unexplained creditors for the assessment year 2007-08. 5. Addition of ?7.88 lakhs as unexplained investment in gold and silver jewelry for the assessment year 2009-10. Detailed Analysis: 1. Jurisdiction of Assessment under Section 153A: The assessee challenged the jurisdiction of the assessment made under Section 153A. The Tribunal held that the search conducted under Section 132 and the discovery of incriminating material justified the initiation of proceedings under Section 153A. The Tribunal rejected the assessee's argument that there was no incriminating material, concluding that the loose sheet found during the search constituted such material. 2. Addition of ?10 Lakhs as Unexplained Investment in a Shop: The assessee argued that the loose document found during the search, which was on the letterhead of his father, did not pertain to him and thus could not be used to make an addition as unexplained investment. The Tribunal noted that the shop in question was constructed without municipal approval and was not declared in the assessee's balance sheet. The Tribunal upheld the addition, stating that the loose sheet indicating the value of the shop at ?10 lakhs constituted incriminating material. The assessee failed to provide evidence that the value of the asset was less than ?10 lakhs. 3. Addition of ?2.5 Lakhs as Unexplained Creditors: The assessee contended that the addition of ?2.5 lakhs as unexplained creditors was invalid as there was no incriminating material found during the search. The Tribunal agreed, citing judicial precedents that additions in respect of assessment years for which the assessment proceedings have concluded cannot be made without incriminating material. The Tribunal directed the deletion of the addition, stating that the assessment for the year 2005-06 had reached finality and could not be disturbed in the absence of incriminating material. 4. Addition of ?15 Lakhs as Unexplained Creditors for the Assessment Year 2007-08: The assessee argued that the addition should be set off against the undisclosed income of ?1.5 crores admitted during the search. The Tribunal noted that the time limit for issuing notice under Section 143(2) had not expired by the date of the search, thus the assessment had not been completed and was abated. The Tribunal upheld the addition, stating that the assessee failed to establish the identity, genuineness, and creditworthiness of the creditors. 5. Addition of ?7.88 Lakhs as Unexplained Investment in Gold and Silver Jewelry for the Assessment Year 2009-10: The assessee claimed that the gold and silver articles found during the search belonged to his father and sister. The Tribunal noted that the lockers from which the articles were found were not in the name of the assessee. The Tribunal held that the onus was on the department to prove that the articles belonged to the assessee. As the department failed to discharge this onus, the Tribunal directed the deletion of the addition. Conclusion: - The appeal for the assessment year 2005-06 was partly allowed, with the addition of ?2.5 lakhs as unexplained creditors being deleted. - The appeal for the assessment year 2007-08 was dismissed, with the addition of ?15 lakhs as unexplained creditors being upheld. - The appeal for the assessment year 2009-10 was allowed, with the addition of ?7.88 lakhs as unexplained investment in gold and silver jewelry being deleted. The above order was pronounced in the open court on 31st July 2017.
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