2017 (9) TMI 517 - AT - Income Tax

Assessment proceedings u/s 153A - Additional income offered for taxation voluntarily in return of income filed u/s 153A - assessee never retracted the statement - assessee claimed that no incriminating material was found during the course of searches - Held that - End of justice will be met in the instant case if the matter is set aside and restored to the file of the AO for denovo adjudication on merits of this issue wherein one more opportunity is required to be granted to the assessee to furnish details/ evidences before the AO to prove that the said additional amount of 5, 16, 485/- voluntarily declared by the assessee in return of income filed in pursuance to notice u/s 153A of the 1961 Act is not income which could be brought to tax within the provisions and mandate of the 1961 Act and hence we are inclined to set aside and restore the matter back to the file of the A.O. for denovo adjudication of this issue on merits in accordance with law. The assessee is directed to produce evidences showing the breakup of income of 5, 16, 485/- which was declared voluntarily as additional income by the assessee in return of income filed u/s 153A of the 1961 Act and to prove that the same do not constitute income of the assessee which could be brought to tax within framework and mandate of the 1961 Act. We have observed that the assessments for assessment year 2007-08 to 2009-10 are all unabated assessments as the assessments were not pending on the date of initiation of search u/s 132 of the 1961 Act and our above decision for assessment year 2006-07 shall apply to appeals for assessment year 2007-08 to 2009-10 mutatis mutandis. We have also observed that the assessment for A.Y. 2010-11 was abated assessment as the assessment was pending on the date of initiation of search u/s 132(1) of the 1961 Act as time limit for issuance of notice u/s 143(2) of the 1961 Act has not expired and the ratio of decision of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation (2015 (5) TMI 656 - BOMBAY HIGH COURT) is not applicable to the assessment year 2010-11 and the AO was required to compute total income of the assessee while framing assessment u/s 153A r.w.s. 143(3) of the 1961 Act whether or not there was any incriminating material found during the course of search u/s 132(1) of the 1961 Act. Thus all the six appeals of both the assessee s are allowed for statistical purpose

Issues Involved:
1. Validity of search under section 132(1) of the Income-tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) to conduct the assessment in the absence of incriminating material found during the search.
3. Acceptance of income voluntarily declared by the assessee in response to notice under section 153A.

Issue-wise Detailed Analysis:

1. Validity of Search:
The assessee challenged the validity of the search operation conducted by the Revenue under section 132(1) of the Income-tax Act, 1961. The grounds included the absence of satisfaction of ingredients prescribed under section 132(1), failure to appreciate various case laws, and the right to challenge the search validity. However, during the tribunal proceedings, the assessee's counsel withdrew this ground, leading to its dismissal.

2. Jurisdiction of the AO:
The assessee raised an alternative ground challenging the AO's jurisdiction to frame the assessment due to the absence of incriminating material found during the search. The assessee argued that the search did not yield any incriminating material and relied on the Bombay High Court's decision in CIT v. Murli Agro Products Ltd. The tribunal noted that the search was conducted on 11th February 2011, and the original return of income for A.Y. 2006-07 was filed on 1st November 2006. The tribunal observed that since no incriminating material was found, no addition could be made in the assessment for the unabated years (A.Y. 2006-07 to 2009-10). However, for A.Y. 2010-11, being an abated assessment, the AO was required to compute the total income, whether or not incriminating material was found.

3. Voluntary Declaration of Income:
The assessee voluntarily declared additional income of ?5,16,485/- under the head 'income from other sources' in response to the notice under section 153A. The assessee claimed this was done to avoid litigation and buy peace. The AO accepted the income declared in the return filed under section 153A without making any additions. The tribunal noted that the assessee did not retract the voluntary declaration during the assessment proceedings. The tribunal held that the assessee must provide a breakup and evidence to prove that the declared income does not constitute taxable income. The tribunal set aside the matter to the AO for denovo adjudication, directing the assessee to furnish the necessary details and evidence.

Conclusion:
The tribunal dismissed the ground challenging the validity of the search as it was withdrawn by the assessee. It allowed the alternative ground for statistical purposes, setting aside the matter to the AO for denovo adjudication. The tribunal directed the assessee to provide evidence to substantiate that the voluntarily declared income is not taxable. The decision applies mutatis mutandis to all the assessment years involved (2006-07 to 2010-11) and to the appeal of another assessee for A.Y. 2008-09.

Order Pronounced:
The order was pronounced in the open court on 16th August 2017.

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