2019 (3) TMI 225 - HC - Income Tax

Validity of Notice u/s 153A for assessment of earlier years - Assessment u/s 153A permissible without incriminating material in some year - assessments for the prior years in which the due date for notice under Section 143(2) has expired - classification in so far as 'concluded assessments' and 'pending assessments' - HELD THAT - When a notice under Section 153A is issued, it enables the department to carry out re-assessment or assessment with respect to the six immediate prior years and the year in which the search is carried out. This does not require any incriminating material recovered on search relating to those prior years; in which there is no time left, on the date of search, for an assessment under Section 143. The provision under Section 153A is a non obstante clause having overriding effect over Sections 139, 147, 158, 149, 151 and 153. The intention of the legislature is to enable assessment, if it has not been regularly done in any of the previous years, or to re-initiate assessment in case there is already proceedings pending or to re-assess in the case of completed assessments; if the search under Section 132 reveals material pointing to a practice of suppression of income from taxation. These materials need not necessarily be that relevant to the previous six years since a practice of suppression detected in the subject year permits a like presumption to be drawn in the earlier six years too; on best judgment with reference to the business or profession carried on by the assessee. There is no assumption possible that in any of the prior years in which assessments were not regularly completed and the time for the same has expired, there could be additions only on the basis of materials recovered relevant to those years. The returns filed in pursuance to a notice under Section 153A is also to be treated as a return filed under Section 139. Hence, we cannot agree with the Tribunal that the assessments carried out under Section 153A for the prior years in which the due date for notice under Section 143(2) has expired, can only be with reference to incriminating materials recovered on search. When a notice is issued pursuant to a search under Section 132, for assessment under Section 153A, all pending proceedings with respect to a regularly initiated assessment or re-assessment would stand abated. For the said years, the proceedings u/s 153A would be continued and the assessments concluded on that basis. When and if the said assessment proceeded with and concluded under Section 153A, is said aside by the statutory authorities or by this Court, then necessarily the original proceedings which stood abated would revive, which is the enabling provision under sub-section (2) of Section 153A. There can be no corollary inferred from the above provisions to find certain years to be of 'concluded assessment'; being possible of re-assessment only on incriminating material recovered in search relatable to that year. - Decided against assessee Addition of gifts or loans received from relatives and the sale of trees - HELD THAT - With respect to 2003-04 the gift claimed by the assessee from relatives is ₹ 10,000/-. The question of law arise only in the said years, which we answer in favour of the Revenue and against the assessee. Restoring the order of the AO, confirming the additions on issues as specified herein above. With respect to the other appeals, we find that no question of law arises from the order of the Tribunal since the issues are already dealt with by the Assessing Officer in the order giving effect to the order of the Tribunal.

Issues:
1. Assessment under Section 153A of the Income Tax Act, 1961.
2. Gifts received from friends for assessment years 2003-04 to 2004-05.
3. Deficiency in cash flow statement related to depreciation claimed on vehicles.
4. Expenditure incurred for foreign travel and valuation of house property.
5. Estimation of business income based on turnover and gross profit.
6. Gifts or loans received from relatives and sale of trees.
7. Interpretation of Section 153A regarding concluded and pending assessments.

Analysis:
1. The appeals arose from the Tribunal's order on an assessment under Section 153A of the Income Tax Act, 1961. Most issues did not survive due to the revenue not challenging certain matters. The Tribunal addressed various issues, including gifts received, deficiency in cash flow statement, foreign travel expenditure, house property valuation, business income estimation, and gifts/loans from relatives and sale of trees.

2. The Tribunal remanded the matter of gifts received from friends for assessment years 2003-04 to 2004-05 to the Assessing Officer. The gifts proven were allowed, while others were added back to income.

3. Regarding the deficiency in the cash flow statement related to depreciation claimed on vehicles, the Assessing Officer refused to accept it as cash in-flow. The Tribunal allowed it as a deduction, stating depreciation can be considered but not as cash in-flow.

4. The issue of expenditure for foreign travel and valuation of house property was addressed. The Tribunal accepted modifications made by the C.I.T. Appeals, with the valuation based on Kerala PWD rates. The addition on the amount received from the son was added back due to lack of proof of the income source.

5. The Tribunal settled the estimation of business income issue, where the Tribunal found lack of substantial evidence for determining production. The Tribunal accepted the suppression percentage stated by the assessee and the gross profit rate from the accounts.

6. Surviving issues included gifts/loans received from relatives and sale of trees. The Tribunal classified concluded and pending assessments under Section 153A, requiring incriminating material for re-assessment of concluded assessments.

7. The Tribunal's interpretation of Section 153A was based on previous decisions, emphasizing the authority to issue notices for re-assessment or assessment for six prior years and the year of search without needing incriminating material. The Tribunal differentiated between concluded and abated assessments, with the intention to avoid parallel proceedings and revive abated assessments if proceedings under Section 153A are set aside.

8. The Court answered the question of law against the assessee, favoring the revenue on the surviving issues of gifts/loans received from relatives and sale of trees. The appeals were allowed, confirming the additions made by the Assessing Officer. Other issues were not considered as they were dealt with in the order giving effect to the Tribunal's decision.

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