2019 (7) TMI 873 - AT - Income Tax

Validity of the reassessment proceedings u/s.147/148 - name of assessee found in diary of other person searched u/s 132 - assessee contended that AO should have resorted to proceedings u/s 153C instead of reopening - impact of word belong to OR pertain to in Section 153C(1)(b) - HELD THAT - Assessment order in the case of the assessee was passed on 16.12.2011. During that time, therefore, the word belong was there and as facts and situation in this case, the diary recovered during the course of search from the premises of the Chhoriya Group did not belong to the assessee and therefore, provisions of Section 153C(1)(b) is not applicable to the case of the assessee since amendment itself come into place on 01.06.2015 In assessee s own case itself in assessment year 2008-09 2015 (3) TMI 1278 - ITAT PUNE , it is specifically analyzed regarding the applicability of Section 153C. Respectfully following the aforesaid decision wherein the facts and circumstances in this relevant assessment year 2003-04 are similar, we dismiss the contention of the assessee regarding applicability of Section 153C and uphold the validity of the reassessment proceedings by the Revenue Authorities u/s.147/148. Thus, ground No. 2 and 3 raised in appeal by the assessee are dismissed. Addition based on entries in diary found in search of other person - diary recovered during the course of search u/s.132 from the premises of Chhoriya - Mr. Chhoriya had also filed an affidavit stating no loans were taken from the assessee - HELD THAT - If the income of the entries which were found in the diary during the course of search in the premises of Chhoriya group, had been declared by Mr. Chhoriya as his own income, in such circumstances, no addition should sustain in the hands of the assessee. However, if it is found that there is a contrary scenario in that case, addition has to be sustained in the hands of the assessee. This issue, therefore needs detailed factual verification. We therefore, set aside the order of the CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for proper verification as herein above directed by us and re-adjudicate the matter in conformity with the principles of natural justice. Thus, grounds No. 5 and 7 raised in appeal by the assessee are allowed for statistical purposes.

Summary

Issues Involved:
1. Challenge to re-assessment proceedings under Section 147/148 of the Income Tax Act, 1961.
2. Allegation of violation of natural justice due to denial of opportunity for cross-examination.
3. Merits of the case regarding the applicability of Section 153C of the Act and additions made based on seized documents.

Analysis:

Issue 1: Challenge to Re-assessment Proceedings
The assessee challenged the re-assessment proceedings under Section 147/148 of the Income Tax Act, contending that Section 153C(1)(b) should have been applied instead. The dispute arose due to the amendment replacing "belong" with "pertain" in the section. The Tribunal referred to a previous case involving the same assessee, where it was established that incriminating documents found did not belong to the assessee, thus upholding the validity of the re-assessment proceedings.

Issue 2: Allegation of Violation of Natural Justice
The assessee alleged a violation of natural justice, claiming denial of the opportunity to cross-examine and access copies of documents. However, the Assessing Officer provided multiple opportunities for inspection, which the assessee did not avail. The Tribunal noted that the assessee's failure to engage in the process undermined the claim of a violation of natural justice, dismissing the ground raised on this issue.

Issue 3: Merits of the Case and Additions Made
Regarding the merits, the Tribunal examined the entries in a diary seized during a search and the subsequent claims made by Mr. Chhoriya regarding the income. The Tribunal emphasized the need for detailed verification to determine if the income entries were correctly attributed. Consequently, the Tribunal set aside the previous order and directed the Assessing Officer to re-examine the matter, ensuring adherence to the principles of natural justice. The grounds raised on this issue were allowed for statistical purposes.

In conclusion, the appeals were partly allowed for statistical purposes, with the Tribunal addressing each issue comprehensively and providing detailed reasoning for its decisions. The judgment highlighted the importance of procedural fairness, legal interpretations, and factual verifications in tax assessment matters.