2020 (12) TMI 111 - AT - Income Tax

Assessment u/s 153C - HELD THAT - As relying on Shri. Panati Vittalnath Reddy Vs DCIT 2020 (3) TMI 572 - ITAT BANGALORE uphold the validity of assessment u/sec 153C of the Act and dismiss this ground of appeal of the assessee. Estimation of business income by the AO @12% of gross receipts - AR s contentions are that the assessment has not abetted since the time limit for issue of notice under section 143(2) of the Act expired before date of search - HELD THAT - There is no addition made under section 153C of the Act as the assessment is not abated on the date of search and partly allow the appeal of the assessee. Restrict the estimation of income @ 8% of gross receipts and partly allow the grounds of appeal of the assessee. Addition being 1/3rd of the cash seized at the time of search - HELD THAT - As assessee has cash withdrawals prior to the date of search. Therefore, the AO is not justified in making addition - we direct the AO to delete the addition and allow this ground of appeal of the assessee. Addition being 1/3rd of the gold seized at the time of search - HELD THAT - In the present case, the assessee has disclosed 329 grams jewellery purchased in A.Y. 2011-12 and 60 grams of jewellery received during marriage and the total aggregating to 379 grams. We find the coordinate bench of tribunal has dealt in the case of Shri Panati Vittalnath Reddy VS DCIT 2020 (3) TMI 572 - ITAT BANGALORE has deleted the addition - The assessee is owning the jewellery aggregating to 389 grams and supported with the evidence. We are of the view that no addition can be sustained.

Summary

Issues Involved:
1. Validity of assessment under section 153C of the Income Tax Act.
2. Estimation of business income.
3. Addition of cash seized during the search.
4. Addition of gold seized during the search.
5. Interest under sections 234-A, 234-B, and 234-C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Assessment under Section 153C:
The assessee challenged the validity of the assessment under section 153C, arguing that the conditions precedent for invoking this section were absent. The Tribunal referred to a similar case (Shri. Panati Vittalnath Reddy vs DCIT) where it upheld the validity of proceedings under section 153C, noting that the search led to the discovery of valuables, cash, and jewelry. The Tribunal confirmed the validity of the assessment under section 153C, dismissing the assessee's appeal on this ground.

2. Estimation of Business Income:
The assessee contested the estimation of business income at 12% of gross receipts by the AO, which was reduced to 8.5% by the CIT(A). The Tribunal observed that the assessment for the year under appeal had not abated, and no incriminating material was found during the search. Referring to the same case (Shri. Panati Vittalnath Reddy vs DCIT), the Tribunal decided that no addition could be made under section 153C for the assessment year under consideration. Consequently, the Tribunal deleted the addition and allowed the appeal on this ground.

3. Addition of Cash Seized During the Search:
The assessee argued against the addition of ?4,93,000, representing 1/3rd of the cash seized. The Tribunal noted that the assessee had withdrawn ?7 lakh a week before the search, which could explain the presence of the cash. Given the nature of the assessee's business, which required holding cash for operational expenses, the Tribunal found the addition unjustified and directed the AO to delete it.

4. Addition of Gold Seized During the Search:
The assessee contested the addition of ?16,42,900, representing 1/3rd of the gold seized. The Tribunal referred to the same case (Shri. Panati Vittalnath Reddy vs DCIT) where it was determined that the jewelry belonged to the entire family and not just the assessee. The Tribunal found that the assessee had disclosed 329 grams of jewelry in the balance sheet and received 60 grams during marriage, totaling 389 grams. It concluded that no addition could be sustained and directed the AO to delete it.

5. Interest under Sections 234-A, 234-B, and 234-C:
The assessee denied liability for interest under sections 234-A, 234-B, and 234-C. However, this issue was not specifically addressed in the Tribunal's detailed analysis.

Conclusion:
The Tribunal upheld the validity of the assessment under section 153C but found the estimation of business income and the additions of cash and gold seized during the search to be unjustified. It directed the AO to delete these additions and partly allowed the appeals for the assessment years 2013-14, 2014-15, and 2015-16.