2021 (1) TMI 392 - AT - Income Tax

Assessment u/s 153A - HELD THAT - AO can make assessment u/s. 153A only in the case, which is pending for regular assessment u/s. 143. In the appellant's case as stated in AR's letter order under section 143(1) stood completed. Therefore, appellant's case squarely falls outside the purview of section 153A. Further, no new materials were found or unearthed during the course of search. As relying on MR. M.A. SIDDIQUE, MR. MOHAMMED SAFWAN case 2020 (8) TMI 835 - ITAT BANGALORE we hold that in the present case also, the Assessment Order passed by the AO under section 153A for Assessment Years 2010-11 and 2011-12 are bad in law and therefore, other grounds regarding merits of various additions in these two years are academic and no adjudication is called for about those grounds in these two years. Estimation of income - as argued CIT(A) was not justified in upholding the estimation of profits at 4% which is not backed by any evidence of comparable cases while in the case of supari business, profits are not above 2% - AO made addition @12% of the alleged undisclosed sales turnover based on data retrieved from the impounded materials - HELD THAT - AO has taken the profit percentage at 12% but he has held that in such a business, the normal profit percentage is 2 - 3% and he held that the ends of justice would be met if profit percentage is computed at 4% as in unaccounted transaction, the profit would be more as government taxes and levies are not paid and on this basis, he sustained the profit to the extent of 4% instead of 12%. In the case of Mr. M.A. Siddique Vs. DCIT 2020 (8) TMI 835 - ITAT BANGALORE the facts are similar as noted by the Tribunal we hold that in the present case also, for Assessment Year 2012-13, profit from arecanut business should be computed by applying profit rate of 2% and this will meet the ends of justice in the facts of the present case. This ground is partly allowed. Addition of cash deposits in bank accounts - HELD THAT - In the present case this is not the allegation of the AO that any bank account is unaccounted or that any deposit entry of such declared bank account is not accounted for in the books of assessee. Learned DR of the Revenue also could not point out any difference in facts in present case and Mr. M.A. Siddique Vs. DCIT 2020 (8) TMI 835 - ITAT BANGALORE and hence, respectfully following this Tribunal order, we hold that in the present case also, there is valid basis of this allegation of the AO that there is unaccounted cash income simply on this basis that deposits in bank account exceeds the declared turnover and therefore, we delete this addition. Ground of the assessee's appeal allowed.

Summary

Issues Involved:
1. Validity of Assessment Orders under Section 153A.
2. Undisclosed Profit from Supari Business Operations.
3. Cash Deposits in Bank Accounts Treated as Undisclosed Income.

Detailed Analysis:

1. Validity of Assessment Orders under Section 153A:
The assessee argued that the assessments made under Section 153A were invalid because no new material was found during the search, and the original assessments were already completed under Section 143(1). The Tribunal noted that the CIT(A) had acknowledged that the case fell outside the purview of Section 153A as no new material was unearthed during the search. The Tribunal referenced a similar case (Mr. M.A. Siddique Vs. DCIT) where it was held that the assessment orders under Section 153A were bad in law under similar circumstances. Consequently, the Tribunal ruled that the assessment orders for Assessment Years 2010-11, 2011-12, and 2014-15 were invalid, making other grounds academic for these years.

2. Undisclosed Profit from Supari Business Operations:
The assessee contested the CIT(A)'s decision to uphold the additions made by the Assessing Officer (AO) regarding undisclosed profits from supari business, arguing that the profit estimation at 4% was not justified. The Tribunal referred to the case of Mr. M.A. Siddique Vs. DCIT, where it was held that a 2% profit rate would meet the ends of justice in the supari business. The Tribunal directed the AO to compute the income from supari business at a 2% profit rate for the relevant years (2012-13, 2013-14, 2015-16, and 2016-17), providing partial relief to the assessee.

3. Cash Deposits in Bank Accounts Treated as Undisclosed Income:
The assessee challenged the additions made by the AO, which were upheld by the CIT(A), regarding cash deposits in bank accounts being treated as undisclosed income. The Tribunal noted that the AO had based the additions on the premise that cash deposits exceeded the declared turnover. However, the Tribunal found that the AO did not provide specific findings that any bank account or entries were unaccounted for. The Tribunal referenced the case of Mr. M.A. Siddique Vs. DCIT, where it was held that such additions were invalid without specific evidence. Consequently, the Tribunal deleted the additions related to cash deposits for Assessment Years 2015-16 and 2016-17.

Conclusion:
- Appeals for Assessment Years 2010-11, 2011-12, and 2014-15 were allowed, invalidating the assessment orders under Section 153A.
- Appeals for Assessment Years 2012-13, 2013-14, 2015-16, and 2016-17 were partly allowed, with the Tribunal directing the AO to compute the income from supari business at a 2% profit rate and deleting the additions related to cash deposits in bank accounts.