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2021 (8) TMI 923 - AT - Income TaxAssessment u/s 153A - Whether no search conducted on the assessee but a survey under section 133A of the Act was conducted? - whether the assessment is to be framed under section 143(3) r.w.s.153C of the Act or under section 143(3) r.w.s.153A of the Act. - HELD THAT - Assessment has to be framed u/s 143(3) r.w.s. 153C of the Act as there was no search on the assessee u/s 132(1) of the Act. The assessee was only covered under survey action u/s 133A of the Act on 24.01.2011. So the score the order of the AO is bad in law In the present case the assessee is a person other than the searched person. Proceedings u/s 153C of the Act can be initiated when the pre-conditions are fulfilled otherwise the proceedings and consequent assessment would be rendered bad and invalid. We note that no such satisfaction has been recorded by the AO of the searched person on the basis of incriminating materials seized during the search as has been testified and brought out by RTI application by the assessee and response thereto by the AO that no satisfaction has been recorded by the AO of the searched person i.e. Katrina Kaif. No incriminating documents were seized during search on Kaitrina Kaif belonging to the assessee as is apparent from the punchnama prepared during search. Also during the course of recording of statement of Kaitrina Kaif not even a single query was raised on the basis of materials seized from Ms Katrina Kaif about the assessee - contentions of the Ld. Counsel of the assessee carry weight that even if the assessment framed is presumed to be under section u/s 143(3) r.w.s. 153C of the Act, even then the assessment is bad in law as the notice has been issued with the satisfaction of the AO of the searched person. In our opinion the assessment framed by the AO is without jurisdiction and can not be sustained. Undisclosed receipt from the clients - Addition on the basis of some rough workings found from the back up of the computer of Ms. Sandhya Ramachandran for the period for which she was not employed with the assessee company - HELD THAT - We find that seized documents do not prove that any cash is paid to Mr. Zarine Khan whose name is mentioned in the document. We also note that Mr. Zarine Khan has not been examined. Moreover Ms. Sandhya Ramachandran stated in her statement that she was not aware of the seized documents as the same pertain to the period prior to joining the employment. Addition in this case is based upon surmises and conjuncture and AO ld CIT(A) have failed to bring any material on record and consequently the same can not be sustained. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The ground no. 1 of the assessee s appeal is allowed. Addition of undisclosed professional receipts on the basis of blackberry conversation between one Ms. Sandhya Ramachandran and unknown some third party - HELD THAT - We find that this addition was also based on conjuncture and surmises. Upon perusal of the record before us we find that there is no evidence of any cash payment to Ms. Katrina Kaif or on her behalf. Even the third party who was on the chat with Ms. Sandhya Ramachandran is not known and Ms. Katrina Kaif in her statement has denied such transactions. Addition on the basis of entries in the loose papers seized - CIT(A) deleted the addition by observing and upholding that addition as made by the AO is based upon the presumptions, assumptions and extrapolation and there was no materials before the AO - HELD THAT - The Supreme Court in Comman Cause 2017 (1) TMI 1164 - SUPREME COURT was dealing with incriminating materials in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. which were found during search. It was held that entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not books of account and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. The Bombay High Court in CIT v Devesh Agarwal 2017 (3) TMI 893 - BOMBAY HIGH COURT has held that no addition can be made on the basis of presumptions, surmises and conjectures. In view of these facts and the decisions as stated above, we are inclined to uphold the order passed by the ld CIT(A) on this issue. The ground no. 2 is allowed.
Issues Involved:
1. Jurisdictional validity of the assessment order under sections 153A and 153C. 2. Confirmation of various additions as unexplained expenditure based on rough workings. 3. Condonation of delay in filing cross objections. 4. Confirmation of additions based on blackberry conversations and loose papers. 5. Deletion of additions made by the AO on account of undisclosed receipts. Detailed Analysis: 1. Jurisdictional Validity of the Assessment Order: - The primary issue raised by the assessee was the jurisdictional validity of the assessment order framed under section 153A read with section 143(3) of the Act. The assessee contended that since there was no search conducted under section 132, but only a survey under section 133A, the assessment should have been made under section 153C, not 153A. - The Tribunal noted that a search was conducted on Katrina Kaif and Group, and incriminating materials were found. The assessee was part of this group and was issued a notice under section 153C, but the assessment was framed under section 153A. - The Tribunal held that the assessment should have been framed under section 153C, as the assessee was not the searched person. The Tribunal emphasized that proper satisfaction must be recorded by the AO of the searched person before issuing a notice under section 153C. Since no such satisfaction was recorded, the assessment was deemed invalid. - The Tribunal quashed the assessment order, allowing the assessee's appeal on this ground. 2. Confirmation of Various Additions as Unexplained Expenditure: - The assessee challenged several additions confirmed by the CIT(A) based on rough workings found from the backup of a computer belonging to an ex-employee, Ms. Sandhya Ramchandran. - The Tribunal found that these rough workings did not constitute sufficient evidence to justify the additions. The Tribunal emphasized that the documents did not belong to the period when the employee was with the assessee company and lacked corroborative evidence. - Consequently, the Tribunal directed the AO to delete these additions. 3. Condonation of Delay in Filing Cross Objections: - The assessee's cross objections were delayed by 33 days. The Tribunal considered the assessee's application for condonation of delay and supporting affidavit. - Citing the Supreme Court's observation in the case of Collector, Land Acquisition V. Katiji, the Tribunal preferred substantial justice over technicalities and condoned the delay. 4. Confirmation of Additions Based on Blackberry Conversations and Loose Papers: - The AO had made additions based on blackberry conversations between Ms. Sandhya Ramachandran and an unknown third party, as well as loose papers found during the survey. - The Tribunal noted that these additions were based on conjectures and surmises without any corroborative evidence. The Tribunal emphasized that there was no evidence of actual cash payments, and the involved parties had denied such transactions. - Referring to the coordinate bench's decision in the case of Katrina Kaif, the Tribunal directed the deletion of these additions. 5. Deletion of Additions Made by the AO on Account of Undisclosed Receipts: - The AO had made significant additions based on SMS and blackberry conversations, alleging unaccounted professional receipts. - The Tribunal found that these additions were based on assumptions and extrapolation without any corroborative evidence. The Tribunal noted that the corresponding additions in the case of Katrina Kaif had been deleted by the CIT(A) and affirmed by the coordinate bench. - The Tribunal upheld the CIT(A)'s deletion of these additions, emphasizing the lack of reliable evidence to support the AO's conclusions. Conclusion: - The Tribunal allowed the assessee's appeals and cross objections on jurisdictional and substantive grounds, quashing the assessment orders and directing the deletion of various additions. The revenue's appeals were dismissed. The Tribunal's decision was based on the principles of proper jurisdiction, evidentiary support, and substantial justice.
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