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2022 (4) TMI 1169 - AT - Income TaxAssessment u/s 153A - proof of incriminating material found in search - estimation of profit - enhancement made by the ld. CIT (A) - HELD THAT - It is an undisputed fact that assessee had become NRI w.e.f. 01.04.2015 and nowhere it is found that assessee carried out any business operation or had any business connection in India once he became NRI. - therefore no addition could have been made. The allegations made by the AO and the interpretation on which he has drawn his presumption after referring to certain foreign entities has been duly explained by the ld. counsel as stated above which has not been rebutted before us nor has been found favour by the CIT (A). CIT (A) has given a very categorical finding that no evidence has been found in the form of seized material or statement to prove that agreement of 2006 between CMF and assessee was extended beyond 31.12.2012 and beyond this period CMF was under any obligation to share the profits with the assessee. Even in various information received through FTTR not single information has been received that either Fedrigoni or CMF has given any money for their India operation for supply of currency notes to Assessee. This finding of ld. CIT (A) without any rebuttal or material information on record cannot be tinkered with. Accordingly the finding of the ld. CIT (A) that after the assessee had become NRI no income has arisen or accrued in India i.e. after 01.04.2015 and therefore even in terms of section 9(1)(i) no income is taxable in the hands of the assessee is upheld. CIT (A) has held that post 31.12.2012 the assumption made by the AO after the period 01.01.2013 is purely based on presumption that there might be continuation of terms and conditions of this agreement which was without any basis or evidences albeit on conjectures and surmises. The alleged money received by the assessee through various dubious entities during FYs 2015-16 2016-17 as alleged by the AO that assessee might have received money on account of share of profit from CMF in connection of its Indian activities is wholly erroneous and none of these informations or material found which he has been referred to by the ld. CIT DR or by the AO even remotely point out that through these dubious entities assessee had carried out any activities in India and accordingly independently also we find that no income has been taxed in India from AYs 2013-14 to 2017-18. Now coming to the additions sustained or enhanced by the ld.CIT (A) in AY 2012-13 first of all even though ld. CIT (A) had admitted that there is no incriminating material or document or any evidence either found during the course of search or even after the post search in the year that post 2012 any payment received by the assessee from CMF or any of its entities. Once it is an admitted fact then in the case of unabated assessment where the assessment has attained finality at the time of search no addition can be made on presumption or estimate basis without any reference to any seized material. Therefore entire addition/ enhancement made by the ld. CIT (A) has no legs to stand and the same is directed to be deleted in view of the judgment of Hon ble jurisdictional High Court in the cases of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Meeta Gutgutia 2017 (5) TMI 1224 - DELHI HIGH COURT In fact this proposition that no addition can be made without any incriminating material would be applicable for AYs 2013-14 2014- 15 2015-16 also therefore on legal ground also no addition can be made for these years. Insofar as additions made in AYs 2016-17 and 2017-18 are concerned which are abated assessment and assessment of year of search there is no evidence indicating that assessee had carried out any operation in India or has received any payment from any entity for business carried out in India. In so far as strong reliance made by the CIT DR to FTTR information as incorporated above we find that none of these informations even remotely suggest that assessee has earned or received any payment in any account for supply of currency paper notes from CMF or Fedrigoni entity for Indian supply. The observation and the information as supplied by the CIT DR has been rebutted by the ld. counsel for the assessee as incorporated above and from the perusal of the same we find that there is nothing which can lead to any inference or the conclusion that the receipts from foreign companies were in relation to services rendered by the assessee to Fedrigoni in India. Thus even the FTTR reference cannot be considered as material on record to support the case made out by the Assessing Officer which goes to prove that his assessment of income was purely based on surmises and presumptions as noted above. Thus not only the finding of the ld. CIT (A) is confirmed but the information supplied by the CIT DR has no correlation or effect so as to reverse the finding of the ld. CIT (A). Accordingly the submissions of the ld. CIT DR are rejected and the order of the ld. CIT (A) is affirmed. - Decided in favour of assessee.
Issues Involved:
1. Legality of additions made under section 153A without incriminating material. 2. Validity of the enhancement of income by CIT(A) for AY 2012-13 and 2013-14. 3. Taxability of income for AYs 2016-17 and 2017-18 when the assessee was a non-resident. 4. Validity of the foreign references and information received through FTTR. 5. Treatment of receipts in foreign entities and their connection with alleged undisclosed commission income. Detailed Analysis: 1. Legality of Additions Made Under Section 153A Without Incriminating Material: The Tribunal noted that the assessments for AYs 2012-13 to 2015-16 had attained finality and were concluded. No incriminating documents or adverse information indicating undisclosed income were found during the search. The Tribunal emphasized that the additions made by the AO were based on presumptions and estimates without any material evidence. The Tribunal relied on the judgments of Hon’ble Delhi High Court in the cases of CIT vs. Kabul Chawla and Meeta Gutgutia Prop. M/s. Ferns ‘N’ Petals, which held that no addition can be made in the absence of incriminating material in concluded assessments. Hence, the additions for these years were deleted. 2. Validity of the Enhancement of Income by CIT(A) for AY 2012-13 and 2013-14: The CIT(A) enhanced the income for AY 2012-13 and 2013-14 on the basis of the agreement between the assessee and CMF, which was valid up to 31.12.2012. The Tribunal observed that even though the agreement was valid up to 31.12.2012, no income or commission was received by the assessee post 01.04.2011. The Tribunal held that in the absence of any incriminating material or evidence found during the search, the enhancement made by the CIT(A) was not sustainable. Hence, the enhancement for these years was deleted. 3. Taxability of Income for AYs 2016-17 and 2017-18 When the Assessee Was a Non-Resident: The Tribunal noted that the assessee became a non-resident w.e.f. 01.04.2015. The AO made additions on the presumption that the assessee might have received income through foreign entities for services rendered in India. The Tribunal observed that there was no evidence indicating that the assessee carried out any operations in India or received any payment for business activities in India post 01.04.2015. The Tribunal relied on the judgment of Hon’ble Delhi High Court in the case of Suresh Nanda, which held that the onus was on the Revenue to prove that the income credited in the bank account was a result of income accrued in India. Hence, the additions for AYs 2016-17 and 2017-18 were deleted. 4. Validity of the Foreign References and Information Received Through FTTR: The Tribunal observed that the foreign references and information received through FTTR did not provide any evidence that the assessee received any income from CMF or Fedrigoni for Indian operations. The Tribunal noted that the information received through FTTR did not establish any nexus between the foreign entities and the alleged undisclosed income. The Tribunal held that the foreign references were based on assumptions and presumptions without any concrete evidence. Hence, the information received through FTTR was not considered as material evidence. 5. Treatment of Receipts in Foreign Entities and Their Connection with Alleged Undisclosed Commission Income: The Tribunal observed that the receipts in foreign entities were in relation to independent services rendered by those entities and had no nexus with the supply of bank note paper by Fedrigoni to RBI. The Tribunal noted that the AO's allegation that the receipts by foreign entities were in lieu of alleged services rendered by the assessee was purely based on assumptions and presumptions. The Tribunal held that the corporate veil of such companies could not be lifted to tax the receipts in the hands of the assessee without any incriminating material. Hence, the additions based on the receipts in foreign entities were deleted. Conclusion: The Tribunal deleted the additions made by the AO for all the assessment years under consideration. The Tribunal held that the additions were based on presumptions and estimates without any incriminating material or evidence found during the search. The Tribunal also deleted the enhancement made by the CIT(A) for AY 2012-13 and 2013-14. The Tribunal upheld the finding of the CIT(A) that no income had accrued or arisen in India for AYs 2016-17 and 2017-18 when the assessee was a non-resident. The Tribunal rejected the information received through FTTR as it did not provide any concrete evidence of undisclosed income.
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