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2022 (9) TMI 1140 - AT - Income TaxAssessment u/s 153A - Unexplained income - income can be considered as unexplained either u/s. 68 or u/s. 69 - documents found during search pertain /relate to the assessee and did not belong to the assessee - HELD THAT - We find no infirmity in the order of the CIT(Appeals), who specifically observed that in view of the specific satisfaction made in the assessment order to the effect that the documents pertain/relate to the assessee, it is evident that documents did not belong to the assessee, as was the mandate in view of various judicial precedents passed by the High Court/Tribunals in order to invoke provisions of 143(3) r.w.s. 153C of the Act prior to the amendment on 1st June 2015. CIT(Appeals), after taking into consideration the facts of the case and applicable judicial precedents has correctly applied the law to the instant facts before us, and we accordingly uphold the order of Ld. CIT(Appeals).
Issues Involved:
1. Validity of initiation of proceedings under section 153C of the Income Tax Act. 2. Addition of Rs. 2,00,00,000 as unexplained income by the Assessing Officer (AO). 3. Merits of the addition made by the AO. Detailed Analysis: 1. Validity of Initiation of Proceedings under Section 153C: The primary issue was whether the proceedings under section 153C were valid, given that the search was conducted before the amendment to section 153C on 1st June 2015. The amendment substituted the words "belong to" with "pertains or relate to." The assessee argued that the documents found during the search did not "belong to" him, and thus, the proceedings under section 153C could not be initiated based on those documents. The CIT(Appeals) agreed with the assessee, citing the Gujarat High Court's judgment in Anilkumar Gopikkrishna Agrawal vs ACIT (2019) 418 ITR 25 (Guj), which held that the amendment to section 153C could not be applied retrospectively. The court observed that the documents found during the search did not belong to the assessee, and hence, the AO had no jurisdiction to make the addition based on such documents. The CIT(A) also referred to the Gujarat High Court's decision in Mukesh Mankechand Sheth vs ACIT (2020) 166 taxman.com 618 (Guj) to support this view. 2. Addition of Rs. 2,00,00,000 as Unexplained Income: The AO added Rs. 2,00,00,000 to the assessee's income, claiming it was unexplained. This addition was based on documents found during a search that indicated a cash transaction involving the assessee. The AO presumed that the assessee had paid cash against a loan received by cheque and that this cash transaction was unexplained. The CIT(A) found that the documents did not belong to the assessee and were merely loose papers without any corroborative evidence. The CIT(A) held that the AO's addition was based on assumptions and not supported by any concrete evidence. The CIT(A) directed the deletion of the addition, emphasizing that the AO's approach was not sanctioned by law. 3. Merits of the Addition Made by the AO: Even on merits, the CIT(A) found the AO's addition unsustainable. The assessee had taken a loan by cheque and paid interest on it, with TDS deducted as per law. The CIT(A) noted that the AO's presumption of cash transactions was not supported by any evidence. The CIT(A) cited the Gujarat High Court's decision in DCIT vs Narendra Garg and Ashok Garg (AOP) 72 taxman.com 355, which held that the AO cannot proceed on mere suspicion and must have concrete evidence to support any addition. The ITAT upheld the CIT(A)'s order, agreeing that the documents found did not "belong to" the assessee and that the AO's addition was based on assumptions without any corroborative evidence. The ITAT also referred to its own decision in DCIT v. Zodiac Mediquip Ltd in ITA number 1646/Ahd/2019, where it had deleted a similar addition based on documents found from a third party. Conclusion: The ITAT dismissed the Department's appeal, upholding the CIT(A)'s order that deleted the addition of Rs. 2,00,00,000. The ITAT found no infirmity in the CIT(A)'s order, both on the validity of the initiation of proceedings under section 153C and on the merits of the addition made by the AO. The cross-objections filed by the assessee were dismissed as not pressed.
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