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2023 (3) TMI 199 - AT - Income TaxLegal validity of the notice issued u/s. 153A/153C - Treating the amount of loan as unexplained amount by the Ld. Revenue Authorities - HELD THAT - We find merit in the argument of the Ld. AR that in the absence of any incriminating material found in the premises of the assessee notice U/s. 153A of the Act cannot be issued. In the instant case the affidavit was found in the premises of Nexus Group but any corresponding corroborative evidence was not found in the premises of the assessee. In the absence of any evidence or incriminating material found in the premises of the assessee issuance of notice U/s. 153A could not be made and the assessment could not be framed U/s. 153A. The case law relied on by the Ld. AR in Mr. Trilok Chand Chaudhary 2019 (9) TMI 95 - ITAT DELHI by the Coordinate Bench of the Delhi wherein it was held that separate search warrant has been issued in the case of the assessee as well as in the case of other party and where the Assessing Officer has used the material found in the case of the other party in the assessment made U/s. 153A of the Act is not permitted in view of the express provision of the law. We are of the considered view that the assessment made by the Ld. Revenue Authorities U/s. 153A of the Act is not valid in law and therefore considered as void-ab-initio. Therefore we are inclined to quash the assessment order passed by the Ld. AO. Decided in favour of assessee. Unexplained Gold Jewellery - treatment of 222.21 gms of Gold Jewellery as unexplained in the hands of the assessee - R argued that 222.21 gms of Gold Jewellery belong to the granddaughter of the assessee who is not staying with the assessee but has kept in the premises of the assessee - HELD THAT - CIT(A) has rightly followed the Board s Instruction No. 1916 dated 11/5/1994 and has allowed the Gold in the possession of the assessee to an extent of 1600 gms in accordance with the family members in the premises of the assessee. Assessee s Representative could not substantiate with evidence that the balance of 222.21 Gms of Gold Jewellery belongs to the granddaughter of the assessee who had kept their jewellery in the assessee s premises. Neither the Ld. AR produced any copies of bills for claiming the jewellery being purchased by the assessee. In the absence of any material evidence to substantiate the holding of addition gold in the premises of the assessee we find that the Ld. CIT(A) has rightly given the benefit of Board s Instruction (supra) and accordingly treated the balance gold of 222.21 gms as unexplained. We are therefore inclined not to interfere in the decision of the Ld. CIT(A) on this issue. Accordingly these grounds raised by the assessee are dismissed. Gain on sale of land - cost of acquisition of the land - Sale consideration of plots considered as income of the assessee - AR submitted that the agricultural land converted into plots and sold by the assessee and should be considered as capital gains - DR submitted that the cost of acquisition of the land the cost of development of the land into plot was not produced before the Ld. Revenue Authorities and hence it cannot be considered - HELD THAT - Admittedly the assessee has sold three plots in the current year by converting the agricultural land into non-agricultural land which is considered as business income by the Ld. AO. It was also observed by the Ld. CIT(A) that the assessee has not submitted the Fair Market Value (FMV) on the date of conversion of the land for the purpose of considering it as capital gains and subsequently the FMV of the land on the date of conversion was also not submitted before the Ld. Revenue Authorities for considering the same as expenses / cost of acquisition by the assessee for the sale of plots. Assessee has not submitted the details of land development charges and has not produced copies of any bills either before the Ld. Revenue Authorities or before us. In the absence of any cogent evidence regarding the cost of acquisition of the agricultural land / conversion into plots obviously certain expenses would have been incurred by the assessee in acquiring the agricultural lands and cost towards conversion of the agricultural land in to plots. Considering the peculiar circumstances of the case it would be reasonable to estimate the business income at 20% on the sale value of Rs 23, 71, 000/-. We therefore direct the Ld AO to compute the business income as decided above and thus this ground raised by the assessee is partly allowed. Addition of interest - AR argued that the loan amount belongs to the wife of the assessee wherein the wife of the assessee has taken a loan on OD facility from Punjab National Bank Bhimavaram for Rs. 4 Crs which was the source for the loans given by the assessee for interest - HELD THAT - As admitted by Ld AR we find that the interest was not disclosed in the hands of the wife of the assessee. However incriminating evidences was seized with respect of interest by the assessee in the impugned AY. In view of this the Ld. Revenue Authorities have rightly considered it as income of the assessee during the impugned assessment year and hence we are inclined not to interfere with the decision of the Ld. CIT(A) on this issue. Thus this ground raised by the assessee is dismissed.
Issues Involved:
1. Legal validity of the notice issued under Section 153A/153C of the Income Tax Act. 2. Treatment of the amount of loan of Rs. 25 lakhs as unexplained. 3. Treatment of 222.21 grams of Gold Jewellery as unexplained. 4. Treatment of sale consideration of plots as business income or capital gains. 5. Addition of interest income. Issue-wise Detailed Analysis: 1. Legal Validity of the Notice Issued Under Section 153A/153C of the Income Tax Act: The assessee argued that the notice issued under Section 153A of the Income Tax Act was invalid as no incriminating material was found during the search and seizure operations at the assessee's premises. The affidavit relied upon by the Assessing Officer (AO) was found in the premises of Nexus Group, not in the assessee's premises. The Tribunal agreed with the assessee, citing precedents from the Delhi Tribunal, which held that material found in the search of another person cannot be used in the assessment under Section 153A of the Act. Consequently, the Tribunal quashed the assessment order passed by the AO, declaring it void-ab-initio. 2. Treatment of the Amount of Loan of Rs. 25 Lakhs as Unexplained: The AO treated the investment of Rs. 25 lakhs as unexplained under Section 69 of the Act, as it was not disclosed in the assessee's financial statements. The assessee contended that the affidavit mentioning the investment was made for the purpose of enabling the sanction of a loan by banks to related parties where the assessee stood as a guarantor. The Tribunal did not address this issue in detail as it became academic after quashing the assessment order on legal grounds. 3. Treatment of 222.21 Grams of Gold Jewellery as Unexplained: The assessee argued that the 222.21 grams of Gold Jewellery belonged to his granddaughter and other relatives. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], who had followed the Central Board of Direct Taxes (CBDT) Instruction No. 1916, dated 11/5/1994, allowing 1600 grams of Gold Jewellery for family members residing with the assessee. The Tribunal found no material evidence to substantiate the claim that the additional gold belonged to the granddaughter and other relatives and thus treated the balance gold of 222.21 grams as unexplained. 4. Treatment of Sale Consideration of Plots as Business Income or Capital Gains: The AO treated the sale consideration of Rs. 23,71,000/- from the sale of plots as business income. The assessee argued that it should be treated as capital gains and that the cost of development should be considered. The Tribunal noted that the assessee had not provided details of the Fair Market Value (FMV) on the date of conversion or the cost of development. In the absence of such evidence, the Tribunal estimated the business income at 20% of the sale value and directed the AO to compute the business income accordingly. 5. Addition of Interest Income: The AO added interest income of Rs. 4,34,310/- to the assessee's income, based on seized documents showing loans advanced to various parties. The assessee contended that the loan belonged to his wife, who had taken an OD facility from Punjab National Bank. The Tribunal found that the interest income was not disclosed in the wife's hands and that incriminating evidence was seized regarding the interest received by the assessee. Thus, the Tribunal upheld the addition of interest income by the AO. Conclusion: The Tribunal allowed the appeal for AY 2014-15 by quashing the assessment order on legal grounds. For AY 2017-18, the Tribunal partly allowed the appeal by estimating the business income at 20% of the sale value of plots and upheld the additions related to unexplained gold jewellery and interest income.
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