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TMI Blog2017 (10) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... id. 4. Without prejudice, it is submitted that the addition of Rs. 9,20,624/- for alleged cash shortage, which is treated as unexplained investment is highly arbitrary and without basis. 5. It is submitted that the sources available to the credit of the appellant, fully explained the investment in land and other outgoings. The Assessing Officer was not justified in treating any part of the investment as not explained. 6. It is submitted that the entire assessment and additions made are arbitrary and illegal and liable to be set aside. The addition of Rs. 60,000/- representing agricultural income, as undisclosed income, is also arbitrary. 7. In this connection, it is respectfully submitted that the CIT (A) has failed to consider the arguments put forward at the time of hearing and the written submissions, fairly and judiciously. The contentions taken in the argument note submitted before the CIT (A), a copy of which is produced herewith, may kindly be treated as part of these grounds. 8. The agricultural income declared should have been treated as an available source against the various investments and outgoings considered in the asst. order. 9. The levy of interest u/s 234A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the notices under section 153C read with section 153A were issued to the assessee for six assessment years preceding the year on 30/08/2012. In response thereto, the assessee requested that the return of income filed before the Income Tax Officer may be treated as the return in response to notice under section 153C for the assessment year 2006-07 to 2011-12 for which the notices under section 153C were issued. The Assessing Officer completed the assessment in each of the cases by making the additions as detailed below: Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Income declared 122918 138070 141514 173046 188056 596657 737186 Add: Agricultural Income Treated as unexplained Cash credit 60000 60000 200000 200000 200000 300000 430000 Cash shortage treated As unexplained Investment 920624 27372 - 270658 1066025 1043928 - Undisclosed income Purchase of land) - - - 2930600 - - 544000 Undisclosed income Money received from Sri KO Varghese Father) 200000 Undisclosed income (money received from Sri Pelexy K Varghese, Brother) - - - - - - 13150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )-2 vs. Index Securities Private Ltd., Vidya Shankar Investment Private Limited 2017(9) TMI 585 Delhi High Court (vi) Principal Commissioner of Income Tax (Central) vs. T. S. Pulses Pvt. Ltd. 2017 (8) TMI 571 Delhi High Court 5. Learned D. R., on the other hand, contended that the incriminating material was duly found. For this our attention was drawn towards the statement recorded during the course of the search in which the assessee has accepted the cash payment in reply to question No. 4 for the purchase of land. 6. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We have gone through the provisions of section 153C as well as the case laws as relied by learned A.R. Now the question before us whether the assessment made under section 153C in the case of the assessee for the assessment year 2006-07 to 2010-11 are valid or not, whether any addition can be made in absence of any incriminating material being found during the course of search if the assessment has already been completed before the date of search. To decide this issue, we have to look into the provisions of the section 153A under Chapter XIV under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner : Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation For the removal of doubts, it is hereby declared that, (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section ; (ii) (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." "153C ASSESSMENT OF INCOME OF ANY OTHER PERSON (1) Notwithstanding anything contained in section 139, section 147, sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person in whose case search is conducted u/s.132 of the Act. Therefore, for initiating action U/S.153C of the Act and framing assessment U/S.153A of the Act, the pre-requisite is that the satisfaction of the Assessing Officer that the money, documents and papers, etc belongs to a person other than the person in whose case search is conducted u/s.132 of the Act. 6.2 It is apparent from the language of section that the section does not require that the documents belonging to the assessee must be incriminating documents. Section 153C gives the jurisdiction to the Assessing Officer once the documents belonging to the assessee are found in the case of the assessee in whose case the search had taken place. It is not the submission of learned A. R. that during the course of search, documents belonging to the assessee or pertaining to the assessee were not found. The submission of learned A.R. relates to that no incriminating documents have been found during the assessment year 2007-08 to 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istics Ltd., no doubt the addition in the case of the assessee can be made by the Assessing Officer only on the basis of incriminating material found during the course of search but the Assessing Officer got jurisdiction for initiating proceedings u/s.153c r.w. section 153A against the assessee in view of documents etc. belonging to the assessee are found in the case of the person in whose case search had taken place. Thus, this decision will help the assessee. 6.6 Similar view has been taken in the cases discussed as under: We noted that Hon'ble Delhi High Court in the case of Chetandas Laxmandas 254 CTR (Del) 392 has taken similar view. In para 11 of this judgement, the Hon'ble High Court held that "obviously an assessment has to be made under this section only on the basis of the seized material". Even we noted that the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, 352 ITR 493 (Del), under para 20, it has been observed as under: "Even if assessment order had already been passed in respect of one or any of the six relevant assessment years either under section 143(1)(a) or 143(3) prior to the initiation of search, still the Assessing Officer is empowere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abated in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. We noted that the decision of Special Bench has been confirmed by Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (NHAVA SHEVA) LTD. [2015] 374 ITR 645 (Bom). We noted that Hon'ble Kerala High Court in the case of CIT vs. Promy Kuriakose [2016] 386 ITR 597 (Ker) while discussing the provisions of section 153C under para 10 observed as under: "10. A comparative analysis of the provisions contained in sections 153A and 153C reveal that jurisdiction under section 153C can be invoked by the Assessing Officer only when money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned and it is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred." 6.8. We have also gone through other decisions, copy of which has been placed on record before us. The propositions of the law in all these decisions are that if during the course of search, documents pertaining to the assessee are found, the Assessing Officer has the jurisdiction under section 153C of the Act but the addition in respect of the assessment, which has not been abated, can be made only on the basis of the incriminating material found during the course of search not otherwise. 7. Now coming to assessment year 2006-07 to 2010-11. We noted that no incriminating material, during the course of search, was found in respect of the agricultural income treated as unexplained cash credit as well as cash shortage treated as unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed below: 04/09/2008 Reliance Capital Rs. 7,50,000 04/09/2008 Standard Chartered Bank Rs.11,00,000 01/11/2008 Barclays Bank Rs.15,00,000 The Assessing Officer was not satisfied about the source as they were taken in the name of M/s Whitelines Marketing Associates, a partnership firm in which the assessee is the Managing Director and was credited in the books of account of the said firm. The Assessing Officer noted that after deducting the bank charges, the said loan has been credited into the books of the assessee firm. The loans were taken subsequently while all five pieces of land were registered in the name of the assessee on 18/06/2008, 02/07/2008 and 10/07/2008. The Assessing Officer took the view that no seller will register the land in favour of the assessee until and unless he received the on-money. The Assessing Officer therefore made the addition of Rs. 29,30,600/-. When the matter went before the CIT(A), the assessee submitted an affidavit before the CIT(A), available at page No. 57 of the paper book, retracting the statement made during the course of search. The affidavit is dated 09/03/2016. No such retraction was made before filing of the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acceptance by the Departmental Authorities but Departmental Authorities did not proceed further with the investigation in order to locate unaccounted income, the assessee cannot deny later the truth or the correctness of the declaration made at the time of search. Where the retraction was not supported by any independent or reliable evidence to prove incorrect nature of facts confined in the original statement, the Assessing Officer could be justified in making impugned addition on the basis of the statement at the time of search. We noted that in the case of Carpenters Classics (Exim) P. Ltd. vs. DCIT [2008] 299ITR (A.T.) 124 (ITAT[Bang]), the Tribunal has held that where retraction of admission of the undisclosed income is to be made is accepted from the assessee or the person admitting undisclosed income to do so within a reasonable time when the retraction is detailed and there is long interval between the admission and the retraction, benefit of retraction cannot easily be accepted. When credit entries are found in the books during the course of search or where receipts were also there along with cheque receipt and cheque receipts were admitted to be additional jobwork recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settled law that the statement recorded during the course of the search will be valuable evidence being incriminating document found during the course of search. Hon'ble Jurisdictional High Court in the case of CIT vs. St. Francis Clay Décor Tiles [2016] 385 ITR 624 (Ker) has held as under: "20. On a plain reading of section 153A, it is clear that once search is initiated under section 132 or a requisition is made under section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year following within six assessment years referred to in clause (b). It further treats the returns so filed as if such return were a return required to be furnished under section 139. So that on a reading of section 153A(1) it is categorical and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk SB A/c No.6135 (Varghese) 934 Investment in business- M/s Whiteline marketing associates 4,00,000 Money given to brother Pelexy K Varghese 5,00,000 Tuition Fee 20,000 Closing balance 2,722 2410012 2410012 12.1 The Assessing Officer has recasted the said cash flow by taking the opening balance to be zero as in the recasted cash flow statement for assessment year 2010-11 the closing balance was taken to be zero. The Assessing Officer therefore, modified the cash flow statement and noted that there was a cash shortage to the extent of Rs. 10,43,928/-. 13. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. Since the assessment for the assessment year 2010-11 was not abated and no material was found during the course of search, on the basis of which the cash flow statement for the assessment year 2010-11 has to be modified, therefore, in our view, the assessee has to get the set off of opening balance of the cash in hand amounting to Rs. 4,83,751/-. We accordingly reduce the addition by the said amount. We also noted that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee becomes infructuous and stands dismissed as such. 14.1 Now coming to the estimation of the agriculture income. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that during the assessment year 2006-07, the assessee was having 54 cents of the agricultural land and from which the assessee has returned the agriculture income to the extent of Rs. 60,000/-. During the assessment year 2007-08 and 2008-09 the assessee has returned the agriculture income at Rs. 60,000/- and Rs. 2,00,000/-. During the assessment year 2009-10 also, the assessee has returned the agriculture income at Rs. 2,00,000/-. At the end of the assessment year 2009-10, the assessee has bought the agricultural land measuring 141.580 cents and subsequent to that also the assessee has brought 23 cents of agricultural land at Vayanasalapady at Kothamangalam. This is as per the statement given by the assessee during the course of search in reply to question No. 4. Thus, during the impugned assessment year the assessee was having agricultural land to the extent of 218.580 cents. During the assessment year 2010-11 also the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the Assessing Officer to recompute the interest levied under section 234A, 234B & 234C of the Act after giving effect to this order. 16. Ground Nos. 1,2,6 and 8 are general in nature and do not require any adjudication therefore, the same are dismissed as such. 17. Ground No. 3 relates to the sustenance of addition of Rs. 5,44,000/- in respect of investment made in the land purchase. The Assessing Officer during the course of assessment noted that during the impugned assessment year the assessee has purchased the land on various dates consisting of five pieces of 10 cent, 13 cent, 11.5 cent, 13 cent and 9.5 cent for a sum of Rs. 5,44,000/-, Rs. 6,85,000/-, Rs. 6,15,000/-, Rs. 6,96,000/- and Rs. 24,90,000/- for which the documents price were Rs. 4,50,000/-, Rs. 3,30,000/-, Rs. 3,77,000/-, Rs. 4,29,000/- and Rs. 4,06,500/-. He went through the cash flow statement furnished by the assessee and noted that two plots of the land for Rs. 5,44,000/- and Rs. 6,85,000/- were purchased on 06/05/2011 and 07/05/2011 in his name and in the name of his wife Mini Eldhose. The Assessing Officer noted that on 07/05/2011 there was a withdrawal of Rs. 6,80,000/- from the capital account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the deletion of Rs. 13,50,000/- Therefore, we delete the addition of Rs. 5,44,000/-. Thus, ground No. 3 stands allowed. 19. Ground No. 4 relates to the estimate of the income by way of profit on sale of land at Rs. 36,000/-. 20. The facts related to this issue, in brief, are that the Assessing Officer noted from the cash flow statement submitted by the assessee that the assessee has sold the land during the year for a sum of Rs. 7,15,000/- and Rs. 5,50,000/- but the assessee has not shown any profit on the said transaction therefore, he added the same in the income of the assessee. When the matter went before the CIT(A), the CIT(A) did not give the specific finding, even though the assessee has taken the said ground before the CIT(A). 21. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We have also gone through the cash flow statement submitted by the assessee before the Assessing Officer during the course of assessment proceedings in replyto the notice issued under section 142(1) which is appearing at para 8 of the assessment order. From page 4 of the assessment order, we find that the assessee has s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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