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Facts
The assessee initially filed an income return of Rs. 6.56 lakhs. During a search, 40 kgs of gold bullion, valued at Rs. 12.16 crores, was found in a locker, which the assessee claimed belonged to others and was opened under instruction. The assessee subsequently filed a revised return under Section 153A declaring Rs. 11.50 crores, including the bullion value, but could not explain the source, leading the AO to add Rs. 11.44 crores under Section 69 and tax it under Section 115BBE.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that despite the assessee declaring the bullion value in a return filed under Section 153A, the unexplained source of the 40 kgs gold bullion attracted the provisions of Section 69A and Section 115BBE. Since the additional income was detected during the search and its source was not explained, the AO and CIT(A) correctly applied these sections.
Key Issues
Whether the addition of unexplained gold bullion under Section 69 and its taxation under Section 115BBE was justified, even though the assessee had declared the amount in a revised return filed under Section 153A following a search operation.
Sections Cited
153A, 143(3), 69, 115BBE, 132(4), 139, 147, 148, 149, 151, 153, 132, 132A, 153B, 153C, 69A
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Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY & SHRI MANISH AGARWAL
The instant appeal filed by the assessee is directed against the order dated 05.08.2021 passed by the Ld. CIT(A)-29, New Delhi, arising out of the Assessment Order dated 31.12.2019 passed by the ACIT, CC- 25 under Section 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for Assessment Year 2017-18.
The matter relates to addition to the tune of Rs.11,44,00,000/- under Section 69 of the Act and also under Section 115BBE of the Act made by the Ld.AO and further confirmed by the First Appellate Authority.
The brief facts leading to the case are that the original return of income was filed by the assessee on 29.07.2017 declaring income at Rs.6,56,770/-. However, during the course of search conducted on JBM Group on 05.10.2017 wherein jewellery/bullion of 40 kgs of gold were found and revised return, therefore, was filed by the assessee declaring income at Rs.11,50,56,770/- on 31.03.2019 followed by return under Section 153A dated 12.10.2019 filed by the assessee at income already declared in revised return as aforesaid. In fact, during the course of search of locker No. L-2001 the assessee before us on oath under Section 132(4) of the Act stated that he was an employee of M/s Jay Bharat Maruti Limited and wholly survived on the remuneration received from the company. In response to question No. 7 he further stated that he was instructed forcefully to open locker in his name in order to keep the original document of the company and as per such instructions of M/s Surendra Kumar Arya, Smt. Neelam Arya and Sh. Anand Swaroop Khandelwal locker No. L-2001 at U & I Vaults was opened jointly in his name and in the name of Sh. Ram Avtar Aggarwal. He further stated that he used to enter into the locker room and not aware the contents in the locker by Smt. Neelam Arya. In fact, the documents or items whereof belonged to the said Smt. Neelam Arya and Sh. Suresh Kumar Arya as stated by the assessee. The source of such 40 kgs bullion valued by government valuer at Rs.12,16,00,000/- was not been able to be explained by the assessee. As the value of such gold was declared in the return filed by the assessee under Section 153A of the Act source whereof could not be established, the same was added in the hands of the assessee. The tax of additional income represented by unexplained gold bars was also found to be charged under Section 115BBE of the Act. The said order stood confirmed by the First Appellate Authority. While making addition the Ld. CIT(A) observed as follows:
“8. Ground Numbers 1 & 2 : These grounds of appeal for adjudication are primarily on the issue as to whether the amount which already forms part of the income shown in the Return of Income filed u/s 153A of the Act can be added back again in the assessment order ignoring the Return filed u/s 153A. I have gone through the return of income filed by the appellant u/s 153A of the Income Tax Act and from the perusal of the return of income filed u/s 153A it is seen that income of Rs 11,44,00,000/- has already been shown by the appellant in the return of income filed u/s 153A of the Income Tax Act. Further the appellant has not made surrender while filing the return of income. The AO has taken the income u/s 139 (1) of the Income Tax Act ignoring the return of income filed u/s 153A of the Income Tax Act and has made the addition of Rs11,44,00,000/- which already forms the part of income shown in the return filed u/s 153A of the Act.
8.1 Reference is made to Section 153-A of the Act which deals with assessment in case of search or requisition. Sub-section (1) :
Notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated under section 132 or books of account, etc. are requisitioned under section 132-A, after 31-5-2003, the assessing officer shall - (a) issue notice to such person for furnishing return of income in respect of each assessment year falling within six assessment years, within such time as may be specified and upon such return of income being filed, the provisions of the Act shall apply as if such return were a return required to be furnished under section 139; and (b) assess or re-assess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made.
8.2 In other words, section 153-A(1) provides that where a person is subjected to a search under section 132 or his books of accounts, etc. are requisitioned under section 132-A after 31-5-2003, the assessing officer is mandated to issue notice to such person to furnish return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. Such returns of income shall be treated to be returns of income furnished under section 139. Once returns are furnished, income is to be assessed or re-assessed for the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, once section 153- A(1) is invoked, assessment for 6 assessment years immediately preceding the assessment year in which search is conducted or requisition is made becomes open to assessment or re-assessment.
8.3 Two issues are of importance here. One is use of the expression "notwithstanding" in sub-section (1); and secondly that returns of income filed pursuant to notice under section 153-A (1)(a) would be construed to be returns under section 139. The use of non obstante clause in sub-section (1) of section 153-A i.e., use of the expression "notwithstanding" is indicative of the legislative intent that provisions of section 153-A(1) would have overriding effect over the provisions contained in sections 139, 147, 148, 149, 151 and 153.
Reference is also made to the second proviso to section 153-A(1) which is relevant:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this (sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:
The second proviso says that any assessment or re-assessment proceedings falling within the said period of six assessment years pending on the date of initiation of search under section 132 or making of requisition under section 132-A shall abate. As per this proviso, any assessment or re-assessment in respect of any assessment year falling within the said period of six assessment years is pending on the date of initiation of search or making of requisition, those assessment or re- assessment proceedings shall abate. In other words, pending assessment or re-assessment proceedings on the date of initiation of search or making of requisition shall abate.
8.4 Thus Section 153A of the Act, provides for the procedure for assessment in search cases. As referred to above, the said section starts with a non- obstante clause stating that it is, "notwithstanding anything contained in section 147, 148 and 149......." Further sub section(a) of section 153A(1) provides for issuance of notice to the persons searched under section 132 of the Act to furnish a return of income. However, the second proviso to section 153A of the said act makes it clear that assessment relating to any assessment year filed within a period of the six assessment years pending on the date of search under section 132 of the Act shall abate. Thus if on the date of initiation of search under section 132, any assessment proceeding relating to any assessment year falling within the period of the said six assessment years is pending, the same shall stand abated and the Assessing Authority cannot proceed with such pending assessment after initiation of search under section 132 of the said Act.
In the present case, search was conducted on the assessee on 5.10.2017. At that point of time assessment in the case of assessee for the assessment year 2017-18 was pending and thus got abated. It is trite law that once the assessment gets abated, the original return which had been filed loses its originality and the subsequent return filed under section 153A of the said Act (which is in consequence to the search action under section 132) takes the place of the original return. In such a case, the return of income filed under section 153A(1) of the said Act, would be construed to be one filedunder section 139(1) of the Act and the provisions of the said Act shall apply to the same accordingly.
8.5 The Honble High Court of Bombay in the case of Principal Commissioner of Income -tax, Central-2 vs JSW Steel Ltd, 422 ITR 71 and the Honble High Court of Delhi in the case of Principal Commissioner of Income -tax-19 vs Neeraj Jindal, 393 ITR 1, have pronounced judgements on the issue, as discussed in above paras.
8.6 Thus, Section 153A provides the procedure for completion of assessment where a search is initiated under Section 132 or books of account, or other documents or any assets are requisitioned under Section 132A after 31.05.2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under Section 132 or requisition was made under Section 132A. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or requisition under Section 132A, as the case may be, shall abate. Section 153A opens with a non- obstante clause relating to normal assessment procedure covered by Sections 139, 147, 148, 149, 151 and 153 in respect of searches made after May 31, 2003. The sections, so excluded, relate to returns, assessment and reassessment provisions. However, the provisions that are saved are those under Section 153B and 153C, so that these three Sections 153A, 153B and 153C are intended to be a complete code for post- search assessments. Considering that the non-obstante clause under Section 153A excludes the application of, inter alia, Section 139, it is clear that the revised return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. Therefore, the position that emerges from the above-mentioned provision is that once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139.
8.7 As discussed above, the addition as done by the AO in the assessment order of the amount of Rs. 11,44,00,000/- on account of possession of gold found and seized has already been shown by the appellant in the return of income filed u/s 153A of the Income Tax Act. In view of the discussion above and respectfully following the judicial pronouncements as quoted supra, I am of the view that the AO has wrongly taken the income of the appellant of Rs.6,56,770/- as per the Return filed u/s 139 (1) of the Income Tax Act ignoring the income of Rs. 11,50,56,770/- filed in the return of income u/s 153A of the Income Tax Act . The return of income filed under section 153A(1) of the said Act, would be construed to be one filed under section 139(1) of the Act and the provisions of the Act shall apply to the same accordingly. A return filed under Section 153A takes the place of the original return under Section 139, for the purposes of all other provisions of the Act. Accordingly the AO is directed to treat the Return of Income filed by the appellant u/s 153A as original return filed u/s 139(1) for the AY 2017-18 for all other provisions of the Act. In view of the above, the addition made by AO of Rs. 11,44,00,000/- in the order passed u/s 153A is not correct.
Now coming to the issue of taxability u/s 115BBE on the additional income of Rs 11,44,00,000/-. It is a matter of fact that during the course of search proceedings, the said bullion of Rs 11,44,00,000/- was found from the locker of the appellant. The said bullion of Rs. 11,44,00,000/- found during the course of search & seizure action was declared by the assessee in its revised return of income and also and also in the Return filed u/s 153A. Accordingly the assessee offered for tax the additional income, as discussed above of Rs. 11,44,00,000/-.
9.1 The additional income surrendered by the appellant was not a voluntary inclusion of the said income which the appellant has claimed in its submissions. Therefore, even though the said additional income of Rs.11,44,00,000/- was included in the Revised Return filed, it does not take away the fact that the said undisclosed income was unearthed by the Department during the course of search proceedings. The AO has not taken into cognizance the return filed u/s 153A and has accordingly treated the additional income of Rs. 11,44,00,000/- to be undisclosed income liable to be taxed in accordance with the provisions of section 115BBE of the I.T. Act. The right course of action that could have been taken by the AO was to start from the Return filed u/s 153A and then treat the additional income of Rs 11,44,00,000/- as unexplained income to be taxed u/s 69A of the Act and accordingly apply the provisions of section 115BBE of the Act. The intention of the AO, however was to tax the additional income of Rs. 11,44,00,000/-to be undisclosed income of the appellant, which was as per law.
9.2 In view of the above facts, I uphold that the unexplained bullion of Rs. 11,44,00,000/- attracts the provisions of section 69A of the Act. In the prepara it has been held that the return filed by the appellant u/s 153A was valid. Thus the said amount of addition of Rs 11,44,00,000/- has been included in the total income as per the return u/s 153A. However, the said additional income has been offered by the assessee for taxation at the regular rate of taxation. Since the said additional income of Rs 11,44,00,000/- was detected and offered for taxation by the assessee as a result of search, therefore provisions of section 69A and section 115BBE are attracted on this income. The decision of the AO to tax the said additional income of Rs.11,44,00,000/- under the provisions of section 69A of the Act and accordingly apply section 115BBE of the Act is as per law and is upheld.”
The return filed by the assessee under Section 153A declaring income at Rs.11,44,00,000/- was technically valid which was offered for taxation by the assessee as a result of search. Therefore, the addition of that amount made by the Ld. AO in the absence of explanation in regard to the source of such income made by the assessee under the provision of Section 69A and Section 115BBE are rightly found to be applicable by the Ld. CIT(A) in confirming the said addition made by the Ld. AO. The order passed by the Ld. CIT(A) is, thus, upheld.
The appeal of the assessee is dismissed.