GOPAL S. PANDIT,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), MANGALURU

The brief facts of the case are that the assessee was assessed u/s. 153A of the Act based on the search and seizure operation carried out at the residence of the assessee on 13/02/2009. The assessment has been completed u/s. 153A in which the total income has been determined at Rs. 90,40,750/-. The assessee challenged the said order before the Ld.CIT(A). The Ld.CIT(A) had modified the appeal and confirmed the unexplained credit at Rs. 7 Lakhs after giving set off from the pooja income estimated. Thereafter the assessee challenged the said order before this Tribunal and the Tribunal insofar as the addition on account of loan obtained from Mr. Sunil Patil as unexplained credit, had considered the submission of the assessee that the said credit was already reported to the department while filing the return of income and the AO had also accepted the same while making the assessment u/s. 143(3) of the Act, had remitted the said issue to the AO to verify the records and find out whether the fact narrated by the assessee is already there in the assessment file and if the same is available, the addition need not be imposed on that score. The Tribunal further directed the AO to verify the return filed on 24/11/2006 and also the records filed during the assessment proceedings in respect of the unsecured loan in the name of Mr. Sunil Patil and if the said fact was disclosed in the return filed on 24/11/2006 to decide about the said addition in accordance with law.

The AO pursuant to the said remand order, has passed an order giving effect to the orders of the ITAT dated 27/02/2017 and confirmed the unsecured loan from Mr. Sunil Patil on the reason that the assessee had no further evidence with regard to unsubstantiated loan creditors in the name of Mr. Sunil Patil. The AO further held that the assessee was unable to satisfactorily show this credit as loan from Mr. Sunil Patil and therefore the assessee is unable to conclusively prove the genuineness of the creditor and accordingly made the addition which was made already in the order dated 21/11/2008.

As against the said order, the assessee challenged the same before the Ld.CIT(A) and contended that the AO had not followed the directions given by the Tribunal and therefore prayed to allow the appeal. The Ld.CIT(A) had also confirmed the addition made by the AO since the assessee had failed to establish the disclosure through documentary evidence and therefore the protection available to concluded assessments does not operate and confirmed the addition.

As against the said order of the Ld.CIT(A), the present appeal has been filed by the assessee before this Tribunal.

At the time of hearing, the Ld.AR submitted that in the first round, the assessee had submitted before the Tribunal that the unsecured loan from Mr. Sunil Patil was disclosed along with the return filed on 24/11/2006 and to verify the said fact, the matter has been remitted to the AO but unfortunately, the AO without giving any finding about the said fact, had confirmed the addition on the ground that the assessee had not conclusively proved the genuineness of the creditor. The Ld.AR further submitted that the Tribunal in the earlier order dated 27/07/2016 had given a finding that the assessee had produced the records to show that the assessee had declared the amount of unsecured loan in the name of Mr. Sunil Patil and therefore the Tribunal had directed the AO to verify his records and thereafter pass orders, if the same is available, in accordance with law. The Ld.AR also draw our attention to the Tribunal order para number 32 wherein the Tribunal had considered the ground raised by the assessee that when the assessment has been completed u/s. 143(3) of the Act, assessment u/s. 153A could not be made without any incriminating materials and therefore the Tribunal had remitted the issue to find out the fact, whether the assessee had disclosed the unsecured loan while filing the return of income and if so, the addition could not be sustained when there is no incriminating material seized at the time of search. The Ld.AR further submitted that without verifying the records, the AO had again called for the various details about the genuineness of the transaction and therefore submitted that the same is not in accordance with the directions given by this Tribunal and prayed to allow the appeal.

The Ld.DR submitted that the assessee had not established the genuineness of the transactions and therefore the AO had rightly made the order giving effect to the Tribunal’s order and prayed to dismiss the appeal.

We have heard the arguments of both sides and perused the materials available on record.

The main grievance of the assessee is that the AO had not followed the directions given by this Tribunal and therefore the order of the AO giving effect to the order of the Tribunal is bad in law. Before proceeding further, we will, for the sake of convenience, extract the findings of the Tribunal given in the earlier round of litigation in ITA No. 1187/Bang/2013 dated 27/07/2016. “32. We have considered the rival submissions as well as the relevant material on record. There is no quarrel on the proposition that if the assessment for a particular assessment year is not pending as on the date of search then it willmay not abate because of the search and seizure action under Section 132 of the Act but the Assessing Officer shall reassess the total income of the assessee. Therefore if during the search proceedings no incriminating material or other evidence found then a particular income or item of income which is accepted in the assessment under Section 143(3) cannot be reassessed. In the case on hand though the assessee has submitted that the Assessing Officer accepted the credit in the name of Mr. Sunil Patil of Rs.42 lakhs and there is no evidence or seized material found during the search to support the undisclosed income. However from the record produced before us, we find that the assessee has filed a return of income on 3.2.2010 along with the Balance Sheet wherein this amount of unsecured loan in the name of Mr. Sunil Patil has been shown and it is not clear whether this record was filed by the assessee along with the return of income filed on 24.11.2006 on which the assessment was completed for the year under consideration. Accordingly, we direct the Assessing Officer to verify whether this unsecured loan in the name of Mr. Sunil Patil was duly disclosed in the return filed on 24.11.2006 or during the assessment proceedings completed vide order dt.21.11.2008. This issue is set aside to the record of Assessing Officer for proper verification and re-adjudication.” 10. From the reading of the said paragraph, the assessee had made two submissions that there was no incriminating mater ials warranting for addition in the completed assessments. The assessee also submitted that while the assessment proceedings u/s. 143(3) was conducted, he had given the details about the unsecured loan amount received from Mr. Sunil Patil along with the return of income which was accepted by the AO and therefore without any incriminating materials seized at the time of search, the said benefit granted by the AO could not be disturbed.

The Tribunal had also observed in their order that the assessee had filed a return of income on 24/11/2006 and along with the said return of income, the details about the unsecured loan was also furnished in the balance sheet but in order to ascertain the said fact, the Tribunal had remitted the matter to the AO for verification of the said fact. In the order giving effect to the order of the Tribunal, the AO had again sought for the details about the unsecured loan obtained from Mr. Sunil Patil and also directed the assessee to prove the genuineness of the said loan amount. The assessee had filed other records to show that the loan is a genuine one but the AO had not accepted the genuineness since the assessee could not be able to produce the said Mr. Sunil Patil. We do not find that the exercise done by the AO while giving effect to the order of the Tribunal is in accordance with the directions issued by the Tribunal. In fact, the Tribunal had directed the AO to verify the records to find out the disclosure of the unsecured loan while filing the return of income on 24/11/2006 or while completing the assessment. The AO instead of verifying the records and gave a finding about the fact that the assessee had declared the said unsecured loan or not while filing the return of income on 24/11/2006, had again issued notice to prove the genuineness of the transaction and finally confirmed the addition on the ground that the assessee had not proved the genuineness. The AO could have done a simple exercise by verifying the records in order to find out the fact but unfortunately, the AO had travelled beyond the directions given by this Tribunal and confirmed the addition. The Tribunal had directed the AO to verify the said fact since the assessee had raised a plea that the said unsecured loan was disclosed while filing the return of income or before completing the assessment proceedings and thereafter to decide about the addition which was made without any incriminating materials. If the assessee had earlier declared the said unsecured loan, necessarily, to revise the assessment u/s. 153A, incriminating materials should be seized, otherwise addition could not be made. But unfortunately, the AO had misunderstood the direction given by this Tribunal and examined the issue in detail and confirmed the addition which in our view is not in accordance with the earlier directions given by this Tribunal. Therefore, we are setting aside the order of the lower authorities in which the addition of Rs. 7 Lakhs has been confirmed.

In the result, the appeal filed by the assessee is allowed.