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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya
O R D E R Per Shri Shamim Yahya (AM) :-
This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-47 dated 07.01.2021 and pertains to assessment year 2014-15. The first issue raised is that ld.CIT(A) erred in confirming the additions in the order issued u/s. 143(3) r.w.s. 153A dehors incriminating material found and seized during the search. On merits the issue raised is that ld.CIT(A) erred in sustaining addition of Rs. 5,70,000/- for unsecured loans.
Brief facts of the case are that assessee has filed return of income u/s. 139(1) on 30.07.2014. Subsequently, pursuant to search on Balaji Group on 28.01.2015, notice u/s. 153A was issued on 06.06.2016. The assessee filed return of income on 29.06.2016. The AO made addition for unsecured loans by observing as under:-
“From the details filed, it is seen that the assessee has accepted Unsecured Loans from several parties during the year. During the course of assessment proceedings, the assessee vide this office letter dated 17.10.2016 was required to furnish a confirmation, copy of Return of income and the bank statement of the lender so that the identity, genuineness and creditworthiness of the party involved can be ascertained.”
Thereafter, AO referred to the detail of assessee’s submission and finally sustained addition of Rs. 14,43,967/-.
Upon assessees appeal, ld.CIT(A) rejected the challenge to jurisdiction by observing as under:-
“Ground no.1 deals with the validity of the assessment made U/S.153A r.w.s. 143(3) of the Act. The assessee in this ground has contended that as no incriminating material was found during the course of search, the assessment made by the Assessing Officer under the said section is invalid. The assessee in this regard relied upon decision of Hon'ble Jurisdictional High Court in case of Continental Warehousing Ltd., and Murli Agro Ltd. The Ld. Assessing Officer while completing the assessment has observed that during the year under consideration, the assessee had raised loan of Rs.1,93,967/- from Anil R. Mekha, and Rs.3 Lakh from Madhukar Kothavade, Rs.650,000/- from Swapnil Amrutkar. Credits in respect of these loans were appearing in the bank account of the assessee, details of which were found during the course of search. It is however, noticed that before giving these loans to the assessee, cash wasdeposited in the bank accounts of these persons. The relevant detail in respect of these loans were found during the course of search including the bank pas book and cheque book of loan creditors etc. Besides the assessee is also a partner in M/s. Marvel Properties, in which certain details osf receipt of on money etc. were also found during the search, which raises doubts about genuineness of unsecured loans in the hands of the assesse. Therefore found during the search against her is not acceptable. In view of these facts, the ratio of Hon’ble jurisdictional High court judgment in the case of Murli Agro Ltd., and Continental Warehousing Ltd., is distinguishable and is not applicable in my humble opinion.”
On merits, ld.CIT(A) sustained addition of Rs. 5,70,000/-.
Against this order, assessee is in appeal before the ITAT.
I have heard both the parties and perused the records. As regards, the challenge to jurisdiction, it is clear that there is no incriminating material seized material found and seized during search. The AO in the order is clearly mentioning that from the details filed for unsecured loans, he is making the examination. Hence, ld.CIT(A) observation is totally wrong, that loan was found during the search. It is evident that assessee has filed return of income earlier. It is not the case that the details were not available. Hence, ld.CIT(A) is totally wrong, that incriminating material is found and seized during search. What he is mentioning is actually the examination by the AO subsequent to search. The examination by the AO subsequent to search by no stretch of imagination can be said to be incriminating material found during search. It is undisputed that assessment u/s. 153A for unabated assessment cannot be done dehors incriminating material found and seized during search. This proposition is duly confirmed by the Hon’ble jurisdictional High court in the case of Continental warehousing Ltd. [2015] 374 ITR 645 and Murli Agro Ltd. in ITA No. 36 of 2009 vide order dated 29.10.2010. ld.CIT(A) has not disputed the legal proposition. However, he has given a wrong finding that loan appearing in account were found during the course of search. This is absolutely incorrect, when viewed from the perspective of AO’s order. Hence, in my considered opinion, the order of ld.CIT(A) is liable to the set aside on this account. Hence, I hold that this assessment was framed u/s. 153A dehors incriminating material and the same is liable to be quashed. The same is quashed accordingly.
Since, I have already held that the assessment is quashed on account of invalidity of jurisdiction, consideration of merits is only of academic interest. I am not engaging into the same.
In the result, this appeal by the assessee stands partly allowed.
Pronounced in the open court on 14 .03.2022