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Facts
A search action under Section 132 against Shri D. Ramgopal led to seizure of documents from the assessee's premises. The assessee's statement under Section 132(4) indicated undisclosed investments in properties. The AO made additions of Rs. 130.50 Lacs (AY 2011-12) and Rs. 109.50 Lacs (AY 2012-13) as unexplained investments under Section 69, which the assessee claimed were sourced from Shri Aswin Thakker, a claim rejected by the AO.
Held
The Tribunal ruled that the assessment under Section 153C was invalid as the assessee should have been treated as a 'searched person' under Section 153A, given that incriminating documents were found and seized from his premises and his statement recorded under Section 132(4). It also held that the additions under Section 69, based on a partially accepted and partially rejected statement of the assessee, were impermissible, especially when the ownership of properties was under dispute. Thus, the impugned additions were deleted.
Key Issues
1. Whether the assessment framed under Section 153C was valid, or should it have been under Section 153A as the assessee was effectively a searched person. 2. Whether the additions for unexplained investments under Section 69 were justified when based on a partially accepted statement under Section 132(4) and when the property ownership was disputed.
Sections Cited
132, 132(4), 132(4A), 153A, 153C, 144, 131, 292C, 69
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL & HON’BLE SHRI MANU KUMAR GIRI
आदेश / O R D E R
PER MANU KUMAR GIRI (Judicial Member)
The captioned appeals by the assessee for Assessment Years (AY) 2011-12 and 2012-13 arises out of separate orders of Ld. first appellate authority. Facts as well as issues are stated to be identical. First, we take up appeal for AY 2011-12 which arises out of an order passed by Ld. Commissioner of Income Tax (Appeals)
Chennai-20 [CIT(A)] on 23-10-2014 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 144 r.w.s. 153C of the Act on 03-03-2016. The grounds raised by the assessee read as under: -
1. The learned Commissioner of Income-tax (Appeals)-20, Chennai {CIT(A)} erred in confirming the addition of Rs.1,30,50,000 made u/s 69 of the Act.
The appellant submits that assessing officer erred in passing the order under section 144 r/w 153C of the Act as the provisions of section 153C are not applicable to his case.
The appellant submits that he is a searched person u/s 132 covered by the Panchanama and warrant of authorization and therefore the assessment should have been made on the appellant being a searched person under section 153A of the Act and not under section 153C of the Act 4. The learned CIT(A) erred in observing that the name of the appellant in the Panchanama was due to clerical error. 5. The appellant submits that a sworn statement was recorded from the appellant admittedly u/s 132(4) on 27/11/2012 which can be recorded which confirms the fact that a search was conducted in the premises of the appellant u/s 132 of the Act. 6. The appellant submits that the document was seized from the premises of the appellant during the course of search and therefore the assessing officer is not correct in invoking the provisions of section 153C and he should have issued the notice u/s 153A only. 7. The appellant submits that none of the requirements for issuing notice u/s 153C are satisfied in his case and therefore the assessment made u/s 153C is liable to be cancelled. 8. The appellant submits that the assessing officer erred in making the addition of Rs.1,30,50,000 based on the scribbling on loose sheets which contained no dates also and the same cannot at all be considered as an incriminating material for the purpose of making any addition either under section 153A/153C of the Act as per the settled law in the matter. 9. The appellant submits that there is no material or document to show that the amounts noted in the loose sheets were made by the appellant only. 10. The appellant submits that on the other hand he was maintaining the accounts for the amounts provided by Mr. Aswin and therefore it cannot be inferred that the entries made in the loose sheets were payments made by the appellant. 11. The appellant submits that the assessing officer has made the additions for various expenses noted in the loose sheets which had not brought any investment as such and therefore the addition of Rs.1,30,50,000 as unexplained investment u/s 69 of the Act made by the assessing officer is not correct and liable to be deleted. 12. The appellant submits that the assessing officer identified three properties in the assessment order as undisclosed investment in properties. Out of the above admittedly item (i) belongs to one Smt. Rajammal not connected with the appellant and item (ii) the amount of sale consideration is not shown but it relates to the subsequent assessment year and the only transaction pertaining to the impugned assessment year is the property purchased in the name of appellant's wife and consideration paid was only Rs. 10,82,850 and stamp duty and registration charges of Rs. 102,970 which was paid by cheque as per sale deed and there was no unexplained investment at all in this year. The assessing officer is therefore not justified in adding Rs.1,30,50,000 as unexplained investment in the appellant's case u/s 69 of the Act
The appellant submits that the amounts were actually provided by Mr. Aswin and since he denied having provided the amount, the Investigating Officers forced the appellant to accept and directed to pay the taxes.
The appellant further submits that the impugned properties are put to dispute in that Sri Ramgopal has sold the very same property through fraudulent methods and the appellant has filed suits before the Courts and the matter is still pending.
The appellant submits that he has not taken possession of the property at all and having denied the source for the amount provided for purchase of the property he has in fact informed the Departmental authorities to sell the said properties and adjust the demands out of sale proceeds of the said properties. 16. The appellant submits that he has no source either to purchase or to pay the taxes demanded. 17. The appellant therefore prays that the assessment made under section 153C may be cancelled as invalid in law and also to delete the addition of Rs 1,30,50,000 made as unexplained investment under section 69 of the Act in the assessment order and render justice.
2. As is evident, the sole grievance of the assessee is confirmation of addition of Rs.130.50 Lacs as made by Ld. AO in the assessment order. The assessee assails the jurisdiction of Ld. AO on the ground that the assessee was a searched person and his statement was also recorded on oath u/s 132(4) and therefore, the assessment ought to have been framed u/s 153A. The Ld. AR also challenged the quantum additions on merits. The Ld. CIT-DR, on the other hand, controverted the arguments of Ld. AR. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 Pursuant to search action u/s 132 in the case of Shri. D. Ramgopal on 27-11- 2013, it was alleged against the assessee that during the course of search, evidences relating to investments by the deceased assessee (Shri S. Damodaran) in three different properties were found and seized. Accordingly, notice u/s 153C was issued to the assessee on 07-07-2015 after recording satisfaction. The notices remained un-responded to by the assessee. The assessee finally appeared before Ld. AO on 05-02-2016 and his statement was recorded therein. 3.2 In the absence of any explanation as forthcoming from the assessee on the issue of unexplained investments, Ld. AO held that the assessee and his wife had made investments in three properties which were not disclosed in the returns of income. The same was quantified at Rs.130.50 Lacs for AY 2011-12 and Rs.109.50 Lacs for AY 2012-13. In statement recorded on oath u/s 132(4), the assessee stated that most of the payments were sourced from Shri Aswin Thakker, Chartered Accountant. The assessee merely acted as mediator for Shri Aswin Thakker. However, Shri Aswin Thakker denied the same. The Ld. AO, considering the fact that investments were made in properties which were registered in the name of the assessee and his wife, the same was to be taxed in the hands of the assessee. Accordingly, the amount of Rs.130.50 Lacs was added in the hands of the assessee and the assessment was framed. Similar assessment was framed for AY 2012-13. Aggrieved, the assessee challenged the assessment so framed by Ld. AO in first appeal. Appellate Proceedings 4.1 The Ld. CIT(A) noted that warrant of authorisation was issued in the name of Shri D. Ramgopal to search the premises of the assessee at Coimbatore on 27-11- 2013. The assessee questioned the jurisdiction of Ld. AO u/s 153C. The Ld. CIT(A), in para 5.2.2 of the impugned order, noted that warrant of authorisation was issued u/s 132 in the case of Shri D. Ramgopal to search assessee’s premises. The copy of warrant of authorisation and Panchnama has been extracted in the impugned order. Undisputedly, the copy of Panchnama was bearing the name of the assessee. The Ld. CIT(A) held that the name of the assessee as mentioned in Sr. No.(A) of Panchnama appear to be merely a clerical error. The AO and two independent witnesses had signed warrant of authorisation as well as the copy of Panchnama. The Panchnama dated 27-11-2013 was prepared on account of the warrant which was issued in the case of Shri D. Ramgopal only and not in the name of the assessee. Shri D. Ramgopal was the searched person u/s 153A. There was clerical error in recording the Panchnama by mentioning the name of the present assessee. Therefore, the assessee could not be considered as the person being searched without having a warrant in the case of the assessee. The assessee could be considered as a person other than the person as referred to in Sec.153A. The loose sheets and documents were found from the premises of the assessee which was in his possession meaning thereby that the seized material belonged to the assessee.
The authorized officer recorded the statement of the assessee u/s 132(4) based on the contents recorded from the material as seized from his residence. The Ld. AO issued notice u/s 153C after recording due satisfaction. The AO of the search person i.e. Shri D. Ramagopal and the assessee was the same AO. Under these circumstances, the plea of the assessee that notice ought to have been issued u/s 153A and not u/s 153C was not to be accepted. 4.2 On merits, it was noted by Ld. CIT(A) that documents reflecting investments were found at the residential premises of the assessee and the presumption u/s 132(4A) & 292C would apply in the present case. The statements u/s 132(4) and 131 were recorded from the assessee which was also on the basis of notings in the seized documents. In the recorded statement, the assessee clearly explained the content of the seized material regarding expenditure incurred by him to purchase the properties in his and in his wife’s name. The onus to explain the sources thereof was on the assessee and the assessee failed to discharge the same. Finally, rejecting all the arguments, legal as well as on merits, the assessment was confirmed for both the years against which the assessee is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that a warrant of authorisation was issued u/s 132 in the name of Shri D. Ramagopal to search the premises of the assessee at No.7/11, Kannan Nivas, Thendral Nagar, Vadavalli, Coimbatore on 27-11-2013. The assessee had filed return of income prior to search declaring income of Rs.2.70 Lacs. During the course of search at assessee’s premises, evidences relating to investments in three properties in the name of the assessee and his wife was found and seized as vide ANN/VN/SD/B&D/S which led to issuance of notice u/s 153C on 07-07-2015. During the course of assessment proceedings, considering the statement of the assessee u/s 132(4) & 131 of the Act, Ld. AO made impugned addition of unexplained investment since the assessee did not furnish any documentary evidence regarding the source for investments made in these immovable properties. The argument that the said investments were sourced from Sri Aswin Thakker was rejected since the assessee failed to establish the said fact.
Upon perusal of ‘warrant of Authorization’ dated 27-11-2013, it could be noted that his warrant has been issued in the case of Shri D. Ramgopal to search the assessee’s premises at 7/31A, Kannan Nivas, Thendral Nagar, Vadavalli, Coimbatore and it was executed on 27-11-2013. However, the perusal of Panchnama dated 27-11-2013 would show that it has been made against the assessee and not against Shri D. Ramagopal. The Ld. CIT(A) had held the same to be mere clerical error. However, this observation is to be seen in the background of the fact that the impugned material was seized from assessee’s premises and his statement was also recorded on oath u/s 132(4) which provide that authorized officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of any books of accounts, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the act. Upon commutative consideration of above stated facts including that fact of seizure of impugned documents from the assessee and statement recorded on oath u/s 132(4) from the assessee, the conclusion of Ld. CIT(A) that there was a clerical error in the Panchnama could not be accepted. The provisions of Sec.153C would apply only if the documents are found during search on another assessee. The same is not the case here. In the present case, the incriminating document has been found from assessee’s possession during search at his premises and the same form the very basis of impugned additions in the hands of the assessee himself. On these facts, the assessee was to be considered as searched person within the meaning of Sec.153A and therefore, the proceedings should not have been initiated u/s 153C in the case of the assessee. Therefore, the assessment so framed u/s 153C was to be considered as bad-in-law. The assessee succeeds on this foremost legal grounds, in both the years.
Proceeding further, the only basis to make the impugned additions is the statement made by the assessee u/s 132(4). There is no corroboration of the admission as made by the assessee. Pertinently, in the same statement, the assessee has stated that the impugned investments were sourced out of funds provided by Shri Aswin Thakker which has been rejected by Ld. AO. In other words, part of the statement has been accepted and part of the statement has been rejected which is impermissible. The same is also evident by the fact that the properties in which the investments were made by the assessee were under dispute before various courts. The same would show that the ownership of the properties was in dispute despite the fact that the same was registered in the name of the assessee and his wife. Therefore, we concur with the aforesaid submissions of Ld. AR that the impugned additions could not have been made on given facts.
Finally, considering totality of facts and circumstances of the case, we delete impugned additions, for both the years.
Both the appeals stand allowed. Order pronounced in the open court on 30th April, 2025