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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeals by assessee for Assessment Years (AY) 2001- 02 to 2007-08 arises out of common order of learned Commissioner of Income Tax (Appeals)-I, Chennai [in short CIT(A)] dated 30.11.2011 in the matter of assessment framed by the Ld. Assessing Officer [AO] u/s. 153A r.w.s. 143(3) of the Act vide separate orders. The assessee has filed concise grounds of appeal which are substantially the same for all the years. First, we take up appeal for AY 2001-02 wherein the grounds taken by the assessee read as under: - 1. The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case. 2. For that the Learned Commissioner of Income Tax (Appeals) erred in upholding the assessment u/s 153A r.w.s 143(3) as valid, without appreciating the fact that there was no incriminating material found during search and the completed assessment u/s 143(3) prior to search u/s 132 cannot be reopened u/s.153A. 3. For that the Learned Commissioner of Income Tax (Appeals) erred in not considering the fact that Section 153A was introduced by Finance Act, 2012 and the said section provides that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this 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. 4. For that the Learned Commissioner of Income Tax (Appeals) ought to have considered that various courts have interpreted the section 153A by deciding that assessment proceedings not pending either by operation of law or expiry of time limit for issuing notice u/s 143(2) or by an order u/s 143(3) on the date of search, cannot be reopened unless some incriminating material was found during the search. Without prejudice to Ground No. 2 to 4 that the assessment is invalid :
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For that the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of other expenses on 20% ad-hoc basis. 6. For that the Learned Commissioner of Income Tax (Appeals) erred in disallowing the entire advertisement and publicity expenses for the subject assessment year amounting to Rs.1,12,750/- without considering the fact that these expenses were incurred for the purpose of business/profession. 7. For that the Learned Commissioner of Income Tax (Appeals) erred in stating that as the appellant's land is contiguous with that of her spouse and the appellant's holding of land is 1/4th of that of her spouse hence the Agricultural Income declared by the spouse to the extent of 1/4th is considered as the income of the appellant and 20% of that income is treated as income from other sources. 8. For that the Learned Commissioner of Income Tax (Appeals) has erred in indirectly confirming the addition of interest u/s. 234B of the Income Tax Act, 1961. 9. For that the Learned Commissioner of Income Tax (Appeals) has erred in indirectly confirming the addition of interest u/s. 234C of the Income Tax Act, 1961.
The Ld. AR advanced arguments assailing the impugned additions on legal grounds as well as on merits. Reliance has been placed on various judicial pronouncements, the copies of which have been placed on record. The Ld. Standing Counsel, Shri Karthick Ranganathan, controverted the arguments put forth by Ld. AR and similarly relied on various judicial pronouncements, the copies of which have been placed on record. After careful consideration of rival submissions and after due consideration of material on record, our adjudication to the appeals would be as under. Proceedings before lower authorities 3.1 The assessee being resident individual is stated to be engaged as costume designer. The assessee was subjected to search action u/s 132 on 23.01.2007 wherein certain cash and jewellery was found. Certain documents as per Annexure Ann/MM/LS/S dt. 23.01.2007 containing pages 1 to 34 were found and seized. The regular return of income as filed by the assessee was already scrutinized u/s 143(3) on 19.03.2004 determining total income of Rs.25.35 Lacs and Agricultural income of Rs.3.85 Lacs.
ITA Nos.21 to 27/Chny/2012 - 4 - 3.2 Subsequent to search, notice u/s 153A was issued. In response, the assessee filed return of income offering income of Rs.28.20 Lacs including agricultural income of Rs.3.85 Lacs. In other words, the income as determined u/s 143(3) was offered in response to notice u/s 153A. It is also evident that no assessment proceedings were pending against the assessee on the date of search and this year was a case of non- abated assessment year. 3.3 It transpired that the assessee had offered agricultural income from AYs 2001-02 to 2007-08 and the assessee was directed to file requisite details in support of the same. Pursuant to the directions of Hon’ble High Court of Madras, the copies of documents were furnished to the assessee. On the basis of assessee’s reply and material on record, Ld. AO proceeded to determine the total income of the assessee. 3.4 Though the assessee submitted that the income of this AY was duly scrutinized u/s 143(3) and therefore, there was no power to scrutinize the same again. However, Ld. AO rejected the plea on the ground that the provisions of Sec.153A empower AO to assess or reassess total income of six assessment years. 3.5 It was noted that the assessee claimed various expenses of Rs.2.20 Lacs in the Profit & Loss Account. In the absence of satisfactory vouchers / supporting documents and to rule out personal element, Ld. AO estimated adhoc disallowance of 20% against the same. The second adjustment was that of agricultural income which was treated as ‘income from other sources’. The same stem from the allegation that spot verification conducted by the investigation unit at Maduranthagam revealed that the lands were barren and mango saplings had been
ITA Nos.21 to 27/Chny/2012 - 5 - planted at the land. Since the assessee could not furnish evidences for sale of coconuts, the income was treated as ‘income from other sources’. 3.6 During appellate proceedings, the matter was remanded back to Ld. AO considering the plea of the assessee that opportunity of hearing was not afforded by AO to substantiate the claim. The assessee produced vouchers which were verified by Ld. AO. The assessee submitted that the expenses were incurred for the purpose of business / profession of costume designing. However, Ld. CIT(A) did not agree with the submissions by observing that the assessee was not costume designer for public at large. Her expertise was exclusive and restricted to designing of costumes in the films. Therefore, the advertisement expenditure in full was to be disallowed. Out of remaining expenses, 20% addition was sustained. In other words, the assessment was enhanced. 3.7 In support of agricultural income, the assessee submitted break-up of agricultural land holdings aggregating to 26.40 acres situated at various places which has been extracted in para-18 of the impugned order. The assessee submitted that lands were jointly inspected by Assessing officer at Coimbatore wherein the land was found to be used for agricultural purposes. The assessee also submitted the name and addresses of persons to whom the agricultural produce was sold. The details of agricultural expenses under various head were also furnished. It was also submitted that income from agricultural operations has been offered and accepted in earlier assessment years. 3.8 The Ld. CIT(A), while concurring with assessee’s submissions regarding agricultural income, noted that assessee’s land was contiguous with the land holdings of her husband Shri A.Vijaykant who
ITA Nos.21 to 27/Chny/2012 - 6 - had 103.19 acres of agricultural land as against 26.40 acres of land as possessed by the assessee which is approx. 1/4th of landholding of Shri A.Vijaykant. Therefore, the income of the assessee should logically be 1/4th of agricultural income shown by Shri A.Vijaykant. Accordingly, the probable agricultural income of the assessee was reworked by considering 1/4th of agricultural income as reflected by Shri A.Vijaykant. Out of this income, 20% was to be treated as ‘income from other sources’ for lack of convincing proof. Accordingly, the ground was partly allowed. Aggrieved, as aforesaid the assessee is in further appeal before us. 3.9 We find that the assessee has assailed the quantum addition on a pertinent legal ground that the additions are not based on any incriminating material as found during the course of search operations and therefore, in case of concluded assessment, no such additions could have been made by Ld. AO. Since, these grounds assail the very validity of impugned additions / disallowance, the same taken up first. For the same, Ld. AR has relied on the decision of Hon’ble Delhi High Court in Pr. CIT V/s Meeta Gutgutia (82 Taxmann.com 287). The Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02.07.2018 which is reported at 96 Taxmann.com 468. The Ld. DR, on the other hand, drawing attention to the statutory provisions of Sec.153A relied on the decision of Hon’ble Kerala High Court in the case of E.N.Gopakumar V/s CIT (75 Taxmann.com 215; 03.10.2016) which has taken a contrary view by relying upon its earlier decision in CIT V/s St. Francis Clay Décor Tiles (70 Taxmann.com 234; 22.03.2016).
ITA Nos.21 to 27/Chny/2012 - 7 - Our findings and Adjudication 4. Upon careful consideration of factual matrix as enumerated in preceding paragraphs, the undisputed position that emerges is that both the additions / disallowances as made by Ld. AO are only based on the return of income filed by the assessee without there being any reference to incriminating material on record to justify these additions / disallowances. The Ld. AO has not referred to any incriminating material while making these additions / disallowances. In fact, the regular return of income was already scrutinized u/s 143(3) and the assessed income was offered by the assessee in response to notice u/s 153A. Thus, the assessment of this year was a non-abated assessment year. In such a case, the additions that could validly be made by Ld. AO are necessarily to be based on some incriminating material as unearthed during the course of search operations as held by Hon’ble Bombay High Court in CIT V/s Continental Warehousing Corporation [2015; 374 ITR 645]. In other words, unless any incriminating material was unearthed, no additions could be sustained in the hands of the assessee. So far as the arguments of revenue that intimation u/s 143(1) would not constitute an assessment, is concerned, we find that the factual matrix in decision rendered by Hon’ble Bombay High Court in CIT V/s Gurinder Singh Bawa (79 taxmann.com 398 05/10/2015) was similar wherein the original return was processed u/s 143(1) and the time limit for issuing notice u/s 143(2) had already expired. The Hon’ble Court chose to follow its own decision rendered in CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645]. Therefore, this argument would not hold much water which is also fortified by subsequent decision of
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Hon’ble Bombay High Court in CIT V/s Deepak Kumar Agarwal (398 ITR 586 11/09/2017) which held as under:- 20. At the outset, and since heavy reliance is placed by the Revenue on the Supreme Court judgment in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), it would be proper to note the facts in the same. 21. There, the Assistant Commissioner of Income Tax challenged the correctness of the decision rendered by a Division Bench of the Gujarat High Court. That Division Bench judgment allowed the Writ Petition/Special Civil Application of the assessee. 22. The respondent-assessee, a private limited company, filed its return of income for the assessment year 2001-2002 on October 30, 2001, declaring total loss of Rs.2,70,85,105/-. That return was proposed under Section 143(1) of the IT Act accepting the loss returned by the respondent. A notice was issued under Section 148 of the IT Act on the ground that the claim of bad debts as expenditure was not acceptable. On 12th May, 2004, a return of income declaring the loss at the same figure as declared in the original return was filed by the respondent-assessee under protest. A copy of the reasons recorded was furnished by the Revenue on the request of the assessee sometime in November, 2004. The assessee raised various objections, both on jurisdiction and the merits of the subject matter recorded in the reasons. The Revenue disposed of these objections on 4th February, 2005 holding that the initiation of reassessment proceedings was valid and it had jurisdiction to undertake such an exercise. The notice under Section 148 of the IT Act dated 12th May, 2004 was challenged by the respondent-assessee. 23. That Writ Petition was allowed and hence, the Revenue was in Appeal. 24. Mr. Ahuja's argument overlooks this factual aspect and when he relies upon the observations of the Hon'ble Supreme Court, and particularly in paragraph 13, he forgets that they were made in the context of a challenge to the notice under Section 148 of the IT Act. The Supreme Court, in paragraph 13 of this judgment, noted that intimation under Section 143(1)(a) was given without prejudice to the provisions of Section 143(2). Though technically this intimation issued was deemed to be a demand notice issued under Section 156, that did not per se preclude the Assessing Officer to proceed under Section 143(2). The right preserved was not taken away. The Hon'ble Supreme Court referred to the period between April 1, 1989 and March 31, 1998, and the second proviso to Sub-section (1) Clause (a) of Section 143 and its substitution with effect from 1st April, 1998. The sending of intimation between 1st April, 1998 and 31st May, 1999 under Section 143(1)(a) was mandatory. That requirement continued until the second proviso was substituted by the Finance Act, 1997, which was operative till 1st June, 1999. 25. The Hon'ble Supreme Court therefore, relied upon these amendments and, tracing their history, held that the intimation under Section 143(1)(a) cannot be treated to be an order of assessment. That is how it referred to the Division Bench Judgment of the High Court at Delhi and explained the legal position. There was thus no assessment under Section 143(1)(a) and therefore, the question of change of opinion did not arise. A reference to Section 147 therefore, was made in the context of the Assessing Officer being authorized and permitted to assess or re- assess income chargeable to tax if he has reason to believe that income for any
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assessment year has escaped assessment. Before us, such is not the position, and even if this judgment of the High Court had been brought to the notice of the Division Bench deciding the Continental Warehousing Corpn. and All Cargo Global Logistics (supra), there would not have been any difference. It was finally held by Hon’ble Court as under: - 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:- “48. The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regularassessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other.
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Before proceeding further, we may now examine the provision contained in subsection (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. 50. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word "incriminating document". Clauses (a) and (b) of section 132(1) employ the words "books of account or other documents". For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment
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has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under subsection (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: - a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.”
It was thus held by Hon’ble Court that in respect of non-abated assessment, the additions are to be strictly based on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered during search. 5. We find that similar view has been expressed by Hon’ble Delhi High Court in CIT Vs. Kabul Chawla (380 ITR 573) which has summarized the legal position as under: - 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring
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him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax. iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
It was thus held that completed assessments could be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed. Nothing has been shown to us that the aforesaid decisions have subsequently been reversed or stayed in any manner by any higher judicial forum.
ITA Nos.21 to 27/Chny/2012 - 13 - 6. We find that similar is the view of Hon’ble Delhi High Court in Pr. CIT V/s Meeta Gutgutia (82 Taxmann.com 287) which has primarily followed the decision of Kabul Chawla (supra). We also find that Special Leave Petition (SLP) filed by the revenue against this decision has already been dismissed by Hon’ble Supreme Court on 02.07.2018 which is reported at 96 Taxmann.com 468. The decision of Hon’ble Court was as under: - 1. Delay condoned. 2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed. 3. Pending application stands disposed of.
During the course of hearing before us, the Ld. DR has relied on the decision of Hon’ble Kerala High Court in the case of E.N.Gopakumar V/s CIT (75 Taxmann.com 215; 03.10.2016) which has taken a contrary view by relying upon its earlier decision in CIT V/s St. Francis Clay Décor Tiles (70 Taxmann.com 234; 22.03.2016). However, upon perusal of decision of Hon’ble Court in CIT V/s St. Francis Clay Décor Tiles (supra), we find that the said case is factually distinguishable. In that case, the admitted facts were that the Managing Partner of the assessee had given voluntary statement to the Assessing Officer that there was undisclosed income of Rs.2.75 Crores. The admission was retracted by the Managing Partner subsequently. On the basis of these facts, it was concluded by Hon’ble Court that since there was a disclosure made by giving a statement during the course of search and therefore, the Assessing Officer, by virtue of the power conferred on him under section 153A, was competent to issue notice under the said provision and require the assessee firm to furnish the returns as
ITA Nos.21 to 27/Chny/2012 - 14 - provided there-under. It was further held that neither under section 132 nor under section 153A, the phraseology "incriminating" is used by the Parliament. Therefore, any material which was unearthed during search operations or any statement made during the course of search by the assessee is a valuable piece of evidence in order to invoke the provisions of Section 153A of the Income Tax Act, 1961. In the present case, no such admission is shown to have been made by the assessee. The revenue could not place any incriminating material before us which has led to the impugned additions / disallowances. Therefore, these case laws are distinguishable on facts. 8. The revenue has also referred to the Special Leave Petition (SLP) filed by the revenue and accepted by Hon’ble Supreme Court in the case of Pr. CIT V/s Gahoi Foods Pvt. Ltd. (117 Taxmann.com 118). We find that SLP has been filed by the revenue against the decision of Hon’ble High Court of Madhya Pradesh as reported at 117 Taxmann.com 117. In this case, Hon’ble Court chose to follow the decision of Hon’ble Delhi High Court in CIT V/s Kabul Chawla (380 ITR 573) and concurred with the views expressed therein. The revenue preferred SLP against the same which has been admitted and tagged with other appeals. However, there is no stay by Hon’ble Supreme Court on the operation of the order of Hon’ble High Court. 9. So far as the decision of Hon’ble Delhi High Court in Filatex India Ltd. V/s CIT (49 Taxmann.com 465) is concerned, we find that in that case Ld. AO, in the proceedings u/s 153A, had made several additions, relying upon the incriminating material found in the course of search. It was undisputed fact that there was incriminating material unearthed by the revenue including statement of Shri Sanjay Agrawal, GM
ITA Nos.21 to 27/Chny/2012 - 15 - (Marketing). It was never the case of the assessee that the initiation of proceedings u/s 153A was bad or unwarranted in law as no incriminating material was found during the search. Therefore, this decision, in our opinion, has no application to the present case before us. 10. In the decision of Hon’ble High Court of Delhi in CIT V/s Anil Kumar Bhatia (24 Taxmann.com 98), the findings that there was no incriminating material was found to be factually unsustainable (para 22). 11. Finally considering the entirety of facts and circumstances, the impugned additions / disallowances are unsustainable in the eyes of law. We order so. The corresponding legal ground as raised by the assessee stand allowed which render other grounds merely academic in nature. In the result, the appeal stand partly allowed. ITA Nos. 22 to 25/Chny/2012, AYs 2002-03 to 2005-06 12. In AY 2002-03, the return of income was filed by the assessee on 30/10/2002 and no notice u/s 143(2) was issued. The time limit to issue the same had expired at the time of search. In response to notice u/s 153A, the assessee filed return of income on 10.09.2007 declaring income of Rs.34.51 Lacs and agricultural income of Rs.8.49 Lacs which is similar to regular return filed by the assessee. The Ld. AO, on similar lines as in AY 2001-02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as ‘income from other sources’. The adjudication of Ld. CIT(A), on both the issues, is common for AYs 2001-02 to 2005-06. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 13. In AY 2003-04, the regular return of income was scrutinized u/s 143(3) on 28.03.2006 determining income of Rs.48.20 Lacs and
ITA Nos.21 to 27/Chny/2012 - 16 - agricultural income of Rs.9.15 Lacs. The same income was offered in response to notice u/s 153A. The Ld. AO, on similar lines as in AY 2001- 02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as ‘income from other sources’. In this year, Ld. AO also disallowed ‘Mandram expenses’ of Rs.10.75 Lacs. The assessee submitted that this issue was already a subject matter of disallowance in original assessment proceedings as decided by Ld. CIT(A). However, rejecting the same, Ld. AO held that the expenditure was related to ‘Pemlatha Peravai’ where the Mandram was run in individual capacity to further popularity of her husband Shri A.Vijaykant. In the absence of vouchers, the expenditure was disallowed. The adjudication of Ld. CIT(A), on both the earlier issues, is common for AYs 2001-02 to 2005-06. The disallowance of Mandram expenses was also confirmed. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 14. In AY 2004-05, the return of income was filed by the assessee on 28.10.2004 and no notice u/s 143(2) was issued. The time limit to issue the same had expired at the time of search. In response to notice u/s 153A, the assessee filed return of income on 10.09.2007 declaring income of Rs.8.40 Lacs and agricultural income of Rs.7.34 Lacs which is similar to regular return filed by the assessee. The Ld. AO, on similar lines as in AY 2001-02, estimated disallowance of 20% against various expenditure claimed by the assessee. The agricultural income was considered as ‘income from other sources’. The adjudication of Ld. CIT(A), on both the issues, is common for AYs 2001-02 to 2005-06. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal.
ITA Nos.21 to 27/Chny/2012 - 17 - 15. In AY 2005-06, the return of income was filed by the assessee on 29.10.2005 and no notice u/s 143(2) was issued. The time limit to issue the same had expired at the time of search. In response to notice u/s 153A, the assessee filed return of income and offered salary income of Rs.43,200/- though the taxable salary as per Form 16 was Rs.1.14 Lacs. Accordingly, the salary income was taken as Rs.1.14 Lacs. Further, Ld. AO disallowed agricultural expenditure of Rs.2.08 Lacs claimed as against agricultural income of Rs.7.65 Lacs. The business loss of Rs.2.28 Lacs was disallowed since the assessee set-off the same from agricultural income. Finally, the agricultural income was treated as ‘income from other sources. The Ld. CIT(A) enhanced the expenditure disallowance on similar line as in AY 2001-02. The adjudication of agricultural income was also on similar lines as in AY 2001-02. Aggrieved, the assessee is in further appeal before us with similar grounds of appeal. 16. Facts in all these years being pari-materia the same as in AY 2001- 02, taking the same view and in the light of settled legal proposition as enumerated therein, we would hold that all these years, being non- abated years, the additions are necessarily to be based on incriminating material as unearthed during the search operations. The Ld. AO has not referred to any incriminating material while making impugned additions / disallowances. Therefore, these are unsustainable in law. We order so. All these appeals stand partly allowed on same lines. ITA No. 26/Chny/2012, AY 2006-07 17. In this year, the assessee has raised similar legal ground as in earlier years. However, the same would not hold good in view of the fact that the assessee was subjected to search action on 23.01.2007 and the
ITA Nos.21 to 27/Chny/2012 - 18 - time limit to issue notice u/s 143(2) had not expired. Therefore, Ld. AO was well within his statutory right to examine and verify the income declared by the assessee. 18. In this year, the regular return of income was filed by the assessee on 06.07.2006 declaring income of Rs.2.38 Lacs. However, in subsequent return filed on 30.10.2006, the assessee offered taxable income of Rs.1.14 Lacs. In response to notice u/s 153A, the assessee offered return of income on 09.10.2007 declaring income from salary for Rs.1.44 Lacs and agricultural income of Rs.7.25 Lacs. The business loss was shown as Rs.1.09 Lacs. 19. Since the assessee was stated to be residing with her husband at Saligramam, the income from house property situated at No.15, Valleeswarar Koil Street, Mylapore was treated as let out property and the income from the same was estimated at Rs.17,047/-. The business income of Rs.2.79 Lacs as admitted in return of income filed on 06.07.2006 was taken to be the business income and the loss shown in the revised return was ignored. In the business income, slot fee of Rs.32.44 Lacs was added. Finally, the agricultural income was treated as ‘income from other sources’. The income thus computed amounted to Rs.43.41 Lacs. 20. Upon further appeal, Ld. CIT(A) directed Ld. AO to take agricultural income as ‘nil’ since no agricultural income was shown by Shri A.Vijaykant in this year. The income from house property as determined by Ld. AO was deleted and the same is not the subject matter of dispute before us. No findings have been rendered on other issues. 21. So far as the assessment of agricultural income is concerned, it is undisputed fact that the assessee is regularly earning this income since
ITA Nos.21 to 27/Chny/2012 - 19 - past several years. The assessee possesses agricultural land which fact has been accepted by Ld. CIT(A). The dispute is with regard to quantum of income only. The Ld. CIT(A) has drawn a presumption that since the assessee’s land holding is 1/4th of land holding of Shri A.Vijaykant, the income should be considered as 1/4th income as shown by him. Since no agricultural income has been shown by assessee’s husband in this year, the entire income has been considered as ‘income from other sources’ which run contrary to the findings of Ld. CIT(A) that the assessee was in possession of land and it earned agricultural income out of the same. Simply because the assessee’s husband did not offer any agricultural income during the year, the assessee’s income could not be taken to be nil. Therefore, this addition has no legs to stand. We direct Ld. AO to treat the income of Rs.7.25 Lacs as agricultural income. The ground thus raised stand allowed. 22. So far as the other issues are concerned, we find that no business income has been reflected by the assessee in this year and therefore, the expenditure of Rs.1.09 Lacs is to be disallowed. In other words, business loss of Rs.1.09 Lacs would not be allowable to the assessee. The salary income would be taken as Rs.1.14 Lacs as accepted by Ld. AO. The slot fees of Rs.32.44 Lacs do not emanate from the return of income filed by the assessee. No such expenditure or income has been admitted. We find that there is no basis to make this addition and therefore, the same stand deleted. The appeal stand partly allowed. ITA No. 27/Chny/2012, AY 2007-08 23. In this year also, the assessee has raised similar legal ground as in earlier years. However, the same would not hold good for the reasons as
ITA Nos.21 to 27/Chny/2012 - 20 - stated on para-17. Further, the assessment of this year has been framed u/s 143(3) of the Act. 24. The assessee claimed agricultural expenses of Rs.73,624/- which were disallowed since the same were not related to agricultural income. The business loss was taken as ‘nil’ since the same was set-off from agricultural income. The agricultural income of Rs.1.75 Lacs was treated as ‘income from other sources’. Upon further appeal, Ld. CIT(A) directed Ld. AO to take agricultural income as Rs.0.50 Lacs. Aggrieved, the assessee is in further appeal before us. 25. The issue of agricultural income has already been adjudicated by us for AY 2006-07. Taking the same view, we direct Ld. AO to take agricultural income as Rs.1.75 Lacs. No other ground has been urged before us in this appeal. The appeal stand partly allowed. Conclusion 26. All the appeal stands partly allowed in terms of our above order.
Order pronounced on 08th June, 2022.
Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा12 /VICE PRESIDENT लेखा सद: / ACCOUNTANT MEMBER चे-ई / Chennai; िदनांक / Dated : 08-06-2022 EDN आदेश की Vितिलिप अ7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF