C.L. SHARMA,NEW DELHI vs. DCIT, NEW DELHI

Brief facts of the case are that there was search and seizure action under section 132 of the Income Tax Act, 1961 (for short “the Act”) in the Accurate group of cases on 26/7/2006, pursuant to which a notice under section 153A of the Act was issued and served on the assessee. Assessee filed their return of income on 3/6/2008 declaring an income of Rs.3,46,508/-.

In the statement recorded under section 132(4) of the Act on 26/7/2006, the assessee stated that the marriage of his elder daughter, namely, Meera Sharma took place on 10/4/2000 for which a sum of Rs. 10 Lacs was incurred. Assessee further stated that such amount was utilised out of the surrendered amount. Assessee was put on notice by the learned Assessing Officer to specifically point out the period of surrender which is attributable for the utilisation of the marriage expenses and learned Assessing Officer observed that the record does not reveal any such surrender whatsoever by the assessee for the year in which the marriage took place. Assessee does not seem to have responded to such a query and the finding of the learned Assessing Officer is a categorical to the effect that there was no surrender during the year under consideration in respect of any of the group of cases and, therefore, the admitted expenditure of Rs. 10 Lacs on marriage cannot be correlated to any surrender.

Learned Assessing Officer further observed that even if it is considered that the sources of marriage expenses were met out of surrendered income of the companies, namely, M/s AML and M/s ATL in which the assessee is the Managing Director, the benefit derived from the companies is assessable in the hand of the assessee as salary in view of section 17(1)(iv) of the Act and 17(2)(iii) of the Act and Explanation 3 to sec. 17(2) of the Act, and therefore, the benefit derived by the assessee from the company in which he is a Director/Managing Director and getting salary in the form of marriage expenses being met out of the sources of the company is taxable in the hand of the assessee as salary.

Learned Assessing Officer further observed that the assessee has furnished the cash utilisation statement of surrendered amount in the hand of the group cases and the assessee has not surrendered any amount in his case; that specific details of cash generation and its utilisation under different heads have been given; that the cash utilisation statement submitted by the assessee is at variance with the income assessed by the Assessing Officer in the group cases; and that it is a clear attempt to cover up the unexplained expenditure and such type of telescoping of additions between different assessees and different assessment years are not permissible as per the Act. For these reasons, the learned Assessing Officer brought the amount of Rs. 10 Lacs to tax by way of addition, inter alia so many other additions by order dated 19/12/2008 passed under section 153A/143(3) of the Act.

Aggrieved by such additions, assessee preferred appeal on several grounds, out of which the assessee did not press many grounds touching certain additions. Insofar as the impugned addition of Rs. 10 Lacs is concerned, plea taken by the assessee is that the preparations of the marriage were done months in advance and accordingly the expenses were incurred much earlier to the actual date of marriage, namely, prior to 31/3/2000 and, therefore, such an expenditure does not fall during the year under consideration. According to the assessee, there is no evidence that such an expenditure of 10 Lacs was incurred during the period between 1/4/2010 and 10/4/2010 nor the assessee could be expected to earn Rs. 10 Lacs during the short period of 10 days. Assessee had taken the positive plea that such an amount was spent out of scrap sales happened prior to 31/3/2000.

Ld. CIT(A) considered all these contentions. According to him as a matter of record, during the course of search, when the statement of the assessee was recorded in section 132 (4) of the Act, the assessee clearly admitted that he had incurred Rs. 10 Lacs for the marriage of his daughter and confirmed in such statement that the marriage of his elder daughter took place on 10/4/2000 which falls in the assessment year 2001-02. CIT(A) further observed that though the assessee claimed to have incurred such an expenditure out of the additional income surrendered for more than 10 crores by the Accurate group, it is found that the marriage expenses of Rs. 10 Lacs was not covered in the utilisation chart of additional income so surrendered, and, therefore, the question of granting benefit of set off/telescoping does not arise. According to the Ld. CIT(A) the stand taken by the assessee that the benefit of set off/telescoping should be given against the funds available against income pertaining to the period prior to 31st of March 2000 is an unsubstantiated afterthought and cannot be accepted. Ld. CIT(A), therefore, confirmed the addition made by the learned Assessing Officer under this head. Assessee, therefore, aggrieved by such an order preferred this appeal.

When the matter is called, neither the assessee nor any authorised representative entered appearance. It could be seen from the record that the notice issued on 18/11/2019 noting the date of hearing as 18/12/2019 was sent to the address given in form No. 36. If the assessee is available in such address, such notice should have been served on the assessee. If for any reason, the assessee is not available there, it is for the assessee to make arrangements for service of such notice by furnishing the address where the assessee would be available, or to deliver it to some authorised person, or by making request to the postal department to detain the mail till the assessee claims the same. Since the assessee does not seem to have adopted any of these methods, we are of the considered opinion that no time could be granted. Basing on the record we proceed to hear the counsel for Revenue and decide the matter on merits.

It is the submission of the Ld. DR that the assessment under section 153A/153C of the Act need not necessarily be based on incriminating material and for such purpose he placed reliance on decision of the Hon’ble jurisdictional High Court in the case of Anil Kumar Bhatia 24 taxmann.com 98. According to him the Assessing Officer is bound to issue notices to the assessee to furnish returns for 6 assessment years and he is empowered to assess or reassess the total income including the undisclosed income of the assessee. He further submitted that learned Assessing Officer is empowered to reopen the proceedings under section 143 (1) (a) or under section 143(3) of the Act to reassess the total income, taking note of the undisclosed income, if any and the learned Assessing Officer is entrusted with the duty of bringing to tax the total income of the assessee whose cases are covered by section 153A of the Act by even making reassessment.

We have gone through the record in the light of the submissions made by the Revenue. Despite the relevant documents made by the Ld. DR, the fact remains that insofar as this addition of 10 Lacs is concerned no incriminating material was found during the search and seizure operations that took place on 26/7/2006. It is only basing on the answers given by the assessee to the questions put by the learned Assessing Officer at the time of recording of the statement of the assessee under section 132 (4) of the Act, the addition is made. It is the decision of the Hon’ble jurisdictional High Court in the case of CIT vs. Kabul Chawla, 380 ITR 573that in the absence of any incriminating material that is found during the search, is not open for the Assessing Officer to reopen the concluded assessment to make any additions. In our considered opinion, this case is covered by the decision in Kabul Chawla (supra) and in view of the same the additions made by the learned Assessing Officer cannot be sustained. We, therefore, find strength in the grounds of appeal pleaded by the assessee and allow them.

In the result appeal of the assessee is allowed. Order pronounced in the Open Court on 6th January, 2020.