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Facts
A search and seizure operation under Section 132 was conducted on the assessee, an individual running cable network businesses, revealing incriminating materials including diaries and notebooks. Subsequently, the Assessing Officer issued a notice under Section 153A, but the assessee failed to comply, leading to a best judgment assessment with several additions based on these seized materials. The assessee challenged these additions before the CIT(A) and then the ITAT, arguing that Section 153A additions must be solely based on incriminating material and that income estimation is not permissible.
Held
The Tribunal held that the additions made by the AO were indeed based solely on incriminating material found during the search and seizure operation, specifically diaries and notebooks revealing undisclosed business receipts. It further affirmed that the estimation of income is permissible under Section 153A assessments if justified by incriminating material, relying on the jurisdictional High Court decision in CIT v. Hotel Meriya. Therefore, the contentions of the assessee challenging the additions were rejected.
Key Issues
Whether additions made under Section 153A are valid if based on incriminating material found during a search and whether income estimation is permissible in such assessments.
Sections Cited
132, 153A, 142(1), 43B
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Income Tax Appellate Tribunal, “SMC” BENCH, COCHIN
Before: Shri Inturi Rama Rao
: Asst.Year 2009-2010 : Asst.Year 2010-2011 ITA No.688/Coch/2024 : Asst.Year 2011-2012 Sri.Rufus Antony Joseph The Deputy Commissioner of “Sahara” H No.22, T.C.3/989(1) v. Income-tax, Central Cir.1 Thoppil Nagar, Muttada P.O. Thiruvananthapuram. Thiruvananthapuram – 695 025. PAN : ACJPJ8257H. (Appellant) (Respondent) Appellant by : --- None --- Respondent by : Smt.Leena Lal, Senior AR Date of Date of Hearing : 03.02.2025 Pronouncement : 06.02.2025 O R D E R These appeals filed by the assessee are directed against different orders of the Commissioner of Income-tax (Appeals)-3, Kochi [“CIT(A)” for short] dated 7th May, 2024 for the assessment years 2006- 2007 to 2011-2012.
Since identical facts and issues are involved in these appeals, they were heard together and are being disposed of by the common order.
The brief facts of the case are that the assessee is an individual engaged in the business of running proprietary concerns under the name -688/Coch/2024. Sri.Rufus Antony Joseph. and style of M/s.Sahara Cable Network and UN Cable Network. A search and seizure operation was carried out under the provisions of sec.132 of the Income-tax Act, 1961 (“the Act” hereinafter) on 08.11.2010. During the course of search and seizure certain incriminating materials were stated to have been found and seized. Based on the incriminating material, the assessee was issued notice u/s.153A of the Act on 28th March, 2012. However, the assessee neither complied with the notice issued u/s.153A of the Act nor filed any information as called for vide notice issued u/s.142(1) of the Act. In the above circumstances, the Assessing Officer (Assessing Officer) was constrained to complete the assessment at a total income of Rs.8,44,795. While doing so, the AO made following additions / disallowances:- (i) Addition of disallowed unsecured loan Rs. 8,000 (ii) Addition of non-admitted income from Sahara Cable Rs.2,09,717 (iii) Addition of income of UN cable network Rs. 79,556 (iv) Addition on account of disallowance u/s 43B Rs. 30,366 (v) Addition of disallowed expenses Rs.2,87,670 (vi) Addition of disallowed expenses Rs. 11,447 4. Being aggrieved by the above assessment order, the assessee has filed an appeal before the CIT(A) and contended that the addition u/s.153A of the Act can be made wholly on the basis of incriminating material found and seized. In support of his contention, the assessee placed reliance on the judgment of the Hon’ble Supreme Court in the case of Pr.CIT v. Abhisar Buildwell P.Ltd. (Civil Appeal No.6580 of 2021). It is further contended that the AO cannot resort to estimation of income in the assessment completed u/s.153A of the Act. However, rejecting the contention of the assessee, the -688/Coch/2024. Sri.Rufus Antony Joseph. CIT(A) confirmed the addition made by the AO by holding that the addition is wholly based on the incriminating material found and seized. The CIT(A) further held by placing reliance on the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Hotel Meriya (2014) 362 ITR 664 (Ker.) that the AO is empowered to estimate the income of the assessee even in the case of search assessment proceedings. However, the CIT(A) deleted the addition on account of unexplained sundry credit of Rs.8,000 and also deleted the addition on account of telephone expenditure.
Aggrieved by the order of the CIT(A), the assessee is in appeal before me in the present appeal. When the matter was called for, none appeared on behalf of the assessee despite due service notice. Therefore, I proceed to dispose of the appeal on merits.
The learned Sr.DR, on the other hand, relied upon the orders of the authorities below.
I have heard the learned Sr.DR and perused the material available on record. The solitary issue that arises for my consideration is that in the assessment made u/s.153A of the Act, whether the AO made the addition wholly based on incriminating material found and unearthed during the course of search and seizure operation or not. There is no quarrel as to the proposition of law that the addition u/s.153A can only made on the basis of incriminating material found and unearthed during the course of search and seizure operation, -688/Coch/2024. Sri.Rufus Antony Joseph. as held by the Hon’ble Supreme Court in the case of Pr.CIT v. Abhisar Buildwell P.Ltd. (supra). In the present case, on a mere perusal of the assessment order, it would be clear that the additions were made based on the diaries and note books seized from the residence of the assessee. The said diaries and note books clearly reveal that the assessee had receipts in respect of Sahara Cable Network, which is a proprietary concern of the assessee. The receipts from said business were not disclosed in the return of income. Based on the gross receipt of Rs.10,23,011 the net profit was estimated at Rs.20.5%. Similarly is the position in the case of business of UN Cable Network. Thus, it is clearly evident that the addition was made solely on the basis of the incriminating material found during the course of search and seizure. Further, the Hon’ble jurisdictional High Court in CIT v. Hotel Meriya (2014) 362 ITR 664 (Ker.) held that even in the case of an assessment made u/s.153A, the estimation of income can be made if the incriminating material justifies estimation. Thus, the contentions raised for challenging the addition made by the AO are devoid of any merit.
In the result, the appeal filed by the assessee is dismissed. Order pronounced on this 06th day of February, 2025.