LALITHA DEVI,,KAKINADA vs. THE ACIT,, RAJAHMUNDRY

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

These appeals filed by the assessee are directed against order of

the Commissioner of Income Tax (Appeals)-3 {CIT(A)}, Visakhapatnam

for the assessment years 2007-08 & 2008-09.

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada

admitting total income of Rs.1,47,830/-. Subsequently, a search u/s 132

of the Act was carried out in the group cases of the assessee on

3.2.2009 and assessment was reopened u/s 153C of the Act by invoking

the provisions of section 153C of the Act. During the search assessment

proceedings, the A.O. found that the assessee had received unsecured

loans of Rs.1,61,900/- from various persons. as follows:

Since the assessee could not furnish any explanation with regard to the source and nature of credits, the A.O. completed the assessment by making addition of Rs.1,61,000/- and disallowed the interest relatable to the unsecured.

before the CIT(A) and the Ld. CIT(A) confirmed the addition made by

the A.O. as under:

8.4) I have carefully considered the written submissions and the facts of the case. There is no dispute regarding the action u/s.132 of the Act carried on 03.02.2008 in the group cases. It is also not disputed by 2

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada the AR that certain documents were seized wherein the details of income of appellant was mentioned. The AR has raised a doubt as to how the Assessing Officer was satisfied on the said material in order to invoke provisions u/s.153C of the Act. I have perused the material on record. It contains transactions relating to construction of residential house. It is also seen that the appellant and other group members have contested in capital gains claim u/s.54F as well as loans obtained from various persons. These two items have direct bearing on the income of the appellant. In view of the facts discussed above, I consider that the Assessing Officer has correctly assumed jurisdiction u/s.153C. Further, the appellant had complied with the proceedings by filing replies and other details without objection in the assessment proceedings. Though the appellant can agitate on legal issues before the appellate authorities, it cannot be a routine ground beyond reasonable time and without adequate material. In view of the facts and legal position discussed above, the plea of the appellant is rejected and the order of the Assessing Officer is held as valid.

8.5) The solitary issue that needs adjudication in this case is cash credits of Rs.1,61,000/- borrowed from 10 people. It is seen from paper book that the appellant has repaid loans to 5 people and remaining 5 people are outstanding. However, during the appellate proceedings, the AR of the appellant filed another paper book on 20.10.2016 which revealed that repayments were made in the case of Sri P. Chandrasekhar (Rs.16,000/-), Sri M. Ramakrishna (Rs.17,000/-), Sri K. Dorababu (Rs.16,000I-) and Sri N. Venkateswara Rao (Rs.15,000/-) prior search action. The remaining 5 were repaid during the year 2010 i.e., subsequent to search.

8.6) It is also a fact that the loans were accepted in cash. The AR was asked to substantiate that the payments were reflected in the books or bank account of creditors for which he expressed his inability. The AR was also requested to substantiate the source of creditors either by bank entries or by salary certificate in order to support their claim that these loans were advanced out of their own savings from salary. The AR again expressed his inability to furnish the details. The facts and circumstances of the case have not changed from the assessment proceedings till the appellate proceedings. The fact that remains unchanged is the confirmation letters from creditors. A mere filing of confirmation letters may not absolve the legal responsibility or obligation of appellant in the absence of corroborative evidence with entries in the bank account of appellant and creditors. Such attempt was not made by the appellant even during the remand and appellate proceedings. The confirmation letters and the claim of repayment of Loan remain self serving statements. The rigors of Section 68 are stringent in the case of credits. What the appellant needs to demonstrate is identity, 3

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada genuineness and creditworthiness of loan creditors. Absence of any one of these elements will render the loan as unexplained and liable to be taxed u/s.68 of the Act. In the instant case, the appellant had failed to prove the genuineness and creditworthiness of creditors.

8.7) In view of the above facts and circumstances, I uphold the addition of Rs.1,61,000 - on account of loan creditors made by the Assessing Officer. Having held that the loans a unexplained, the interest claimed by the appellant is also held as unexplained expenditure Accordingly, the claim of the appellant is hereby rejected and the order of the Assessing Officer is confirmed.

before us. During the appeal hearing, the Ld. A.R. argued that in this

case, the assessee has filed a return of income on 23.11.2007 and the

time limit for issue of notice u/s 143(2) of the Act got expired on

30.9.2008. Therefore, the assessment is completed assessment, hence,

the additions if any required to be made only on incriminating material

but not on the material accounted in the books of accounts. The Ld.

A.R. argued that unsecured loans were recorded in the books of

accounts as evidenced from the assessment order. Hence, the

assessment made by the A.O. u/s 153C of the Act is required to be

quashed.

the lower authorities.

on record and gone through the orders of the authorities below. In this

case, the assessee filed return of income on 23.11.2007 and the notice 4

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada u/s 143(2) of the Act required to be issued on or before 30.9.2008.

Therefore, the assessment is completed assessment. In the case of

search assessments, completed assessments should not be disturbed

unless the incriminating material is available. Any addition required to be

made u/s 153C of the Act is only on the basis of incriminating material

but not from the assessment records. This view is supported by the

order of this Tribunal in the case of Bhavanasi Anjaneyulu in ITA No.354

and 359/Vizag/2017 dated 19.1.2008 relied up on by the assessee. The

ITAT, Visakhapatnam in its order in the case of P.Rama raju in ITA

no.424 to 426/Vizag/2013 dated 31/07/2017 expressed the same view

relying on the Special bench decision in the case of All cargo Logistics

Ltd. The ld. A.R relied on the order of this Tribunal in ITA Nos.300 to

305/Vizag/2012, in case of L. Suryakantham Vs. ACIT, where in the

ITAT has considered similar issue and held that the A.O. had no

jurisdiction to make additions u/s 153A of the Act, for the assessments

which are not pending as on the date of search and also the time limit

for issue of notice u/s 143(2) of the Act has been expired. The relevant

portion of the order is extracted below:

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada has accepted that he has inflated 10% labour charges and which is common in this line of business. Consequent to search action u/s 132 of the Act, the assessee case has been centralized and accordingly fresh assessment proceedings have been initiated by issuing notice u/s 153A/153C of the Act for the six assessment years immediately preceding the assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to produce books of accounts and relevant bills & vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no additions can be made to the returned income. It is further submitted that as per sec. 153A of the Act, de-novo assessment can be made only in respect of the assessment year for which the assessment proceedings had been abated and that in respect of assessment years for which the assessment had already been reached a finality, such assessment could not be made u/s 153A of the Act unless there was seized materials.

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada limit for issue of notices u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to reassess the income of those completed assessment years.

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada 23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate bench of this Tribunal, while deciding the issue in favour of the assessee held as under:

“In assessments that are abated, the AO aretains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means – (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search.”

“We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgement and order of the learned Tribunal.

It appears that the learned Tribunal found on fact that after completion of assessment proceedings and after reaching finality thereon, the Assessing Officer tried to reagitate the assessments. According to us, the learned Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal.

Hence, the appeal is dismissed. There will be no order as to costs.”

Kolkata bench in the case of Smt. Yamini Agarwal Vs. DCIT (Central

Circle)-3, Kolkata reported in 83 Taxman.com 209 after considering

the decision of special bench ruling in the case of All Cargo Logistics

and the decision of Hon’ble Karnataka High Court in the case of

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada Canara Housing and the Bombay High Court decision in the case of

Anil Kumar Bhatia and expressed a view that in respect of

assessments completed prior to the date of search the scope of

proceedings u/s 153A of the Act has to be confined only to the

material found in the course of search. For the sake of convenience,

we extract the relevant para-25 & 26 of the cited order.

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed.

required to issue the notice only on the basis of money, bullion,

jewellery, other article or thing seized or requisitioned belonged to or

any books of accounts or documents seized or requisitioned pertains to

or pertain to the assessee. For ready reference we extract section 153C

of the Act, which reads as under;

“153C(1) Not withstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person [and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub- section (10 of section 153A].”

respectfully following the view taken by the coordinate bench of this 10

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada Tribunal, we hold that invoking provisions of section 153C of the Act

without having incriminating material is bad in law and accordingly we

set aside the orders of the lower authorities and allow the appeal of the

assessee.

ITA 112/Vizag/2017:

grounds of appeal raised in this appeal hence the appeal filed by the

assessee is dismissed as not pressed.

No.111/Vizag/2017 is allowed and ITA No.112/Vizag/2017 is dismissed.

The above order was pronounced in the open court on Apr’18.

(वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : VG/SPS

ITA No.111 & 112 /Vizag/2017 Lalitha Devi, Kakinada आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-