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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
These five appeals out of seven appeals by the assessee, are arising out of the common orders of Commissioner of Income Tax (Appeals)-38, Mumbai [in short CIT(A)], in appeal No. CIT(A)-38/IT- 30,31,32,33,34,/2009-10 order dated 17.01.2011. The Assessments relating to these five appeals were framed by the Dy. Commissioner of Income Tax, Circle-40, Mumbai (in short ‘DCIT’ / AO) for the A.Ys. 2001- 02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 vide orders dated 27.11.2008 under section 153A r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The remaining two appeals, one is against the revision order passed by CIT(C)-IV, Mumbai vide order in F.NO. CIT(C)- IV/263/2010-11 dated 11.03.2011 under section 263 of the Act for AY 2002-03. Another appeal is against the consequential order passed by AO under section 143(3) r.w.s 263 of the Act vide order dated 27.12.2011 by ACIT, CC-40, Mumbai for AY 2002-03.
In for AY 2001-02
2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO and also enhancing the assessment on account of gift received by assessee amounting to ₹ 11,23,000/- treating the same as non-genuine and unexplained. The assessee has challenged assumption of jurisdiction for framing the assessment under section 153A read with section 143(3) of the Act, as there is no incriminating material found during the course of search and -43, 4211/Mum/2011 347/Mum/2014 assessment is not based on incriminating material although the original assessment remains unabated.
Briefly stated facts are that a search and seizure action under section 132 of the Act was carried out by the department on Saf Yeast Group on 30.11.2006. The present assessee has been member of Saf Yeast group, was covered under search and seizure action under section 132 of the Act. Original return of income for AY 2001-02 was filed by the assessee under section 139(1) of the Act on 23.05.2001 declaring the income at ₹ 1,45,210/-. This return has become final and no proceedings whatsoever was pending as on the date of the search and seizure action carried out by the department under section 132 of the Act on very assessee’s cases on 30.11.2006. The AO issued notices under section 153A of the Act and finally, completed the assessment under section 153A read with section 143(3) of the Act, vide order dated 27.11.2008 and made addition on account of deposits made with State Bank of Bikaner and Jaipur Saving Account No. 5222. According to AO, in the present Saving Bank Account there is peak of credit entries of deposits of cash of ₹ 7,24,098/- as on 03.05.2011 and giving benefit of opening capital balances of ₹ 2 lakhs and gross total income declare during the year under the original return of income at ₹ 1,53,667/-, he estimated the undisclosed income of ₹ 3,68,431/-. The AO further estimated the addition of ₹ 1 lakh on account of low household withdrawal. Accordingly, the AO computed the undisclosed income of the assessee at ₹ 4,68,431/- . Aggrieved, assessee preferred the appeal before CIT(A).
The CIT(A) considered this issue, but finally added the unexplained gift of ₹ 11.23 lakhs and after allowing the benefit of already added discrepancy in the capital account and the drawings and deletion made as per Para 7.1 of CIT(A) ‘s order of ₹ 2 lakhs retained further addition of -43, 4211/Mum/2011 347/Mum/2014 ₹ 4,54,569/-. For this CIT(A) confirmed the addition by observing in Para 8.1 as under: -
“8.1 In view of the finding given in para Nos. 6.0 to 6.6 supra bolding that alleged gift have to be treated as unexplained income, AO is hereby directed to enhance the assessed income for the AY 2001-02 by an amount of ₹ 4,54,569/-, which is arrived at as under:
Unexplained income(gifts) ₹ 11,23,000/- Less: Discrepancy in the capital account ₹ 4,68,431/- & drawings Deletion of addition made as per para 7.1 above ₹ 6,68,431/- ₹ 4,54,569/-.”
5. Before us, the learned Counsel for the assessee argued that there is no incriminating material found during the course of search regarding unexplained gifts or the deposits made in the Savings Bank Account maintained with State Bank of Bikaner and Jaipur account No. 5222. The learned Counsel for the assessee stated that even the assessee has filed return of income for AY 2001-02 on 23.05.2001 and along with return of income filed the income and expenditure account, capital account where he has disclosed the gifts of ₹ 11.23 lakhs and also bank balance maintained with State Bank of Bikaner and Jaipur Account No. 5222/- at ₹ 11.48 lakhs. The learned Counsel for the assessee drew our attention to pages 147 to 151, wherein the copy of return of income for the relevant assessment year and copies of income and expenditure account, capital account and balance sheets as on 31.03.2001 are enclosed. The learned -43, 4211/Mum/2011 347/Mum/2014 Counsel for the assessee in view of the above, stated that the entire saving bank account of State Bank of Bikaner and Jaipur saving Bank Account No. 5222 and the gift received from Shri Gulab M. Adnani, Shri Jammumal V. Pohani, Shri Jashanlal D. Somani are already disclosed to the department and the assessment has been unabated and no proceedings whatsoever was pending before the AO for this assessment year. The learned Counsel for the assessee relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Continental Warehouse Corporation (2015) 374 ITR 645 (Bombay) for this proposition. When these facts were confronted to the learned Sr. Departmental Representative, Shri Manjunatha Swamy, he only relied on the assessment order and the order of CIT(A) but could not point out what was the incriminating material found during the course of search and which is used for making addition.
In view of the above facts and circumstances, we are of the view that the assessee has filed regular return of income for AY 2001-02 on 02.03.2009, wherein the gift received from the above said parties of ₹ 11.23 lakhs has been disclosed in the capital account which is enclosed with the return of income. Further, we also find that the bank balances of the saving bank account No. 5222 mentioned with the State Bank of Bikaner and Jaipur is also disclosed in the balance sheet as on 31.03.2001 and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying on the decision of Hon’ble Bombay High Court in the case of Continental Warehouse Corporation (supra) is clearly applicable in respect of -43, 4211/Mum/2011 347/Mum/2014 undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search. Following the Hon’ble Bombay High Court and going by the facts of the case, we delete the addition. The appeal of the assessee is allowed.
In for AY 2003-04
The facts and circumstances are exactly identical from AY 2001- 02. The AO added the gift of Rs. 6,62,000/- as unexplained in the hands of the assessee received from Shri Gulab M. Adnani. The CIT(A) confirmed this addition and further enhanced the following additions:-
“i. ₹ 2,00,000/- being Maturity amount of fixed deposit. ii. ₹ 86,855 being amount received on redemption of ULIP.”
The facts and circumstances are exactly identical relating to search conducted on 30.11.2006. We find from the facts of the case that the assessee has filed regular return of income for AY 2003-04 on 27.08.2003 under section 139 of the Act and along with the return of income the assessee has disclosed the gifts received in the capital account filed with the return of income from Shri Gulab M. Adnani. The assessee has enclose the copy of capital account along with the return, wherein the gift received from the above said party of ₹ 6,62,000/- has been disclosed. Further, the assessee also drew our attention to the capital account wherein he has declared the receipt of fixed deposit maturity amount of ₹ 2 lacs and amount receive don redemption of ULIP of ₹ 86,855/-. Further, we also find that there is no proceedings pending before the AO on account of regular assessment and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The -43, 4211/Mum/2011 347/Mum/2014 assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying on the decision of Hon’ble Bombay High Court in the case of Continental Warehouse Corporation (supra) is clearly applicable in respect of undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search. Following the Hon’ble Bombay High Court and going by the facts of the case, we delete the addition. The appeal of the assessee is allowed.
In for AY 2004-05
The facts and circumstances are exactly identical from AYs 2001- 02 and 2003-04. The AO added an amount of ₹ 55,000/- on account of unexplained cash credit in the hands of the assessee being liability shown in the balance sheet in the name of ‘Plas Chem’.
The facts and circumstances are exactly identical relating to search conducted on 30.11.2006. We find from the facts of the case that the assessee has filed regular return of income for AY 2004-05 on 01.12.2004 under section 139 of the Act and along with the return of income the assessee has disclosed this amount of ₹ 55,000/- in the balance sheet being liability in the name of ‘Plas Chem’. Further, we also find that there is no proceedings pending before the AO on account of regular assessment and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying -43, 4211/Mum/2011 347/Mum/2014 on the decision of Hon’ble Bombay High Court in the case of Continental Warehouse Corporation (supra) is clearly applicable in respect of undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search. Following the Hon’ble Bombay High Court and going by the facts of the case, we delete the addition.
One more issue in this appeal is raised by assessee by way of additional ground that the CIT(A) has enhanced the assessment in respect to gift received from Mr. Gulab Adnani as unexplained income under section 68 of the Act. For this assessee has raised the following additional ground.
“8. Without prejudice to the other grounds, the learned CIT(A) erred in enhancing the income of the Appellant by taxing gift of ₹ 6,31,000/- received from Mr. Gulab Adnani as unexplained income under section 68 of the Act. The said enhancement is perverse and contrary to law.”
The facts and circumstances are exactly identical relating to search conducted on 30.11.2006. We find from the facts of the case that the assessee has filed regular return of income for AY 2004-05 on 27.08.2003 under section 139 of the Act and along with the return of income the assessee has disclosed the gifts received in the capital account filed with the return of income from Shri Gulab M. Adnani. The assessee has enclose the copy of capital account along with the return, wherein the gift received from the above said party of ₹ 6,31,000/- has been disclosed. Further, we also find that there is no proceeding pending before the AO on account of regular assessment and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The -43, 4211/Mum/2011 347/Mum/2014 assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying on the decision of Hon’ble Bombay High Court in the case of Continental Warehouse Corporation (supra) is clearly applicable in respect of undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search. Following the Hon’ble Bombay High Court and going by the facts of the case, we delete the addition. The appeal of the assessee is allowed.
In for AY 2005-06
The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the addition made by the AO of ₹ 25,000/- on account of unexplained cash credit.
The facts and circumstances are exactly identical relating to search conducted on 30.11.2006. We find from the facts of the case that the assessee has filed regular return of income for AY 2005-06 on 01.09.2005 under section 139 of the Act and along with the return of income the assessee has disclosed this amount of ₹ 25,000/- in the balance sheet being liability in the name of Shri Gulab Adnani. Further, we also find that there is no proceeding pending before the AO on account of regular assessment and there is no incriminating material available with the assessing officer for framing this assessment under section 153A read with section 143(3) of the Act. The assessment originally made is unabated and once, there is no incriminating material found during the course of search in relation to the income added as undisclosed income, the proposition argued by the learned Counsel for the assessee relying on the decision of Hon’ble Bombay High Court in -43, 4211/Mum/2011 347/Mum/2014 the case of Continental Warehouse Corporation (supra) is clearly applicable in respect of undisclosed income added by the AO despite the fact that there is no incriminating material found during the course of search. Following the Hon’ble Bombay High Court and going by the facts of the case, we delete the addition.
In for AY 2006-07
The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the addition made by AO of unexplained cash credit of Rs. 4,97,000/-. The AO noted that there is credit in the accounts of the assessee amounting to Rs. 4.97 lakhs in the name of ‘journal’ as the assessee could not file any details. The AO added the same to the return of income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A).
Before CIT(A), the assessee file reconciliation statement based on the credits of Rs. 4.97 lakhs as on 31.03.2006. It was explained that this entry was on account of reconciliation statement based on the credits of Rs. 4.97 lakhs. The AO has made addition. The assessee before the CIT(A) explained that there is credit in his capital account under the narration of ‘journal’ of an amount of Rs. 4.97 lakhs as on 31.03.06. It was explained that this entry difference in the value recorded in the books of account, which was on explained by filing of reconciliation of Flat account in the books of accounts. It was explained that there was an accounting error occurred in AYs 1995-96, 1998-99, 2000-01 and 2004- 05 while recording the value of Flat owned by the assessee resulting in short credit in the capital account and the assessee filed reconciliation statement. The CIT(A) confirmed the addition by stating that the assessee has failed to satisfactorily explain the credit entry of Rs. 4.97 lakhs by observing in Para 12.3 as under: - -43, 4211/Mum/2011 347/Mum/2014
“12.3 On a careful examination of the remand report and the submissions made by the appellant, it is seen that the appellant has not discharged the onus of explaining the addition made in the capital account amounting to Rs. 4,97,000/-. Even after admitting the additional evidence during the appeal proceedings and after providing adequate opportunities, the appellant has failed to satisfactorily explain the addition to the capital account amounting to Rs.4,97,000/-. Therefore, in the facts and circumstances of the case, the addition of Rs.4,97,000/- is hereby upheld u/s 68 of the Act..”
Aggrieved, now assessee is in appeal before the Tribunal.
Before us, the learned Counsel for the assessee drew our attention to balance sheet as on 31.03.2005, which carried forward the value of flat. Finally, the learned Counsel for the assessee took us through the balance sheet for 31.03.2006, wherein the value disclosed is Rs. 29,67,200/- and this is the actual value. The learned Counsel for the assessee filed paper book at pages 1, wherein the details of credit balances as per the balance sheet for AYs 1995-96, 2000-01, 1998-99 and 2004-05 are disclosed and finally reconciliation as on 31.03.2006 is enclosed. We have gone through the reconciliation and when confronted the same to the learned CIT DR, he fairly stated that this reconciliation can be sent back to the file of the AO for verification and in case this verification is correct the AO can delete the addition otherwise, the AO will sustain the addition.
After hearing both the sides and going through the facts of the case, we are of the view that let this issue of reconciliation referred back -43, 4211/Mum/2011 347/Mum/2014 to the file of the AO and we order accordingly. The AO will go into the reconciliation and after verifying reconciliation, will decide whether addition is to be sustained or addition is to be deleted. We order accordingly. The matter is remanded back to the file of the AO.
The next issue in this appeal of is as regards to the order of CIT(A) confirming the addition of gift received from Shri Gulab M. Adnani of Rs. 25,000/-. At the outset, the learned Counsel for the assessee has not argued this issue due to smallness of tax effect and hence, he stated that this can be decided by the Tribunal accordingly. As the learned Counsel for the assessee seems not interested in prosecuting this issue due to smallness of amount, the same is dismissed.
The only issue in this appeal of assessee is against the revision order passed by the CIT(A) revising the assessment framed by AO under section 153A read with section 143(3) of the Act. For this assessee has raised the following 3 effective grounds:-
“1. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax erred in concluding that the order made under section 143(3)/153A of the Act by the Assessing Officer is erroneous and prejudicial to the interest of the revenue Provisions of the Act ought to have been properly construed and regard being had to facts of the case said order should not have been treated as erroneous and prejudicial to the interest of the revenue Reasons assigned by him are wrong and insufficient to justify that said order is erroneous and prejudicial to the interest of the revenue.
-43, 4211/Mum/2011 347/Mum/2014
On the facts and circumstances of the case and in law the learned Commissioner of Income Tax erred in arriving at the conclusion that there is omission on the part of the assessee to disclose gift received by his minor children in as much as there is no provision in the Act or column in the return of income to disclose gift received by minor children. Provisions of the Act ought to have been properly construed and regard being had to facts of the case no such conclusion should have been arrived at. Reasons assigned by him are wrong and insufficient to justify such conclusion so arrived at.
3. On the facts and circumstances of the case and in law the learned Commissioner of Income Tax erred in rejecting contention of the appellant that order made under section 143(3)/153A of the Act is illegal, bad in law, and contrary to the provisions of the Act in as much as there is no seized material in the case of appellant and therefore no valid order could have been made under section 143(3)/153A of the Act. Provisions of the Act ought to have been properly construed and regard being had to facts of the case an illegal and invalid order can not be held to be erroneous and prejudicial to the interest of the revenue. Reasons assigned by him are wrong and insufficient to treat an illegal and invalid order as erroneous and prejudicial to the interest of the revenue.”
At the outset, the learned Counsel for the assessee stated that the minor children of the assessee i.e. Master Ashish Soomaney and Master A Soomaney received gift from one Shri Gulab M. Adnani, a -43, 4211/Mum/2011 347/Mum/2014 Spanish citizen of Indian origin. During FY 2001-02 relevant to AY 2002- 03 the following gifts were received:-
“04.04.2001 Rs. 6,01,000 09.04.2001 Rs. 5,51,000 Total Rs. 11,52,000/-”
According to CIT(A), the assessment completed under section 143(3) read with section 143A of the Act is erroneous as the genuineness of this Gift received from Shri Gulab M. Adnani has not been verified and the above gifts were neither disclosed by the assessee in his return of income nor any particulars or details are submitted during the course of assessment proceedings. The learned Counsel for the assessee before us stated that that there is no incriminating material found during the search in relation to these gifts, which were disclosed in the return filed by the assessee for AY 2002-03. We find from the assessment order and the order of PCIT revising the assessment, that there is no incriminating material found during the course of search which reveals that this gift amount is undisclosed. For this proposition, the learned Counsel for the assessee stated that this issue has been deliberated Hon’ble Delhi High Court in the case of Pr. CIT vs. Shri Mahesh Kumar Gupta in /2-16 & CM Nos. 43256-43257/2016 vide order dated 22.11.2016 observing as under: -
“4. There is no dispute that the search and seizure proceedings in this case did not result in anything, therefore, material either in the form of books of account or other documents related to the issue of deemed dividend under Section 2(22) of the Act. The amounts paid were in fact originally declared in the assessment returns of the assessee.
-43, 4211/Mum/2011 347/Mum/2014
The CIT, therefore, had opportunity to exercise his powers as it were on the basis of returns as filed originally and validly under Section 263 of the Act.
In the circumstances in the absence of any material disclosing that the issue of deemed dividend had been willfully derived or had been deemed or otherwise withheld from the assessment an addition under Section 153A was warranted - based on the proposition taught by this Court in judgment dated 28.08.2015 in ITA 707/2014 titled: CIT vs Kabul Chawla. Therefore, we concur with the ITAT's opinion in this regard. The search and seizure proceedings in such cases are undoubtedly meant to bring to tax amount that are to be determined on the basis of materials seized in the course of such searches; permitting anything over and above that would virtually amount to letting the Revenue have a third or fourth opinion as it were. Searches –to quote the view of Attorney-general (NSW) vs. Quin (1990) HCA 21 in another context are “not the key which unblocks the treasury” of the Revenue’s jurisdiction in regard to matters that had attracted attention in the regular course of assessment.
In view of the above decision of Hon’ble High court, we are of the view that the assessment framed by AO is neither erroneous nor prejudicial to the interest of the Revenue and hence, the PCIT cannot assume jurisdiction under section 263 of the Act for revising the assessment. Accordingly, we quash the revision order passed by PCIT under section 263 of the Act and allow the appeal of the assessee. -43, 4211/Mum/2011 347/Mum/2014 In for AY 2002-03
At the outset, it is noticed that the assessment framed by AO in consequence to revision order passed by the PCIT under section 263 of the Act. Since, we have quashed the revision order passed by the PCIT, the consequential assessment framed will not survive and hence, the orders passed by the lower authorities are set aside and the appeal of the assessee is allowed.
In the result, the appeals of assessee in 3740, 3741, 3742/Mum/2011 are allowed. Appeal of assessee in ITA No. 3743/Mum/2011 is set aside to the file of the AO and allowed partly. Appeals of assessee in 347/Mum/2014 are allowed.
Order pronounced in the open court on 07-08-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 07-08-2018 kao kI ga[- .