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Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R Per Shri A.K. Garodia, Accountant Member; Both these appeals are filed by the assessee which are directed against two separate orders of ld. CIT (A), Davangere both dated 30.03.2017 for Assessment Years 2010-11 and 2011-12. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
It was submitted by ld. AR of assessee that ground nos. 1, 2 and 3 in both years are general and ground no. 4 is regarding validity of reassessment proceedings. This ground is as under. “4. The Ld. Assessing Officer erred in carrying out the impugned assessment under section 147 of the Income-tax Act and the Ld. CIT (A) erred in upholding the Order of the Ld. Assessing Officer.”
The assessee has also raised one additional ground in both years which is as under. “TheLd AO erred in carrying out the impugned assessment under Section 147 of the Income Tax Act instead of Section 153C of the Income Tax Act.”
Regarding the issue involved in ground no. 4 and the additional ground, it was submitted by ld. AR of assessee that search was conducted u/s. 132 of IT Act and in the case of M/s. Anantha Refinery Pvt. Ltd. (“ARPL”) on 03.12.2010 and the reopening is in the basis of material found in that search and therefore, in the facts of the present case, the provisions of section 153C are applicable and not of section 147 and therefore, reopening is bad in law. Reliance has been placed by him on the Tribunal order rendered in the case of Rajat Shubra Chatterji vs. ACIT in and ITO vs. Shri ArunKumar Kapoor as reported in 140 TTJ 0249. The ld. DR of revenue supported the orders of the authorities below.
I have considered the rival submissions. I find that as per the first Tribunal order rendered in the case of Rajat Shubra Chatterji vs. ACIT (supra), I find that the copy of this Tribunal order is not made available by the learned AR of the assessee but this Tribunal order is reported in CCH 135 (Delhi) Tribunal. In that case, the Tribunal followed another Tribunal order rendered by Amritsar Bench of the Tribunal in ITO vs. Shri ArunKumar Kapoor (supra) and hence, I first consider the applicability of that Tribunal order of Amritsar bench of the Tribunal. Para nos. 7.2, 8 and 9 of this Tribunal order are relevant for the issue in dispute before me and therefore, these paras are reproduced herein below for ready reference. These paras are as under.
“7.2 The undisputed facts are that a search was conducted under section 132 of the Act in the case of M/s. Today Homes & Infrastructure Pvt. Ltd. on 28-3-2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the DCIT, Central Circle- 22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under section 153C/148 of the Act. It is after that during the course of appellate proceedings before the CIT (A) the assessee took an additional ground of appeal to the effect that the reassessment proceedings initiated by the AO u/s.148 are illegal and void ab initio. In the instant case, the learned CIT (A) has correctly observed that the A.O. should have issued notice under section 153C of the Act and should have framed the assessment under section 153C read with section 153 of the Act. Section 153Cof the Act reads as under:-
& 1709/Bang/2017 Page 3 of 9 "153C. Notwithstanding 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 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 such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A."
8. On a perusal of the above provisions, it would be clear that the provisions of section 153C of the Act were applicable, which supersedes the applicability of provisions of sections 147 and 148 of the Act. As we have already noted hereinabove that the documents were seized during the search under section 132 of the Act and the same was sent to the assessee's A.O. at Amritsar by the Officer at Delhi. In our view, the learned CIT(A) has correctly observed that only the provisions in which any assessment could be made against the assessee in the Income tax Act was section 153C read with section 153 of the Act. It is also apparent from the record that the Officer at Delhi has mentioned in his letter that the necessary action may be taken as per law under section 153C/148 of the Act. Hence, notice issued under section 148 of the Act and proceedings under section 147 of the Act by the AO are illegal and void ab initio. In view of the provisions of section 153C of the Act, section 147/148 stand ousted. In the instant case, the procedure laid down under section 153C has not been followed by the A.O. and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari Vs. ACIT and another, reported in (2007) 289 ITR 341, wherein it has been held that if the procedure laid down in section 158BD is not followed, block assessment proceedings would be illegal. The CIT (A) has correctly observed that the provisions of section 153C are exactly similar to the provisions of section 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT (A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned DR that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure Pvt. Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by the learned D.R. is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dated 30-12-2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned D.R. Therefore, we uphold the order of the CIT (A) and dismiss the ground Nos.1 to 4 of the appeal.
& 1709/Bang/2017 Page 4 of 9 9. Since we have upheld the order of the CIT (A) in quashing the reassessment order and, therefore, we do not think it necessary to go into the merits of the case.”
In the present case also, this is noted by the AO in the assessment order that during the course of search operation carried out u/s. 132 of the Act in the case of ARPL on 03.12.2010, seized material marked as A/NSN/1 was found which reflected that there was unexplained investment of Rs. 9,90,145/- made by the assessee. On the basis of this evidence found in the course of search, the AO invoked the provisions of section 147 after duly recording the reasons for reopening of the assessment and a notice u/s. 148 of the Act was issued on 16.04.2012 which was duly served on the assessee. Hence it is seen that the search in the present case was carried out on 03.12.2010 and therefore, for Assessment Year 2010-11, section 153C can be invoked but for Assessment Year 2011-12 being the year of search, section 153C cannot be invoked and therefore, in respect of Assessment Year 2010-11,these Tribunal orders cited by ld. AR of assessee are applicable and respectfully following the same, I hold that the assessment order framed by the AO u/s. 147 for Assessment Year 2010-11 is bad in law because the same should have been made by the AO u/s. 153C. Since in AY 2010 – 11, the assessment order itself is quashed, the issue on merit do not call for any adjudication. Accordingly the assessment order in Assessment Year 2010-11 is quashed.
In the result, the appeal of assessee for Assessment Year 2010-11 is allowed.
Now I take up the appeal for Assessment Year 2011-12. The grounds raised by the assessee are as under.
“1. The Order of the learned CIT (A) is opposed to law, facts and circumstances of the case. 2. The Order is passed in haste, without providing sufficient and reasonable opportunity of being heard. 3.The Order is passed against the principle of natural justice and thus liable to be quashed. 4.The Ld. Assessing Officer erred in carrying out the impugned assessment under section 147 of the Income-tax Act and the Ld.
& 1709/Bang/2017 Page 5 of 9 CIT(A) erred in upholding the Order of the Ld. Assessing Officer. 5.The Ld. Assessing Officer erred in treating the capital balance of HUF as money lent by the Appellant in the ordinary course of business amounting to Rs. 19,00,000/- and further erred in treating the sum of Rs. 2,28,000/- as interest earned on the same. Further, he erred in adding a sum of Rs. 89,000/-, Rs. 6,30,000/- and Rs. 1,53,000/- as unexplained income. The Ld. CIT(A) erred in confirming the Order of the Ld. Assessing Officer.
6. The Ld. CIT(A) failed to note that the Ld. AO has erred in interpolating the presumptive provision of section 292C of the Act to bring the above amounts to tax in the hands of the Appellant.
7. The Ld. CIT(A) erred in confirming the Order of the Ld. AO who erred in treating the scribbling found in the seized documents as actual transaction of business. 8. The Ld. CIT(A) and the Ld. AO erred in adding a sum of Rs. 1,00,000/- to the income of the Appellant which, in fact, was a transaction of hand loan, that did not materialize due to insufficiency of funds. 9. The Ld. AO erred in adding a sum of Rs. 1,70,000/- to the income of the Appellant merely on the basis of scribbling made on one of the seized materials. 10. The Ld. CIT(A) and the Ld. AO failed to appreciate that the money advanced by Ms. Swetha, daughter of the Appellant, to M/s. Anantha Refinery Private Limited and other concerns amounting to Rs. 7,17,000/- was in the nature of loan for which ledger extracts were furnished during the course of assessment proceedings. 11. The Ld. AO erred in levying interest under section 234A, 234B & 234C of the Act. The computation thereof is erroneous. 12. The Appellant seeks your leave to add, alter, amend or delete any of the grounds urged at the time of hearing.”
In this year also, ground nos. 1, 2 and 3 are general which require no separate adjudication and ground no. 4 and additional grounds is rejected because I have already seen that this being the year of search, provisions of section 153C are not applicable.
Regarding the merit of the addition being disputed by the assessee as per ground nos. 5 to 8, it was submitted by ld. AR of assessee that these were the submissions of the assessee before the AO as noted by him on page no. 5 of the assessment order that the amount mentioned on page no. 68 of the seized material (A/NSN/1) are belonging to N. Surnarayana (HUF) who is assessed to tax before the learned ITO, Ward-1, Chitradurga under PAN: AKBHN2752B and the entire calculation is about rough estimate written by the grant daughter of the assessee on dictation of the assessee out of memory. It is submitted that the first amount noted of Rs. 19 Lacs is of opening capital balance in HUF account as on 31.03.2009 and remaining amounts are regarding incomes accrued over the years. In support of this contention, he submitted English version of the information as per scribbling on page no. 68 of seized material as per which the principle amount was Rs. 19 lakhs and the interest was Rs. 2.28 lakhs and Rs. 0.89 lakhs totaling Rs. 22.17 lakhs to which a further amount was added Rs. 6.30 lakhs being in respect of SVT profits and further interest of Rs. 1.53 lakhs was added making it Rs. 30 lakhs. It was also submitted that as per the capital account of HUF made available as per Annexure – 4 of the appeal memo/paper book, opening balance as on 01.04.2004 was Rs. 19,89,470/- which was considered at Rs. 19 lakhs by the assessee out of memory and to this, various income for Assessment Year 2005-06 to 2010-11 were added making a total of Rs. 30 Lacs. He submitted that the opening balance as well as closing balance of HUF capital is tallying with the rough estimate on the seized material and therefore, no addition is justified on the basis of this seized material. The ld. DR of revenue supported the orders of authorities below.
I have considered the rival submissions. I find force in the submissions of ld. AR of assessee because as per seized material, copy of which is available on page no. 27 of the paper book of which English translation is made available, opening balance is of Rs. 19 lakhs and closing balance after making addition of various amounts is Rs. 30 lakhs and the name mentioned on top is “Tathaiah”. This has been explained that in Kannada, “Tathaiah” is called to grandfather and it has been explained that this is in hand writing of the granddaughter of the assessee. The amounts are tallying if it is considered that the notings are by way of memory in round figure. This was the contention raised by the assessee since very beginning but no reason has been given in the assessment order or in the order of CIT(A) to reject this explanation of assessee. The AO has simply said that assessee did not satisfy this claim. In the order of CIT(A) also, this is only basis given by CIT(A) to reject the explanation of the assessee that no evidence was placed on record to justify the explanation of the assessee. In my considered opinion, assessee has to explain the seized paper and if the explanation of the assessee is rejected, cogent reasons should be given for such rejection. Explanation of the assessee is reasonable that these are rough estimated figures noted out of memory about opening balance of capital of HUF and its income over the years and the same is supported by the Balance Sheet of HUF except odd figures. Under these facts, I feel it proper to accept the explanation of the assessee in the facts of the present case, Therefore, I delete the addition on the basis of this seized material of Rs. 30 lakhs. Ground nos. 5, 6 and 7 are allowed.
Regarding ground no. 8, in respect of addition of Rs. 1,00,000/-, it was explained by the assessee before the AO, CIT(A) and before me that this was a proposed transaction which did not materialize. This relevant seized material is available on page no. 28 of the paper book and I find that in the same, amount of Rs. 1,00,000/- is mentioned with one name but the date mentioned has been struck down. In my considered opinion, the seized material itself suggests that since the date is struck down, it may be a case of non-materialization of the transaction and therefore, on this issue also, I find force in the submissions of ld. AR of assessee and therefore, this addition of Rs. 1,00,000/- is also deleted. Ground no. 8 is allowed.
Regarding ground no. 9 in respect of addition of Rs. 1,70,000/-, the seized material is available on page no. 29 of the paper book. Regarding this seized material, this was the contention of the assessee that this document does not belong to the assessee. Had this document been found in the possession of the assessee, the presumption would have worked against the assessee but in this case, the search is carried out in the premises of ARPL and not in the case of the assessee and therefore, this explanation cannot be brushed aside and it
has to be seen that whether from the seized material, there is any indication that it belongs to the assessee. From the seized material available on page no. 29 of the paper book, it is seen that there is noting of a few amounts only without any name or date. As per the page 8 of the assessment order also, it comes out that the AO has invoked the provisions of section 292C without any concrete finding that this document has any relation with the assessee. I find that section 292C comes into operation, if the document in question is found in the possession of the assessee ion course of search. In the present case, section 292CD is not applicable because the document in question is not found in the possession of the assessee and it was found in course of search at the premises of ARPL. Hence, any addition on the basis of this dumb document is not justified without establishing any connection with the assessee and therefore, this addition of Rs. 1,70,000/- is also deleted. Ground no. 9 is also allowed.
Regarding ground no. 10 in respect of addition of Rs. 7.17 lakhs, it is the explanation of the assessee that this amount was advanced by daughter Ms. N S Swetha to various concerns of ARPL and the same is appearing in the books of ARPL. The AO is saying on page no. 8 of the assessment order that the assessee did not explain the source of amount stated to have been invested by his daughter in various concerns. Before me, the assessee made available copy of IT return filed by daughter of the assessee Ms. N S Swetha for Assessment Year 2005-06 on 29.07.2005 available on pages 87 to 91 of paper book and the same for Assessment Year 2006-07 is available on pages 92 to 94 of paper book and for Assessment Year 2007-08 is available on pages 95 to 97 of paper book and the same for Assessment Year 2008-09 is available on pages 98 to 100 of paper book and the same for Assessment Year 2009-10 is available on pages 101 to 104 of paper book and for Assessment Year 2010-11 is available on pages 105 to 107 of paper book. As per the balance sheet as on 31.03.2010 available on pages 107 of paper book, Swetha is showing advances of Rs. 1.50 lakhs in the name of M/s. Anantha Spinning Mills Pvt. Ltd. and Rs. 4.30 lakhs in the name of ARPL apart from other assets and the total assets is totaling Rs. 15,14,720/- as on 31.03.2010 and return of income for Assessment Year 2010-11 was filed on 30.03.2011 i.e. much before the & 1709/Bang/2017 Page 9 of 9 reopening of the Assessment for this year and A. Y. 2010-11. Hence these documents have to be accepted and as per the same, the source of fund is properly explained in the hands of Ms. N S Swetha daughter of the assessee and therefore, this addition is also deleted. Ground no. 10 is also allowed.
Ground no. 11 is consequential being regarding interest u/s. 234A, 234B and 234C.
In the result, the appeal filed by the assessee for Assessment Year 2011-12 is partly allowed.
In the combined result, the appeal filed by the assessee for Assessment Year 2010-11 is allowed and for Assessment Year 2011-12 is partly allowed.
Order pronounced in the open court on the date mentioned on the caption page.