Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: Shri D.T. Garasia & Shri G Manjunatha
Date of hearing 04-12-2017 Date of pronouncement 29 -12-2017 O R D E R
Per G Manjunatha, AM :
This appeal filed by the assessee is directed against the order of the CIT(A)-40, Mumbai dated 19-11-2013 and it pertains to A.Y. 2003-04. The assessee raised the following grounds of appeal:-
“1. The learned CIT (Appeals) has erred in law and on facts and in the circumstances, in upholding the order of the Assessing Officer making addition Rs. 3100,0001- by treating the gift received as income of the appellant ignoring all the details submitted to him relating to the 'gift' including the order passed in regular assessment by the predecessor-AO by way of scrutiny under section 143 (3) of the act. Nothing incriminating was found and recovered in the course of search.
2 ITA 644/Mum/2014 1. The learned CIT (Appeals) has erred in law and on facts and in the circumstances, in upholding the order of the Assessing Officer making addition Rs. 1,00,000/- by treating as cash payment made from undisclosed source U/S.69C.
2. The learned CIT (Appeals) has erred in law and on facts and in the circumstances, in upholding the order of the Assessing Officer making addition Rs. 2,71,250/- on account of amount credited in capital account as prior period adjustment. Notwithstanding the fact that assessment was completed by way of scrutiny under Sec. 143(3) of the act and nothing was recovered in the course of search relating to this issue.”
The brief facts of the case are that the assessee, an individual carrying on the business of manufacturing of readymade shirts in the name & style M/s Tele Enterprises. The assessee is also the proprietor of M/s Sundha Maa Clothing Co. A search and seizure action u/s 132 of the I.T. Act was carried out in Mali group of cases on 28-02-2006. During the course of search, certain material relating to the assessee was found and seized. Accordingly, notices u/s 153A of the Act was issued calling for return of income. In response to notice u/s 153A, the assessee has filed return of income on 30-08-2007 declaring total income of Rs.2,55,530. The case has been selected for scrutiny and notice u/s 143(2) and 142(1) were issued. In response to notices, the authorized representative of the assessee appeared from time to time and furnished the details, as called for.
Assessment was completed u/s 143(3) r.w.s. 153A on 29-12-2008 in which the AO made addition of Rs.1 lakh as unexplained expenditure u/s 69C of the Act and Rs.3 lakhs as bogus gifts and Rs.2,71,290 as unexplained cash credit u/s 68 of the Act. Aggrieved by the assessment order, the assessee preferred appeal
3 ITA 644/Mum/2014 before the CIT(A) Before the CIT(A), the assessee has filed elaborate written submissions to challenge addition made by the AO towards unexplained expenditure u/s 69C, bogus gift and unexplained cash credit. The CIT(A) for the detailed reasons recorded in his order, confirmed addition made by the AO and dismissed the appeal filed by the assessee. Aggrieved by the order of CIT(A), assessee is in appeal before us.
The Ld.AR for the assessee submitted that the Ld.AO was erred in making addition towards gifts of Rs.2,71,250 in the assessment framed u/s 153A without there being any incriminating material found as a result of search. The Ld.AR further submitted that the AO has made addition of Rs.3 lakhs gift received from Shri Anthony Bonifacio on the ground that the assessee failed to establish the occasion of the gift and existence of reciprocity, ignoring the fact that the issue has been subject matter of regular assessment order passed by the AO u/s 143(3), wherein the AO has called for details of gift and had chosen to accept the explanation offered by the assessee. The Ld.AR further submitted that in the assessment framed u/s 153A, no addition could be made without there being any incriminating material found as a result of search in respect of assessments which are not abated as on the date of search. The Ld.AR further submitted that the AO erred in making addition towards amount credited in capital account of Rs.2,71,250 as prior period adjustment on the basis of financial statements filed by the assessee which is part of regular return of income and also was subject matter of regular assessment u/s 143(3). The AO
4 ITA 644/Mum/2014 do not have any incriminating material to make additions. In the absence of any incriminating materials, no addition could be made to the returned income in respect of assessment years, which is not abated as on the date of search. The Ld.AR further submitted that in respect of addition made on the basis of seized materials, which is not belonging to the assessee, the assessee hade explained the seized material with reference to books of account of another firm wherein he was a partner, but the AO has ignored all evidences to make addition only on the basis of seized material which is incorrect.
The Ld.DR, on the other hand, strongly supported the order of CIT(A) 5. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made addition towards gift received from one, Mr. Anthony Bonifacio on the ground that the assessee has failed to prove the occasion for gift and also the relationship between the donor and the done. The AO made addition of Rs. 2,71,250 in respect of amount credited in capital account on the basis of financial statements filed by the assessee which was part of regular return of income filed u/s 139(1) of the Act. The AO also made addition of Rs.1 lakh on the basis of seized materials on the ground that the assesseee has failed to explain source of Rs.1 lakh paid to Gajendra Cards. It is the contention of the assessee that in respect of addition towards alleged gift and credit in capital account, the AO was erred in making addition in the absence of any seized materials found as a result of search in respect of assessment year which is not abated as on the date of 5 ITA 644/Mum/2014 search. The assessee further contended that in respect of addition of Rs.1 lakh u/s 69C, he has explained the seized material with reference to books of account of another partnership firm, however, the AO has not given any reasons for making addition despite furnishing necessary evidences.
Having heard both sides and considered material on record, we find force in the arguments of the Ld.AR of the assessee in respect of grounds 1& 3 where the assessee has challenged addition made by the AO towards gift received from Mr.Anthony Bonifacio and addition of Rs.2,71,250 in respect of credits found in capital account as prior period adjustments. No doubt, the AO has made addition on the basis of financial statement filed by the assessee which was part of regular return of income filed u/s 139(1) without there being any incriminating material found as a result of search. It is also an admitted fact that the issue of gift received from Mr.Anthony Bonifacio was subject matter of discussion by the AO in the regular assessment order passed u/s 143(3) wherein the issue has been thoroughly examined by the AO. It is also an admitted fact that the addition made by the AO towards credit in capital account is not based on any incriminating material found as a result of search. It is a settled legal position of law in respect of abated and unabated assessments where the Hon’ble Bombay High Court in the case of CIT vs Continental Housing Corporation Ltd (2015) 274 ITER 645 (Bom) held that a plain reading of section 153A of the Act makes it clear that on initiation of proceedings u/s 153A, it is only the assessment / re-assessment proceedings that are pending as 6 ITA 644/Mum/2014 on the date of search u/s 132 of the Act stand abated and not the assessments / re-assessments already finalised for those assessment years covered u/s 153A of the Act. We further notice that the Special Bench of Mumbai Tribunal in the case of All Cargo Global Logistics Ltd vs CIT 137 ITD 287(Mum)(SB) after considering the provisions of section 153A held that no addition can be made in the absence of any incriminating material found during the course of search in respect of assessment years which are not abated as on the date of search. In this case, admittedly, search took place on 28-06-2006. The time limit for issue of notice u/s 143(2) for the assessment year 2003-04 has been expired on 30-09- 2004. The assessment for the assessment year 2003-04 has been concluded as on the date of search, therefore, we are of the view that the AO cannot make any addition without there being any incriminating material found as a result of search. Admittedly, in this case, the AO has made addition towards gift and credit found in capital account on the basis of financial statement filed by the assessee and such addition is not based on any seized material. Therefore, we are of the view that the AO was incorrect in making addition towards gift and credit found in capital account in the assessment framed u/s 153A. The CIT(A), without appreciating the facts has simply upheld addition made by the AO.
Hence, we are inclined to reverse the findings of Ld.CIT(A) and delete the addition made by the AO towards gift and credit found in the capital account. 7. Insofar as addition of Rs.1 lakh u/s 69C of the Act, as unexplained expenditure, the AO made addition of Rs.1 lakh on the basis of seized material
7 ITA 644/Mum/2014 which indicates that the assessee had paid cash of Rs.1 lakh on 24-01-2003 to Gajendra Cards. The AO further observed that cash payment of Rs.1 lakh is not reflected in the books of account of the assessee for the relevant assessment year. Therefore, he opined that the assessee has failed to explain source for payment of Rs.1 lakh and accordingly made addition u/s 69C of the Act. It is the contention of the assessee that the AO has made additions on the basis of noting available on page 139 of the seized materials without considering the explanation offered by the assessee that the said payment relates to business transactions towards purchase of cloth in respect of another firm where the assessee is a partner. The assessee further contended that these transactions were in relation to the business of Nimbeshwar Creation whose income was offered by way of disclosure consequent to search u/s 132 of the Act.
Having heard both the sides and considered material on record, we find that the AO has made addition of Rs.1 lakh u/s 69C by referring to a document in Annexure A-3 on page 139 whereas the assessee claims that reference made by the AO to Annexure A-3 on page 139 pertains to business of Nimbeshwar Creation whose income has been offered by disclosure. The facts are not clear.
Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of explanation of the assessee; hence, we set aside the issue to the file of the AO and direct him to consider the issue afresh after affording reasonable opportunity of hearing to the assessee. 9. In the result, appeal filed by the assessee is partly allowed, for statistical
8 ITA 644/Mum/2014 purpose. Order pronounced in the open court on 29th December, 2017.