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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
This is an appeal filed by the assessee directed against the order of the CIT(A)-11, Bangalore, dated 26/02/2016 for the assessment year 2010-11.
2. The assessee raised the following grounds of appeal:
Briefly facts of the case are that the assessee is an HUF engaged in the business of dealing in gold and jewellery. A search and seizure operations under the provisions of section 132 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] were conducted in the case of M/s.Mangalchand Banthia and others on 12/03/2012. It was stated that certain documents belonging to the assessee were found during the Page 3 of 11 course of search and seizure operations. Consequently, notice u/s 153C of the Act dated 01/10/2013 was issued and served on the assessee. In response to same, assessee submitted that the original return of income filed on 20/03/2012 declaring a total income of Rs.14,49,970/- be treated as return in response to notice u/s 153C of the Act. Subsequently, notice u/s 143(2) dated 20/9/2013 was issued and served on the assessee and the assessment was completed u/s 143(3) r.w.s. 153C of the Act vide order dated 28/03/2014. While doing so, the Assessing Officer (AO) made addition of Rs.75,12,096/- on account of difference in stock of gold as per stock register and details in report of Form 3CD. The AO noticed that as per registered impounded on 12/03/2012 as per annexure MPJ/S-4, opening stock as per the stock register as on 1/4/2011 was 18,355.370 gms whereas as per report in Form 3CD, opening stock as on 01/04/2011 was 13,295.370 gms and the difference of 5060 gms between the stock register and the details as per Form 3CD, was brought to tax by adopting the rate of Rs.1632 per gm. When the assessee was called upon to explain the difference in stock, it was submitted that difference in stock of 4603 gms was on account of gold taken as advance under MP Deposit Scheme (MPDS) from various family members numbering to 22. The above explanation tendered by the assessee in support of difference in stock of 4603 gms was rejected by the AO on the following grounds:
The difference amount was brought to tax as unexplained investment.
Being aggrieved, an appeal was filed before the CIT(A) who vide impugned order, dismissed the appeal. It was, inter alia, contended that there was no satisfaction recorded by the AO of the person searched and therefore, the proceedings initiated u/s 153C were not valid in law. This contention was negatived by the CIT(A) after verifying from the assessment record that the AO has recorded a satisfaction note dated
Page 6 of 11 01/10/2013 and the satisfaction note was reproduced by the CIT(A) as under:
As regards merits of the addition, the CIT(A) confirmed the addition.
Being aggrieved, assessee is before us in the present appeal.
4.1 Learned AR of the assessee submitted that the original notice u/s 153A dated 01/10/2013 was issued to the assessee. However, the assessment came to be completed u/s 143(3) r.w.s. 153C of the Act. He further submitted that the notice u/s 143(2) issued against original return of income, not against return filed in response to notice issued u/s 153C of the Act. He further contended that no satisfaction as required u/s 153C was recorded by the AO. In support of this contention, he relied on the following decisions:
As regards merits of the addition, he submitted that the explanation offered by the assessee that difference in the quantity of stock as per stock register and the report in Form 3CD is only account of receipt of jewellery under the scheme called MP Deposit Scheme. He submitted that even confirmation letter from the depositors have been filed. Thus, he submitted that no addition is called for in the circumstances of the case.
4.2 On the other hand, ld.CIT(DR) submitted that the assessee having participated in the assessment proceedings without raising any objection as to the validity of the notice
Page 8 of 11 issued u/s 153C, he cannot raise objection at this stage. Relying upon the provisions of section 292B, he submitted that notice issued was valid in law. As regards recording of satisfaction, ld.CIT(DR) submitted that when the AO of the searched person and the assessee are same, there was no need of recording of separate satisfaction and in this connection, he relied on the decision of the Hon’ble Allahabad High Court in the case of TVS Securities & Finance (P) Ltd vs. CIT (42 taxmann.com 441)(All) and the decision of the Hon’ble Kerala High Court CIT vs. Dr. T.M.Kuriachan (32 taxmann.com 165)(Ker). He further submitted that the proceedings u/s 153C were validly initiated as the kartha of the assessee had declared undisclosed income u/s 132(4) of the Act in the hands of P.Gouthamchand, HUF. On the merits of the issue, ld.CIT(DR) submitted that the AO was justified in rejecting the explanation, as no corroborative evidence was filed to establish that the assessee had received gold under MP Deposit Scheme. Doubts raised by the AO, as mentioned in the assessment order, had remained unsubstantiated. In the circumstances, the addition should be confirmed.
We heard rival submissions and perused material on record. At the first instance, we shall deal with validity of the notice u/s 153C of the Act. It is a matter of record that kartha of the assessee i.e. P.Gouthamchand had given a statement u/s 132(4) of the Act offering income of Rs.80 lakhs in the hands of Page 9 of 11 the present assessee. Veracity of the statement is not under challenge. Needless to mention that statement given in the course of search and seizure proceedings u/s 132(4) constitutes material or document sufficient to give rise to jurisdiction u/s 153C of the Act. Admittedly as there was no warrant of search against the appellant, provisions of the Act do no authorize the AO to issue notice u/s 153A of the Act. However, in this case, though the notice was issued u/s 153A of the Act, the assessee filed return in response to same and participated in the assessment proceedings. Thus, the assessee has participated in the assessment proceedings and filed certain details and explanation before the AO and the same was considered by the AO at the time of framing the assessment order. Therefore, it cannot be said that any prejudice is caused to the assessee by mere wrong provision of law in the notice issued to him. The Parliament has enacted section 292B to cover this kind of situation. The provisions of section 292B are extracted below: Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
Page 10 of 11 The above provisions clearly provide that no return of income, assessment or notice, summons, other proceedings under the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission if in substance and effect, it is in conformity with or according to the intent and purpose of the Act. The Hon’ble Andhra Pradesh High Court in the case of Bharathi Cement Corporation vs. CIT (356 ITR 74) had interpreted the provisions of section 292B of the Act as under: “............It may however be noted that Section 292B of the Act enacts no assessment, notice, summons or other proceedings taken by the authorities under the Act shall be invalid by reason of any mistake, defect or omission if such notice or proceedings or assessment is otherwise valid under the Act. This provision enacts the principle that mere non-mention or mention of a wrong provision of law in a proceeding or order cannot be a ground to invalidate it if that is otherwise permissible and valid under law.......... ”.
Thus having regard to the provisions of section 292B of the Act, we hold that mere mention of wrong section in the notice does not vitiate the validity of the very notice issued for filing return of income. Thus, the contention of the assessee that notice issued requiring assessee to file return of income is invalid, cannot be accepted. As regards recording of satisfaction, the CIT(A) had observed that the AO has recorded a satisfaction note and the satisfaction note was also recorded in his order. As regards the contention of the assessee that satisfaction note has to be recorded again by the AO of the assessee who has Page 11 of 11 jurisdiction over him, no material was produced before us that no such satisfaction was recorded by his AO. In absence of material on record, we are unable to appreciate the contention of the assessee. Thus, in our considered opinion, the proceedings are validly initiated u/s 153C of the Act.
As regards merits of the addition, the AO has raised certain questions doubting the veracity of the explanation offered by the assessee as per paragraph 7 of the assessment order, which are reproduced supra. The doubts raised by the AO remain unsubstantiated and the assessee had made no effort to controvert the above findings of the AO. As the assessee has failed to prove his claim, we have no option but to confirm the addition.