SAURIN MANUBHAI PATEL,MUMBAI vs. ACIT CC 25, MUMBAI

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ITA 3432/MUM/2015Status: DisposedITAT Mumbai10 February 2017AY 2007-083 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions made under Section 153C without incriminating documents found during search are unsustainable. Consequently, a penalty levied on such an addition, which would likely have been deleted on appeal, is also unsustainable.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 14.50 lakhs on account of professional receipts based on an AIR report. The AO levied a penalty of Rs. 4,88,069/- under Section 271(1)(c) for not reflecting these receipts. The CIT(A) confirmed the penalty.

What were the issues?

Whether a penalty under Section 271(1)(c) can be levied on an addition made under Section 153C without incriminating material found during search. The validity of an assessment made under Section 153C without assessment year-specific incriminating documents.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 153C,Section 143(3),Section 132

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SHRI D. KARUNAKARA RAO & SHRI RAM LAL NEGIShri Saurin Manubhai Patel, Shri Mayur Kisnadwala Shri Saurabhkumar Rai, DR

For Appellant: Shri Mayur Kisnadwala
For Respondent: Shri Saurabhkumar Rai, DR
Hearing: 14.12.2016Pronounced: 10.02.2017

सुनवाई की तायीख / Date of Hearing : 14.12.2016 घोषणा की तायीख /Date of Pronouncement : 10.02.2017 आदेश / O R D E R

PER D. KARUNAKARA RAO, AM:

1.

This appeal filed by the assessee on 5.6.2015 is against the order of the CIT (A)-51, Mumbai dated 20.03.2015 for the assessment year 2007-2008. In this appeal, assessee raised the following grounds which read as under:- “1. On the facts and in the circumstances of the case and in law, the order levying penalty is bad in law.

2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in confirming the action of the AO of levying penalty of Rs.4,88,069/- u/s 271(1)(c) of the Act.”

2. At the outset, Ld Counsel for the assessee mentioned that the relevant assessment was made u/s 143(3) read with section 153C of the Act on 19.3.2013 determining the assessed income of Rs. 68,44,890/- against the returned income of Rs. 53.94 lakhs. In the assessment, AO made the addition of Rs. 14.50 lakhs on account of professional receipts relying on the information received through AIR. In the assessment order, AO held that the assessee has not reflected professional receipt of Rs. 14.50 lakhs, which was received from M/s. Terock Infrastructure Pvt Ltd. Accordingly, AO levied the above said penalty of Rs. 4,88,069/- u/s 271(1)(c) of the Act vide his order dated 19.9.2013. On appeal, CIT (A) confirmed the said penalty and therefore, the assessee is in appeal before us.

3. During the proceedings before us, Shri Mayur Kisnadwala, Ld Counsel for the assessee submitted that this is a case, wherein solitary addition was made by the AO in the search assessment relating to the said professional receipts of Rs. 14.50 lakhs and the same is not supported by any incriminating information found during the search action on M/s. Patel Engineering Ltd group of cases. In fact, the said AIR report of the Department was the source of information for the said addition. The assessment made u/s 143(3) r.w.s 153C of the Act is unsustainable in law considering the absence of any incriminating material. Further, Ld Counsel for the assessee mentioned that the assessment constitutes an „non-abated assessment‟ considering the fact that the original return of income was filed on 27.3.2008 and notice u/s 143(2) of the Act was not issued till the date of search action. The actual due date expired by the time of search action u/s 132 of the Act or the date of receipt of the documents / seize material by the Assessing Officer of the assessee.

4. We have heard both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed before us. On perusal of the facts of the case, we find, it is a settled legal proposition that no additions in the case of the assessee, like the present one who is covered by the provisions of section 153C of the Act, can be made validly in the absence of assessment year specific incriminating documents. The completed assessments like the instant one, cannot be reopened for making additions other than the additions unsupported by the incriminating material either found during the search or collected during the search action. Therefore, if the assessee would have contested in appeal the above addition of Rs. 14.50 lakhs, in all probability, the assessee would have won the case in its favour and the additions would have been deleted in the appeals. On these facts, the levy of penalty u/s 271(1)(c) of the Act on such addition of Rs. 14.50 lakhs which would have been deleted by the appellate authority is unsustainable in law and the same constitutes legal proposition. Therefore, after hearing both the parties, we are of the opinion, the penalty levied by the AO in this case should be deleted. Accordingly we order.

5. In the result, appeal of the assessee is allowed.

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