MRS. K.RESHUMA,CHENNAI vs. DCIT, CHENNAI

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

All the appeals of the assessee and revenue relates to two independent

assessees. Since common issue arises for consideration in all the appeals, we

heard the same together and disposing off the same by this common order.

assessee filed return of income for the assessment year 2001-02 on

29.11.2001. The time limit for issue of notice under Section 143(2) expired on

3 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

30.11.2002. The learned counsel for the assessee further submitted that an

assessment order was also passed under Section 143(3) on 22.03.2004.

Therefore, no assessment proceeding was pending as on 03.07.2006 when the

search was carried out. Since no assessment proceeding was pending, the

income disclosed before the date of search cannot be taken as income for the

block period. In other words, according to the learned counsel for the assessee,

the assessing officer has to confine himself only to the material found during

the course of search operation. Placing reliance on the order of this Tribunal in

ITA Nos.559 to 564/Mds/2014 dated 16.06.2014, the learned counsel for the

assessee submitted that when no assessment proceedings was pending on the

date of search, reassessment can be made only if incriminating material are

collected in the course of search material.

incriminating material found during the course of search operation. Therefore,

there cannot be any addition when the assessment proceeding was initiated

under Section 153A and 153C of the Act. The learned counsel also placed his

reliance on the order of this Tribunal in the case of Shri V.G.S.Rajesh in ITA

Nos.2081 to 2086/Mds/2012 dated 03.07.2015.

4 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

assessee submitted that the assessee filed the return of income under Section

139(1) of the Act on 29.07.2002. The time limit for issue of notice under

Section 143(2) expired on 31.07.2003. The assessing officer issued intimation

under Section 143(1) on 06.08.2003. Since the time limit for issue of notice

under Section 143(2) expired, the assessment proceeding is terminated by

operation of law. Therefore, on the date of search, no assessment proceeding

was pending. Therefore, the assessing officer has to confine himself only to the

material found during the course of search operation and the income disclosed

in the regular return before the date of search cannot be a reason for making

addition for the block period. Similarly, for the assessment year 2003-04, the

assessee filed return of income on 22.09.2003 and the time limit for issue of

notice under Section 143(2) expired on 30.09.2004. No assessment under

Section 143(3) was passed. However, the assessing officer issued intimation

under Section 143(1) on 05.03.2004. Therefore, on the date of search, no

assessment proceeding was pending.

the regular course on 02.02.2005 and the time limit for issue of notice under

Section 143(2) expired on 28.02.2006. In this order, according to the learned

counsel, no intimation was issued under Section 143(1) and no assessment

5 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

order was also passed under Section 143(3). Therefore, the assessment

proceeding was terminated on 28.02.2006. Hence, the block assessment for the

assessment years 2001-02 to 2004-05 is not validly framed on the basis of the

search materials. In the case before us, according to the learned counsel, no

material was found during the course of search operation. What was disallowed

by the assessing officer is expenditure claimed by the assessee for the medical

profession and also gift received from close relatives. In fact, the expenditure

and gift were disclosed in the profit and loss account filed by the assessee in

the regular course of filing return before the date of search. The information

available in the profit and loss filed before the assessing officer in the regular

course along with return of income before the date of search cannot be a basis

for making addition for the block period under Section 153A of the Act.

learned counsel for the assessee submitted that the assessment proceeding for

assessment years 2005-06, 2006-07 and 2007-08 was pending on the date of

search. The first addition made by the assessing officer is disallowance of

Rs.84,606/- towards expenses. According to the learned counsel, the assessee

claimed before the assessing officer that expenses towards vehicle

maintenance, telephone bill, staff salary, lighting charges, medicine expenses,

etc. to the extent of Rs.1,61,554/-. The assessing officer disallowed 40% of the

6 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

total claim on adhoc basis without any material. On appeal by the assessee, the

CIT(A) however, restricted the same to 25%. The learned counsel for the

assessee submitted that the assessee is a medical practitioner by profession.

After the death of her husband, the assessee is running the clinic with a

skeleton staff. The assessee could not even meet the day to day expenditure.

In fact, the assessee’s close relative one Mr.A.Ravindran who is employed in

United States of America was financially supporting the assessee by giving

small monetary gift. Therefore, the CIT(A) instead of restricting the

disallowance at 25% ought to have deleted the claim of the assessee. Similarly

for other assessment years, the expenditures were disallowed by the assessing

officer at 40%. However, the CIT(A) restricted the same at 25%. According to

the learned counsel, the CIT(A) is not justified in restricting the disallowance at

25%. The CIT(A) ought to have deleted the entire disallowance. The other

common ground raised by the assessee in other assessment years is the gift

received by the assessee from Mr.A.Ravindran.

mother’s own brother’s son. Shri.A.Ravindran, studied in U.S.A. and he was

residing there for more than 40 years. In fact, the said Shri A.Ravindran

became a citizen of U.S.A. Since the assessee is a widow and suffering, he is

extending financial support by giving monetary gift. Even though for the

7 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

assessment year 2005-06, the assessing officer made an addition of

Rs.43,620/- towards unexplained gift, the CIT(A) deleted the same on appeal

by the assessee. For the assessment year 2006-07, the CIT(A) sustained the

gift of Rs.2,66,747/- out of the total gift of Rs.4,41,966/-. For the assessment

year 2007-08, the CIT(A) deleted the entire gift of Rs.3,08,378/-. However, the

assessee filed the appeal before the Tribunal challenging the correctness of the

order of the CIT(A). The expenditure confirmed by the CIT(A) to the extent of

25% of the total claim was also been challenged by the revenue in the

department appeal for the assessment year 2007-08. Furthermore, the

assessee has incurred an expenditure of Rs.1,22,906/- on renovation of the

building. The CIT(A) without giving any reason has confirmed the order of the

assessing officer. The assessee according to the learned counsel incurred

expenditure of Rs.1,22,906/- for renovation of the building from the

professional income and the gift received from Shri A.Ravindran. The assessee

has also received gift during her birthday celebrations. The assessee being a

medical practitioner by profession, she used to receive small gift from various

person and close relatives during her birthday. The details of gift were filed

before the assessing officer. Inspite of that the assessing officer made addition.

representative submitted that for the assessment year 2001-02 to 2004-05, the

8 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

expenditure claimed by the assessee was found to be false by the assessing

officer. On a query from the bench, what is the basis for concluding that the

expenditure claim by the assessee in the regular assessment proceeding are

false, the learned department representative submitted that the assessee being

a medical practitioner was expected to maintain certain books of accounts.

However, no such books of account were maintained. No vouchers and bills

were also maintained by the assessee. Therefore, the assessing officer came to

the conclusion that the expenditure claimed by the assessee is not correct.

Hence, the assessment proceeding initiated by the assessing officer under

Section 153A is justified. The learned department representative further

clarified that the addition made by the assessing officer was with regard to the

expenditure incurred by the assessee and also gift received. According to the

learned representative for the department, no specific material was found

during the search operation in respect of the so called expenditure and the gift.

The disallowance was made mainly on the basis of the profit and loss account

which was filed by the assessee in the regular course before the date of search.

Since the assessing officer found that the expenditure claimed by the assessing

officer is not correct, he rightly initiated the proceeding under Section 153A of

the Act.

9 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

department representative submitted that for these assessment years, the

assessment proceedings were pending on the date of search. Therefore, the

assessing officer has to pass a composite order including all the income

disclosed by the assessee in the regular course and also the income which was

found during the course of search operation. As rightly submitted by the

learned counsel for the assessee, the assessing officer claimed expenditure for

all the assessment years. However, the assessing officer on adhoc basis

disallowed 40% of the claim made by the assessee. On appeal by assessee, the

CIT(A) restricted the disallowance at 25% of the claim made by the assessee.

Since the assessee is not maintaining any books of account, bills and vouchers,

according to the learned representative, the CIT(A) ought not to have restricted

the disallowance at 25% made by the assessing officer. The revenue has filed

the appeal for the assessment year 2007-08 challenging the correctness of the

order passed by the CIT(A) granting partial relief to the assessee. Referring to

the unexplained marriage expenditure, the learned department representative

submitted that the assessee has paid a sum of Rs.25,000/- by cash on

07.03.2006 to Hotel Le Meridien and another sum of Rs.2,50,000/- was also

paid to the very same hotel. Apart from this, the assessee has purchased a

diamond eartop and diamond necklace from M/s.VBJ Jewelleries and paid

Rs.49,825/- on 15.05.2006. Out of the total addition of Rs.12,16,610/-, the

10 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

CIT(A) deleted the addition made by the assessing officer to the extent of

Rs.8,91,785/-. However, there was an addition to the extent of Rs.3,24,825/-.

Referring to the claim made by the assessee before the assessing officer that

the marriage expenditure were met by the assessee’s aunt and the assessee

reimbursed the expenditure subsequently, the learned department

representative submitted that the claim of the assessee was not supported by

any material evidence. Therefore, the CIT(A) rejected the claim of the assessee

to the extent of Rs.3,25,825/-. According to the learned department

representative, when no evidence was available, the CIT(A) ought to have

confirmed the entire addition made by the assessing officer to the extent of

Rs.12,61,610/-. Therefore, the CIT(A) committed an error in restricting the

addition to Rs.3,24,824/-.

renovation of the building, the learned department representative submitted

that the assessee could not produce any material for the source of earning the

income of Rs.1,22,906/- which was said to be for invested for renovation of the

building. The assessee claimed before the assessing officer and the CIT(A) that

the entire expenditure was accounted in the return of income. The CIT(A)

deleted the addition made by the assessing officer without any reason.

According to the learned representative, when the assessee has not explained

11 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

the source for earning Rs.1,22,906/- the same has to be added to the income

of the assessee.

Shri A.Ravindran is a non resident Indian. Year after year, the assessee

receiving gift from the said Shri A.Ravindran. Since the assessee is not

reciprocating by offering any gift to said A.Ravindran, the assessing officer

found that there is no genuineness in the so called gift said to be received from

Shri A.Ravindran. Accordingly, the assessing officer made an addition. The

CIT(A), however, without appreciating the material on record, deleted the

addition made by the assessing officer.

perused the material available on record. Let us first take the assessment years

2001-02 to 2004-05. From the material available on record, it appears that

there was a search operation in the premises of the assessee, namely

Dr.K.Vanitha on 03.07.2006. The time limit for issuing notice under Section

143(2) expired for Assessment Years 2002-03 and 2003-04. For the

Assessment Year 2001-02, the assessing officer passed the order under Section

143(3) on 22.03.2004. Therefore, on the date of the search on 03.07.2006, no

proceeding was pending before the assessing officer. Hence, the assessing

12 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

officer cannot re-open the assessment concluded before the date of search. In

other words, the assessing officer may make a fresh assessment in respect of

the income which was unearthed during the course of search operation on the

basis of the material found by the revenue in the course of search operation. In

the case before us, admittedly, no material was found during the course of

search operation. Therefore, this Tribunal is of the considered opinion that

there cannot be any assessment of income for the block period in the absence

of any material found during the course of search operation. We have also

gone through the order of this Tribunal in the case of Shri V.G.S.Rajesh

(supra). In the case before this Tribunal in Shri V.G.S.Rajesh (supra), the time

limit for issuing notice under Section 143(2) expired on the date of search.

Therefore, this Tribunal found that the assessment proceedings are terminated

by operation of law. Since no assessment proceeding was pending on the date

of search, the Tribunal found that the assessment for the block period could be

made only on the basis of the material found during the course of search

proceedings. Accordingly, the assessment made by the assessing officer as

confirmed by the CIT(A) was set aside. In this case also for the assessment

year 2001-02 and 2002-03, the assessing officer has passed the order under

Section 143(3). For the Assessment Year 2003-04 & 2004-05, the time limit for

issuing notice under Section 143(2) expired. Therefore, for all the three

assessment years, the assessment proceedings were not pending on the date

13 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

of the search. Hence, in the absence of any material found during the course of

operation, this Tribunal is of the considered opinion, that there cannot be any

assessment for the block period. Accordingly, the orders of the lower

authorities are set aside for the assessment years 2001-02, 2002-03, 2003-04

and 2004-05, the entire addition made by the assessing officer is deleted.

not in dispute that the assessment proceeding was pending on the date of

search. The first disallowance made by the assessing officer was disallowance

of Rs.84,606/- towards expenditure. The assessing officer has also disallowed

Rs.1,61,554/- towards telephone bill, staff salary, lighting charges, medicine

expenses, etc. In fact, out of the total expenditure claimed by the assessee, the

assessing officer disallowed 40% of the claim on adhoc basis. The assessing

officer has not referred to any material found during the course of search

operation. On appeal by the assessee, the CIT(A) restricted the disallowance at

25% of the total claim of the assessee. The assessing officer has also made an

addition with regard to so called gift said to be received by the assessee from

Mr.A.Ravindran. The said Shri A.Ravindran is a close relative of the assessee.

After the death of the assessee’s husband, the said Shri A.Ravindran is

financially supporting the assessee by advancing gift occasionally. No material

was found during the course of search operation to show that the transaction

14 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

of gift was not genuine. The assessee has also claimed that the marriage

expenses were met by the assessee’s aunt and the same was reimbursed

subsequently. The assessing officer disbelieved the claim of the assessee on

the ground that there was not material evidence. It is pertinent to keep in mind

that this is a block assessment. Therefore, it is for the assessing officer to

substantiate the addition made in the assessment. When the assessee claims

that the marriage expenditure was met by the aunt and it was subsequently

reimbursed, it is for the assessing officer to examine further and find out

whether such claim was correct or not. In the absence of any further

investigation and material before the assessing officer, this Tribunal is of the

considered opinion that disallowing the marriage expenditure is not justified at

all.

hands of Mrs.Reshuma for the assessment year 2006-07, from the order of

both the authorities below, it appears that the fixed deposit receipts were found

during the course of search operation to the extent of Rs.27,40,313/-.

However, no addition was made other than the gift credited in the capital

account to the extent of Rs.4,91,414/-. The assessee claimed before the

authorities below that Shri A.Ravindran, a non resident Indian living in U.S.A.

gifted Rs.4,91,414/- on the occasion of the birthday. It is also a fact that the

15 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

said Shri A.Ravindran being a close relative of the assessee gifted money to the

assessee and her sisters, etc. The financial capability of the said Shri

A.Ravindran is not disputed by the revenue. The assessing officer disallowed

the claim of the assessee only on the ground that the assessee has not

reciprocated by making a return gift to said Shri A.Ravindran. When the

assessee claims that the said Shri A.Ravindran is supporting the family, this

Tribunal is of the considered opinion that non reciprocation of the gift by the

assessee cannot be a reason for making doubting the genuineness of the gift.

For accepting a gift, it is not necessary in law that such gifts need to be

reciprocated by making another gift. It may be a moral responsibility of the

recipient of the gift to reciprocate the same at the appropriate stage. When the

assessee claimed to have received the gift from her maternal uncle Shri

A.Ravindran when the assessee was under financial constraint, this Tribunal is

of the considered opinion that the donor himself might not have expected such

reciprocation from the assessee or from her family. Therefore, this Tribunal is

of the considered opinion that rejection of the claim of the assessee with regard

to gift said to be given by Shri A.Ravindran is not justifiable.

addition made by the assessing officer for assessment years 2004-05, 2005-06,

2006-07 and 2007-08 also. In the absence of any material, this Tribunal is of

16 I.T.A. Nos.832 to 839 & 882/Mds/2011 & C.O.No.82/Mds/2011

the considered opinion that the addition made by the assessing officer is not justified. Accordingly, the orders of the lower authorities are set aside and the entire addition made by the assessing officer is deleted.

Order pronounced on 28th October, 2016 at Chennai.

Sd/- Sd/- (अ�ाहमपी.जॉज�) (एन.आर.एस. गणेशन) (Abraham P. George) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member

चे�नई/Chennai, �दनांक/Dated, the 28th October, 2016.

sp. आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A) 4. आयकर आयु�त/CIT, 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.