2015 (11) TMI 1373 - AT - Income Tax

Tribunal rules in favor of assessee, dismisses Revenue's appeals for assessment years 2001-07

The Tribunal allowed the assessee's appeals for the assessment years 2001-02 to 2004-05, setting aside the assessment orders. For the assessment years ... Validity of assessment order u/s 153C - Held that:- No material was found during the course of search operation. What was available with the Revenue is the computer statement of depositors which was found during the course of survey operation u/s 133A of the Act. Even assuming that the material found during the course of survey operation can be a basis for making a block assessment, this Tribunal is of the considered opinion that the details of deposits were very much before the Assessing Officer in the returns of income filed by the assessee in the regular course before the date of search. Therefore, in the absence of any further material with regard to non-genuineness of the deposits, this Tribunal is of the considered opinion that the concluded assessments for the assessment years 2001-02 to 2004-05 cannot be reopened. In view of the above discussion, this Tribunal is of the considered opinion that the assessment proceedings initiated by the Assessing Officer u/s 153C of the Act in the absence of any material found during the course of search operation cannot be justified. Accordingly, the orders of the lower authorities are set aside for assessment years 2001-02 to 2004-05. Now coming to the assessment proceedings for the assessment years 2005-06 and 2006-07, the assessee fled the return of income on 10.10.2005 for the assessment year 2005-06. The time limit for issuing notice u/s 143(2) for the assessment year 2005-06 is available upto 30.9.2006. In fact, the search operation was conducted on 4.7.2006. For the assessment year 2006-07, the due date for filing return of income has not expired and the assessee filed the return of income after the search on 31.10.2006. Therefore, for the assessment years 2005-06 and 2006-07, the assessment proceedings are pending, hence, the proceedings initiated by the Assessing Officer u/s 153C are valid for the assessment years 2005-06 and 2006-07. Un-genuine receipts - Held that:- The genuineness of the deposits made in assessment year 2001-02 cannot be examined in assessment year 2005-06 since the assessment proceedings were not pending on the date of search operation. Therefore, even assuming that the deposits are not genuine, this Tribunal is of the considered opinion that that cannot be a reason for making any addition for the assessment year 2005-06 and 2006-07, therefore, the Assessing Officer is not justified in following his observation for the assessment year 2001-02. The Assessing Officer is expected to make independent enquiry for the assessment years 2005-06 and 2006-07. Admittedly, the deposits were received in the earlier assessment years and the same were carried forward for the assessment years 2005-06 and 2006-07 and the assessee has also offered a sum of ₹ 55 lakhs in respect of fresh deposits received during the year under consideration. Therefore, this Tribunal is of the considered opinion that no further addition is required in respect of such deposits for the assessment years 2005-06 and 2006-07. The CIT(A) computed the peak deposit by computing the difference between the earlier deposits and the current deposits. For assessment year 2005-06 the peak credit computed by the CIT(A) is NIL. Therefore, this Tribunal is of the considered opinion that there is no justification for making any addition for the assessment year 2005-06. Now coming to assessment year 2006-07, the CIT(A) computed the peak credit at NIL. The Assessing Officer says that a sum of ₹ 50 lakhs was admitted by the assessee as undisclosed deposits. The CIT(A) rejected the claim of the assessee to set off the peak credit of ₹ 40,74,441/- for assessment year 2001-02. Since this Tribunal find that there cannot be any block assessment for assessment year 2001-02 u/s 153C of the Act, the income offered by the assessee has to be set off. Therefore, this Tribunal is of the considered opinion that no further addition is called for assessment year 2006-07 also. In view of the above discussion, we are unable to uphold the orders of the lower authorities. Accordingly, the orders of the lower authorities are set aside - Decided in favour of assessee. Issues Involved:1. Jurisdiction of the Assessing Officer to pass the assessment order under Section 153C of the Income Tax Act.2. Validity of the assessment proceedings for the assessment years 2001-02 to 2004-05.3. Validity of the assessment proceedings for the assessment years 2005-06 and 2006-07.4. Merits of the additions made for the assessment years 2005-06 and 2006-07.Detailed Analysis:1. Jurisdiction of the Assessing Officer to Pass Assessment Order under Section 153C:The main contention in the assessee's appeals was regarding the jurisdiction of the Assessing Officer to pass the assessment order under Section 153C of the Income Tax Act. The assessee argued that no search was conducted on its premises; instead, the search was conducted on the premises of the partners. The assessee had filed returns of income for the assessment years 2001-02 to 2006-07 in the regular course, and the time limits for issuing notices under Section 143(2) had expired for most of these years. Therefore, the assessment proceedings were not pending, and no proceedings could be initiated under Section 153C in the absence of any material found during the search.2. Validity of Assessment Proceedings for Assessment Years 2001-02 to 2004-05:The Tribunal noted that the search was conducted in the residential premises of the partners, not in the assessee-firm's premises. The assessee had filed returns of income in the regular course for all the assessment years. Section 153C provides for the assessment of income on a person other than the searched person if any material is found during the search. However, the Tribunal found that no material related to the assessee-firm was found during the search. The computer statement of depositors found during the survey operation could not be considered new material. Hence, the assessment proceedings for the years 2001-02 to 2004-05 could not be reopened, and the assessment orders for these years were set aside.3. Validity of Assessment Proceedings for Assessment Years 2005-06 and 2006-07:For the assessment years 2005-06 and 2006-07, the Tribunal found that the assessment proceedings were pending as the search was conducted before the expiry of the time limit for issuing notices under Section 143(2). Therefore, the proceedings initiated by the Assessing Officer under Section 153C were valid for these years.4. Merits of Additions for Assessment Years 2005-06 and 2006-07:For the assessment year 2005-06, the assessee had shown deposits in the balance sheet, and the Assessing Officer made additions based on findings from the assessment year 2001-02. However, the Tribunal noted that the deposits were disclosed in earlier returns, and the genuineness of these deposits could not be questioned in the absence of new material. The Tribunal found no justification for further additions for the assessment years 2005-06 and 2006-07, as the deposits were carried forward from earlier years and the assessee had already offered a sum of Rs. 55 lakhs for fresh deposits. Consequently, the Tribunal upheld the CIT(A)'s computation of peak credit and found no justification for further additions.Conclusion:The Tribunal allowed the assessee's appeals for the assessment years 2001-02 to 2004-05 and set aside the assessment orders. For the assessment years 2005-06 and 2006-07, the Tribunal found the proceedings under Section 153C valid but concluded that no further additions were justified. The Revenue's appeals were dismissed, and the Tribunal upheld the orders of the lower authorities. The final order was pronounced in the open court on 9th October 2015, at Chennai.