2016 (12) TMI 241 - AT - Income Tax

Tax Appeals: Tribunal Grants Relief, Directs Deletion of Additions. Reassessment Ordered for Exemption Issue.

Smt. Anjali Pandit and Others Versus Asstt. Commissioner of Income Tax, Central Circle 12, Mumbai

Smt. Anjali Pandit and Others Versus Asstt. Commissioner of Income Tax, Central Circle 12, Mumbai - [2016] 52 ITR (Trib) 404 Issues Involved:1. Jurisdiction of AO under Section 153A.2. Treatment of Long Term Capital Gain (LTCG) as income from other sources.3. Addition under Section 69C for unexplained expenditure on purchase of shares.4. Addition under Section 69C for unexplained expenditure on commission/service charges.5. Enhancement of assessment by CIT(A).6. Denial of exemption under Section 54F.Detailed Analysis:1. Jurisdiction of AO under Section 153A:The assessees raised additional grounds challenging the jurisdiction of the AO to make additions under Section 153A when no incriminating material was found during the search. The Tribunal admitted these additional grounds, citing that the issue of jurisdiction is a core legal issue affecting the basis of the assessment. The Tribunal relied on the decision in National Thermal Power Co Ltd Vs CIT (1998) 229 ITR 383 (SC) and All Cargo Global Logistics Ltd Vs Dy. CIT (2012) 137 ITD 26 (Mum)(SB). The Tribunal concluded that since the assessments were not pending on the date of the search and no incriminating material was found, the AO had no jurisdiction to assess the LTCG as income from other sources. This was supported by the case of All Cargo Global Logistics Ltd V/s DCIT (2012) 137 ITD 287 (Mum)(SB) and confirmed by the Hon'ble Bombay High Court in CIT V/s Continental Warehousing Corporation (Nhava Sheva) Ltd.2. Treatment of Long Term Capital Gain as Income from Other Sources:The Tribunal found that the AO had no jurisdiction to treat the LTCG as income from other sources since no incriminating material was found during the search. The Tribunal held that the LTCG declared by the assessee should be accepted as genuine. This decision was based on the principle that completed assessments cannot be disturbed unless some incriminating material is found during the search, as established in the case of All Cargo Global Logistics Ltd V/s DCIT.3. Addition under Section 69C for Unexplained Expenditure on Purchase of Shares:The Tribunal noted that the shares were purchased in an earlier assessment year (2003-04) and the source of purchase was explained as speculative income and cash. The Tribunal held that since the purchase was made in an earlier year and accepted by the AO, the addition under Section 69C in the current year was not justified. The Tribunal directed the AO to delete the addition of Rs. 1,58,299.4. Addition under Section 69C for Unexplained Expenditure on Commission/Service Charges:The Tribunal found that there was no evidence of commission payments and that the addition was based on mere suspicion. The Tribunal referred to the decision in the case of Smt Kamlaben Pandit V/s ACIT, where a similar addition was deleted. The Tribunal directed the AO to delete the addition of Rs. 3,54,680.5. Enhancement of Assessment by CIT(A):The CIT(A) had enhanced the assessment by treating the entire sale proceeds of shares as unexplained cash credit under Section 68. The Tribunal held that the enhancement was also without jurisdiction as it was not based on any seized or incriminating material found during the search. The Tribunal directed the AO to delete the enhancement.6. Denial of Exemption under Section 54F:The Tribunal restored the issue of exemption under Section 54F to the file of the AO for fresh adjudication. The Tribunal directed the AO to decide the matter afresh after affording a reasonable hearing to the assessee and considering the documentary evidence regarding the purchase of the flat.Conclusion:The Tribunal allowed the appeals of the assessees, directing the AO to delete the additions made under Sections 68 and 69C and to reassess the issue of exemption under Section 54F. The Tribunal's decision was based on the lack of jurisdiction of the AO under Section 153A and the absence of any incriminating material found during the search.