2018 (10) TMI 1449 - AT - Income Tax

Appeals partly allowed for assessment years 2007-2011, emphasizing importance of evidence

The tribunal partly allowed the appeals for assessment years 2007-08 to 2011-12, remitting certain issues back to the Assessing Officer for fresh ... Assessment u/s 153C - not providing the seized material to the assessee well in advance to analyze and file the return of income - Held that:- Assessing Officer (AO) had issued the notice u/s 153C on 13.08.2013 calling for the returns of income for the A.Y.2007-08 to 2011- 12, but there was no response from the assessee. Subsequently, the AO issued a letter calling for information and there was no response from the assessee for the letter also. The assessee has requested for copies of the seized material on 11.03.2014 and the AO supplied the copies of the seized material on 13.03.2014 within two days of time, thus we do not find any lapse from the AO.. During the appeal hearing before the Ld. CIT(A) also, the assessee did not analyze the seized material taken by her and presented the case. This ground was not raised by the assessee before the Ld. CIT(A) and during the appeal hearing, the Ld AR did not make any argument to support this ground.- Decided against assessee Cash deposits made in the bank account of Late Shri D.. Krishnamachary father of D. Sampath - Held that:- As evident from the bank account, there are frequent cash deposits and withdrawals which required to be considered in the totality of the facts, but not the deposits alone. Since the assessee has assured that they would submit the entire information required for the purpose of completion of the assessment, in the interest of justice, the issue should be remitted back to the file of the AO to arrive at the true and correct income. The assessee should submit the necessary information explaining the sources of deposits, application of money and arrive at the peak deposit before the AO to consider the same as income. Accordingly we set aside the order of the lower authorities and remit the matter back to the file of the AO for fresh consideration. Unexplained cash deposits - Held that:- The assessee explained the sources for the deposit for the AY 2007- 08 & 2008-09 as pension deposit and for the AY. 2009-10 the source was stated to be out of pension and agricultural income. Since the cash deposits in ground No. 2 and 3 are remitted back to the file of the AO, we are of the view that it is also required to be considered along with cash deposits discussed in ground No. 2 and 3 of this order. Thus, we remit the matter back to the file of the AO for fresh consideration. Additions based on bank deposits instead of seized material - Held that:- In this case, the assessee has not filed the regular return of income and no assessments were made u/s 143(3) / 143(1) for the impugned assessment year. Thus, the bank account found during the course of search was not declared by the assessee. Therefore, the bank accounts found during the course of search constitutes the seized material capable of initiating proceedings u/s 132. Accordingly, we uphold the action of the AO for initiating the proceedings u/s 153C and the legal validity of consequent additions made by the AO and dismiss the appeal of the assessee on this ground. Unexplained expenditure - source of the expenditure for construction / renovation of the house - Held that:- During the search and seizure operations conducted in the premises of Shri D. Sampath, the AO found the material marked as Annexure A/DS/12 at page Nos.. 198-200 and noticed that Late Shri D. Krishnamachary has made notings with regard to the house construction at Warangal. The same was confirmed by his son Shri D. Sampath in the statement recorded on 01.08.2011. However, neither Shri D. Sampath nor Shri D. Sriramulu has explained the source. The source was stated to be from the amounts received from U Rajya Lakshmi, but no evidence was furnished with regard to the receipt of money from U Rajya Lakshmi. During the appeal hearing, before the CIT(A) and before us, the assessee failed to furnish any evidence to explain the source of the expenditure for construction / renovation of the house Issues Involved:1. Provision of seized material to the assessee.2. Addition of cash deposits in the bank account of Late Shri D. Krishnamachary.3. Verification of records and assessment orders of Smt. U. Rajya Lakshmi.4. Cash deposit of Rs. 21,500/- in the account of Late Shri D. Krishnamachary.5. Additions based on bank deposits instead of seized material.6. Expenditure incurred for construction of the house.Detailed Analysis:Issue 1: Provision of Seized Material to the AssesseeThe assessee argued that the assessment under section 144 was invalid as they were not given sufficient time to analyze the seized material and file the return under section 153C. The tribunal found that the Assessing Officer (AO) provided the seized material within two days of the request, and the assessee did not raise this issue before the Commissioner of Income Tax (Appeals) [CIT(A)]. Consequently, the tribunal dismissed this ground for all assessment years (A.Y.) 2007-08 to 2011-12, citing no merit in the argument.Issue 2: Addition of Cash Deposits in the Bank Account of Late Shri D. KrishnamacharyThe AO found substantial cash deposits in the bank accounts of Late Shri D. Krishnamachary, which were treated as undisclosed income for A.Y. 2007-08 to 2011-12. The assessee contended that the deposits were made out of withdrawals and requested the consideration of peak deposits instead of the entire deposits. The tribunal remitted the matter back to the AO to consider the peak deposits as income, directing the assessee to submit necessary information explaining the sources of deposits and application of money.Issue 3: Verification of Records and Assessment Orders of Smt. U. Rajya LakshmiThe assessee withdrew this ground during the appeal hearing. Therefore, the tribunal dismissed it as withdrawn for A.Y. 2007-08 to 2011-12.Issue 4: Cash Deposit of Rs. 21,500/- in the Account of Late Shri D. KrishnamacharyThe assessee explained the sources of deposits for A.Y. 2007-08 to 2009-10 as pension deposits and agricultural income. Since the related issues were remitted back to the AO, the tribunal also remitted this issue for fresh consideration along with the cash deposits discussed in Issue 2.Issue 5: Additions Based on Bank Deposits Instead of Seized MaterialThe assessee argued that the assessments were made based on bank deposits without relying on seized material. The tribunal upheld the AO's action, stating that the bank accounts found during the search constituted seized material capable of initiating proceedings under section 132. Therefore, the tribunal dismissed the assessee's appeals on this ground for A.Y. 2007-08 to 2011-12.Issue 6: Expenditure Incurred for Construction of the HouseFor A.Y. 2009-10, the AO found that the assessee incurred an expenditure of Rs. 18,43,758/- for house renovation, which was treated as unexplained expenditure due to lack of evidence. The CIT(A) confirmed the addition, noting that the assessee failed to provide credible evidence to substantiate the claim of receiving amounts from U. Rajya Lakshmi. The tribunal upheld the CIT(A)'s order, finding no reason to interfere due to the absence of evidence explaining the source of the expenditure.Conclusion:The appeals for A.Y. 2007-08 to 2011-12 were partly allowed, with certain issues remitted back to the AO for fresh consideration and other grounds dismissed. The tribunal emphasized the need for the assessee to provide necessary information and evidence to substantiate their claims during the reassessment process.