2019 (2) TMI 350 - AT - Income Tax

Tribunal upholds Revenue's reassessment for AY 2006-2011, emphasizes detailed verification

Deputy Commissioner of Income-tax, Circle 1 (2) (1), Bengaluru Versus Shri Sachin Kamath

The Tribunal upheld the reassessment proceedings under Section 147 initiated by the Revenue for AY 2006-07 to 2011-12, stating that the documents seized ... Reopening of assessment - applicability of provisions of sec.153C - Held that:- On the disputed issue of assessment u/s 143(3) r.w.s. 147, though the assessee’s premises was not searched u/s 132, the fact remains that the assessee is only a third party and the details which are unearthed in the case of a searched person or belonging to assessee are prima facie cannot be disbelieved. The assessee has filed revised grounds of cross objection challenging the validity of issue of notice u/s 143(2) of the Act. At the time of hearing, the learned AR submitted that for the assessment year 2011-12, the assessment was completed u/s 143(3) of the Act without issuing notice u/s 143(2). On perusal of the assessment order, we found that notice u/s 143(2) was issued on 20/01/2014. When we called for assessment records of the AO, the said information could not be explained and also there is no finding of the CIT(A) on this legal issue which was raised. Hence, we consider it appropriate to remit this disputed issue to the file of the CIT(A) for adjudication. Accordingly, the cross objection for the assessment year 2011-12 is partly allowed for statistical purposes. Calculation of peak credit between the transaction of the assessee, Shri Dayananda Pai and CHD on the basis of documents filed in the course of hearing - Held that:- We are unable to understand the methodology of consolidated peak credit considered and there is no reference to peak credit calculation in respect of this assessee. The details filed by the AR are for the first time before the Tribunal based on the statements recorded in Dummy Tally Account in the course of search operations of Shri Dayananda Pai and CHD. We considering the material filed on record and the Settlement Commission and CIT(A)’s observations, are of the substantive opinion that these facts are to be examined and verified and the matter needs to be reconsidered for limited purpose for calculation of peak credit between the transaction of the assessee, Shri Dayananda Pai and CHD on the basis of documents filed in the course of hearing and accordingly, we restore this disputed issue to the file of the CIT(A) who shall call for remand report from the AO on these issues and pass a speaking order on the peak credit calculation only. The assessee shall co-operate in submitting information at the earliest and we allow the grounds of appeal of Revenue for statistical purposes. Issues Involved:1. Legality of reassessment proceedings under Section 147/148 of the Income-tax Act, 1961.2. Validity of additions made based on Dummy Tally Account.3. Applicability of Section 153C vis-à-vis Section 147.4. Double taxation of amounts already assessed by the Settlement Commission.5. Procedural validity of notices issued under Section 143(2).Detailed Analysis:1. Legality of Reassessment Proceedings under Section 147/148:The Revenue filed appeals against the CIT(A)'s orders for AY 2006-07 to 2011-12, challenging the reassessment proceedings initiated under Section 147. The assessee argued that the reassessment was illegal as it was based on materials seized during a search at a third-party location, which should have invoked Section 153C instead. The Tribunal noted that the AO had reason to believe there was income escapement and issued notices under Section 148, completing the assessment under Section 143(3) r.w.s. 147. The Tribunal upheld the AO's action, stating that the documents seized belonged to the assessee and justified the reassessment under Section 147.2. Validity of Additions Made Based on Dummy Tally Account:The AO made additions based on unaccounted transactions found in the Dummy Tally Account seized during a search at the premises of Shri Dayananda Pai and CHD. The CIT(A) deleted these additions, noting that the transactions were owned up by Shri Dayananda Pai and CHD before the Settlement Commission and taxed accordingly. The Tribunal found that the CIT(A) did not independently verify the peak credit calculations and restored the issue to the CIT(A) for re-examination, emphasizing the need for a detailed verification of the transactions and peak credit calculations.3. Applicability of Section 153C vis-à-vis Section 147:The assessee contended that the AO should have proceeded under Section 153C instead of Section 147, as the seized documents were found at a third-party location. The Tribunal referred to the provisions of Sections 153C and 147, noting that the AO had the discretion to choose the appropriate section. The Tribunal cited the decision in Shailesh S. Patel vs. ITO, which supported the AO's choice to proceed under Section 147 when Section 153C could not be invoked. The Tribunal concluded that the AO's action under Section 147 was justified and dismissed the assessee's cross objections.4. Double Taxation of Amounts Already Assessed by the Settlement Commission:The assessee argued that the amounts in question were already taxed in the hands of Shri Dayananda Pai and CHD by the Settlement Commission, and taxing them again would result in double taxation. The Tribunal acknowledged this contention but noted that the CIT(A) did not provide a clear basis for deleting the additions. The Tribunal restored the issue to the CIT(A) for a detailed examination of the peak credit calculations and the specific transactions between the assessee, Shri Dayananda Pai, and CHD, to ensure no double taxation occurs.5. Procedural Validity of Notices Issued under Section 143(2):For AY 2011-12, the assessee challenged the validity of the assessment under Section 143(3), claiming that no notice under Section 143(2) was issued. The Tribunal found that the assessment records did not clearly indicate the issuance of such notice and remitted the issue to the CIT(A) for verification and adjudication.Conclusion:The Tribunal allowed the Revenue's appeals for statistical purposes, restoring the issues to the CIT(A) for re-examination and verification of the peak credit calculations and procedural compliance. The assessee's cross objections were dismissed, except for the procedural issue for AY 2011-12, which was remitted to the CIT(A) for further adjudication. The Tribunal emphasized the need for detailed verification to ensure no double taxation and compliance with procedural requirements.