2019 (5) TMI 1604 - AT - Income Tax

Tribunal directs reassessment on seized documents & commission income for multiple assessment years

The Tribunal allowed the assessee's appeal for A.Y 2007-08, directing the Assessing Officer (A.O) to verify the date of receiving seized documents under ... Assessment u/s 153C - absence of any incriminating material found or seized - date on which the books of accounts or documents or assets seized during the course of search proceedings - computation of the block of six years preceding the AY relevant to the previous year /in which the search was conducted - HELD THAT:- The ‘satisfaction’ of the A.O of the assessee i.e the person other than the searched person was recorded on 15.01.2014. As such, the period of six years was to be reckoned from the date of recording of such ‘satisfaction’, which would thus take within its sweep the period relevant to Assessment Years: 2008-2009 to 2013-2014. Accordingly, as per the ld. A.R, the case of the assessee for the year under consideration i.e. A.Y.2007-2008 would not fall within the scope and gamut of the period for which assessment proceedings u/s153C could be framed. As per the facts stated by the ld. A.R before us, we find substantial force in his contention that the year under consideration viz. A.Y 2007-08 does not fall within the period for which assessment u/s 153C could be framed. Accordingly, we direct the A.O to verify the factual position as regards the date on which the books of accounts or documents or assets seized during the course of search proceedings were delivered by the A.O of the searched person to the A.O of the assessee i.e the person other than the searched person. Apart there from, in case the A.O of the searched person and that of the assessee is the same person, then the date of recording of ‘satisfaction’ by the A.O in the file of the assessee i.e the person other than the searched person, shall be taken as the relevant date for reckoning the period of six assessment years for which assessments could have been framed u/s 153C. In case, the claim of the assessee that the year under consideration vis. A.Y.2007-2008 falls beyond the scope of six assessment years from the aforementioned date of recording of satisfaction or receiving of documents or assets seized or books of accounts by the A.O of the assessee, as the case may be, then the assessment framed by the A.O shall stand vacated. The “Additional Ground of appeal” raised by the assessee is allowed in terms of our aforesaid observations. Additions based on contents lying in the locker - HELD THAT:- We find that the assessee in his ‘statement’ which was initially recorded during the course of the search & seizure proceedings u/s.132(4), dated 20.11.2012, had specifically stated that the contents lying in the locker were belonging to him. In fact, a perusal of the assessment order reveals, that the assessee on being confronted with the aforesaid documents viz. Annexure-A/1 to A/4 had specifically admitted that the same were required by him in the course of his business to get orders from the customers to prove the genuinenity of the supplier parties. On a perusal of the specific replies to the queries as regards the seized documents viz Annexure-A/1 to A/4, it can safely or rather inescapably be concluded that the said documents belonged to the assessee. As such, we are not inclined to accept the contention of the ld.A.R that the assessee was in no way connected with the documents which were found and seized during the course of search proceedings from his locker No.596 with M/s Gold Sukh Safety Vaults Ltd., 65 Vithalwadi, Mumbai-400002. Computing the commission income of the assessee @3% of the aggregate of the turnovers of the respective 53 concerns - Assessee was involved in the business of providing/arranging accommodation entries for third parties - HELD THAT:- The lower authorities have failed to prove on the basis of any irrefutable documentary evidence that all the 53 parties on whose turnovers for the respective years the commission income of the assessee as a facilitator/bogus entry provider had been worked out were involved in the business of providing accommodation entries. The very basis for working out the brokerage income in the hands of the assessee cannot be accepted on the very face of it. Further, as observed by us hereinabove, as the basis for working the commission @3%/0.05% by the AO/CIT(A), is also not backed by any supporting material, therefore, the same does not inspire much of confidence as regards the estimation of the commission income of the assessee, and thus cannot be summarily accepted on the very face of it. The matter has not been appreciated by the lower authorities in the right perspective. Admittedly, we though are in agreement with the observations of the lower authorities that the assessee was engaged in the business of facilitating/providing of accommodation entries, however, the very basis for quantifying the estimation of such commission income does not find favour with us. Be that as it may, in our considered view, the matter requires to be restored to the file of the A.O with certain specific directions. Undisclosed silver weighing 11.2 Kgs and cash - undisclosed income of the assessee for the previous six assessment years - HELD THAT:- As we have restored the issue as regards the quantification of the ‘undisclosed income’ of the assessee to the file of A.O for fresh adjudication for the year under consideration and the preceding years, therefore, in all fairness the said issue is also restored to his file for adjudicating the same afresh. In case, the assessee is able to substantiate in the course of ‘set aside’ proceedings that he had sufficient funds available with to explain the investment made towards the value of 11.2 kg of silver jewellery and the cash of ₹ 11,00,000/- found from his locker no. 596 during the course of the search proceedings, then the addition to the said extent towards unexplained investment shall stand deleted. We do not find favour with the claim of the ld. A.R that the lower authorities had not given any basis for taking the value/upholding the value of the seized silver at ₹ 7,23,060/-. Rather, as is discernible from the records, we find that the assessee had categorically stated in his statement recorded during the course of the search proceedings that the 11.2 kg of silver jewellery that was found and seized from his locker No. 596 during the course of the search proceedings, was of a value of ₹ 7,23,060/-. We thus reject the contention of the ld. A.R that there is no basis for taking the value of the aforesaid 11.2 kg of silver jewellery by the A.O at ₹ 7,23,060/-. Issues Involved:1. Validity of jurisdiction assumed by the A.O under Section 153C.2. Assessment based on information from the Sales Tax Department.3. Assessment of income without specifying the section or head under which it is taxable.4. Taxation of short-term capital gain at normal rates instead of the prescribed rate of 10%.5. Addition of undisclosed silver and cash.Detailed Analysis:1. Validity of Jurisdiction Assumed by the A.O under Section 153C:The assessee challenged the jurisdiction of the Assessing Officer (A.O) under Section 153C of the Income-tax Act, 1961, arguing that the assessment should be based on the date of receiving the seized documents by the A.O having jurisdiction over the assessee. The Tribunal agreed with the assessee, referencing the judgment in CIT Vs. RRJ Securities Ltd., (2016) 380 ITR 612 (Delhi), and directed the A.O to verify the date of receiving the documents or the date of recording satisfaction. If the year under consideration (A.Y 2007-08) falls beyond the six assessment years from the relevant date, the assessment shall stand vacated.2. Assessment Based on Information from the Sales Tax Department:The A.O based the assessment on documents found in the assessee's locker, which included tax-related documents of third parties. The A.O presumed the assessee was controlling hawala parties and earning commission from bogus transactions. The Tribunal found the A.O's estimation of commission income at 3% unsupported by evidence and directed the A.O to verify the details of the parties from the Sales Tax Department, provide the assessee an opportunity to produce the parties, and substantiate the estimation of commission income logically.3. Assessment of Income Without Specifying the Section or Head Under Which It Is Taxable:The Tribunal did not specifically address this issue in detail but implied that the assessment should be based on clear and substantiated evidence, ensuring that the income is categorized under the appropriate section or head as per the Income-tax Act.4. Taxation of Short-Term Capital Gain at Normal Rates Instead of the Prescribed Rate of 10%:The Tribunal did not find any infirmity in the CIT(A)'s order, which dismissed this ground as no addition on this aspect was made by the A.O. The assessee's appeal on this ground was dismissed.5. Addition of Undisclosed Silver and Cash:The assessee argued for telescoping the addition of undisclosed silver and cash against the assessed undisclosed income for the preceding six years. The Tribunal directed the A.O to consider this claim during the reassessment proceedings. However, the Tribunal rejected the assessee's contention that the lower authorities did not provide a basis for valuing the seized silver at Rs. 7,23,060, as the assessee himself had admitted this value during the search proceedings.Separate Judgments:The Tribunal's decision applies mutatis mutandis to all the assessment years under consideration (2007-08 to 2013-14). The appeals of the revenue were also restored to the file of the A.O for fresh adjudication in line with the Tribunal's observations.Conclusion:The Tribunal allowed the assessee's appeal for A.Y 2007-08 and partly allowed the appeals for A.Ys 2008-09 to 2013-14 for statistical purposes. The revenue's appeals were also allowed for statistical purposes, directing the A.O to reassess based on specific directions and logical reasoning.