2020 (8) TMI 238 - AT - Income Tax

Tribunal upholds income additions and assessment validity, dismisses challenge on jurisdiction.

Muzibur Raheman Khan Versus ACIT, Central Circle-1, Bhubaneswar

Muzibur Raheman Khan Versus ACIT, Central Circle-1, Bhubaneswar - TMI Issues Involved:1. Jurisdiction and authority of the assessment under Section 153C.2. Addition of Rs. 10,11,780 under commission income.3. Addition of Rs. 4,00,000 under sundry creditors.4. Applicability of Section 41(1) concerning the addition of sundry creditors.5. Deletion of Rs. 93,40,000 under Section 40A(3) regarding payment of expenditure other than account payee cheque/draft.Issue-wise Detailed Analysis:1. Jurisdiction and Authority of the Assessment under Section 153C:The assessee contended that the assessment under Section 153C was without jurisdiction as no incriminating material was found during the search that pertained to the assessment year in question. The Tribunal noted that the search operation conducted on 08.10.2013 led to the seizure of documents, including purchase deeds, from the residence of Hapizur Raheman Khan. These documents were considered to have revenue implications. The Tribunal referred to the legal position established in the case of Kabul Chawla [2016] 380 ITR 573 (Delhi), which states that completed assessments can only be interfered with based on incriminating material unearthed during the search. The Tribunal found that the case fell within the ambit of undisclosed income, thus justifying the assessment under Section 153C.2. Addition of Rs. 10,11,780 under Commission Income:The assessee argued that the commission income of Rs. 10,11,780 was wrongly shown in the original return filed under Section 139 and corrected in the return filed under Section 153C. The AO made the addition based on the discrepancy between the original return and the return filed under Section 153C. The CIT(A) confirmed the addition, stating that the assessee did not provide any explanation or supporting documents for the alleged mistake. The Tribunal upheld the CIT(A)'s decision, noting that the assessee failed to explain the difference and that the proceedings under Section 153C cannot be used to reduce income without filing a revised return.3. Addition of Rs. 4,00,000 under Sundry Creditors:The assessee claimed that the sundry creditors of Rs. 4,00,000 were wrongly disclosed in the original return and corrected in the return filed under Section 153C. The AO added the amount to the total income, and the CIT(A) confirmed the addition, applying Section 41(1) of the Act, which pertains to the cessation of liability. The Tribunal agreed with the CIT(A)'s reasoning that the assessee's action suggested that the liability ceased to exist, thus attracting the provisions of Section 41(1).4. Applicability of Section 41(1) Concerning the Addition of Sundry Creditors:The Tribunal upheld the CIT(A)'s application of Section 41(1), which deals with the cessation of liability. The assessee's reduction of sundry creditors by Rs. 4,00,000 indicated that the liability ceased to exist, justifying the addition under Section 41(1).5. Deletion of Rs. 93,40,000 under Section 40A(3) Regarding Payment of Expenditure Other than Account Payee Cheque/Draft:The AO made an addition of Rs. 93,40,000 for expenditures made in violation of Section 40A(3), which mandates payments above a certain limit to be made by account payee cheque/draft. The CIT(A) deleted the addition based on the remand report, and the Tribunal dismissed the Revenue's appeal on monetary grounds. The Tribunal noted that the assessee supported the CIT(A)'s order in the cross-objection, which was also dismissed.Conclusion:The Tribunal dismissed the assessee's appeal, confirming the additions of Rs. 10,11,780 under commission income and Rs. 4,00,000 under sundry creditors. The Tribunal found that the assessment under Section 153C was justified based on the presence of undisclosed income and the discrepancies in the returns filed by the assessee. The deletion of Rs. 93,40,000 under Section 40A(3) was upheld, and the legal ground raised by the assessee regarding the jurisdiction of the assessment was rejected.