2021 (3) TMI 1113 - AT - Income Tax

Tribunal directs re-examination of additions without incriminating material

Shri Sanjay Mehta, Smt. Seema Mehta, Mrs. Sandhya Sahlot, Mr. Surendra Mehta, Mr. Sandeep Mehta, Mrs. Priya Mehta, Mr. Hitesh Mehta, Mr. Arun Sahlot, Bhopal Versus ACIT (3) (1), Bhopal

Shri Sanjay Mehta, Smt. Seema Mehta, Mrs. Sandhya Sahlot, Mr. Surendra Mehta, Mr. Sandeep Mehta, Mrs. Priya Mehta, Mr. Hitesh Mehta, Mr. Arun Sahlot, ... Issues Involved:1. Timeliness of filing Miscellaneous Applications (MAs).2. Non-adjudication of specific legal grounds by the Tribunal.3. Additions made in respect of years without incriminating material.4. Additions based on rough notings in a diary without corroboration by independent evidence.Detailed Analysis:1. Timeliness of Filing Miscellaneous Applications (MAs):The assessee(s) filed Miscellaneous Applications under section 254(2) of the Income Tax Act, 1961, seeking rectification of apparent mistakes in the Tribunal’s orders dated 22.03.2013, 16.04.2013, and 30.04.2013. The learned counsel for the assessee argued that these applications were filed within the stipulated time of four years, relying on the judgment of the Hon’ble MP High Court in the case of Distt. Central Co-operative Bank Ltd. V. UOI (2017) 86 taxmann.com 176 (MP). The Tribunal agreed with this proposition and admitted the MAs for adjudication.2. Non-Adjudication of Specific Legal Grounds by the Tribunal:The assessee(s) contended that two common issues raised in their grounds of appeal were not adjudicated by the Tribunal. These issues were:- No addition should be made for years where no incriminating material was found as the assessments stood completed under sections 143(3)/143(1) and were not pending on the date of search.- No addition should be made based on rough notings in a diary found during the search without corroboration by independent evidence.The Tribunal acknowledged that these issues remained undecided and warranted rectification under section 254(2).3. Additions Made in Respect of Years Without Incriminating Material:The Tribunal examined the first issue, which questioned the additions made for assessment years 2003-04 to 2006-07, where no incriminating material was found during the search. The Tribunal noted that the original assessments for these years were completed and not pending on the date of the search. The Tribunal referred to the Special Bench Decision in All Cargo Global vs. DCIT and the case of Gurinder Singh Bawa, which held that additions for completed assessments should not be made in the absence of incriminating material. The Tribunal directed the Assessing Officer (AO) to examine whether any incriminating material was found during the search and whether the assessments for these years were concluded and non-abated. If no incriminating material was found, the AO should not make any additions.4. Additions Based on Rough Notings in a Diary Without Corroboration by Independent Evidence:The second issue involved additions made based on rough notings in a diary found during the search. The assessee argued that these notings were merely business proposals and not actual financial transactions, and no independent corroborative material was provided by the AO. The Tribunal observed that the AO did not examine or cross-examine the assessee or the alleged recipients of the payments noted in the diary. The Tribunal emphasized that additions cannot be made based on rough jottings without corroborative evidence. The Tribunal set aside the issue to the AO for fresh examination, directing that additions should only be made if a proper nexus is established and corroborated with relevant material.Conclusion:The Tribunal allowed the Miscellaneous Applications to the extent that the two common issues remained to be adjudicated. The Tribunal directed the AO to re-examine the issues of additions for assessment years without incriminating material and additions based on rough notings in the diary, providing reasonable opportunity of being heard to the assessee(s). The order was pronounced in the open Court on 25.03.2021.