2021 (12) TMI 921 - AT - Income Tax

Assessment proceedings upheld, additions deleted for imprest account amounts

Shri Anand Nadig Versus The Deputy Commissioner of Income Tax, Circle 7 (2) (1), Bangalore

Shri Anand Nadig Versus The Deputy Commissioner of Income Tax, Circle 7 (2) (1), Bangalore - TMI Issues Involved:1. Initiation of assessment proceedings under Section 147 read with Section 148 vs. Section 153C of the Income-tax Act, 1961.2. Validity of additions made under Sections 68 and 69 of the Income-tax Act, 1961 for the assessment years 2006-07 to 2009-10.Issue-wise Detailed Analysis:1. Initiation of Assessment Proceedings:The primary issue raised is whether the assessment proceedings should have been initiated under Section 147 read with Section 148 or Section 153C of the Income-tax Act, 1961. The assessee argued that the assessments should have been made under Section 153C, as the material for the additions was unearthed during a search action under Section 132. However, the Tribunal concluded that the documents found during the search did not 'belong to' the assessee but merely contained information pertaining to the assessee. The Tribunal emphasized the distinction between 'belong to' and 'pertains to' or 'relates to,' noting that Section 153C could not be invoked unless the documents seized actually belonged to the assessee. Consequently, the Tribunal upheld the initiation of assessment proceedings under Section 147 read with Section 148, as the conditions for invoking Section 153C were not satisfied.2. Validity of Additions Made:Assessment Year 2006-07:The addition of Rs. 16,11,774 under Section 69A was based on entries found in a ledger account in the DTTE (Dummy Tally Training Environment) seized during the search. The assessee argued that the amounts were part of the gross receipts already declared and were merely imprest amounts spent on behalf of PDP (P. Dayananda Pai) and CHDC (Canara Housing Development Company). The Tribunal accepted the assessee's contention, noting that the entire entries in DTTE were considered in the proceedings before the Settlement Commission (SC) in determining the income of PDP and CHDC. Therefore, the addition was deleted.Assessment Year 2007-08:The addition of Rs. 86,00,000 under Section 68 was based on entries in the ledger account of D.N. Associates, where the assessee was a partner. The Tribunal found that the entries pertained to the firm and not to the assessee in his individual capacity. Since D.N. Associates had already declared additional income, the Tribunal held that the addition in the hands of the assessee was unsustainable and directed its deletion.Assessment Year 2008-09:The additions of Rs. 1,75,10,000 and Rs. 50,00,000 were based on similar ledger entries. The Tribunal reiterated its findings from the previous years, holding that the amounts were part of the imprest account and had been offered to tax by PDP and CHDC before the SC. Consequently, the additions were deleted.Assessment Year 2009-10:The addition of Rs. 11,00,000 was based on entries in the same ledger extract as in AY 2006-07. The Tribunal, consistent with its earlier findings, directed the deletion of the addition, noting that the sum in question was part of the imprest account and recorded money received and spent on behalf of PDP.Conclusion:The Tribunal upheld the initiation of assessment proceedings under Section 147 read with Section 148 and directed the deletion of the additions made under Sections 68 and 69 for the assessment years 2006-07 to 2009-10, based on the findings that the amounts in question were part of the imprest account and had already been considered in the proceedings before the Settlement Commission. The appeals were partly allowed.