ITAT upholds additions for undisclosed income and bogus capital gains in search assessment cases

ITAT Mumbai dismissed most grounds of appeal. Assessment years 2010-11 to 2014-15 were held as unabated years disturbed by incriminating material found during search, justifying additions for undisclosed income, house property income, and bogus long-term capital gains. Transfer under section 127 was valid per section 129 provisions. Interest under section 234B was chargeable in section 153A proceedings without hearing requirement. However, bogus LTCG addition was remanded to AO for fresh determination following coordinate bench precedent, directing assessee to prove genuineness of trades and produce relevant parties for examination.

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Issues Involved:
1. Jurisdiction under Section 153A of the Income Tax Act.
2. Addition of income from house property.
3. Disallowance of exemption under Section 10(38) of the Income Tax Act.
4. Addition of undisclosed income.
5. Change of jurisdiction under Section 127 of the Income Tax Act.
6. Issuance of notice under Section 143(2) by the new incumbent.
7. Levy of interest under Section 234B.
8. Violation of principles of natural justice.

Summary:

1. Jurisdiction under Section 153A of the Income Tax Act:
The assessee challenged the jurisdiction under Section 153A, arguing that no incriminating material was found during the search. The Tribunal upheld the jurisdiction, noting that incriminating material, such as the balance sheet and undisclosed income, was found during the search. The Tribunal relied on the Supreme Court's decision in Abhisar Buildwell Pvt Ltd, which allows additions based on incriminating material found during the search.

2. Addition of Income from House Property:
For multiple assessment years, the AO added income from house properties not disclosed by the assessee. The Tribunal upheld the additions but directed the AO to grant a standard deduction of 30% of the annual value under Section 24 of the Act. The Tribunal found that the properties were not let out during the year, and thus, no vacancy allowance was allowed.

3. Disallowance of Exemption under Section 10(38):
The AO disallowed the exemption claimed by the assessee on long-term capital gains from the sale of shares, considering them bogus. The Tribunal noted the detailed statements of Mr. Vipul Bhatt, the accommodation entry provider, and corroborative evidence, including the involvement of the assessee's chartered accountant. The Tribunal directed the AO to re-examine the issue, allowing the assessee to produce relevant evidence and witnesses.

4. Addition of Undisclosed Income:
For the assessment year 2010-11, the AO added Rs. 198,000 as undisclosed income based on seized documents. The Tribunal upheld the addition, noting that the assessee could not substantiate that the amount pertained to a different financial year.

5. Change of Jurisdiction under Section 127:
The assessee argued that the transfer of jurisdiction was done without giving an opportunity of hearing. The Tribunal dismissed this ground, stating that no opportunity is required for transfer within the same city.

6. Issuance of Notice under Section 143(2) by the New Incumbent:
The assessee contended that a fresh notice under Section 143(2) should have been issued by the new incumbent AO. The Tribunal dismissed this ground, citing Section 129 of the Act, which allows the succeeding AO to continue proceedings from where the predecessor left.

7. Levy of Interest under Section 234B:
The assessee challenged the levy of interest under Section 234B. The Tribunal dismissed this ground, stating that the levy of interest is automatic and consequential.

8. Violation of Principles of Natural Justice:
The assessee claimed a violation of natural justice, arguing that cross-examination of witnesses was not allowed. The Tribunal found no merit in this argument, noting that the assessee was aware of the statements and had the opportunity to produce relevant witnesses. The Tribunal directed the AO to ensure no violation of natural justice in the re-examination of the issues.

Conclusion:
The Tribunal partly allowed the appeals, directing the AO to re-examine certain issues while upholding the jurisdiction under Section 153A and the additions made based on incriminating material. The Tribunal emphasized the need for the AO to grant standard deductions and ensure compliance with the principles of natural justice.

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