2017 (10) TMI 1678 - AT - Income Tax

Search assessment under section 153A upheld, but gift additions were remitted for fresh verification of genuineness and donor creditworthiness.

In a search assessment under section 153A, the Assessing Officer may reopen and verify six preceding assessment years where seized gift deeds and ... Scope of assessment under section 153A - Verification of disclosed gifts in search assessments - Remand for fresh examination of genuineness and creditworthinessScope of assessment under section 153A - Search assessment of total income - Incriminating material - The Assessing Officer could examine the disclosed gifts in proceedings under section 153A notwithstanding the objection that no incriminating material had been found. - HELD THAT: - The Tribunal held that section 153A empowers the Assessing Officer, after a search, to assess or reassess the total income of the six preceding assessment years. In the present case, the earlier returns had only been processed under section 143(1) and no scrutiny assessment had taken place. Though the gifts had been disclosed in the returns, their correctness had never been verified by the Department earlier. During search, gift deeds and affidavits were found and seized, and the Assessing Officer, while acting under section 153A, was entitled to examine the veracity of those gifts. On these facts, the Tribunal upheld the assumption of jurisdiction and rejected the challenge to the assessment on the ground that no incriminating material was found. [Paras 10, 11]The challenge to the validity of the proceedings under section 153A failed.Genuineness of gifts - Creditworthiness of donors - Fresh verification - The addition on account of gifts required fresh examination because neither proper investigation by the Assessing Officer nor complete discharge of onus by the assessee had taken place. - HELD THAT: - The Tribunal found that the Assessing Officer had made the addition without verifying the donors through summons under section 131, despite having particulars such as PAN and bank account details. At the same time, the assessee had also not fully discharged the burden of proving the donors' creditworthiness and the genuineness of the gifts by producing the donors or other complete supporting material. In these circumstances, the matter was remitted for a fresh decision so that the claim of gifts could be examined in accordance with law after giving the assessee a reasonable opportunity. [Paras 12]The addition relating to gifts was set aside to the Assessing Officer for fresh adjudication.Final Conclusion: The Tribunal upheld the validity of the assessments under section 153A for the years in question, holding that the disclosed gifts could be examined in such proceedings. However, since the factual verification of the gifts was incomplete on both sides, the issue was remanded to the Assessing Officer, and all the appeals were allowed for statistical purposes. Issues: (i) Whether proceedings and additions under section 153A could be sustained in the search assessments; (ii) whether the addition made towards gifts received by the assessee required fresh verification.Issue (i): Whether proceedings and additions under section 153A could be sustained in the search assessments.Analysis: Section 153A authorises assessment or reassessment of the total income of six assessment years immediately preceding the search year. In the present facts, gift deeds and affidavits were found and seized during search, and the earlier returns had only been processed under section 143(1), without scrutiny verification. The Tribunal held that in such circumstances the Assessing Officer was competent to invoke section 153A and verify the gifts in the search assessments.Conclusion: The challenge to the section 153A proceedings failed, and the action of the Assessing Officer was upheld.Issue (ii): Whether the addition made towards gifts received by the assessee required fresh verification.Analysis: Although the assessee relied on the seized gift declarations, the Tribunal found that the Assessing Officer had not examined the donors by summons under section 131 and that the assessee had also not fully discharged the burden of proving the genuineness of the gifts and the creditworthiness of the donors. In the interests of justice, the gift issue was directed to be examined afresh by the Assessing Officer after giving the assessee an opportunity of hearing.Conclusion: The addition on account of gifts was set aside and remitted for de novo consideration.Final Conclusion: The search assessment was sustained, but the gift-related addition was not finally affirmed and was sent back for fresh adjudication, resulting in partial relief to the assessee.Ratio Decidendi: In a search assessment under section 153A, the Assessing Officer may verify disclosed gifts where seized material is found, but where the genuineness and creditworthiness of the gifts remain unverified, the issue may be remitted for fresh examination.