TaxTMI 
TaxTMI 
2015 (7) TMI 736
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....ring the course of search u/s.132 of the Act. 3. The facts of the case for the A.Y 2006-2007 are that in this case original assessment was completed u/s.143(3) of the Act followed by u/s.153A r.w.s. 143(3) of the Act. Consequent to search action at the residential premises of the assessee on 18.11.2011. According to the Commissioner of Income Tax the Assessing Officer could not examine certain issues relating to investment made by the assessee in various companies and firms and the interest income received /receivable from some of the debtors. It was also noticed by the Commissioner of Income Tax that the opening capital balance for the year 2006-07 and the capital account for the subsequent years was not properly reconciled by the assessee during the course of the proceedings u/s 153A r.w.s.143(3). It was further noticed by the Commissioner of Income Tax that the Cash Flow Statement furnished by the assessee indicating drawings and justifying the cash found during the course of search at Rs. 14,50,000/- cannot be accepted as the drawings reflected in such Cash Flow Statement would not have been adequate for the assessee's life style and has accordingly proposed to estimate ....
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....er of Income Tax (Appeals) against original assessment order passed u/s.143(3) of the Act. 5. On appeal, the Commissioner of Income Tax (Appeals) given relief to the assessee. Further on contesting before the ITAT, the matter was set aside with the direction to the Assessing Officer to re-examine the statement of affairs vide their orders No. 986/MDS/2012 dated 12.09.2012. 6. While re-examining, comparing and contrasting the two Statement of Affairs for both the assessment years 2006-07 and 2007-08, the Assessing Officer has noticed a shortage of Rs. 1,01,97,722/- in the liability side for the assessment year 2006- 07 and Rs. 12,15,79,373/- for the assessment year 2007-08. When these differences were sought to be explained by the assessee, the assessee has come up with another revised Statement of Affairs as substantial differences in the balances of Assets and Liabilities. Thus, there was substantial discrepancies in the three Statements of Affairs which could not be examined properly by the Assessing Officer during the proceedings u/s 153A finalized on 28.3.2014. Thus, the acceptance of the Revised Statement of Affairs was suffering from defects resulting in a assessment er....
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....nd the source of payment of Rs. 11,85,71,079/- (43,25,53,096 - 31,39,82,017/- ) is not explainable from the bank statements. 6.3 Comparison of three statement of affairs for assessment year 2007-08 shown following discrepancies.: (a) Originally, the statement of affairs for AY 2007-08 showed balance of loan received of Rs. 38,96,40,723/- (liability side of SOA). The second SOA did not include this item at all but in third statement of affairs filed on 28/03/2014, the balance on this account has been shown at Rs. 33,70,54,907/-. Although there is increase in loan received balances if compared with the SOA for AY 2006-07 filed on 28/03/2014, yet difference balances shown in statement of affairs originally filed and the SOA filed on 28/03/2014 is not explainable. (b) Balances of loan paid was shown at Rs. 52,45,95,954/- in SOA originally filed which stood reduced to Rs. 1,33,75,858/-. Now in the statement of affairs filed on 28/03/2014, it has been increased to Rs. 54,71,54,871/-. No explanation is filed by the assessee for such difference and sources of investment (c) On 11/04/2006, there is a deposit of Rs. 5,21,898/-. The assessee has credit it as 'other income'....
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.... 17 Kavitha Narendran 600000 18 KMB Granites 22000000 22000000 19 K. Nalliappan 700000 20 K. Neelavathy 2000000 2000000 21 Kumbakonam Kannan 3740000 22 K. Yusuff Basha 3800000 3800000 23 Marrs Granities 1000000 24 M.S.Meiyappan 150000 25 Natarajan Nandagopal 658458 26 N. Chandrasekar 212410 27 P. Yasodha 3000000 3000000 28 Raghava Enterprises Pl Ltd 25300000 29 Ravikumar Industries 5000000 30 R.Gandhi 500000 31 R.G.Narendran 400000 32 Salem Basha 14806341 13806341 33 Salem KMB Constructions 10000000 10000000 34 Shri. Ramdhas Estates P.Ltd 11800000 11800000 35 Sundaram Finance Ltd 130000000 1300000000 36 Sundaram Home Fiance Ltd 700000000 70000000 37 Swasti Chem Pvt. Ltd 4000000 4000000 38 Trident Granities 2000000 39 V. Kannan 15000000 40 &n....
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.... Sengutuvan loan 2077502 21577502 42 Sri Ramachandra Educational and health trust 3817238 3817238 43 Sterling computer loan 2000000 44 Sunil Yunus Zia 10000000 10000000 45 S. K. Varatharaj loan 1000000 46 Swadesamitran Ltd Loan 2785000 47 T. Amudha loan 5130758 48 Tanchem imports & Exports p. Ltd 10052263 10052263 49 Thiruballa Realtors P. Ltd 6600000 62638850 50 Thiruballa Realtors P. Ltd 26706360 29360819 51 Transworld properties P. Ltd 5500000 52 Trivitron Medical Systems P. Ltd 5000000 5000000 53 TVRSS Enterprises 18223932 54 Vivek Gover loan 1314450 55 Woods Indian Negotiations 550000 56 Binny Ltd 17500000 17500000 57 Virion Chemicals & Distilleries Ltd 5425000 58 Advance for land 37437564 59 TCP 18686728 60 Thiruvalluvar textiles p. ltd 51878171 61 Jagathra holdings p. ltd 100000 62 ....
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....Officer should have merged all the three Statements of Affairs filed and constructed a tentative Trial Balance from the balances under each account. After balancing the Trial balance, the Assessing Officer should have independently verified with each creditor or debtor to ascertain the balances by calling for statement of the assessee in the respective books. The Assessing Officer should also have verified the investments made with different entity separately and also ascertain the quantum of investment made with reference to the purchase documents etc. While doing so, the incomes received from such loans, investments and properties should be verified and taken into account from the respective account. Similarly, wherever the assessee has borrowed the monies, the Statement of Accounts should be obtained from the creditors along with the interest paid. It was also to be ascertained whether the assessee was following Cash method of accounting or Mercantile method of accounting to arrive at the correct balances and correct incomes /expenditures from each of the assets as well as loans However, this is a very elaborate exercise involving not only the assessment years 2006-07 and 2007-0....
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....ee that cash withdrawn for personal consumption was adequate as the assessee's personal expenditure for the period 1.4.2011 to date of search 18.11.2011 stands at Rs. 4,60,000/-. It was contention of the Assessing Officer that if the assessee has spent Rs. 4,60,000/- from April to 18.11.2011, the date of search i.e. seven and half months, the expenditure could have been much more than the withdrawals of the assessee in the earlier years too, than what have been shown in books. Hence, he has interpolated the probable expenditure incurred by the assessee in the earlier years by applying the Cost Inflation Index method inversely as given below:- "Examination of these cash accounts revealed that the assessee has never withdrew cash for house-hold expenses like food and clothing. This issue was discussed with the ld. Authorised Representative for assessee. The ld. Authorised Representative for assessee filed a revised cash tally. This cash tally has been found not acceptable, since besides other abnormalities, the cash receipts for each year does not match with the cash book and the withdrawal for household expenses is not reflected with the cash book. The expenditure on house ho....
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....on independent merits in the relevant Assessment year. Similar is the position in other assessment years. Against this, the assessee is in appeal before us. 12. The ld. Authorised Representative for assessee submitted that the assessee was engaged in the money lending business and was also a partner in various firms and was a director in companies. A search and seizure operation was carried out in the group cases of Trivitron group of companies on 18th November, 2011 at the office, factory and residential house of Directors. In the case of the assessee search was conducted at his residence. During the course of search operations, the Income Tax department had seized cash amounting to Rs. 14,50,000/- and jewellery valuing 4234 grams (net). There were no other material, books or other documents found/seized during the said search operations. A sworn statement was recorded from the assessee on the date of search questioning the source of the cash and the jewellery seized. The assessee gave an impromptu statement that he possessed about Rs. 15 to 20 lakhs of which Rs. 10 lakhs were collected from his friends and well wishers for the construction activity of the Pollachi Narasimhar T....
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.... the course of search assessment proceedings, the assessee had filed the statement of affairs in respect of his personal assets and liabilities. (iv) Later a combined statement of affairs was filed before the Assessing Officer as per his directions during the course of search assessment proceedings on 26th March 2014. (v) The Assessing Officer completed the 153A proceedings for the AYs 2006-07 to AY 2011-12 without making additions as he was apparently and admittedly convinced that the assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s 143(3) after thorough verification of loan balances, among others, and by giving due credence to the undisputed fact that there was no search material found during the course of search relatable to the Asst Years 2006-07 to 2011-12. (vi) The cash found during the course of search operations was added as the income of the assessee in the year of search i.e in Asst Year 2012-13. During the course of assessment proceedings, the assessee had filed a cash book without considering the cash drawn for his personal expenses and the total of the cash available with himself and his family members was Rs. 30 lakhs (approx). Later....
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....d during the course of search operations other than the cash and jewellery. A copy of the panchanama was enclosed in Page Nos. 31-37 of the Paper Book. (ii) The assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s.143(3) after thorough verification of loan balances together with their confirmations. (iii) The proceedings u/s/153A were concluded for the AYs 2006-07 to AY s 2011-12 without making additions, as the AO was apparently convinced that the loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in....
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....d Representative for assessee submitted that the Assessing Officer had taken one possible view in the eyes of law and accordingly made a decision not to make any addition. Hence, it cannot be construed that the order is erroneous within the meaning of section 263 of the Act and accordingly invoking of jurisdiction u/s 263 of the Act by the CIT was null and void. Reliance was placed in this regard on the decision of Supreme Court in the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83 (SC), in which it observed that ''a bare reading of this provision makes it clear that the pre-requisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Sec. 2....
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....jurisdiction u/s.263 of the Act passed by the Commissioner of Income Tax. 16. The Departmental Representative relied on the order of the Commissioner of Income Tax and specifically stated that a true picture of statement of affairs was essential to ascertain the sources and nature of use of properties purchased, for determining the Wealth Tax liability. The ld. Authorised Representative for assessee before the Commissioner of Income Tax has also fairly conceded that the statement of affairs needs to be examined in detail. For this reason, the assessment was set aside for fresh examination of the statement of affairs by the Assessing Officer and also to arrive at the interest incomes from all the loans given and also, the interest paid on the loans borrowed. 17. We have heard both the sides and perused the material on record. In this case for the assessment year 2006-07, the original assessment was completed u/s.143(3) of the Act on 28.11.2008. Later on, there was a search action u/s.132 of the Act at the residential premises on 18.11.2011. Consequent to search action the assessment for the assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of the Act vide order dated 28....
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....elow:- '' The assessee's business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/- 15,03,06,250/- Closing balance of capital as on 31.03.2007 : 15,25,96,482/- Difference in the Capital Account : 22,90,232/- The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before the Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (Rs.3,86,774/-), Bank of Baroda (Rs.12,12,517/-) and SB account with Egmore Benefit Society Ltd (Rs.21,897/-) not reduced than the corresponding capital account balance figure would be Rs. 15,09,75,204/- The difference of Rs. 6,68,954/- offered to tax. The assessee's representative contention was not be accepted by Commissioner of Income Tax as the assessee's business in money lending, and the assessee has not charging interest from the person to whom money has been lent. According to the Commissioner of Income tax it can't not be distinguished whether that particular loan was interest bearing or not. Hence,....
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....e order of the Tribunal and thereafter, the Tribunal order stands and is operative and not the original assessment order. Then it is to be noted that Commissioner of Income Tax through proceedings u/s.263 cannot sit over on the order of the Tribunal so as to decide what is right or wrong. In other words, in respect of any issue which was subject matter of the appeal before the Tribunal and the Tribunal decided it one way or other, the Commissioner of Income Tax would not take up the same issue in proceedings u/s.263 of the Act as held by jurisdictional High Court in the case of CIT vs. Farida Prime Tannery, 259 ITR 342 (Mad). The Commissioner of Income Tax observed in its order at para 5 that while re-examining, comparing and contrasting the two Statement of Affairs for both the assessment years 2006-07 and 2007-08, the Assessing Officer has noticed a shortage of Rs. 1,01,97,722/- in the liability side for the assessment year 2006-07 and Rs. 12,15,79,373/- for the assessment year 2007-08. When these differences were sought to be explained by the assessee, the assessee has come up with another revised Statement of Affairs as substantial differences in the balances of Assets and Liab....
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....hat no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpreted should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A(i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results. There is no casus omisus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions are manifold, the foremost being that the provision under section. 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the later deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. 21. Before....
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....herefore, such an assessment has a vital link with the initiation and conduct of the search. A search can be authorized on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, one proceeds to literally interpret to provision in section 153A as it exists and read it alongside the provision contained in section 132(1) of the Act. 24. The provision comes into operation if a search or requisition is initiated after 31.05.2003. On satisfaction of this condition, the Assessing Officer is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is 'shall' and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is 'shall' and, therefore, the Assessing Officer has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment o....
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....rd or unjust results. 27. Thus in assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately and in other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - books of account,, other document, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. 28. The above view was taken by Special Bench, Mumbai in the case of CIT vs. All Cargo Global Logistics Ltd (supra). 28.1 Further, it is to be noted that for the assessment year 2006- 2007 assessment was completed u/s.143(3) of the Act on 31.12.2009 and later on assessment was reopened consequent to search action u/s.153A of the Act on 28.03.2014. The assessee filed statement of affairs that original return filed u/s.139(1) of the Act and also same was revised during the course of proceedings u/s.143(3) of the Act. ....
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....icer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment. In the present case, the Commissioner of Income Tax categorically observed whatever statements on record were already produced by the assessee both in the course of original assessment u/s.143(3) and also in assessment proceedings u/s.153A of the Act. The Assessing Officer adopted one of the course permissible under law and he has taken one view that the Commissioner of Income Tax does not agree which cannot be tr....