AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 736
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. 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 the drawings at a higher level and thus add ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 erroneous and prejudicial to the interests of revenue. 6.1 The assessee filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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' but it is not reflected from the statement of taxable income. This amount has escaped ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 D.K. audikeshvulu 20000000 41 The Narasimha mills ltd 10000000 42 Sapthagiri enterprises 3000000 Total 389640723 337054907 Loan paid balance as on 31.03.2007 Sl.No Details for loans received As per old SOA filed along with return u/s.139(1) As per New SOA filed 1 7th Channel communications 3600000 2 Aalwel Fabs 500000 3 Anchor Breweries L....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Four square realtors p. ltd 15519 63 Sun breeze realtors p. ltd 15519 Total 524595954 547154871 (f) The assessee vide his letter dated 26.03.2014 has submitted that the is not able to furnish evidences for sources of fund invested in shares of M/s. Thiruvalluvaar Textiles Private Ltd. For this, he has offered Rs. 1,26,000/- for taxation. This addition has not been made. (g) There is no reason for exclusion of certain parties from the lists mentioned above and inclusion of new entries. There is also no reason mentioned by the assessee to deviate from the figures originally shown as loan received and loan paid''. 7. The Commissioner of Income Tax observed the he had examined the records and gone through the discrepancies pointed out by the Assessing Officer in the statement of affairs in the proposals u/s.263 and compared the same with the explanation and the statements filed by the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od 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 2007-08 but also subsequent assessment years and this could not have been completed in the three days available for the Assessing Officer before the proceedings are completed in time on 31.3.2014. Hence, the proceedings u/ 153A r.w.s. 143(3) finalized on 29.03.2014 are set aside with the direction to re- examine all the assets and liabilities bearing in the Balance Sheet on the above mentioned lines and also to arrive the correct income. Since the assessment was being set aside for re-examining and reworking out the statement of affairs for the assessment year 2006-07 and the same will have a cascading effect on the subsequent assessment year, the assessment year 2007-08 to 2012-13 were also set aside for carrying out the same exercise in the Statement of Affairs. Further, a true picture on Statement of Affairs was also essential to ascertain the sources and nature of use of properties purchased, for determining the Wealth Tax liability. When this proposition was p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 hold expenses although not reflected from the cash account was estimated by assessee. The cash withdrawal for financial year 2006-07 to 2011-12 (upto date of search) have been claimed to be Rs. 1,80,000/-, Rs. 2,40,000/-, Rs. 3,00,000/-, Rs. 3,60,000/-,Rs.4,20,000/- and Rs. 4,60,000/-(upto DOS) respectively. The cash withdrawal from 01/04/2011 to 18/11/2011 (for 7.5 month) has been claimed to be Rs. 4,60,000/-. On the basis of claimed household expenses for search year, the house-hold expenses for earlier years were estimated to be Rs. 40,10,028/-by applying cost inflation ratio as under: Asst. Year Estimate of requirement of assessee C.I. ratio Assessee's claim of withdrawal 2006-07 465977.1 0.957611 120000 2007-08 486603.8 0.941924 180000 2008-09 516606.4 0.946735 240000 2009-10 545671.3 0.920886 300000 2010-11 592550.3 0.888889 360000 2011-12 666619.1 0.905732 420000 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....khs of which Rs. 10 lakhs were collected from his friends and well wishers for the construction activity of the Pollachi Narasimhar Temple and the same had to be handed over to the temple authorities. The assessee had also stated that there was adequate cash balance available with him as per the books of accounts. Regarding the jewellery he had replied that those jewellery belonged to his mother, (late) Mrs Kamalam and his wife Mrs Radha Venkataachalam and they had already declared jewellery to the tune of 5516.35 grams of net weight under VDIS' 97. Consequent to the search operations, notice u/s.153A of the Act was issued for the AYs 2006-07 to 2011-12 and the assessments were completed u/s. 153A r.w.s.143(3) of the act on 28th March, 2014 accepting the original returned/ assessed income, without making any additions. Later the Commissioner of Income Tax- Central-I invoked Sec 263 stating that the assessment was held to be erroneous and prejudicial to the interest of revenue. It was also stated in the notice u/s 263 that the Assessing Officer, due to paucity of time, had not verified the loan balances and hence the assessment was treated as erroneous and prejudicial to the int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sonal expenses and the total of the cash available with himself and his family members was Rs. 30 lakhs (approx). Later on, when the Assessing Officer asked for the drawings for his personal expenditure, the assessee had stated that expenses like telephone, electricity etc., were taken care by the company in which he is the managing director and the same was included in the Form 16 as perquisite. The personal expenses like food and clothing were met by the assessee from the cash balance. The assessee filed a combined cash book of himself and his family members considering the drawings for the personal expenses like food and clothing and arrived at the cash balance of Rs. 10 lakhs (approx). (vii) However, the Assessing Officer did accept to the assessee's submission but did not agree to the quantum of the drawings made by the assessee. Accordingly, the Assessing Officer applied the Cost Inflation ratio for the drawings ought to have been made by the assessee from AYs 2006-07 up to the date of search and arrived at an estimated drawings of Rs. 37,34,028/- and concluded that the assessee is not left with any cash as on the date of search as per books of accounts and accordingly t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever. (iv) While this is so, the Commissioner of Income Tax- Central-I erred in setting aside the entire assessment proceedings to the file of the AO for review of the Statement of Affairs filed during the course of Sec 153A proceedings. 15. The ld. Authorised Representative for assessee placed reliance on the decision of the Special Bench of the Mumbai Bench rendered in the case of CIT vs All Cargo Global Logistics Ltd in ITA Nos. 5018 to 5022 & 5059/M/2010 which was recently affirmed by the Bombay High Court in the case of CIT vs Continental warehousing Corporation in ITA no. 523 of 2013, dated 21st April, 2015. The operative portion of the judgement of Bombay High Court is as follows:- "a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s.153A will be made on the basis of incriminating material, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Sec. 263(1) of the act''. 15.2 Moreover, the notice u/s 263 of the Income Tax Act, 1961 received by the assessee from the office of the Commissioner of Income Tax-Central I, it was stated that there was no adequate inquiry made by the Assessing Officer on the Statement of Affairs filed by the assessee due to paucity of time. This proves that the provisions of Sec 263 of the Income Tax Act, 1961 are invoked by the CIT as in his opinion that the inquiry made was inadequate. It is submitted that this reason cannot be the subject matter of revision proceedings u/s 263 of the Act. Reliance was placed in this regard on the decision of Delhi High Court rendered in the case of CIT vs. Sunbeam Auto Ltd (2011) reported in 332 ITR 167. 15.3 The ld. Authorised Representative for assessee humbly submitted that the issues raised by the CIT in the show cause notice can be stated as "not considered by the Assessing Officer" only on the assessment which was completed u/s.143(3).The CIT cannot invoke the provisions of section 263 on the assessment completed u/s 153A r.w.s 143(3) dated 28/03/2014 for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of the Act vide order dated 28.03.2014, wherein the Assessing Officer computed assessed income at Rs. 3,12,33,973/- as he did in u/s.143(3) of the Act. In other words, there was no addition of whatsoever to the returned income consequent to search action. However, as evident from the para one of order passed by the Commissioner of Income Tax passed u/s.263 of the Act, the Assessing Officer could not examine certain issues relating to the investments made by the assessee in various companies and firms and interest incomes received/ receivable from some of the debtors. It was also noticed 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 Assessing Officer 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 the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hether that particular loan was interest bearing or not. Hence, the difference of Rs. 22,90,232/- was added to the returned income. Thus, it was also on record that original assessment order passed u/s.143(3) of the Act for the assessment year 2007-08 on 31.12.2009 was subject matter of the appeal before the Commissioner of Income Tax (Appeals) as well as before the Tribunal. The Tribunal in ITA No.986/Mds/2012 vide its order dated 12.09.2012, directed the Assessing Officer to re-examine the statement of affairs filed by the assessee. 19. Inspite of this, now the Commissioner of Income Tax wanted to review the order of the Assessing Officer passed u/s.153A r.w.s 143(3) dated 28.03.2014. First of all u/s.263 of the Act, the Commissioner of Income Tax must call for examining the records of the proceedings under Act and after examining the same if he came to a conclusion that the order passed by the Assessing Officer to be erroneous in so far as it is prejudicial to the interest of revenue, then he can revise the assessment order u/s.263 of the Act and issue notice. There should be independent application of mind by Commissioner of Income Tax himself. He cannot solely act upon the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... substantial differences in the balances of Assets and Liabilities. 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 erroneous and prejudicial to the interests of revenue. The Commissioner of Income Tax in its order u/s.263 wanted to review the giving effect order to Tribunal order by Assessing Officer which is not possible. If there is any error in giving effect order by the Assessing Officer, that order is to be reviewed and not the order passed u/s.153A r.w.s.143(3) of the Act. There is no dispute that Section 153A is applicable in this case. Hence, the Assessing Officer is obliged to issue notice under section 153A in respect of six preceding years, preceding the year in which search etc. has been initiated. Thereafter, he has to assess or reassesses the total income of these six years. It is obligatory on the part of the Assessing Officer to assess or reassess total income of the six years as provided in section 153A(1)(b) and reit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... two are inextricably linked with each other. 21. Before proceeding further, one may now examine the provisions contained in sub-section (2) of section 153. It provides that if any assessment made under sub-section (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the assessee is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, it is found that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the assessee, though not specifically stated, would be that on annulment of the assessment made under section 153(1), the Assessing Officer gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made under section 153(1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 25. The question now is - what is the scope of assessment or reassessment of total income under section I53A(1)(b) and the first proviso? For answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search, such books of account or oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of proceedings u/s.143(3) of the Act. Later once again during the assessment proceedings u/s.153A of the Act, the Commissioner of Income Tax observed that there were difference between three statements filed by the assessee when compared to each other. The Commissioner of Income Tax wanted to bring difference between these statements for taxation. Thus, it means that there was no incriminating material found during the course of search action u/s.132 of the Act. 28.2. In view of the above, the original assessment order for the assessment year 2006-2007 was already completed u/s.143(3) of the Act. Hence the assessment u/s.153A to be made on the basis of incriminating material, which means books of account, other documents, 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. It was admitted fact in this case that there was no incriminating material discovered in the course of search action. There was also no allegation that the assessee has failed to produce books of accounts and documents in the course of original documents. It is also a fact that recorded by Commissioner of I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x does not agree which cannot be treated as error unless the view taken by the Assessing Officer is unsustainable under law. Moreover, while making assessment the Assessing Officer examined the accounts, made enquiries, applied his mind to the facts and circumstances of the case and determined the income, the Commissioner of Income Tax while exercising his power u/s.263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. In our opinion, the Assessing Officer exercises quasi-judicial power vested in his hands and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income Tax wanted to do further enquiry as he has not satisfied with the enquiry made by the Assessing Officer. In the present case, the Assessing Officer made enquiry both in the course of original assessment u/s.143(3) for the assessment year 2006-07 and also during the course of assessment u/s.153A of the Act and the assessee has given a detailed explanation to Assessing Officer to consider the same after being satisfied by the explanation given by the....