TaxTMI 
TaxTMI 
2011 (7) TMI 1148
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....essment made by the AO for the A.Y. 2003-04 & 2004-05. No other appeals, either by the assessee or by the revenue, pertaining to the A.Y. 2000-01, 2001-02, 2002-03, 2005-06 & 2006-07 are not pending before the Tribunal as no such appeal has been filed either by the assessee or by the department, as so informed by both the parties. 4. In the revenue's appeal, the revenue has disputed only that part of CIT(Appeals) order relating to the additions made by the AO on account of alleged unexplained gift claimed to have been received by the assessee in the periods relevant to the A.Y. 2003-04 & 2004-05. 5. In the Cross Objection, the assessee has taken the grounds challenging the validity of search conducted u/s 132 of the Act as well as the validity of notice issued u/s 153Aor validity of assessment made u/s 143(3)/153A of the Act. 6. Since the grounds raised in the Cross Objection goes to the root of AO's jurisdiction to make assessment u/s 153A, we first proceed to take up the Cross Objection filed by the assessee. 7. Now, we come to the Cross Objections filed by the assessee in both the assessment years i.e. A.Y. 2003-04 & 2004-05. 8. In both the assessment years, the assessee ha....
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....s as herein above are without prejudice to each other and are to be considered with similar grounds raised during appeal to ld. CIT and assessee prays leave to add, alter and/or modify any of the grounds of objection on or before the date of hearing of the appeal." 9. The grounds whereby the assessee has objected before the ld. CIT(A) the proceedings u/s 153A, the jurisdiction thereto, transfer of jurisdiction, improper actions under the provisions of sec. 132 and improper opportunities granted to him, has been decided by ld. CIT(A) in identical manner in both the assessment years, namely, A.Y. 2003-04 & 2004-05, by observing and holding as under: - 8. "These are generalized grounds wherein the assessee has objected proceedings u/s 153A, the jurisdiction thereto, transfer of jurisdiction improper actions under the provisions of section 132 and improper opportunities granted to him. 8.1 The matter has been elaboratively discussed, and dealt with vide grounds of appeal no. 1,2,6 for the A.Y. 2000-01, and being fully covered therefore, not being separately dealt and the decision framed for A.Y. 2000-01 is relied upon." 10. From the said order of ld. CIT(A), it is found that he h....
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.... some time on account of departmental communication the assessee received notices from earlier jurisdictional AO, but the same will neither render transfer order u/s 127 nor assumption of Jurisdictional u/s 153A bad. 4.3 Regarding the objections of the appellant that doubts/objections of assessee about the proper jurisdiction were not addressed before proceeding with the assessment proceedings. Though it was the responsibility of ld. CIT, Meerut but in absence of any such communication, the AO could have furnished reasons, but in my view non furnishing thereof will neither vitiate jurisdiction or assessment. Thus, the assessee's objections are dismissed as unmerited. 4.4 Assessee's contention that no notice u/s 143(2) was issued is irrelevant as this cannot make the assessment void abinito, particularly considering that the return filed by the assessee u/s 153A is compulsory subjected to scrutiny and the circumstances, issuance of the notice is merely a formality." 11. Be it noted here that no appeal has been filed by the assessee against the said part of ld. CIT(A)'s order in A.Y. 2000-01 and other years except the present cross objections filed in A.Y. 2003-04 and 2004-05. I....
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....njab & Haryana). iii) Gaya Prasad Pathak Vs. Asstt. CIT (2007) 290 ITR 128 (MP). iv) Lal (M.B) Vs. CIT (2005) 279 ITR 298 (Del.). 16. The Division Bench of the Hon'ble Delhi High Court in the matter of M.B. Lal Vs. CIT (2005) 279 ITR 298 held that the validity of search proceedings cannot be examined in appeal filed before the Tribunal against block assessment and the remedy lies under Article 226 of the Constitution. 17. Similarly, in the case of CIT Vs. Paras Rice Mills (2009) 313 ITR 182 (P&H), the Hon'ble Punjab & Haryana High Court following the decisions of Hon'ble Delhi High Court in the M.B. Lal's case (2005) 279 ITR 298, held that while hearing an appeal against the order of assessment, the Tribunal cannot go into the question of validity or otherwise of any administrative decision for conducting search and seizure. 18. In the case of Gaya Prasad Pathak (2007) 290 ITR 128 (MP), it has been held by Hon'ble Madhya Pradesh High Court that the jurisdiction exercised by the statutory authority while hearing an appeal cannot enter into the justifiability of an action u/s 132A of the Act. 19. After referring the decision of Division Bench of Delhi High Court in the case o....
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....el.). iv) Decision of Hon'ble Madhya Pradesh High Court in the case of Gaya Prasad Pathak Vs. Asstt. CIT (2007) 290 ITR 128 (MP) 24. In the case of Astt. CIT Vs. Chilka Vyankatesh Sidram, ITAT, Pune, 'A' Bench has observed that the view of the Spl. Bench of the Tribunal in the case of C. Ramaiah Reddy Vs. Asstt. CIT (supra) has been approved by the judgment delivered by the Hon'ble Hon'ble Delhi High Court in the case of MB. Lal Vs. CIT (supra). 25. In the case of Promain Ltd. (supra) the Larger Bench of Five Members of the Tribunal has held that the Tribunal cannot examine the validity of search action u/s 132 of the Act. In this case, the Spl. Bench was constituted to consider the question whether the Income Tax Appellate Tribunal has powers to adjudicate upon the issue relating to the validity of the search conducted u/s 132 while disposing the appeal against block assessment. This Spl. Bench was constituted in the light of contrary decisions rendered by different Benches. In a third member decision in the case of Dr. A.K. Bansal Vs. Asstt. CIT (2000) 73 ITD 49, the Allahabad Bench of ITAT has held that AO as well as the Tribunal have powers to adjudicate upon the matter reg....
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.... assessee has already filed a writ petition before the Hon'ble High Court of Allahabad challenging the validity of search operation of assessee, which is pending adjudication, and therefore, it is not within our jurisdiction at this stage to decide this issue regarding the validity of search action taken u/s 132 of the Act. 28. In view of the foregoing discussion, the grounds challenging the validity of search and seizure action taken u/s 132 of the Act are rejected. 29. Now, we shall come to the various grounds challenging the validity of notice issued u/s 153A, assessment proceedings initiated u/s 153A and assessment order made u/s 143(3)/153A of the Act. 30. We have heard both the parties and perused the orders of the authorities below. 31. On the question challenging the validity of assessment proceedings initiated u/s 153A and assessment order made by the concerned AO u/s 153A, the assessee has mainly raised following points: - i) that notice issued u/s 153A is invalid on various counts as narrated in the grounds before us. ii) that AO has erred in making assessment u/s 153A in the hands of the assessee in his individual capacity. iii) that search warrant has been is....
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....all the facts and circumstances of the case, contentions and cases that may be raised by both the parties before him. The assessee shall be at liberty to raise any other contentions before the ld. CIT(A) regarding validity of assessment made u/s 153A of the Act as he so advised. 35. The next contention of the assessee is that AO has erred in framing assessment in absence of proper order u/s 127 of the Income Tax Act, 191. The assessee has also contended that ld. AO has erred in processing with the assessment without disposing assessee's objections regarding jurisdiction and without providing the copy of order of competent authority transferring jurisdiction to his office. The assessee has submitted that the copy of the transfer order was not provided to the assessee before completion of the assessment. He further contended that the objections raised by the assessee were not disposed off before transfer of his case from one AO to another. He further contended that transfer order made u/s 127 was invalid in as much as this order was not communicated to him before it made effective. 36. The ld. Departmental Representative on the other hand, invited our attention to the provisions of....
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.... Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place." 39. On perusal of the provisions contained in section 127(3), we find that nothing in sub-section (1) or sub-section(2) of sec. 127 shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place. Therefore, the mandatory requirement of providing a reasonable opportunity of being heard and recording reasons for transferring any case as contemplated u/s 127(1) or 127(2) shall not be applied in the cases where the transfer is from any Assessing Officer to any other Assessing Officer having offices situated in the same city or locality or place. In the present case, the assessee's old jurisdiction was lying with AO of Ward 2(2), Meerut and was transferred to ACIT, Central Circle, Meerut. The concerned transfer order has been pas....
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....licability of sub-section (1) or sub-section (2) of sec. 127 in the cases where transfer of case is made from one officer to another situated in the same city, locality or place. 42. Our view that no opportunity was required to be given to the assessee and consequently, or no reasons were required to be recorded before the case is transferred from one Assessing Officer to another situated in the same city, locality or place, is fortified by the following decisions: - i) Kashiram Aggarwala Vs. Union of India (1965) 56 ITR 14 (SC) ii) S.L. Singhania Vs. CIT (1992) 193 ITR 275 (Del.) iii) T.S. Sujatha Vs. Union of India (1999) 238 ITR 599 (Ker.) iv) Power Controls and Others Vs. CIT (2000) 241 ITR 807 (Del.) 43. In the case of Kashiram Aggarwala Vs. Union of India & Anothers (1965) 56 ITR 14 the Hon'ble Supreme Court held that in the case where the Income Tax proceedings against the assessee was transferred from the Income Tax Officer of Ward-1, to the Income Tax Officer of another ward in the same city without recording any reasons therefore, the orders of transfer were purely administrative in nature, passed for considerations of convenience of the department and no possib....
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....enue was distinguished by the Hon'ble High Court of Gauhati by observing that this decision is not of any assistance to the revenue in that case since that was a transfer from the ITO to another ITO in the same city, or, as stated in the judgment itself "in the same locality" and the proviso to sec. 127(1), therefore, applied. In other words, the Hon'ble Gauhati High Court has taken a view that the requirement of providing opportunity of being heard and consequentially recording reasons for the transfer was not necessary in the cases where there was a transfer from the ITO to another ITO in the same city or locality or place. The relevant observations of the Hon'ble High Court in this regard are as under: - "Mr. Sharma drew our attention to a decision of this court in Kashiram Agarwalla Vs. Union of India (1965) 56 ITR 14 (SC): TC 69R. 660. It is submitted that this Court took the view that orders u/s 127(1) are held in that decision to be "purely administrative in nature" passed for consideration of convenience and no possible prejudice could be involved in the transfer. It was also held therein that under the proviso to s. 127(1) it was not necessary to give the appellant an op....
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.... and consequently, the assessment order made by the AO to whom case was validly transferred, is within his jurisdiction on this count. Hence, the assessee's objections in this regard are rejected. 50. Further, the assessee has objected that the Assessing Officer has completed the assessment under sec. 153A read with sec. 143(3) without serving any valid notice u/s 143(2) of the Act. The assessee has further contended that the notices purportedly issued u/s 143(2) do not confirm to the requirement of valid notices as contemplated u/s 143(2) of the Act. He submitted that the A.O. should have assigned reasons of enquiry in the notice purportedly issued u/s 143(2) of the Act. In this connection, the assessee has relied upon the following decisions:- * CIT vs. Rajiv Sharma (ITA No.19 of 2004) reported in [2010] 5 taxmann.com 101 (All.); * ACIT vs. G.M. Infrastructure (2011) 49 TTR 151 (Indore)(Trib.) 51. The assessee further contended that the fact that notice issued by the AO u/s 143(2) was not a valid notice, has been accepted by the learned CIT(A), but he rejected the assessee's ground by observing that issuing of notice u/s 143(2) is just a formality. He, therefore, contended ....
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....response to a notice under sub-section (1) of section 142, and where the Assessing Officer has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, the Assessing Officer shall serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and requiring the assessee, on a date to be specified therein, to produce or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim. This clause (i) to sec. 143(2) was inserted by the Finance Act, 2002 with effect from 1.06.2002 with a view to make a limited pinpoint enquiry on specified claims of loss, exemption, deduction, allowance or relief and pass such order on response of the assessee, while reserving the right of the AO to convert such pinpoint limited scrutiny proceedings to a regular one by issuing notice under sec. 143(2)(ii). The aforesaid notice under sec. 143(2)(i) is no more permissible on or after 1st June, 2003 as it has been provided in the Proviso inserted by the Finance Act, 2003 w.e.f. 1.06.2003 that no notice u/s 143(2)(i) shall be s....
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....was furnished. 56. In the present case, with a view to enable him to finalize the assessment proceedings the AO had issued two separate letters dated 7th November, 2007 in both the Assessment Years i.e. Assessment Year 2003-04 and 2004-05 requiring the assessee to furnish various details and explanation in respect of source of various assets and to prove whether they were recorded in regular books of accounts in the respective period. In this notice, the assessee was asked to furnish cash flow statement etc, bank statements, details of movable and immovable property, source of cash found at the time of search, source of jewellery found at the time of search, source of various FDRs found during the course of search, produce the donors along with documentary evidences regarding the identity of the donor, sources of income etc., sources of investment for purchase of property at Noida, confirmation of loan, investment made in the property of Roop Netraalaya Building, explain the writing on pages of loose papers seized as per Annexure A-1 to A-102, details of household expenses and details of business and profession etc. in the Assessment Year 2003-04. Similar requisitions were made by....
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....cument, account and any other evidence on which the assessee may rely, in support of the return filed by him. Therefore, in the light of the contents of the notice and letter dated 7-11-2007, we are of the considered opinion that the notice u/s 143(2) issued by the AO on 7.11.2007 satisfies the conditions enumerated in sec. 143(2)(ii) of the Act and therefore, it cannot be said to be invalid. 58. In the case of CIT vs. Rajiv Sharma [2010] 5 taxmann.com 101 (All.), the Hon'ble Allahabad High Court has held as under:- "22. The provisions contained in sub-section (2) of Section 143 of the Act, is mandatory and Legislature to their wisdom by using the word, `reason to believe', had cast a duty on the Assessing Officer to apply mind to the material on record and after being satisfied with regard to escaped liability, shall serve notice specifying particulars of such claim. 23. In view of the above, after receipt of return in response to notice under Section 148, it shall be mandatory for the Assessing Officer to serve a notice under sub-section (2) of Section 143 assigning reason therein." 59. Since in the case before the Hon'ble High Court, no notice u/s 143(2) was issued after r....
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....essee on 25.09.2007 in pursuance to the notice issued by the AO u/s 153A on 10.09.2007. There is no quarrel as to the proposition that issuing notice u/s 143(2) is mandatory before completing the assessment u/s 143(3) read with section 153A of the Act. In the present case, the notice u/s 143(2) has been issued and served upon the assessee after the return was filed by the assessee as stated above. Therefore, the assessment proceedings completed by the AO cannot be considered to be null and void on this count. 61. In the light of the discussions made above, we therefore, hold that it was mandatory on the part of the AO to issue notice u/s 143(2) of the Act before proceeding with the assessment to be completed under sec. 143(3) read with sec. 153A. We further hold that in the present case, the AO has accordingly issued valid notice under sec. 143(2) dated 7.11.2007, within one year from the end of the month in which the assessee filed return of income in pursuance to the notice issued u/s 153A of the Act, which was duly served upon the assessee. Thus, the assessee's objection in this regard is rejected. 62. In the result, the cross objection filed by the assessee is partly allowed ....
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....8377; 3,50,000/- in the bank account, the other entries have been verified and nothing adverse has been found. With regard to these two entries pertaining to gifts received by the assessee, the Assessing Officer has observed that since the matter was not taken up in the original assessment proceedings, hence no report submitted on the issue and the issue was left to be decided by the CIT (A) on merits. 67. Learned DR submitted that the CIT (A) has admitted documents, he has not examined the same and he simply granted the relief without verifying the genuineness of transactions stated in these documents. CIT (A) also failed to appreciate that when amount shown as receipt by way of gifts, the onus was on the assessee to prove the genuineness of the transaction, creditworthiness of the donors, occasion on which the gifts were made, relationship between the donor and the donee and existence of the natural love and affection. CIT (A) simply granted relief by holding that in his opinion, the documents adduced were sufficient to establish the intent and creditworthiness of donors. He also erred by holding that genuineness of transaction cannot be questioned for reasons the matter of comp....
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....tence of reciprocity and if the assessee fails to establish any of these facts, the amount shown so received can be treated as assessee's income form undisclosed sources representing the assessee's own money, introduced in the garb of gift received. The CIT (A) granted the relief on the basis of documents filed, i.e., gift deeds, affidavits of donors and income-tax particulars of these donors along with wealth-tax return and statement of affairs. He has simply stated that the documents adduced by the assessee are sufficient to establish the intent and creditworthiness of donors and the genuineness of the transaction cannot questioned for three reasons - firstly, the matter of completed assessment in the case of donors; secondly, the documentary evidences, for example, gift deed and affidavit on record; and finally the transaction is already in the bank account referred by the Assessing Officer himself. He also stated that keeping in mind that admission of such documents is not objected by the Assessing Officer in the remand proceedings, the addition is deleted. He also failed to verify the veracity of documents and examine these documents in view of the law laid down by Hon'ble....
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.... income and her statement of accounts for relevant year in which the gift was made have not been filed before us. The statement of her bank account indicating the transaction of ₹ 4,00,000/- has also not been filed. In the absence of such documentary evidence in support of what is stated in the affidavits and memorandum of gift cannot be accepted at face. The source of donation is not supported by debit entries in the bank account of the donor. No copy of bank account of Laxmi Agarwal was submitted. She stays in Brahmpuri, Delhi and D.D. was made SBBJ, New Rohtak Road, New Delhi. It is not clear how the demand draft was prepared by cash or by debiting the donor's account. The copy of memorandum of gift filed before us shows that it was not signed by donee. What sort of natural love, affection and relationship between the donor and donee existed has not been explained. In the case of Kesho Ram Gupta also, the gift is shown by demand draft. The draft of Laxmi Agarwal and Kesho Ram Gupta are in serial and obtained on the same day from same branch of the same bank. Page 45 is I.T. Return acknowledgement for Assessment Year 2001-02 of Shri Kesho Ram Gupta. Page 46 is intimation fo....
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....ived gifts as under :- Date Name of Donor Amount Remarks 06-04-2004 Cap. Sanjeev Juneja Rs.8,00,000/- Donor is not produced, identity, credit worthiness and genuineness of the transaction is also not proved. Relationship between donor and donee is not established, occasion on which such huge amount of gift was given is also not shown. From the inquiries conducted by this office it has come to the notice of this office that since last two years the donor is out of India. However assessee is claiming that donor has appeared before investigation wing. 06-12-2003 Anand Jain Rs.9,00,000/- Donor is not produced, identity, credit worthiness and genuineness of the transaction is also not proved. Relationship between donor and donee is not established, occasion on which such huge amount of gift was given is also not shown. From the inquiries conducted by this office it has come to the notice of this office that the donor is out of India. 13-11-2003 Balbir Singh, Municipal Market, Sonipat Rs.10,00,000/- Gift is made in the name of Master Parkhayat son of assessee. Bank account of the donor was filed. On local enquiry it was revealed that at the given address no such person ....
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....filing of the confirmation letter and copy of bank statement do not discharge the onus which is cast upon the assessee. Assessee did not produce the donor which was specifically called for vide quarry dated 07-11­2007 and 27-11-2007. It is also not proved for giving a huge sum of ₹ 37,00,000/- as gift what was the occasion. In the above circumstances factum of the gift are not established, hence addition of ₹ 37,00,000/- is made in the hands of assessee. Addition of Gift in the name of minor son Master Parkhayat is made in the hand of the assessee in view of the fact that income of the assessee is more greater then his wife Dr. Sangeeta." 75. The CIT (A) has deleted the addition by holding as under :- "11.5 I have carefully gone through the facts of the case, material on record, documents and contentions of the assessee and decided cases by courts in the matter. Under the circumstances I, reluctantly agree with the appellant that at no stage AO has shown his dissatisfaction on any of the evidence adduced by the appellant, nor AO has bothered to use his powers to personally cross examine donors or to get any information even from their assessing officers. It is se....
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....009. Thus, I am of the view that upon the examination of the documents, the A.O. himself is satisfied about genuineness of the transaction. There is nothing on record, found during the search or otherwise is the case of the A.O. that the assessee is earning income not returned to tax. Neither any undisclosed asset was found nor any undisclosed bank account was noticed and hence the appellant can not be penalized for actions of others or failure to take actions under section 131 by the assessing officer. Hence the addition of ₹ 37,00,000/- constituting ₹ 10,00,000/- received from Mr. Balbir Sing, ₹ 9,00,000/- received from Mr. Anand Jain, ₹ 10,00,000/- from Mr. K.M. Goel ₹ 28,000/- and ₹ 8,00,000/- received from Capt Juneja is deleted." 76. Learned DR submitted that the assessee has received these amounts in his or his minor's bank account. Assessee claims that these were gifts received from various donors but assessee has failed to prove the identity, creditworthiness of donors and genuineness of transactions. The relationship between the donor and donee is also not established. The occasions on which such huge gifts were received were also not ....
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....T (A) has rightly relied upon. He also submitted that the affidavits, confirmation of gifts and particulars of bank accounts were submitted. The assessee has proved the identity, creditworthiness and genuineness of transactions. He also pleaded that since the assessee is not maintaining any books of account, therefore, no addition can be made u/s 68 of the Income-tax Act. The documentary evidences submitted were not controverted by the Assessing Officer. No addition can be made without any corroborative evidences found during the search. In the case of NRI, the burden is on the revenue to prove the source of money in India. He also submitted that even in the cases, where the creditors were not found at the address, no addition can be made. No addition can also be made for the non-production of the donor. The assessee has submitted sufficient documentary evidences. The Assessing Officer has power to issue summons u/s 131 which he has not done. In the case of NRI, confirmation of gift is sufficient. These persons were assessed to tax which is sufficient to prove the creditworthiness. Therefore, the Assessing Officer should not have made the addition. The addition made without examina....
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....ity of the donor, capacity of the donor to make the gift and must also establish that he has received these amounts as genuine gifts. The genuineness of the gifts cannot be determined without looking into the facts of the human probabilities, relationship of donor and donee, the occasion of making gifts and existence of reciprocity, if any. In case, the assessee fails to establish any one of the facts, the amount received by the assessee can be treated as income of the assessee from undisclosed sources representing assessee's own money, introduced in the garb of a gift received shown by the assessee. In this case, the CIT (A) has simply relied on the documents submitted. The discrepancy in copy of bank account submitted and copy of account directly obtained from bank have not been reconciled and have not been taken note off by CIT (A) even though the fact has been clearly stated by Assessing Officer in his assessment order. We have also observed that the entry pertaining to the gift is not found to be reflected in the bank statement obtained directly from the bank. The pages 80 to 82 of paper book submitted for ITA No.3794/Del/2009 for Assessment Year 2003-04 pertains to Assessment....