AI Drafter 
TaxTMI 
TaxTMI 
2016 (1) TMI 215
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....following grounds which read as under: "1. The orders passed by the Ld Lower Authorities are bad in law and in facts. 2. The assessment order passed / upheld u/s 153A r.w.s 143(3) of the Act by the lower authorities is ab-initio void, inasmuch as, as no form of return of income was prescribed for the assessment year under appeal by the rule making authority, the whole assessment mechanism failed. 3. The learned lower authorities have grossly erred in completing / upholding the assessment on the basis of an invalid ROI filed in Form 2D as the said form 2D was not a prescribed form of return u/s 153A of the Act. In the absence of compliance of mandatory provisions of section 153A of the Act by the rule making authority, the impugned assessment order should have been declared non-est. 4. The Ld lower authorities have grossly erred in holding, that the gift received at Rs. 4 Crs by the appellant was not a valid gift and have further erred in excluding the said gift amount from the capital account of the appellant. 5. the Ld lower authorities have grossly erred in making / confirming an addition of Rs. 3,18,54,658/- to the returned income by ....
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.... determined at Rs. 3,84,98,320/- which includes the additions (i) income from undisclosed sources towards payment of loan amounting to Rs. 3,18,54,658/- and (ii) income from undisclosed sources of Rs. 60 lakhs. Aggrieved, assessee carried the matter in appeal before the first appellate authority. 6. During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) upheld the AO‟s decision on account of addition of Rs. 3,18,54,658/- and regarding the addition of Rs. 60 lakhs, CIT (A) directed the AO to verify the concerned bank statements of the donor and to ascertain the genuineness of the gift. He further directed the AO to delete the addition in case the genuineness of the gift is treated as explained. Aggrieved with the said decision of the CIT (A), assessee is in appeal before the Tribunal by raising the abovementioned grounds. 7. During the proceedings before us, narrated the above facts and brought our attention to the financial statements of the assessee and submitted that the issue revolves around the gift of Rs. 4 Crs reflected in the assessee‟s capital account. As per the Ld Counsel, during the search....
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....no reference to the seized material in any of the additions made by the AO. Ld Counsel for the assessee also argued that such additions are unsustainable in law. Ld Counsel for the assessee also demonstrated that the reduction in the balances of loans and advances was attributable to transfer entries passed through journal as detailed in respective accounts, where the details of loans and advances were explained. In support of his contention that when there is finding or discussion about the any incriminating material seized during the search, the assessment order passed u/s 153A r.w.s 143(3) of the Act is not tenable in law, Ld Counsel for the assessee filed written submissions and also relied on following decisions viz., (i) CIT vs. Smt Shaila Agarwal, 346 ITR 130; (ii) All Cargo Global Logistics Ltd vs. DCIT [18 ITR 106] (Mum.) (SB); (iii) Spacewood Furnishers Pvt Ltd Ors vs. DGIT & Ors. [340 ITR 393 (Bom)] (iv) Shri Govind Agarwal v. ACIT being ITA No: 3389/Mum/2011 dated 10.01.2014; (v) SKS Ispat and Power Limited vs. DCIT and others. 8. On the other hand, Ld DR relied on the order of the AO and the CIT (A). Further, on the legal propositions, Ld DR has nothing to controver....
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....not based on either the unaccounted books of accounts of the assessee or books not produced to the AO earlier or the incriminating material gathered by the investigation wing of the revenue. Considering the legal propositions place before us by the assessee‟s counsel, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT - From Held portion: ....The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, inasmuch as, in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. ....... ....... Para 26 of the Judgment: The plea raised on behalf of the assessee that as the first proviso provides fo....
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....ocuments found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. B. All Cargo Global Logistics Ltd. v. Deputy Commissioner of Income-tax, Central Circle-44 [2012] 23 taxmann.com 103 (Mum.) (SB) Para 58 of SB decisions: Thus, question No.1 before us is answered as under : (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, which in the context of ....
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.... 16. In these circumstances, we have no doubt about the absence of any seized material which are incriminating in nature to back the additions u/s 68 or 14A of the Act made in the assessment made u/s 153A of the Act for the AY under consideration. Regarding the DVO‟s report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, cannot be sustained legally. As such, we find that the AO has not used the said report of the DVO also for making additions of Rs. 31,33,007/-, the difference between accounted amount of Rs. 46,13,007/-, claimed as the amount spent on construction of house and acquisition of land as on 31.3.2002 minus Rs. Rs. 14.8 lakhs, the investment made on the land plots. AO made addition for assessee‟s failure to provide evidences / bills in support of the claim of expenditure on the construction. It the presumption of the AO that the plots since acquired only by July 2001, the assessee would not ha....
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....nt to extract the summary of the legal propositions and the conclusion of said judgment of the Hon‟ble Delhi High Court which is as follows: Summary of the legal position: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be....
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....t on account of „gifts‟ but on account of „source of funds for repayment of loans‟. In this regard, we find the said loans are repaid through journal entries. Therefore, Revenue Authorities are not supposed to make such additions in the assessment. Considering the factual matrix of the case as well considering the above settled legal position of the issue that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same. Considering our decision on the legal issue in favour of the assessee, the other grounds demand no specific adjudication. Thus, on the legal ground the assessee succeeds and rest of the grounds are dismissed as academic. 12. Accordingly, appeal of the assessee is allowed. ITA No.2823/M/2013 (AY 2002-03) (Revenue's appeal) 13. This appeal filed by the Revenue on 10.4.2013 is against the said order of the CIT (A)-39, Mumbai dated 7.1.2013 for the AY 2002-03. In this appeal, Revenue raised the following grounds which read as under: ....
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....gift amount from the capital account of the appellant. 5. Having regard to the facts of the case, the provisions of law and judicial propositions, the whole assessment order deserves to be annulled and additions made to returned income needs to be deleted." 17. Assessee also raised additional grounds vide letter dated 20.8.2015 and the same read as under: "1. The assessment order passed u/s 153A r.w.s 143(3) of the Act, 1961 is ab-initio void, inasmuch as, no incriminating material was found during the course of search proceedings carried out on 3.8.2006 at appellant‟s residence. Consequently, the provisions contained in section 153A of the IT Act, 1961 including abatement of pending assessment are not attracted at all. 2. The learned lower authorities have grossly erred in making / upholding an addition of Rs. 3,18,54,658/-, not based on or relatable to the material found or seized during the course of search." 18. In the present appeal, assessee raised the identical issues to that of the AY 2002-03 in ITA No.3094/M/2013, which is adjudicated by us in the above paragraphs of this order. While adjudicating the said appeal for the AY 2002-2003,....
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....d in disallowing / confirming an addition of Rs. 2,55,125/- by recourse to section 40(a)(ia) of the Act even though the payment in question was merely a reimbursement to a co-plaintiff and not a professional. Reasons assigned for the impugned disallowance are wrong and contrary to the facts on record. 3. Having regard to the facts of the case, provisions of law and judicial propositions, as nothing was payable as at the end of the year, provisions of sections 40(a)(ia) of the Act were not applicable at all. 4. The learned lower authorities have grossly erred in charging interest u/s 234A of the Act at Rs. 1,529/- even though ROI was filed well within the stipulated time limit prescribed vide section 139(1) of the Act." 24. Briefly stated relevant facts of the case are that the assessee filed the return of income declaring the total income of Rs. 3,48,449/-. During the assessment assessment proceedings, AO noticed that the assessee failed to deduct TDS on professional fees amounting to Rs. 2,55,125/- out of the total professional fees of Rs. 3,70,125/-. Accordingly, AO proposed to invoke the provisions of section 40(a)(ia) fo the Act. In this regard, it is the s....