TaxTMI 
TaxTMI 
2017 (10) TMI 1278
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....ant's case. As such the assessment is invalid. 4. Without prejudice, it is submitted that the addition of Rs. 9,20,624/- for alleged cash shortage, which is treated as unexplained investment is highly arbitrary and without basis. 5. It is submitted that the sources available to the credit of the appellant, fully explained the investment in land and other outgoings. The Assessing Officer was not justified in treating any part of the investment as not explained. 6. It is submitted that the entire assessment and additions made are arbitrary and illegal and liable to be set aside. The addition of Rs. 60,000/- representing agricultural income, as undisclosed income, is also arbitrary. 7. In this connection, it is respectfully submitted that the CIT (A) has failed to consider the arguments put forward at the time of hearing and the written submissions, fairly and judiciously. The contentions taken in the argument note submitted before the CIT (A), a copy of which is produced herewith, may kindly be treated as part of these grounds. 8. The agricultural income declared should have been treated as an available source against the various investments and outgoings considere....
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....sessment year 2011-12 and 2012-13 were filed on 15/03/2012 and 19/11/2013 declaring an income of Rs. 5,96,657/- and Rs. 7,37,186/- respectively. Subsequently, the notices under section 153C read with section 153A were issued to the assessee for six assessment years preceding the year on 30/08/2012. In response thereto, the assessee requested that the return of income filed before the Income Tax Officer may be treated as the return in response to notice under section 153C for the assessment year 2006-07 to 2011-12 for which the notices under section 153C were issued. The Assessing Officer completed the assessment in each of the cases by making the additions as detailed below: Description 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Income declared 122918 138070 141514 173046 188056 596657 737186 Add: Agricultural Income Treated as unexplained Cash credit 60000 60000 200000 200000 200000 300000 430000 Cash shortage treated As unexplained Investment 920624 27372 - 270658 1066025 1043928 - Undisclosed income Purchase of land) - - - 2930600 - - 544000 Und....
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....igh Court (ii) Principal Commissioner of Income Tax (Central) vs. T. S. Pulses Pvt. Ltd. 2017 (8) TMI 571 - Delhi High Court (iii) CIT vs. Promy Kuriakose [2016] 386 ITR 597 (Ker) (iv) Principal Commissioner of Income Tax, Ahmedabad-3 vs. Dipak Jashvantlal Panchal [2017] 397 ITR 153 (v) Principal Commissioner of Income Tax (Central)-2 vs. Index Securities Private Ltd., Vidya Shankar Investment Private Limited 2017(9) TMI 585 Delhi High Court (vi) Principal Commissioner of Income Tax (Central) vs. T. S. Pulses Pvt. Ltd. 2017 (8) TMI 571 Delhi High Court 5. Learned D. R., on the other hand, contended that the incriminating material was duly found. For this our attention was drawn towards the statement recorded during the course of the search in which the assessee has accepted the cash payment in reply to question No. 4 for the purchase of land. 6. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We have gone through the provisions of section 153C as well as the case laws as relied by learned A.R. Now the question before us whether the assessment made under section 153C in the case of the assess....
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....s the total income in respect of each assessment year falling within such six assessment years : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner : Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation For the removal of doubts, it is hereby declared that, (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act....
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....zed or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A." 6.1 In our opinion, the Assessing Officer assumed jurisdiction for framing the assessment U/S.153C of the Act where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person in whose case search is conducted u/s.132 of the Act. Therefore, for initiating action U/S.153C of the Act and framing assessment U/S.153A of the Act, the pre-requisite is that the satisfaction of the Assessing Officer that the money, documents and papers, etc belongs to a person other than the person in whose case search is conducted u/s.132 of the Act. 6.2 It is apparent from the language of section that the section does not require that the documents belonging to the assessee must be incriminating documents. Section 153C gives the jurisdiction to the Assessing Officer once the documents belonging....
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....nt u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and; ( ii) undisclosed income or property discovered in the course of search". 6.5 In view of the decision of Special Bench in the case of All Cargo Global Logistics Ltd., no doubt the addition in the case of the assessee can be made by the Assessing Officer only on the basis of incriminating material found during the course of search but the Assessing Officer got jurisdiction for initiating proceedings u/s.153c r.w. section 153A against the assessee in view of documents etc. belonging to the assessee are found in the case of the person in whose case search had taken place. Thus, this decision will help the assessee. 6.6 Similar view has been taken in the cases discussed as under: We noted that Hon'ble Delhi High Court in the case of Chetandas Laxmandas 254 CTR (Del) 392 has taken similar view. In para 11 of this judgement, the Hon'ble High Court held that "obviously an assessment has to be made under this section only on the basis....
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....al assessments have already been completed on the date of search by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings u/s 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abated in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. We noted that the decision of Special Bench has been confirmed by Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (NHAVA SHEVA) LTD. [2015] 374 ITR 645 (Bom). We noted that Hon'ble Kerala High Court in the case of CIT vs. Promy Kuriakose [2016] 38....
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....vision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred." 6.8. We have also gone through other decisions, copy of which has been placed on record before us. The propositions of the law in all these decisions are that if during the course of search, documents pertaining to the assessee are found, the Assessing Officer has the jurisdiction under section 153C of the Act but the addi....
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....i Eldhose Agrl. Land in ArakuzhaPanchayath 4 02/07/2008 4095/08 2,20,000 7,29,200 28,000 7,57,000 36,460 cents in Sy.No.491/2/2 in the name of father K.O. Varghese agrl. Land in ArakuzhaPanchayath 5 10.07.2008 4267/08 50,000 1,08,000 7,000 1,15,000 6 cents in Sy.No.698/ 5/3 Palpra Panchayat When the Assessing Officer asked the source of investment the assessee explained that the payment for all these investments was made out of the loan taken by the assessee as detailed below: 04/09/2008 Reliance Capital Rs. 7,50,000 04/09/2008 Standard Chartered Bank Rs.11,00,000 01/11/2008 Barclays Bank Rs.15,00,000 The Assessing Officer was not satisfied about the source as they were taken in the name of M/s Whitelines Marketing Associates, a partnership firm in which the assessee is the Managing Director and was credited in the books of account of the said firm. The Assessing Officer noted that after deducting the bank charges, the said loan has been credited into the books of the assessee firm. The loans were taken subsequently while all five pieces of land were registered in the name of the as....
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....paid by him but he never retracted the said statement either before ADI or before the Assessing Officer. The statement was retracted only before the CIT(A) by filing an affidavit dated 09/03/2016 while the search had taken place on 02/11/2011. 9.1 It is settled law in view of the decision of ITAT, Mumbai Bench in the case of Hiralal Maganlal & Co. vs. DCIT [2005] 96 ITD 113 that where the assessee had made voluntary declaration on oath under section 132(4) and induced the Departmental Authorities to act upon the same at the time of search and its acceptance by the Departmental Authorities but Departmental Authorities did not proceed further with the investigation in order to locate unaccounted income, the assessee cannot deny later the truth or the correctness of the declaration made at the time of search. Where the retraction was not supported by any independent or reliable evidence to prove incorrect nature of facts confined in the original statement, the Assessing Officer could be justified in making impugned addition on the basis of the statement at the time of search. We noted that in the case of Carpenters Classics (Exim) P. Ltd. vs. DCIT [2008] 299ITR (A.T.) 124 (ITAT[....
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....n on 04/09/2008, 01/11/2008 and 04/09/2008 while the assessee has purchased the land vide sale deed registered on 18/06/2008, 02/07/2008 and 10/07/2008. We do agree with the contention of learned D.R. and the finding given by the authorities below that no seller would transfer the land until and unless he received the on-money agreed between the two. Explaining the source of onmoney does not prove that the assessee has paid the on-money for the purchase of land. In view of this fact, we do not find any illegality or infirmity in the order of CIT(A). This is the settled law that the statement recorded during the course of the search will be valuable evidence being incriminating document found during the course of search. Hon'ble Jurisdictional High Court in the case of CIT vs. St. Francis Clay Décor Tiles [2016] 385 ITR 624 (Ker) has held as under: "20. On a plain reading of section 153A, it is clear that once search is initiated under section 132 or a requisition is made under section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year follow....
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.... 85,680 Profit from business (Mini Eldhose) 3,65,000 Reliance capital Loan repayment principal 1,79,828 Ernakulam district co-op Bank Int.SB A/c.5245 (Mini Eldhose) 450 Reliance capital Loan repayment Interest 95,248 Ernakulam district co-op Bank IntSB A/c.61 35 (K O Varghese) 434 Standard Chartered Bank Loan Repayment Principal 3,62,722 Catholic Syrian Bank SB A/c. No.0200 interest 98 Standard Chartered Bank Loan Repayment Interest 1,75,478 Drawing from business, M/s. White line marketing associates 5,00,000 Ernakulam district co-op bank SB A/c no.5245 (Mini) 450 Ernakulam district co-op bank SB A/c No.6135 (Varghese) 934 Investment in business- M/s Whiteline marketing associates 4,00,000 Money given to brother Pelexy K Varghese 5,00,000 Tuition Fee 20,000 Closing balance 2,722 2410012 2410012 12.1 The Assessing Officer has recasted the said cash flow by taking the opening balance to be zero as in the recasted cash flow statement for assessment year 2010-11 the closing balance wa....
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....ct of the said income against the cash shortage. Therefore, except the estimation of the agriculture income of Mini Eldhose, we reduce the addition of the cash shortage by Rs. 4,83,751/- and Rs. 3,65,000/-. Thus, this ground is partly allowed. 14. Ground Nos. 6, 7 & 8 relate to treating the agriculture income shown by the assessee at Rs. 3,00,000/- to be the income from other sources. So far the availability of source of this amount against the outgoing while estimating the cash shortage, we noted that the Assessing Officer in the modified cash flow statement has taken the sum of Rs. 3,00,000/- as income shown by the assessee as agriculture income treating it as undisclosed income therefore, ground No. 8 taken by the assessee becomes infructuous and stands dismissed as such. 14.1 Now coming to the estimation of the agriculture income. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that during the assessment year 2006-07, the assessee was having 54 cents of the agricultural land and from which the assessee has returned the agriculture income to the extent of Rs. 60,000/-. During the assessment yea....
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....er side but since in the preceding assessment year the income from the same land holding stand accepted by processing the return under section 143(1) to the extent of Rs. 2,00,000/- therefore, we treat the sum of Rs. 2,00,000/- following principle of consistency, although it is on higher side from the said agriculture land, to be the agriculture income and confirm the action of the authorities below treating the balance sum of Rs. 1,00,000/- as income from undisclosed sources. Thus, this ground taken by the assessee is partly allowed. 15. Ground No. 9 of the appeal relates to levy of interest under section 234A, 234B & 234C of the Act. As agreed by both the sides, this issue is consequential in nature. We accordingly direct the Assessing Officer to recompute the interest levied under section 234A, 234B & 234C of the Act after giving effect to this order. 16. Ground Nos. 1,2,6 and 8 are general in nature and do not require any adjudication therefore, the same are dismissed as such. 17. Ground No. 3 relates to the sustenance of addition of Rs. 5,44,000/- in respect of investment made in the land purchase. The Assessing Officer during the course of assessment noted that durin....
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....Rs. 9,00,000/- on 19/04/2011 and Rs. 45,000/- on 20/04/2011. It was noted that the said amount was also quickly withdrawn in cash and credited into the accounts of the assessee's wife Mini Eldhose Rs. 9,00,000/- withdrawn on 19/04/2011 and Rs. 8,70,000/- on 18/08/2011. Once the CIT(A) has deleted the addition of Rs. 13,50,000/- which includes the sum of Rs. 9,00,000/- withdrawn by the assessee on 19/04/2011 and given to the assessee's wife. Therefore, the contention of Learned D. R. that there was no withdrawal for paying the consideration of Rs. 5,44,000/- from the account of Mini Eldhose on 19/04/2011 amounting to Rs. 9,00,000/-, which is sufficient to cover up the sum of Rs. 5,44,000/- and the Revenue has not come in appeal against the deletion of Rs. 13,50,000/- Therefore, we delete the addition of Rs. 5,44,000/-. Thus, ground No. 3 stands allowed. 19. Ground No. 4 relates to the estimate of the income by way of profit on sale of land at Rs. 36,000/-. 20. The facts related to this issue, in brief, are that the Assessing Officer noted from the cash flow statement submitted by the assessee that the assessee has sold the land during the year for a sum of Rs. 7,15,000/- and R....