TaxTMI 
TaxTMI 
2018 (4) TMI 121
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....1-12, the assessment has been completed under section 143(3) of the Act. 3. Briefly stated facts of the case are that the assessee is an individual and a search and seizure operation under section 132(1) of the Income-tax Act, 1961 (in short 'the Act') was carried out on 17/09/2010 at the premises of the assessee alongwith other cases of "Nagar Dairy Group" and "Sanya Group" of cases. Consequent to search action, notices were issued under section 153A of the Act in respect of assessment year 2005-06 to 2010-11 and under section 143(2) the Act in respect of assessment year 2011-12. In all the assessments completed, mainly additions have been made on three issues: 1. Agriculture income shown by the assessee held as undisclosed income. 2. Credit entries in bank accounts held as undisclosed income. 3. Deemed dividend under section 2(22)(e) of the Act. 3.1 Before the Ld. CIT-(A), the assessee submitted that additions made are outside the ambit and scope of section 153A of the Act and also challenged the addition on merit. The Ld. CIT-(A) though upheld additions on legal ground, however on merit, he partly deleted the additions related to credit in bank a....
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.... only on the basis of suspicion, surmises and conjectures that agricultural income shown in the return of income is a contrivance devised by the appellant to plough back unaccounted income into business without bringing in any material on record found during the course of search and seizure operation in support of his allegation. 4. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in upholding the validity of assumption of jurisdiction by the AO to assess the case of the appellant under section 144 of the Income tax Act, 1961 without issuing statutory notice under section 144 of the Income tax Act, 1961. 5. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in upholding the validity of assumption of jurisdiction by the AO to assess the case of the appellant under section 144 of the Income tax Act, 1961 even though the AO has not mentioned the relevant note which informs an assessee that failure on the part an assessee to comply with the terms of notice 142(1) will entail ex....
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....he Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla(Supra), no addition could have been made by the Assessing Officer in the assessment years. In support of his contention that additions have not been made on the basis of incriminating materials, he referred to various paragraphs of the order of the Assessing Officer as well as of Ld. CIT(A). 7.1 The Ld. CIT(DR), on the other hand, submitted that a list of bank accounts held by the assessee was prepared during the course of search proceeding in the form of Annexure- A- 3, which is part of the Panchnama dated 17.09.2010. According to her, the addition in respect of credit entries in bank accounts, has been made on the basis of incriminating material in the form of bank account found during the course of search. According to her, at least the addition in respect of unexplained credit in bank account, was based on incriminating material found during the course of search and thus, to that extent ratio of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) would not apply. 7.2 We have heard the rival submissions and perused the relevant material on record. The Ld. counsel of the assessee has relied on the ....
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.... word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006- 07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 7.3 Thus, we find that in para- 37(vii), the Hon'ble High Court has held that, wherever the assessment....
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....ned counsel of the assessee submitted that the bank accounts are duly disclosed in the return of income and books of accounts of the assessee and entries are duly recorded in regular books of accounts. In our opinion, making a list of bank accounts maintained by the assessee, during the course of search proceeding, cannot itself make the entries in bank accounts as incriminating. During the hearing, the bench asked the Ld. CIT(DR) as whether, in the statement under section 132(4) of the Act recorded during search proceeding, any question was asked to the assessee raising doubts on the credit in bank account, however, she failed to bring any evidence to establish that the bank accounts found were incriminating document. With regard to the other two additions related to agriculture income and dividend income also, she could not point out any incriminating material found or seized during the course of search from the premises of the assessee. 7.8 In view of the above, we are of the opinion that in respect of assessment years 2005-06 to 2007-08, the assessments had already attained finality before the date of search and no incriminating material was found or seized from the premises....
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....on of Rs. 7,59,528/- made by AO by treating the agricultural income earned by the appellant as unexplained income only on the basis of suspicion, surmises and conjectures that agricultural income shown in the return of income is a contrivance devised by the appellant to plough back unaccounted income into business without bringing in any material on record found during the course of search and seizure operation in support of his allegation. 4. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in confirming the addition of Rs. 6,33,476/- made by the AO in the hands of appellant as deemed dividend under section 2(22)(e) of the Income tax Act, 1961 without appreciating the fact that no loan or advance has been given by M/s AIMS Promoters Private Limited to the appellant through Mis Nagar Dairy Private Limited other than normal business transactions. 5. That on the facts and in the circumstances of the appellant's case, the learned Commissioner of Income tax (Appeals) erred both in fact and in law in upholding the validity of assumption of jurisdiction by the AO to....
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....re income except documents in respect of ownership of agriculture land, which were filed before the Ld. CIT-(A) as additional evidence. The Ld. CIT-(A) forwarded those additional evidences to the Assessing Officer for his comments. The Ld. CIT- (A) after considering the remand report of the Assessing Officer and rejoinder thereto of the assessee admitted the additional evidences. According to the Ld. CIT-(A) for claiming benefit of exemption of agriculture income under section 10 of the Act, the assessee should have furnished following documents: (i) The proof of use of land for agricultural purposes, (ii) Proof of assessment to land revenue subject to a local rate assessed and collected by Officers. (iii) Performance of any process ordinarily employed by a cultivator or received of rent in kind. (iv) Proof of having rendered the produce raised or received by him in a fit condition for being taken to the market. (v) No process other than ordinarily employed by a cultivator or receiver of rent in kind has been employed. (vi) Outside the jurisdiction of any municipality or cantonment board having a population of not less than 10,0....
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....ne to the land by human or mechanical agency. In this context, the relevant part of the judgment of the Hon'ble Madras High Court rendered in a case is worth quoting:- "A merchant who purchases the standing crop derives profit from his contract of purchase at an advantageous price and resale of the produce at a higher price. The land is not the direct or immediate or effective source of his income. Agriculture income cannot be said to accrue to every person into whose hands the produce of the land passes. The decision is an authority for the proposition that to constitute agricultural, income the land must be the direct or immediate or effective source of income." 10.2 The Ld. CIT-(A) further observed that the assessee has filed only following evidences to demonstrate the agriculture activity: (i) figure of expenses for agriculture operations (ii) sales receipt of agriculture goods sold (iii) proof of ownership of lands 10.3 After appraising the evidences of the assessee, the Ld. CIT-(A) upheld the addition with following observation: ".................................................................................. The above subm....
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....Ld. CIT(DR), on the other hand, submitted that the assessee has not shown any vouchers or evidences incurred in relation to agriculture activity. She also pointed out that in the bills of sale of agricultural produce, the item sold is recorded as "Basmati Dhan", whereas no such produce is recorded in the "Land Revenue Records". According to her, the document furnished by the assessee, do not demonstrate the quantum of agriculture income earned by the assessee. 10.6 We have heard the rival submission and perused the relevant material on record. It is evident that no evidence supporting the expenses incurred for earning agriculture income has been submitted by the assessee. We have also noticed inconsistency in the agriculture produce sold and agriculture produce recorded in the "Land Revenue" records. According to the bills, which are available on page 31 to 32 of the paper book, agriculture produce sold is "Dhan Basmati", whereas the agriculture produce recorded in "Land Revenue" records corresponding to the land of the assessee (available on page 269 to 272), "Dhan" is not mentioned. Further, there are no records or evidence as to the volume of agriculture produce produced from....
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....sel, there was no violation of the Rule 46A of the Income Tax Rules by the Ld. CIT- (A). 12. The ground No. 1 of the appeal of the Revenue relates to CIT-(A) deleting of addition of Rs. 4,09,76,000/-by the learned CIT-(A) out of the total addition of Rs. 4,17,35,528/- made by the Assessing Officer on account of unexplained entries appearing in bank account. 12.1 Before the Ld. CIT(A), the assessee claimed that all the debit and credit entries of the bank accounts were duly explained to the Assessing Officer during assessment proceeding along with necessary supporting evidences, despite that the Assessing Officer made addition. It was contended by the assessee that the impugned bank account was not an undisclosed or concealed bank account and the said bank account was reflected in the return of income filed by the assessee. The assessee also filed explanation of all debit and credit entries of bank account before the Ld. Commissioner of Income-tax (Appeals) alongwith supporting evidences. The Ld. CIT-(A) forwarded explanation of the assessee as well as supporting documents to the Assessing Officer for his comment. The Assessing Officer in his remand report only reiterated find....
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....on along with the bank statement of the latter to prove the genuineness and creditworthiness of the lender. Having regard to the nature of evidence produced, I am of the firm opinion that the deposits of Rs. 18,50,000/- stand fully explained. In respect of deposits of Rs. 50 lakhs on 14/11/2007, Rs. 50 lakhs on 23/11/2007, Rs. 50 lakhs on 27/11/2007, Rs. 45 lakhs on 12/2/2008, Rs. 5 lakhs on 13/02/2008, Rs. 5 lakhs on 28/3/2008, Rs. 4 lakhs on 28/03/2008 and Rs. 2 lakhs on 28/03/2008 they were explained as having been taken from Manoj Sethi, Madhusudan Realtors P Ltd., Jam Indian P Ltd., Sanjeev Chugh, Lakshya Dairy P Ltd, Grip Info Solution P. Ltd., Atul Nagar & Rohi Nagar respectively. Another sum of Rs. 4 lakhs was shown as received on 28/3/2008 from Rohit Nagar. In respect of Manoj Sethi his banks statement and his return of income were filed on demand apart from the confirmation filed with the paper book forwarded to the AO for his comments. Accordingly, on a consideration of the evidence filed the amount of Rs. 50 lakhs is deleted being explained. In respect of Madhusudan Realtors P Ltd the confirmation filed indicated that it was a repayment of the loan ear....
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....he same is a subject matter of consideration of deemed dividend. In any case the confirmation filed with the paper book was further supplemented by the copy of bank statements on demand wherein the above amounts were shown as having been paid to the appellant out of its current account. Accordingly, on a consideration of the evidence filed the amount of Rs. 57,60,000/- lakhs is deleted being explained. As to the deposits of Rs. 6,36,283/- and Rs. 1,23,245/- on 16/2/2008 & 22//2/2008, the same have been held as taxable income claimed as exempt by the appellant in the garb of agricultural income. Accordingly, the same is held as income from other sources and liable to tax. However, to prevent double jeopardy the amount of Rs. 7,59,528/- shall not be brought to tax separately. Accordingly, ground no. 2 is partly allowed." 12.2 The ground No. 4 of the appeal of the assessee relates to addition as deemed dividend under section 2(22)(e) of the Act. The ground No. 2 of the appeal of the Revenue also relate to this addition. 12.3 The facts qua the addition are that during the relevant year M/s Nagar Dairy Private Limited (NDPL) received unsecured loan of Rs. 73,69,5....
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....and sold could not be produced. Moreover, it was not clear as to why the company M/s Nagar Dairy P Ltd. gave advances even before the lands on which the projects were likely to be undertaken were free from encumbrances. Trade means some ongoing activities in present. Since it was not necessary, normal and incidental to advance such money without even the existence of the suitable land, the advance of Rs. 6,33,476/- is not held as having been given in the course of business. Moreover, the proof of purchase and registration of the lands on which the projects of residential colonies and showroom etc. were to come up was not available. Similarly, the agreements to sell with the proof of registration for lands allegedly sold to M/s. AIMS Promoters P Ltd. were also not provided. The proof of purchase and registration of the same lands by M/s. Nagar Dairy P. Ltd. for which advances were given by M/s. AIMS Promoters P Ltd. were also not there. The approvals of the government authorities for constructing commercial complexes at Meerut and residential colonies at village shakarpur, paragana Tehsil Hapur, Distt.-Ghaziabad were also missing. Moreover, the reason why the sums of money ....
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....d should be computed on the date of transaction and not in the year-end. 13.1 On the other hand, Ld. CIT(DR) contended that the assessee failed to establish any business connection between the two companies or any business expediency for giving loans. According to her, the MOU is only a self serving documents and no such transfer of land was ever executed between the companies. According to her, reimbursement of rent should have been considered for exclusion, prior to restriction of deemed dividend to the accumulated profit of company, who has given loan. 13.2 We have heard the rival submission of the parties in relation to Ground No. 1, 2 and 3 of the appeal of Revenue and ground No. 4 of the appeal of the assessee and perused the relevant material on record. Both the issues of credit entries in Bank accounts and deemed dividend are related to the issue of additional evidences raised by the Revenue and, thus, we are first taking up the issue of admitting additional evidences by the Ld. CIT(A) raised by the Revenue in ground No. 3 of the Appeal, which goes to the root of the addition toward credits in bank account and deemed dividend. 13.3 The Ld. CIT-(A) while admitting t....
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....ssessing Officer any evidence which is relevant to any ground of appeal; or (d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-r. (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-r. (1) unless the Assessing Officer has been allowed a reasonable opportunity (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additinal evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of t....
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....ment, we are of the view that the Tribunal ought to have restored the matter to the CIT(A) with the direction to him to comply with sub-r. (3) of r. 46A. In our opinion and with respect, the error committed by the Tribunal is that it proceeded to mix up the powers of the CIT(A) under sub- s. (4) of s. 250 with the powers vested in him under r. 46A. The Tribunal seems to have overlooked sub-r. (4) of r. 46A [sic-s. 250] which itself takes note of the distinction between the powers conferred by the CIT(A) under the statute while disposing of the assessee's appeal and the powers conferred upon him under r. 46A. The Tribunal erred in its interpretation of the provisions of r. 46A vis-à-vis s. 250(4). Its view that since in any case the CIT(A), by virtue of his coterminous powers over the assessment order, was empowered to call for any document or make any further enquiry as he thinks fit, there was no violation of r. 46A is erroneous. The Tribunal appears to have not appreciated the distinction between the two provisions. If the view of the Tribunal is accepted, it would make r. 46A otiose and it would open up the possibility of the assessees' contending that any additional evid....
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.... accepting the additional evidences under rule 46A of the I.T. Rule as reported above. Submitted for kind consideration." 13.6 Further, we note that the Ld. CIT-(A) inferred from the comment of the Assessing Officer that he had no reservation and the genuineness of the explanation given by the assessee. The relevant part of the order of the Ld. CIT-(A) is reproduced as under: "The AO was confronted with the above details in the remand proceedings. The AO merely stated as under:- "During the year consideration the assessee has been maintain bank account no. 001110001203248 with HDFC bank and also saving account No.10132279635 with SBI Shahadra, Delhi. The assessee has failed to furnish the complete details with explanation in regard to credit entries appearing in her bank account totalling Rs. 4,17,35,528/-. Therefore, in the circumstances credit entries appearing in the account of the assessee were held to be out of undisclosed income and the same was added to the income of the assessee." From the above, it is inferred by me that the AO had no reservations on the genuineness of the explanations given by the appellant in the paper book in regard to the ....