AI Drafter 
TaxTMI 
TaxTMI 
2019 (2) TMI 350
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....l take up the Revenue's appeal ITA No.1780/Bang/2017 for assessment year 2006-07. The revenue raised the following grounds of appeal: 1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. The Ld. CIT (A) erred in not appreciating the fact that the AO had made addition on the basis of individual payments and receipts that the assessee had with Shri P. Dayananda Pai and M/s Canara Housing Development Company (CHDC) as found in the seized material. 3. The Ld. CIT (A) erred in not appreciating the fact that colour of the income changes whenever money passes from one hand to another. Thus nature of unaccountable income and its taxability needs to be examined in the hands of the assessee independently. 4. The Ld. CIT (A) erred in ignoring the fact that the assessee had presented the different versions of facts to the AO on different point of time i.e. initially in the statement recorded on oath, the assessee confirmed the cash transactions recorded in the ledgers of Dummy Tally Software (DTTE) and acknowledged that these were related with h....
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....tice for re-assessment and also copy of the reasons were supplied to the assessee. The AO dealt on the ledger account copies in the name of assessee in the search proceedings of Shri Dayananda Pai and such ledger account contained transaction from Dummy Tally Training Environment ['DTTE' for short] which the AO has referred at pages 3 and 4 of the assessment order. The assessee was provided an opportunity to explain the nature of transactions in seized ledger and the AO has worked out the peak credit. Show-cause notice was also issued. The assessee filed reply on 7/3/2013, 18/3/2018 and 25/03/2013 which was dealt by the AO at pages 5, 6 and 7 of the assessment order. The AO, considering the statements recorded and particular questions raised in the statements has concluded that the assessee could not explain the transactions found in the seized ledger; in spite of providing adequate opportunity and the assessee could not substantiate with any evidence or support, finally AO made disallowance of peak cash balance of Rs. 1,92,10,000/- as unexplained income of the assessee from other sources and passed order u/s 147 r.w.s. 143(3) of the Act dated 28/03/2012. 5. Aggrieved by the ord....
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.... resolved by us, is whether the peak credit method can be adopted as a reliable method for a correct determination of the applicant's income? The issue relates to the seized evidence marked as Annexure A/AK/PDP/06 which consists of a set of 6 CDs, a pen drive and floppy drive. The above CDs contained Tally accounts data complete with ledgers, cash book, balance hseet, P&: Account, etc. under the caption Dummy Tally Training Environment. This evidence was seized at the residence of 5mt.Adlene Kagoo, P5 to Dr.P.Dayananda Pai. The entries in the Dummy Tally have been owned up by Dr.Dayananda Pal as belonging to him and his firm i.e. CHDC. Page 63 of 74 - Point No.12.1.3 of the 5C order:-Thus the aggregate undisclosed income on the basis of the revised peak would be Rs. 171,33,35,796 (being the aggregate of peak credit set out in letter dated 16.09.2015 from Principal Commissioner of Income Tax, Central, Bangaluru) less expenses of Rs. 13,82,48,882 i.e net of 157,50,86,914. When this was pointed out to the AR during the course of the final hearing, he gave his consent to offer an additional undisclosed income being 75% of Rs. 157,50,86,914 which works out to Rs. 118,13,15,....
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....s, while rejecting the legal objections raised." and finally, the CIT(A) concluded that the addition by the AO based on Dummy Tally Account cannot be sustained and deleted the addition and partly allowed the appeal of the assessee and passed order on 18/05/2017. 7. Aggrieved by the order, the Revenue has filed an appeal before the Tribunal. Before us, learned DR argued grounds and referred to the findings of the AO and the statements and particular documents seized. The learned DR emphasized that the addition made by the AO in respect of individual payments and receipts of Shri Dayananda Pai and CHD are lack of explanation of source of the assessee and has to be taxed in assessee's individual hands and cannot be viewed from the business point of view of Shri Dayananda Pai and CHD. The AO relied on the evidence available based on the Dummy Tally Account that the assessee was involved in making cash advances to Shri Dayananda Pai and others and such amounts are returned to the assessee. Though the assessee was provided adequate opportunity but could not establish with any evidence in support of the sources. 8. The learned DR mentioned that before the Settlement Commission, S....
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.... the assessee with Shri Dayananda Pai is one to one and the assessee should explain the sources. We found that the assessee has not filed application before the Settlement Commission on his assessment but only Shri Dayananda Pai and CHD have filed application and the Hon'ble Settlement Commission has passed orders dated 19/10/2015 which the CIT(A), on this specific issue, has referred at para.14 which is extracted in page 5 of this order. Further the contentions of the learned AR that the said amount does not belong to the assessee and are only advances for the property development and does not include profit or income element. The Settlement Commission considered the peak credit worked out in respect of transaction of Shri Dayananda Pai and CHD and granted the relief. Whereas the learned DR emphasized on the peak credit and argued that the individual peak credit of the assessee with parties was not worked out in the proceedings and CIT(A) order is silent on this issue, but the CIT(A) considered the fact that has been owned by the Settlement Commission applicants, but prima facie nothing was brought on record to substantiate the sources and the payments for this assessment year. We....
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.... allow grounds of appeal of the Revenue for statistical purposes. 13. The assessee has filed cross objections in the revenue's appeals. At the time of hearing of the cross objections, the assessee has filed application for condonation of delay in filing the cross objections. We, having considered the learned AR's submissions, the affidavit and application for condonation of delay and also there is no serious objection from the learned DR, we consider it appropriate to condone the delay in filing the cross objections and admit the same. 14. The assessee has raised common issues in the cross objections for assessment years 2006-07 to 2011-12. For the sake of convenience, we take up the CO No.27/Bang/2018 for the assessment year 2006-07. The assessee raised the following grounds of cross objections: 1. "The reassessment u/s 147/148 in the appeal filed by the Department is illegal as the reassessment proceedings are based on material seized during search in terms of provisions of section 132 at third party place. 2. The AO ought to have proceeded in terms of section 153C whenever material seized u/s 132 at third party place is utilised for reopening assessments ....
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....ngs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A : [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted ....
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....been discovered by the Assessing Officer will not necessarily 1amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any othe....
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....ond proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." On perusal of the provisions, the AO has chosen to go ahead in the assessee's case by issuing notice u/s 147 of the Act and completed the assessment u/s 148 r.w.s. 143(3). The fact remains that the assessee is a third party and the documents seized in the search proceedings of Shri Dayananda Pai and CHD are related to assessee and belong to him. The learned AR submitted that the amount mentioned in the seized documents has been owned by the applicants of the Settlement Commission viz., Shri Dayananda Pai and CHD though belonging to the assessee. But the learned AR could not controvert with any material evidence except submitting that the amount owned by the applicants in the Settlement Commission belongs to the assessee Further, the decision of the co-ordinate bench in the case of ACIT vs. Srinvas Rao Hoskote in ITA Nos.1154 & 1155/Bang/2015 dated 21/02/2018 relied by the learned AR, the revenue file....
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....uently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further --------- " 14.2 On a bare reading of s. 153C noted above, it is self evident that this provision governs assessment of income of a person other than a person in whose case search was initiated. 14.2.1 Also, this provision along with o....
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....his example if the purchaser's premises are searched and the registered sale deed is seized, it cannot be said that it "belongs to" the vendor just because his name is mentioned in the document. In the converse case if the vendor's premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy "belongs to" the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to "belong to" the petitioner. . . . . . . . . . 14.5 The decisions cited on behalf of the assessee are clearly distinguishable and do not raise any conflict with position of law narrated above. The decision rendered by the Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1 has been rendered under a different scheme for assessment of search cases i.e. with reference to block period regime. The Hon'ble Gujarat High Court also echoes that in case of conflict between the operation of erstwhile Section ....