TaxTMI 
TaxTMI 
2024 (9) TMI 1189
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....53A r.w.s.143(3) of the Act, after due verification of all the facts and documents furnished by assessee during assessment proceedings. 1.1. That, Id.CIT(A) has further erred in confirming the reopening of completed assessment under section 147 of the Income Tax Act, when the proper course of action was to invoke the provisions of section 153C and complete assessment in accordance with provisions of that section. Appellant prays reopening the assessment under the facts and circumstances of the case and is not in accordance with law, thus consequent order deserves to be quashed. 2. On facts and circumstances of the matter the Id. CIT(A) has erred in confirming the addition of Rs. 1,76,342/-made by ld.AO on the basis of an excel sheet found with an employee of the Maverick group, by alleging the same as containing details of interest paid by the assessee out of undisclosed income, without appreciating the explanation/ documents filed by the assessee. The addition so confirmed deserves to be deleted. 3. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in confirming the action of Id. AO in completing assessment without provid....
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.... as to why it should not be added to total income treating it as interest paid from undisclosed source of income for the year under consideration. The assessee vide his reply dated 14.12.2018 and requested for cross examination of the persons who has prepared the report of interest calculation. The assessee has given a general reply. The reply filed by the assessee has been considered and found untenable. 3.2 Ld. AO noted that the assessee has been allowed ample opportunity, but he failed to furnish any evidence contradicting the information available with the revenue. The assessee never produced himself during assessment proceedings to contradict the information available in the records of the revenue; he has failed to comply even though the show cause notices given to him in view of the principles of natural justice. Since the assessee has not controverted the information available the adjustment entries amount pertains to the assessee of Rs. 1,76,342/- is added to the total income of the assessee treating as interest paid from undisclosed source of income for the year under consideration. 4. Aggrieved from that order of ld. AO, assessee preferred an appeal before the ld....
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....rasad More [1971] 82 ITR 540. Two important principles enumerated in this judgement are as under:- * A party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statemerats in documents either executed or taken by a party and rely on those recitals. * If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. In view of the above, the submission made by the appellant cannot be accepted. The contention of the appellant that there is no connection with these parties is also incorrect as the bank part of the transactions is not in dispute ie. transactions have taken place between the parties. 5.5 Further, when all other figures are matching and accepted by the parties then the incriminating/unaccounted figures are also deemed to be correct until or unless proved otherwise by the assesses using evidences. The appellant in the present case has failed in this regard as also failed to satisfy that how the data of admitted bank transactions was w....
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.... 82 ITR 540 [Hon'ble Supreme Court) * Sumati Dayal v. Commissioner of Income-tax [[1995] 80 Taxman 89 (SC)/[1995] 214 ITR 801 (SC)/[1995] 125 CTR 124 (SC)[28- 03-1995] [Hon'ble Supreme Court * CIT v. P. Mohankala [2007] 291 ITR 278 1 [Hon'ble Supreme Court) * Vivek N. Jajodia v. Income-tax Officer, 16(2)(2), Mumbai (2011) 10 ITRIT) 581 (Mumbai)/[2010] 123 ITD 136 (Mumbai)/[2010] 134 TTJ 806 (Mumbai)[23-01- 2009] * Durai Murugan Kathir Anand v. Additional Commissioner of Income-tax [2022) 136 taxmann.com 70 (Madras)/[2022) 443 ITR 423 (Madras)(25-02-2022) 5.7 In his reply, appellant has also relied upon the judgment in the case of other individuals in whose case similar addition was done but that was on protective basis and Hon'ble Tribunal has granted relief in those cases. The appellant has placed copy of combined order dated 26-09-2022 of Hon'ble ITAT in ITA Nos. 152, 161, 164, 165/JP 2020 and other ITAs and Cross Objections. One of the main grounds for the relief in the order is that the addition was done on protective basis and the substantive addition has not been done in any hand. This issue is discussed in bett....
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.... the issue of cross examination. The Ld. AO in this regard has observed that that the Hon'ble Supreme Court in the case of C. Vasantalat & Co. vs. CIT 45 ITR 206 (SC) (3 Judge Bench) had observed that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The right of cross examination is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. Bakshi Gulam Mohammad AIR 1967 SC 122). The question which may largely depends on the facts and circumstances of the case (Shyam lal Biri Merchant vs. UOI (1993) 68 ELT 548, 551 (All). The Hon'ble Rajasthan High Court in the case of Rameshwar lal Mali vs. CIT 256 ITR 536 (Raj.) has held that "there is no provision....
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....3.2024. In the meantime, a search action was carried out in the case of Maverick Group, wherein a pen drive stated to have been found and seized from the possession of some Shri Kailash Chand Khandelwal, who is one of the employees of the Maverick Group, Jaipur. According to ld. AO, such purchase contained some entries pertaining to the individuals/ concerns of Maverick group as also some other persons, and had an amount of Rs. 1,76,342/- against the name of assessee. On the basis of this information reasons were recorded u/s 147 and a notice was issued to the assessee u/s 148 of the Act. The copy of reasons recorded is available at (APB 1-4). The assessee had filed objections against the reasons(APB 5-6) so recorded which were rejected by ld.AO in a summary manner and the assessment was completed u/s 143(3) r.w.s.147 of the Act, by adding the said sum of Rs. 1,76,342/- by alleging that the assessee had paid interest in cash out of undisclosed source of income. Aggrieved of the aforesaid addition, the assessee has filed the appeal before the ld. CIT(A) who arbitrarily dismissed the appeal of the assessee without considering the submission of assessee. Therefore th....
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....meaning of sec 147 of the I T Act, 1961. However it is pertinent to mention here that, assessment was earlier completed u/s 153A r.w.s.143(3) of the Act on 31.12.2016, wherein the assessee had duly filed confirmations from all the parties involved and the said loans taken by the assessee were fully examined and the interest paid was accepted as such. There was no material with ld.AO, except information about entry in pen-drive found with one of the employee of Maverick group, who is not even connected to the assessee. It is submitted that the Ld. AO ought to have considered the issue objectively and not on the so called information received from some other official, therefore, the action of the ld. AO in reopening the completed assessment without independent application of mind deserves to be held bad in law. The Hon'ble Gujarat High Court in the case of Seth Brothers Vs. CIT reported in 169 CTR 519 has laid down following principles for the re-opening of the assessment u/s 148 of the Income Tax Act, 1961: (Reproduced in 28 TW 57,79) "11 (a) There must be material for belief (b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. ....
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....udit party on a point of law- Does not amount to "Information"- Income Tax Act, 1961, s.147(b)- Comptroller and Auditor General's (Duties, Powers and Conditions of Service)Act, 1971, s.16- Circular of Central Board No.14/19/56-II dated July 28,1960, paras 2,4. Devendra Kumar Jain, Jaipur vs ITO , ITAT Jaipur I have heard the ld. DR and perused the materials available on record including the written submission filed by the ld. AR of the assessee. From the perusal of the figures of the Profit & Loss Account, the amount of Trailer Rent of Rs. 3,60,000/- was shown as in independent item of expense. Further this amount was also shown in the Tax Audit Report as payments to specified persons u/s 40A(2)(b). Thus, it could not be presumed that the AO had not verified the expense about its allowability or otherwise as stated by the ld. CIT(A). The AO is not supposed to make all that as part of the assessment order. He is supposed to make the enquiries to be part of assessment order where he is not satisfied and where he holds different views. The decision of the ITAT, Jaipur Bench in the case of Arvind BhartiyaVidhyalayaSamti vs. ITO 32 Tax World 155 (2004) relied on by the....
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....t there was reason to believe that income had escaped assessment, the case is a classic instance of a change of opinion. The High Court further observed that when copies of statement of income, trading account, profit and loss account, audit report etc., were appended to the return filed by the assessee, taking resort to Section 147/148 was unwarranted as it constituted a change of opinion, since the material acted upon had been made available along with return of income. Commissioner of Income Tax Vs. Eicher Limited, (2007) 294 ITR 310 (Del) The High Court has taken a view that since the facts and materials were before the Assessing Officer at the time of framing of the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounted to a change of opinion, which would not form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. The Hon'ble High Court further observed that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that ....
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....nation of the said person was not allowed though such entries were found in possession of a person who was absolutely unconnected to the assessee. However, in spite of the dire necessity of cross-examination in the circumstances of the case, the assessee's request for cross-examination was turned down in an arbitrary manner, without specifying any justifiable reason. The Ld. AO merely stated that he was not bound by the technical rules of evidence and therefore, was not under any obligation to provide cross examination of the aforesaid person. Thus the assessment proceedings completed without adhering to the strict rules of natural justice embedded in an authority of quasi-judicial nature is prima facie bad in law and deserve to be quashed. Ld. CIT(A) dismissed the contention of assessee that ld. AO passed the order without disposing the objections raised by assessee for reopening the assessment vide letter dated 28.11.2018 by simply stating that proceedings were getting time barred concluded the proceedings by passing vide order 28.12.2018. In this regard it is submitted that actions of ld. AO is against the settled position of law in the case of the GKN Drivesha....
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....nsidering the facts of the case in the light of ratio laid as discussed hereinabove we uphold the order of ldCIT(A) by dismissing the appeal of the revenue. The legal ground raised by the revenue is dismissed." Similarly in the instant case, no speaking order for disposal of objections was passed by ld. AO before passing the order u/s 148 r.w.s. 143(3) of the Act and action of ld. CIT(A) in confirming the action of ld. AO on the ground that proceedings are getting time barred (even though order was passed after 1 month from the date of objection raised by assessee) could not be sole basis for rectify the error of ld. AO, despite of the facts there are plethora judgement in the favour of assessee. It is also a matter of fact that no search has been conducted in the case of assessee and the entries in the pen-drive are not found and seized from the possession of the assessee thus the presumption available u/s 132(4) cannot be applied against the assessee, as has been done blindly by the ld. AO. It is further submitted that, the said entries found during search operation of Maverick Group, had entries pertaining to the assessee. Therefore provisions of sec 153C of th....
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....d 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 under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before 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, 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. It is submitted that Finance Act 2014 has amen....
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....tain cardinal tests and principles which have not been fulfilled in the instant case. It is therefore submitted that reopening of assessment u/s 147 is not in accordance with law and thus entire proceedings being bad in law, deserves to be quashed. Further reliance is placed on the judgement of jurisdictional High Court in the case of Shyam Sunder Khandelwal vs ACIT, Central Circle 2 in D.B. Civil Writ Petition No. 18363/2019 held as under- "CONCLUSION:- 23. The reasons supplied in case in hand for initiation of proceedings under Section 147/148 are based on the incriminating material and documents including Pen Drives seized during the search carried out of the Manihar Group and the statements recorded during proceedings. From the information received the AO noticed that the loan advanced and interest earned thereon were unaccounted. In other words the basis for initiation of Section 148 proceedings is the material seized relating to or belonging to the petitioner, during the search conducted of Manihar Group. 24. In the case where search or requisition is made, the AO under Section 153A mandatorily is required to issue notices to the assessee f....
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....ion lacks merit and shall defeat the concept of single assessment order for each of relevant preceding years for assessing 'total income' in case of incriminating material found during search or requisition. 30. The argument that by enactment of Section 153A to 153D has not eclipsed Section 148 does not enhance the case of respondent to initiate the proceedings under Section 148. On fulfillment of two conditions for invoking Section 153C the proceeding in accordance with Section 153A are to be initiated. The operating field of and Section 153A to 153D and Section 148 are different. Applicability of Section 153C in cases where the seized material related to or belonged to person other than on whom search is conducted or requisition made does not render Section 148 otiose. Section 148 shall continue to apply to the regular proceedings and also in cases where no incriminating material is seized during the search or requisition. 31. ..................... ......................... ........................ 40. In view of above discussion the notices issued under Section 148 and the impugned orders are quashed. However, the respondents shall be....
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....g the explanation/documents filed by the assessee. In this regard it is submitted that an addition of amount Rs. 1,76,342/- was made by relying upon the material stated to have been found noted in the pen drive seized from the possession of an employee of Maverick Group, Jaipur wherein contained an excel sheet. The said excel sheet contained three columns titled as 'adjustment' containing entries of amount Rs. 35,15,548/- out of which in entry of Rs. 1,76,342/- is in the name of the assessee with interest @2.4% mentioned in the last column. During the course of assessment proceedings in the case of assessee himself, initial notice u/s 133(6) was issued (APB 9) wherein the said amount of interest appearing as 'adjustment interest' was alleged to be interest received and was asked to furnish the manner of disclosing the same in the return of income. In reply to this vide letter dated 21.03.2018 (APB 10-11) it was explained that interest was not paid to them rather, it was paid by them. Further the confirmation for the same had already been submitted before ld.AO during proceedings u/s 153A of the Act. Thereafter, ld. AO had changed his stand of treating the entries as intere....
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.... the excel sheet. The entries appearing in the 'adjustment' column was the additional interest asked by the lender, which was never paid by the assessee, as is evident from the fact that no TDS was deducted there on. Further no incriminating document was found during the course of search corroborating the allegation of the ld. AO nor was anything brought on record during the post search assessment proceedings by the ld.AO to substantiate the allegation that the assessee had paid anything more than what was recorded in the books of the assessee. Moreover, the assessee had filed copies of confirmation from the concerned parties along with the PAN and complete address, duly confirming the amount borrowed with the amount of Interest paid and Tax deducted by the assessee which stood accepted without raising any doubts. Thus, the assessee has discharged the initial burden of explaining the entries in the pen-drive found in possession of an employee of the assessee, so far as it pertained to the assessee. Also, it is a settled law that mere writing any transaction in one's own record including on computer without the knowledge or supporting, signatures, handwriting etc. of other ....
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....roup - Shri Kailash Khandelwal, who is completely unknown and unrelated to the assessee and except for the entries found noted in the pen drive found from his possession there is no corroborative evidence found either during the course of search or assessment proceedings to corroborate the allegations of ld.AO. Thus, cross examination of the said person is sine qua non, as only he could have explained the entries made by him, no other material has been referred to by the Ld. AO. ii. The requirement of allowing cross-examination of the person whose entries are the sole basis of addition made in the hands of assessee, who is unconnected to the assessee, is a sine qua none for validity of adjudication proceedings. The Ld. AO has unlawfully tried to dispense with this requirement by stating that he is not bound by the Technical Rules of Evidence Act. As against this in the case relied by ld.AO the non-provision of cross examination was held as a technical-breach for the reason that the papers which were made basis for addition were found at the premises of the assessee and it was the assessee's employee whose statement was relied upon. It was under these circumstances....
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....n this regard in order passed u/s 153A r.w.s. 143(3) of the I T Act. Also during the reassessment proceedings nothing was brought on records to establish that the alleged interest was paid over and above the interest claimed by the assessee. Nor any questionnaire/ notice was summoned to the parties concerned when all details pertaining to those parties were already submitted by the assessee during the proceedings u/s 153A r.w.s.143(3) of the Act. The sole reason for making the impugned addition was the noting found in the pen-drive found with a third party, totally unconnected to the assessee. It is humbly submitted that the assessee had elaborately demonstrated the fact that the said pen-drive was not prepared by the assessee and the ld.AO has not doubted this. The assessee has fully explained the entries as appearing in the books of the assessee other than the ones appearing under the column 'Adjustment entries' for which it was categorically stated that they were not made by assessee. This fact is further evident from the fact that the assessee has deducted due tax on the amount of interest actually paid by him and the same is appearing as such in the excel sheet. The e....
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....at there is no substantiative addition in those persons who claimed to have additional interest as duly confirmed before us by the AO and secondly when the substantive addition is not made protective addition cannot survive. The amount in dispute is nothing but the amount of the additional interest demanded and not paid by the assessee. Based on the decision relied upon by the ld. AR and on careful consideration of the facts in this case we hold that the ld. AO before completing the assessments on protective basis, the AO is supposed to point out the name of the assessee who may be the owner of such income. It is common ground that in the present case, till this date, the authorities below did not bring on record any material to show that the declared income in question really belongs to some other assessee. The ld. DR honestly conceded that till this date no proceedings in respect of the disputed income have been made against any other assessee and the same is also confirmed by the AO in the report presented before us. 16. It is not disputed the findings of the ld. AO that there is no addition on substantive basis. Thus, the protective addition cannot be survived as AR of....
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....tentions raised by both the parties. Hence, the bench feels that the decision taken by us in ITA No. 41/JP/2020 shall apply mutatis mutandis in this case also. The relevant finding in 41/JP/2020 is extracted here in below 15. We have heard ............ 16. It is not ............ 40.6 Based on the above observations the cross objection No.16/JPR/2020 is allowed." Thus, the addition so made merely on suspicion without any corroborative evidence on record deserves to be deleted." 6. To support the various contentions so raised in the written submission the ld. AR of the assessee relied upon the following evidences:- S. No. PARTICULARS PAGE NOS. 1. Copy of reasons for reopening of the Assessment u/s 147 of the I.T. Act, 1961 1-4 2. Copy of objections filed before DCIT, Central Circle-1, against reopening of the assessment 5-6 3. Copy of letter filed before DCIT, Central Circle-1, in response to order disposing objections against reopening of the assessment 7-8 4. Copy of notice u/s 133(6) of the I.T. Act, 1961 dated 16.03.2018 9-10 5. Copy of reply filed before ACIT, Central Circle-1, dated 21.03.....
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..../-, which was the same as declared in return filed u/s 139(1). During search action carried out in the case of Maverick Group, wherein a pen drive stated to have been found and seized from the possession of some Shri Kailash Chand Khandelwal, who is one of the employees of the Maverick Group, Jaipur. According to ld. AO, some entries pertaining to the individuals/ concerns of Maverick group as also some other persons, and had an amount of Rs. 1,76,342/- against the name of assessee. On the basis of this information reasons were recorded u/s 147 and a notice was issued to the assessee u/s 148 of the Act by recording the reasons. The assessee had filed objections against the reasons so recorded which were rejected by ld.AO in a summary manner and the assessment was completed u/s 143(3) r.w.s.147 of the Act, by adding the said sum of Rs. 1,76,342/- by alleging that the assessee had paid interest in cash out of undisclosed source of income. Aggrieved of the aforesaid addition, the assessee has filed the appeal before the ld. CIT(A) who dismissed the ground and confirmed the addition. Therefore, the present appeal. Ground no. 2 raised by the challenges the addition made by l....
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....ng the search proceeding no questions are raised to the parties not only that the employee from this PEN drive found, his statement is not recorded. Thus, merely from that PEN when the veracity about that evidence is not recorded no addition either protective or substantive can be made. Not only that even on the merits the addition cannot be made on two counts, one is that there is no substantiative addition in those persons who claimed to have additional interest as duly confirmed before us by the AO and secondly when the substantive addition is not made protective addition cannot survive. The amount in dispute is nothing but the amount of the additional interest demanded and not paid by the assessee. Based on the decision relied upon by the Id. AR and on careful consideration of the facts in this case we hold that the id. AO before completing the assessments on protective basis, the AO is supposed to point out the name of the assessee who may be the owner of such income. It is common ground that in the present case, till this date, the authorities below did not bring on record any material to show that the declared income in question really belongs to some other assessee. The Id.....