TaxTMI 
TaxTMI 
2025 (9) TMI 210
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....T has accorded the approval u/s 151 in a mechanical manner and as such the notice u/s 148 and all further proceedings are bad in law. 4. That CIT(A) while rejecting the additional evidence, wrongly formed an opinion that no proper reasons were given for admission of additional evidence whereas the application for additional evidence states otherwise. 5. That the CIT(A) wrongly dismissed the additional evidence application despite the fact that the powers of CIT(A) are coterminous with that of AO and also Rule 46A does not take away the basic powers of CIT(A) u/s 250(4). 6. That CIT(A) while rejecting the additional evidence application failed to appreciate that the law is well settled on the issue that technicalities should not hinder the cause of justice. 7. That the CIT(A) has wrongly upheld that addition of Rs 4,80,000/- made by AO on account of addition to capital the same is against the facts on record, in the form of additional evidence, before him. The amount added by AO was the opening balance only. 8. That the CIT(A) has wrongly upheld that addition of Rs 13,651/- made by AO on account of disallowance of expenses. 9. Th....
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....has admitted of having started constructing/renovating his workshop/residence in the year 2012, however the assessee could not provide any evidence with regard to the investment in construction / renovation during the course of survey operation u/s 133A. From the perusal of the return of income, the assessee has mentioned "Y" against the col 'Are you liable to maintain accounts as per section 44AA?". However during the course of survey operation u/s 133A and in response to summons u/s 131 of the IT Act, 1961, the assessee failed to produce the books of account and even admitted of not having maintained any books of accounts. Even otherwise no books of accounts found relating to any financial year starting from the start of the business in the year 2004 to the date of survey even on computer or otherwise. Therefore, I have reasons to believe that the income declared by the assessee has been understated to the extent of more than Rs. 1,00,000/- which is based on the facts that no books of accounts maintained and the source of investment in construction/renovation of the work shop / residential house, in terms of provisions of section 147 (b) of the Income Tax Act, 1961. ....
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....ion u/s 151 of the IT Act, 1961 is enclosed herewith." 5.3 Further, reference was drawn to the approval granted by the Ld. Pr. CIT wherein he has stated that on the basis of reasons recorded and evidence, he agrees that income has escaped assessment and it is therefore a fit case for issuance of notice under section 148 of the Act. 5.4 Referring to the aforesaid, the ld AR submitted that there is not even a single document for A.Y. 2012-13 which has been impounded during the course of survey and the same is evident from the assessment records wherein there is no documents available on record which is pertaining to the impugned assessment year which has been impounded during the course of survey. It was accordingly submitted that there is no information available with the AO from any source either in terms of the survey report or document impounded during the course of survey and therefore the claim of the AO that certain incriminating documents were found during the course of survey is purely imaginary and not based on any material much less incriminating material available on the record. It was further submitted that no such incriminating documents as so claimed by the AO ha....
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.... therefore, had nothing before him which would enable him to record his belief that any such escapement has taken place. In the circumstances, the reasons recorded and which pertain to all the assessment years prior and subsequent to the survey can hardly satisfy requirement in law. This is not how the power under section 147 should be exercised. That is to be exercised and in exceptional cases. It should not be exercised as a manner of routine and merely because some survey of this nature had taken place. At any point of time and when there was shortage of potato in the market, that such powers of survey were invoked. If nothing has been found therein which would indicate escapement of income and chargeable to tax, then, the basis for reopening ought not be such survey actions and the report. Something more was required in law for the Assessing Officer to exercise his powers." 5.7 Further, reference was drawn to the decision of Hon'ble Delhi High Court in case of Agya ram Vs. CIT reported in 386 ITR 0545 wherein it was held as under: "the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further e....
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....the year under consideration is enclosed herewith for the clarification. As such the addition amounting to Rs 4,80,000/- is liable to be deleted. b) Disallowance of expenses Amounting Rs 13,651/- by AO is completely wrong and is against the facts of the case. The expenses debited by appellant to its P & L are bare minimum expenses. (i) SALARY: The total salary debited to P & L account is Rs 64,000/- is of only of one full time employee. The AO has not given any finding or evidence for disallowing 1/6th of salary. The disallowance by AO is very harsh conduct that too without any basis. (ii) Other Expenses The total amount of travelling and other expenses debited to P & L account are mere Rs 17,910/- out of which AO has disallowed 1/6th of such expenses. The AO has not given any finding or evidence for disallowing 1/6th of Travelling and other expenses. The disallowance by AO is very harsh conduct that too without any basis. c) Addition For Household Expenses: The AO has wrongly made the addition of Rs 50,000/- on account of household expenses. the addition of Rs 50,000/- on account of household expenses are also without any basis....
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....o be dismissed. 8. Further, on merits of the addition, reliance was placed on the findings of the Ld. CIT(A) and the contents thereof read as under: "The contentions of the appellant on these grounds are not acceptable as the AO had given an opportunity for production of books of accounts & vouchers to the assessee and the assessee should have availed of the same. Hence, the contentions of the appellant that all the bills & vouchers were complete cannot be accepted at this stage as necessary verification could have been easily carried out by the AO. It was only in the absence of the said bills & vouchers having been produced before the AO, the said disallowance was made by the AO. Also, during the assessment proceedings, the AO has given ample opportunities to the assessee but the assessee has not availed. As discussed above, additional evidence in the form of capital account has not been admitted. Even Otherwise, appellant has not been able to prove the authentication of this account its opening balance etc. The account are apparently not audited as well. The appellant has submitted that AO has made addition by taking difference of closing balance as reduced b....
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....rom reading the reasons and this is the bare minimum mandatory requirement of Section 147(1) of the Act and the reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 10. Applying the aforesaid legal proposition in the present case, let's look at the reasons recorded by the Assessing officer before issuance of notice on 19/12/2018 u/s 148 of the Act wherein the Assessing officer has stated that "During the course of survey operation u/s 133A of the Income Tax Act, 1961 certain incriminating documents have been found and certain facts have come to the notice of the department during the course of statement of the assessee who is running the business of car wash under the name and style "Preet Service Station". The assessee has admitted of having started constructing/renovating his workshop/residence in the year 2012, however the assessee could not provide any evidence with regard to the investment in construction / renovation during the course of survey operation u/s 133A. From the perusal of the return of income, the assessee has mentioned "Y" against the col 'Are you....
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....corded and in absence thereof, the assessee is within his rights to question the basis of such reopening and to that extent, we agree with the ld AR that in absence of any incriminating material or the contents thereof as referred in the reason so recorded, the nexus between such material and formation of belief that income has escaped assessment has not been established. 13. Further, it is also evident from the reasons so recorded that neither books of accounts nor any evidence towards the construction/renovation of workshop/residence was provided by the assessee and consequently, the same were not found during the course of survey and therefore, reliance thereon for formation of belief that income to the extent of more than Rs 1,00,000/- has escaped assessment doesn't arise for consideration. 14. What therefore left is the statement of the assessee recorded during the course of survey in respect of which the AO has stated in the reasons so recorded that "the assessee has admitted of having started constructing/renovating his workshop/residence in the year 2012" and has relied on such statement. In the statement so recorded, it is noted that the assessee has stated that the ....