2015 (3) TMI 397 - AT - Income Tax

Gift received by the appellant as undisclosed income - addition of Rs. 45 lakhs in the assessment made u/s 143(3) r.w.s. 153C - Search u/s 132 - Held that - The total income shall be determined in respect of assessment year for which original 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. As already observed that no incriminating material has been found relating to the year in which the assessee has received gifts. Therefore in our opinion no addition on account of the gifts can be sustained. Accordingly on this basis itself we delete the addition on account of gifts - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Legality of the additional grounds raised by the Assessee.
3. Validity of the addition of Rs. 45 lakhs as undisclosed income.
4. Confirmation of the addition by CIT(A).
5. Confirmation of interest levy under Section 234B.
6. General arbitrariness and reasonableness of the addition.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Assessee filed an affidavit explaining a 19-day delay in filing the appeal, citing that the delay was due to the preoccupation of the staff in legal matters related to the imprisonment of Shri B.P. Anandkumar Singh. The Tribunal accepted this explanation, noting that the Assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Consequently, the delay was condoned, and the appeal was admitted.

2. Legality of the Additional Grounds Raised by the Assessee:
The Assessee raised additional grounds regarding the legality of the addition of Rs. 45 lakhs as undisclosed income, arguing that no capital was detected during the search under Section 132. The Tribunal admitted these additional grounds, referencing the Supreme Court decision in National Thermal Power Co. Ltd. vs. CIT, which allows legal grounds to be raised for the first time before the Tribunal. The Tribunal decided to adjudicate these additional grounds first.

3. Validity of the Addition of Rs. 45 Lakhs as Undisclosed Income:
The Assessee received Rs. 45 lakhs as a gift from Hasim Mod Trading Est. of Dubai, which was confirmed by the Donor. The AO, however, deemed the gifts as not genuine, relying on circumstantial evidence and human probabilities, and made an addition under Section 68. The Tribunal noted that the original assessment had accepted the gifts as genuine, and no new material was found during the search to justify the proceedings under Section 153C.

The Tribunal referred to various case laws, including the Special Bench decision in All Cargo Global Logistics Ltd vs. DCIT, which held that additions under Section 153A should be based on incriminating material found during the search. As no such material was found in this case, the Tribunal concluded that the addition of Rs. 45 lakhs could not be sustained.

4. Confirmation of the Addition by CIT(A):
The CIT(A) had confirmed the AO's addition of Rs. 45 lakhs, but the Tribunal found this confirmation to be unjustified as it was not based on any incriminating material found during the search. The Tribunal emphasized that the AO's jurisdiction under Section 153C was valid only if the documents found during the search belonged to the Assessee and were incriminating, which was not the case here.

5. Confirmation of Interest Levy under Section 234B:
The Assessee contested the interest levy under Section 234B, arguing that it was arbitrary and excessive. However, since the Tribunal deleted the addition of Rs. 45 lakhs, the issue of interest levy became moot. The Tribunal did not specifically adjudicate on this ground due to the deletion of the primary addition.

6. General Arbitrariness and Reasonableness of the Addition:
The Assessee argued that the addition was arbitrary and unreasonable. The Tribunal agreed, noting that the addition was not based on any new or incriminating material found during the search. The Tribunal reiterated that the AO could not make additions under Section 153A for completed assessments unless based on material unearthed during the search.

Conclusion:
The Tribunal allowed the Assessee's appeal, deleting the addition of Rs. 45 lakhs on the basis that no incriminating material was found during the search to justify such an addition. Consequently, the grounds related to the merits of the addition were not adjudicated, as the primary issue was resolved in favor of the Assessee. The order was pronounced in the open court on 9/12/2014.