2022 (5) TMI 1487 - AT - Income Tax

Assessment u/s 153C - Material found was not hitherto undisclosed to the income tax department income there from was also disclosed to the department - HELD THAT - This argument of the Ld. A.R. holds no merit since the provisions of section 153C do not discuss that seized material should be incriminating in nature or undisclosed in nature for pending assessment. It says only about any material articles things books of accounts documents seized or requisitioned that belongs to or pertains to person other than the searched person. In our opinion there were seized material procured during the course of search action in the case of Srinivasa Trust on 6.8.2012. Therefore framing assessment thereafter u/s 153C of the Act is valid and the question of abatement or non-abatement do not arise since there are seized material. Accordingly the argument of the assessee s counsel that the assessment for the assessment year 2010-11 2011-12 do not abate on 30.8.2013 is incorrect and the ratio laid down in the case of Delhi International Airport Ltd. cited 2021 (11) TMI 928 - KARNATAKA HIGH COURT do not come into assistance of assessee since there is seized material. Accordingly the issue of framing of assessment u/s. 153C of the Act is upheld and order of the CIT(Appeals) is reversed on this issue. Capital gain - land which is subjected to Joint Development is Stock In Trade of the assessee - when the ownership in these lands held as stock in trade gets actually transferred from the Respondent? - The Respondent has so far declared a Total Taxable income of Rs. 435, 43, 56, 426/- which includes a sum of Rs. 310, 96, 66, 066/-as Income from Business Rs.124, 46, 90, 420/- as Income from Long Term Capital Gain which are income arising out of the JDA on upto A.Y. 2020-21. The assessee has paid the due taxes assessments are completed for most of the years except A.Y. 2020-21 which is in progress. The details of the Returns filed for the A.Y s 2012-13 to 2020-21 a consolidated chart showing income declared under the heads Business Income Long Term Capital Gains year wise arising out of the Project is also filed separately before this Tribunal. This proves that there is no intention on the part of the assessee not to disclose income from the JDA but that the assessee is declaring the same in accordance with law. Any addition made in A.Y. 2010-11 2011-12 would amount to double addition double collection of taxes on the very same income. Disallowance u/s 14A applying rule 8D (2)(ii) (iii) - It is now a settled law that any disallowance of expenditure u/s section 14A by applying rule 8D (2)(ii) (iii) cannot exceed the income earned from the said investment. In the present case the income earned is NIL and hence no expenditure can be disallowed - we deem it appropriate to remand the issues on merits to the CIT(Appeals) to be decided in accordance with law. CIT(Appeals) is directed to pass a detailed order on merits independently based on evidence filed qua each addition for the assessment years under consideration after providing opportunity of being heard to the assessee as well as the AO.

Summary

Issues Involved:
1. Validity of proceedings under section 153C.
2. Requirement of incriminating material for invoking section 153C.
3. Assessment of income from Joint Development Agreement (JDA) and related additions.
4. Disallowance under section 14A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 153C:
The revenue challenged the CIT(A)'s decision allowing the assessee’s appeal, arguing that the CIT(A) erred in relying on the Supreme Court's decision in M/s. Calcutta Knitwears and the Board's Circular 24/2015. The revenue contended that the Assessing Officer (AO) for both the "searched person" and the "other person" was the same, and thus, the requirement for recording satisfaction separately did not apply. The Tribunal upheld the initiation of proceedings under section 153C, stating that the provisions do not mandate that the seized material must be incriminating or undisclosed. The Tribunal reversed the CIT(A)'s order on this issue, validating the framing of assessment under section 153C.

2. Requirement of incriminating material for invoking section 153C:
The assessee argued that the documents seized were not incriminating and were already disclosed in earlier assessments. The Tribunal noted that section 153C does not specify that the material must be incriminating or undisclosed. The Tribunal found that the seized materials were sufficient to invoke section 153C, dismissing the assessee's argument that the assessments for AY 2010-11 and 2011-12 do not abate.

3. Assessment of income from Joint Development Agreement (JDA) and related additions:
The AO had made significant additions to the assessee's income based on the JDA with Prestige Estates Projects Pvt. Ltd. The assessee contended that the income should be recognized only upon the actual transfer of property through registered sale deeds, as the land was held as stock-in-trade. The Tribunal noted that the CIT(A) had not provided a detailed order on the merits of the additions and had simply relied on the Tribunal's earlier decision in the assessee's case for AY 2009-10. The Tribunal remanded the issues on merits back to the CIT(A) for a detailed and independent examination of each addition, based on the evidence presented.

4. Disallowance under section 14A of the Income Tax Act:
The AO had made disallowances under section 14A, which the assessee argued were not based on any incriminating material found during the search. The Tribunal noted that the CIT(A) had not adjudicated this issue in detail. The Tribunal directed the CIT(A) to re-examine the disallowances under section 14A independently, ensuring a proper application of mind and satisfaction as required by law.

Conclusion:
The Tribunal upheld the validity of the proceedings under section 153C but remanded the issues on the merits of the additions and disallowances back to the CIT(A) for a detailed and independent examination. The revenue's appeals were allowed for statistical purposes, and the CIT(A) was directed to provide a detailed order based on the evidence and after providing an opportunity for hearing to both parties.