TMI Blog2015 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... F INCOME TAX [2012 (7) TMI 222 - ITAT MUMBAI(SB)] - addition u/s.153A can be made on the basis of incriminating material which in the context of relevant provisions means books of accounts and other documents found in course of search - summary assessment was done u/s.143(1) in respect of return of income filed on 29-3-2006 - The time limit for issue of notice u/s.143(2) was expired on 31st March, 2007 i.e 12 months from the end of the month in which return was furnished - the time limit for issue of notice u/s.143(2) has already expired on 31-3-2007, which is much prior to the date of search i.e. 12-9-2007 - no incriminating material with regard to alleged gift/loan was found during the course of search so as to empower the AO to make addition u/s.153A with regard to such gift/loan – there was no merit in the addition so made by AO u/s.153A without referring any incriminating material having found during the course of search, when the time limit for issue of notice u/s.143(2) had expired much prior to date of search. Assessee has discharged its burden of proof u/s.68 of the Act by proving identity of the loan creditor, Genuineness of the loan transaction and Credit worthiness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the assessment u/s 153A of the I. T. Act as no relevant or incriminating material or evidence was found or seized during the course of search reflecting undisclosed income. 2. On the facts and in the circumstances of the case, the CIT(A) erred in confirming the addition of ₹ 98,15,000/- which was without any basis. 3. On the facts and in the circumstances of the case and in law, the Ld. C.I.T.(A) erred in confirming the addition of ₹ 97,00,000/- made by the learned A.O. on account of loan. 4. On the facts and in the circumstances of the case and in law, the Ld. C.I.T.(A) erred in confirming the addition of ₹ 65,0001- made by the learned A.O on account of foreign travelling and ₹ 50,0001- made by the learned A.O on account of credit card expenses. 3. Rival contentions have been heard, record perused. Facts in brief are that a search and seizure operation was initiated u/s.132 on 12-9-2007 in case of M/s K Sera Sera Productions Ltd. The husband of the assessee Mr. Parag Sanghavi was director of this company and therefore his residence was also covered in the search operation. During the course of the search at the resident of the assessee no i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent u/s.153A can be made on the basis of the incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme u/s 143(1) and time limit for issue of notice u/s 143(2) expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. For this proposition, further reliance was placed on the decisions of :- a) ITAT Mumbai Bench in the case of Shri Gurinder Singh Bawa vis. DCIT - 28 taxmann.com 328. b) ITAT Mumbai Bench in the case of Anil P. Khimani vs. DCIT (ITA No.2855 to 2860/Mum/2008, dated 23-2-2010. c) ITAT Vishakkapatnam in the case of KGR Exports vs. JCIT (ITA No.494/V/2007, dated 11-9-2008). d) ITAT Jodhpur Bench in the case of Vishal Dembla vs. DCIT - 157 TTJ 189. e) ITAT Mumbai Bench in the case of DCIT V. Pratibh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of learned AR was that assessee has not used any credit card in her name and the personal drawing made by her bank account was sufficient for her regular expenses and, therefore, estimated addition of ₹ 50,000/- was not called for. 6. On the other hand, contention of learned DR was that processing of return u/s.143(1) is not an assessment in view of the decision of Hon ble Supreme Court in the case of Rajesh Zaveri Stock, 291 ITR 501. Since no scrutiny assessment was framed u/s.143(3), accordingly, the AO was justified in making addition u/s.153A. As per learned DR it was only case of search operation. The case was subsequently taken up for scrutiny and the AO has found that it was bogus gift. He further contended that u/s.153A, the AO can assessee or reassess the total income for the six assessment years immediately preceding assessment years in which search was conducted. 6.1 With respect to the loan of ₹ 97 lakhs, the contention of learned DR was that this amount was shown as gift in the return of income filed and only during the course of scrutiny assessment proceeding that the assessee has changed his version and stated that it was a loan transaction. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has referred any incriminating material found during the course of search, based on which addition had been made. In terms of judicial pronouncements in case of Alcargo Global Logistic Ltd., (supra), addition u/s.153A can be made on the basis of incriminating material which in the context of relevant provisions means books of accounts and other documents found in course of search. In the instant case, summary assessment was done u/s.143(1) in respect of return of income filed on 29-3-2006. The time limit for issue of notice u/s.143(2) was expired on 31st March, 2007 i..e 12 months from the end of the month in which return was furnished. In the relevant assessment year under consideration i.e. A.Y.2005-06, the return of income was furnished on 29-3-2006. As per proviso to Section 143(2) notice under clause (ii) shall not be served on the assessee after the expiry of 12 months from the end of the month, in which return is furnished. Thus, the time limit for issue of notice u/s.143(2) has already expired on 31-3-2007, which is much prior to the date of search i.e. 12-9-2007. It is also not in dispute that no incriminating material with regard to alleged gift/loan was found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. 6.2 In this case, the AO had made assessment on the information/material available in the return of income. The information regarding the gift was available in the return of income as capital account had been credited by the assessee by the amount of gift. Similar was the position in relation to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO asked further details and also loan confirmation from Shri Vijay Bhansali along with his creditworthiness. In Para 9, the AO concluded that since credit worthiness of Mr. Vijay Bhansali is not proved, the said loan is interest fee loan and is still to be repaid by assessee and thereby he treated ₹ 97,00,000/ - as unexplained cash credit u/s 68. In para 4.2 the ld. CIT (A) has incorporated submission of the assessee to the effect that the addition cannot be made u/s 68 as the assessee has submitted confirmation of loan, copy of bank account from whom the loan is received, copy of passport, letter from the Abu Dhabi Commercial Bank through which the cheque is received and therefore the assessee has produced all the evidence to prove the credit worthiness of the loan creditor. However, CIT(A) rejected assessee s contentions and has given his finding at para 4.4. The ld. CIT (A) has relied on the decision of the Hon. Supreme Court in the case of Durgaprasad More 82 ITR 540 and Sumati Dayal v. CIT 214 ITR 801 and also the decision of Delhi ITAT in the case of DCIT v. Smt. Phoolwatidevi 314 ITR (AT) 1 and held that by applying the test of human probability and surrounding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the loan transaction c. Credit worthiness of the loan creditor Accordingly, the addition made by the AO without giving any finding otherwise is not justified. There is no dispute to the well settled legal proposition that in case of loan transaction assessee is not only required to prove the identity of the loan creditor but also the genuineness of the loan transaction as well as creditworthiness of the loan creditor. In the instant case, since the assessee has proved by the above documents that the loan creditor is a long and good friend of the assessee s husband and the interest free loan was given to help the assessee to purchase of a residential flat in Bombay for which loan was actually utilised. Further the credit worthiness of the loan creditor is also proved by filing the Net Worth Certificate from Chartered Accountant firm of Dubai. For this purpose, reliance can be placed on the decision of Hon ble Patna High Court in the case of Sarogi Credit Corporation Vs. CIT, 103 ITR 344 and Hon ble Gujarat High Court in the case of DCIT Vs. Rohini Builders, 256 ITR 360. Decisions relied by CIT(A) are not applicable to the facts of the instant case. In view of the above docu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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