TMI Blog2015 (7) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Assessing Officer proposed the Commissioner of Income Tax to review the order u/s.153A of the Act. In our opinion, the Commissioner of Income Tax wanted to do the things indirectly which cannot be done directly. Further, he mentioned in the order that the Assessing Officer examined the statement of affairs for the assessment years 2006-07 and 2007-08 during the course of assessment u/s.143(3) of the Act finalised on 31.12.2009 and he wanted to review the same which is nothing but causing roving inquiry which is not permitted u/s.263 of the Act. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, so that revision of jurisdiction u/s.263 is appropriate. In our opinion this is not a fit case for revision u/s.263 of the Act and we are cancelling the order passed u/s.263 for the year 2006-07. Thus, all the other orders passed u/s.263 by Commissioner of Income Tax are annulled. - Decided in favour of assessee. - I.T.A. Nos.2634, 2635, 2636, 2637, 2638 & 2639/Mds/2014 - - - Dated:- 17-7-2015 - Shri Chandra Poojari Shri Challa Nagendra Prasad, JJ. For the Petitioner : Ms. S. Vidya, C.A. For the Respondent : Shri. Pathlavath Peerya, IRS, CIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These six appeals by assessee s are directed against the different orders of the Commissioner of Income Tax, Chennai, passed u/s.263 of the Act dated 31.07.2014 for the above assessment years. Since the issue in these appeals are common in nature, these appeals are clubbed, heard together, and disposed of by this common order for the sake of convenience. 2. The assessee s grievance in the appeals is with regard to invoking of jurisdiction u/s.263 of the Act by the Commissioner of Income Tax directing the Assessing Officer to pass fresh assessment order which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/- 15,03,06,250/- Closing balance of capital as on 31.03.2007 : 15,25,96,482/- Difference in the Capital Account : 22,90,232/- The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (Rs.3,86,774/) Bank of Baroda (Rs.12,12,517/-) and SB account with Egmore Benefit Society Ltd (Rs.21,897/-) not reduced than the corresponding capital account balance figure would be ₹ 15,09,75,204/-. The difference of ₹ 6,68,954/- offered to tax. The assessee's representative contention was not accepted by Assessing Officer while completing assessment u/s.143(3) of the Act as the assessee's business in money lending, and the assessee has not charging interest from the person to whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered as un-explained investment. 6.2. Comparison of three statement of affairs for assessment year 2006-2007 has shown following discrepancies. a) The first SOA shows loan received (balance) of ₹ 15,83,40,723/-, the second does not show any balance on this account and in third SOA the balance of loan received has been decreased to ₹ 5,32,54,907/-. It implies that either the assessee has repaid ₹ 10,50,85,816/- (if compared with the SOA filed along with return u/s 139) / repaid ₹ 9,70,00,000/- (if compared with the final SOA filed on 28/03/2014) or the balances shown are not true. The sources of repayment have not been verified due to scarcity of time. The bank books filed by the assessee for assessment year 2006-07 do not show any such repayment of loan. therefore. it may be presumed that the assessee has repaid from undisclosed sources. It may be noted that the assessee has never produced complete books of accounts so that the source could have been ascertained. b) Originally the total balance of loan paid was shown at ₹ 28,55,32,805/-. In second statement of affairs shown loan paid balance amounting to ₹ 11,69,94,360/- and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balances as on 31.03.2007 1 A.Koteewaran Loan 500000 2 A. Kuberan Loan 1000000 3 Appu Hotels Ltd 2813000 4 Baba Enterprises Loan 5552000 5 Karnataka Breweries Distilleries P. Ltd 8700000 8700000 6 MBDL Loand 500000 7 N. Neelavathi Loan 500000 8 Poovaiammal Loan 132243 9 Sapthagiri Enterprises loan 3000000 20000000 10 S. Lakshmi Narayani Ammal Loan 450000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Estates P.Ltd 11800000 11800000 35 Sundaram Finance Ltd 130000000 1300000000 36 Sundaram Home Fiance Ltd 700000000 70000000 37 Swasti Chem Pvt. Ltd 4000000 4000000 38 Trident Granities 2000000 39 V. Kannan 15000000 40 D.K. audikeshvulu 20000000 41 The Narasimha mills ltd 10000000 42 Sapthagiri enterprises 3000000 Total 389640723 337054907 Loan paid balance as on 31.03.2007 Sl.No Details for loans received As per old SOA filed along with return u/s.139(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Matrix Foundations P. Ltd 1245600 3299571 25 Meera papers ltd 5000000 26 M.G. Enterprises Loan 4007762 27 M. Nithiyandam loan 300000 28 Mookambika Realotrs pvt ltd 14921500 19336595 29 M. Radha loan 1075500 30 Nauzer Nowraji Bangalore 3000000 3000000 31 N.P.V. Ramasamy Udayar (HUF) 21296379 21176379 32 NVK Arumugam loan 800000 33 Padma loan 1570400 34 Promoters contribution to TCP ltd 57974008 35 Radha Venkatachalam loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5425000 58 Advance for land 37437564 59 TCP 18686728 60 Thiruvalluvar textiles p. ltd 51878171 61 Jagathra holdings p. ltd 100000 62 Four square realtors p. ltd 15519 63 Sun breeze realtors p. ltd 15519 Total 524595954 547154871 (f) The assessee vide his letter dated 26.03.2014 has submitted that the is not able to furnish evidences for sources of fund invested in shares of M/s. Thiruvalluvaar Textiles Private Ltd. For this, he has offered ₹ 1,26,000/- for taxation. This addition has not been made. (g) There is no reason for exclusion of certain parties from the lists mentioned above and inclusion of new entries. There is also no reason menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from such loans, investments and properties should be verified and taken into account from the respective account. Similarly, wherever the assessee has borrowed the monies, the Statement of Accounts should be obtained from the creditors along with the interest paid. It was also to be ascertained whether the assessee was following Cash method of accounting or Mercantile method of accounting to arrive at the correct balances and correct incomes /expenditures from each of the assets as well as loans However, this is a very elaborate exercise involving not only the assessment years 2006-07 and 2007-08 but also subsequent assessment years and this could not have been completed in the three days available for the Assessing Officer before the proceedings are completed in time on 31.3.2014. Hence, the proceedings u/ 153A r.w.s. 143(3) finalized on 29.03.2014 are set aside with the direction to re- examine all the assets and liabilities bearing in the Balance Sheet on the above mentioned lines and also to arrive the correct income. Since the assessment was being set aside for re-examining and reworking out the statement of affairs for the assessment year 2006-07 and the same will hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier years by applying the Cost Inflation Index method inversely as given below:- Examination of these cash accounts revealed that the assessee has never withdrew cash for house-hold expenses like food and clothing. This issue was discussed with the ld. Authorised Representative for assessee. The ld. Authorised Representative for assessee filed a revised cash tally. This cash tally has been found not acceptable, since besides other abnormalities, the cash receipts for each year does not match with the cash book and the withdrawal for household expenses is not reflected with the cash book. The expenditure on house hold expenses although not reflected from the cash account was estimated by assessee. The cash withdrawal for financial year 2006-07 to 2011-12 (upto date of search) have been claimed to be ₹ 1,80,000/-, ₹ 2,40,000/-, ₹ 3,00,000/-, ₹ 3,60,000/-,Rs.4,20,000/- and ₹ 4,60,000/-(upto DOS) respectively. The cash withdrawal from 01/04/2011 to 18/11/2011 (for 7.5 month) has been claimed to be ₹ 4,60,000/-. On the basis of claimed household expenses for search year, the house-hold expenses for earlier years were estimated to be ₹ 40,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the position in other assessment years. Against this, the assessee is in appeal before us. 12. The ld. Authorised Representative for assessee submitted that the assessee was engaged in the money lending business and was also a partner in various firms and was a director in companies. A search and seizure operation was carried out in the group cases of Trivitron group of companies on 18th November, 2011 at the office, factory and residential house of Directors. In the case of the assessee search was conducted at his residence. During the course of search operations, the Income Tax department had seized cash amounting to ₹ 14,50,000/- and jewellery valuing 4234 grams (net). There were no other material, books or other documents found/seized during the said search operations. A sworn statement was recorded from the assessee on the date of search questioning the source of the cash and the jewellery seized. The assessee gave an impromptu statement that he possessed about ₹ 15 to 20 lakhs of which ₹ 10 lakhs were collected from his friends and well wishers for the construction activity of the Pollachi Narasimhar Temple and the same had to be handed over to the temp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had filed the statement of affairs in respect of his personal assets and liabilities. (iv) Later a combined statement of affairs was filed before the Assessing Officer as per his directions during the course of search assessment proceedings on 26th March 2014. (v) The Assessing Officer completed the 153A proceedings for the AYs 2006-07 to AY 2011-12 without making additions as he was apparently and admittedly convinced that the assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s 143(3) after thorough verification of loan balances, among others, and by giving due credence to the undisputed fact that there was no search material found during the course of search relatable to the Asst Years 2006-07 to 2011-12. (vi) The cash found during the course of search operations was added as the income of the assessee in the year of search i.e in Asst Year 2012-13. During the course of assessment proceedings, the assessee had filed a cash book without considering the cash drawn for his personal expenses and the total of the cash available with himself and his family members was ₹ 30 lakhs (approx). Later on, when the Assessing Officer asked for the dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions other than the cash and jewellery. A copy of the panchanama was enclosed in Page Nos. 31-37 of the Paper Book. (ii) The assessments for the Asst Years 2006-07 and 2007-08 were duly completed u/s.143(3) after thorough verification of loan balances together with their confirmations. (iii) The proceedings u/s/153A were concluded for the AYs 2006-07 to AY s 2011-12 without making additions, as the AO was apparently convinced that the loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever loan balances reflected in the statement of affairs were duly examined in detail for the Asst Years 2006-07 and 2007-08 during scrutiny assessment proceedings and more so in view of the fact that, admittedly, there was no incriminating material found during the course of search relatable to Asst Years 2006-07 to 2011-12 for making any addition in any manner whatsoever. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessee submitted that the Assessing Officer had taken one possible view in the eyes of law and accordingly made a decision not to make any addition. Hence, it cannot be construed that the order is erroneous within the meaning of section 263 of the Act and accordingly invoking of jurisdiction u/s 263 of the Act by the CIT was null and void. Reliance was placed in this regard on the decision of Supreme Court in the case of Malabar Industrial Co. Ltd (2000) 243 ITR 83 (SC), in which it observed that a bare reading of this provision makes it clear that the pre-requisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to Sec. 263(1) of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63 of the Act passed by the Commissioner of Income Tax. 16. The Departmental Representative relied on the order of the Commissioner of Income Tax and specifically stated that a true picture of statement of affairs was essential to ascertain the sources and nature of use of properties purchased, for determining the Wealth Tax liability. The ld. Authorised Representative for assessee before the Commissioner of Income Tax has also fairly conceded that the statement of affairs needs to be examined in detail. For this reason, the assessment was set aside for fresh examination of the statement of affairs by the Assessing Officer and also to arrive at the interest incomes from all the loans given and also, the interest paid on the loans borrowed. 17. We have heard both the sides and perused the material on record. In this case for the assessment year 2006-07, the original assessment was completed u/s.143(3) of the Act on 28.11.2008. Later on, there was a search action u/s.132 of the Act at the residential premises on 18.11.2011. Consequent to search action the assessment for the assessment year 2006-07 was framed u/s.153A r.w.s.143(3) of the Act vide order dated 28.03.2014, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee s business is money lending and filed a statement of affairs as on 31.03.2007 Opening Balance of capital i.e as on 31.03.2006 : 13,16,06,077/- Net profit for the financial year 2006-07 was : 1,87,00,173/- 15,03,06,250/- Closing balance of capital as on 31.03.2007 : 15,25,96,482/- Difference in the Capital Account : 22,90,232/- The ld. Authorised Representative for assessee vide letter dated 22.12.2009 before the Commissioner of Income Tax has stated that the closing balance kept with Indian Bank Porur (Rs.3,86,774/-), Bank of Baroda (Rs.12,12,517/-) and SB account with Egmore Benefit Society Ltd (Rs.21,897/-) not reduced than the corresponding capital account balance figure would be ₹ 15,09,75,204/- The difference of ₹ 6,68,954/- offered to tax. The assessee's representative contention was not be accepted by Commissioner of Income Tax as the assessee's business in money lending, and the assessee has not charging interest from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the order passed by the Assessing Officer. It is further to be noted that whatever the order Tribunal passed, the order of the Assessing Officer ceases to exist and merges in the order of the Tribunal and thereafter, the Tribunal order stands and is operative and not the original assessment order. Then it is to be noted that Commissioner of Income Tax through proceedings u/s.263 cannot sit over on the order of the Tribunal so as to decide what is right or wrong. In other words, in respect of any issue which was subject matter of the appeal before the Tribunal and the Tribunal decided it one way or other, the Commissioner of Income Tax would not take up the same issue in proceedings u/s.263 of the Act as held by jurisdictional High Court in the case of CIT vs. Farida Prime Tannery, 259 ITR 342 (Mad). The Commissioner of Income Tax observed in its order at para 5 that while re-examining, comparing and contrasting the two Statement of Affairs for both the assessment years 2006-07 and 2007-08, the Assessing Officer has noticed a shortage of ₹ 1,01,97,722/- in the liability side for the assessment year 2006-07 and ₹ 12,15,79,373/- for the assessment year 2007-08. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment and the other being assessment under section 153A. In other words these two assessments merge into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpreted should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A(i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assessees where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view clear and unambiguous words used by the Legislature. This interpretation does not cause any absurd etc. results. There is no casus omisus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions are manifold, the foremost being that the provision under section. 153A should be read in conjunction with the provision contained in section 132(1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch can be issued will have to be taken into account. 23. Having held so, an assessment or reassessment under section 153A arises only 'When a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. A search can be authorized on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, one proceeds to literally interpret to provision in section 153A as it exists and read it alongside the provision contained in section 132(1) of the Act. 24. The provision comes into operation if a search or requisition is initiated after 31.05.2003. On satisfaction of this condition, the Assessing Officer is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall' and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iteral interpretation and reading the relevant provisions together. This interpretation does not in any manner give results which can be said to be ultra vires. It also does not give any absurd or unjust results. 27. Thus in assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately and in other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means books of account,, other document, found in the course of search but not produced in the course of original assessment, and undisclosed income or property discovered in the course of search. 28. The above view was taken by Special Bench, Mumbai in the case of CIT vs. All Cargo Global Logistics Ltd (supra). 28.1 Further, it is to be noted that for the assessment year 2006- 2007 assessment was completed u/s.143(3) of the Act on 31.12.2009 and later on assessment was reopened consequent to search action u/s.153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is erroneous that the section will be attracted. In the present case there is no incorrect assumption of facts or an incorrect application of law by the Assessing Officer. The Assessing Officer has applied his mind to the seized material while framing assessment for the year 2006-07 u/s.153A of the Act. The Commissioner of Income Tax cannot expect to correct the assessment order passed u/s.153A of the Act duly considered the seized material and in the present case the Commissioner of Income Tax wanted to consider the statement of affairs filed by the assessee during the course of assessment u/s.153A though it was not part of the seized material and it cannot be considered for framing assessment u/s.153A of the Act as assessment for the assessment year 2006-07 has already been completed u/s.143(3) and re-assessment u/s.153A be made only on the basis of incriminating material found in the course of search but not produced in the course of original assessment. In the present case, the Commissioner of Income Tax categorically observed whatever statements on record were already produced by the assessee both in the course of original assessment u/s.143(3) and also in assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
