Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2016 (1) TMI 215

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... rd in respect of the legal expenses, is subject to deduction of TDS or not, the following points need to be ascertained viz., (i) what is the relationship between the assessee and the actually payer of the legal fees ie "principal to principal" relationship or "principal to an agent relationship"; (ii) whether it is a case of reimbursement or not; (iii) whether the co-owner effected the TDS when he made payment and (iv) whether the actual respondent assessed to tax and made the payment. Therefore, in our considered opinion, the matter should be remanded to the file of the AO to adjudicate the issue afresh and pass a speaking order on the above mentioned points. It is need less to mention that the assessee should be provided a reasonable opportunity of being heard as per the principles of natural justice - Decided in favour of assessee for statistical purposes. - I.T.A. No.3094/M/2013, I.T.A. No.3095/M/2013, I.T.A. No.3096/M/2013, I.T.A. No.2823/M/2013, I.T.A. No.2824/M/2013 - - - Dated:- 16-10-2015 - SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Shri G.P. Mehta For The Revenue : Shri G.M. Doss ORDER PER D. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... o the facts of the case, the provisions of law and judicial propositions, the whole assessment order deserves to be annulled and additions made to returned income needs to be deleted. 3. Assessee also raised additional grounds vide letter dated 20.8.2015 and the same read as under: 1. The assessment order passed u/s 153A r.w.s 143(3) of the Act, 1961 is ab-initio void, inasmuch as, no incriminating material was found during the course of search proceedings carried out on 3.8.2006 at appellant‟s residence. Consequently, the provisions contained in section 153A of the IT Act, 1961 including abatement of pending assessment are not attracted at all. 2. The learned lower authorities have grossly erred in making / upholding an addition of ₹ 3,18,54,658/-, not based on or relatable to the material found or seized during the course of search. 4. Since, the issue raised in the additional ground raised by the assessee, ie the validity of the additions made in the assessment in the absence of any incriminating material, being the legal ground, it needs to be adjudicated first so as to deciding the appeal on merits. Therefore, we shall first adjudicate this g .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... tries by way of journal entries. He also submitted that the loans repaid out these gifts were also never involved movement of cash therefore, the said transactions do not amount to unaccounted transactions‟. Explaining the same, Ld Counsel for the assessee submitted that the addition made by the Assessing Officer has no nexus whatsoever to the said seized gift deeds. In this regard, he brought our attention that no addition was made on account of gifts‟ but the additions made on account of sources for repayment of loans. This is not the issue to be considered for addition in search assessment without conveying back-up of the seized / incriminating material in case of assessments non-abated as per the provisions of section 153A of the Act. Further, Ld Counsel for the assessee submitted that on the date of the search no assessment proceedings were pending and the assessee filed the return of income on 31.10.2002. It was further submitted that no notice u/s 143(2) / 143(1) of the Act was issued within the stipulated time initiating the assessment proceedings. Further also, the prescribed time limit for issue of notice u/s 143(2) of Act was expired before the said date of .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... T v. All Cargo Global Logistic (374 ITR 645) (supra), copies of which are placed on record. On perusal of the said decisions, we find they are relevant for the proposition that when no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law . In this regard, we find it relevant to extract the relevant paras from the decision of the Tribunal in the case of Shri Govind Agarwal (supra) and the same is as follows: 12. We have heard the parties and their divergent stands on the legal issue and the validity of the instant assessment/reassessment with the routine additions u/s 68 and section 14A of the Act based on the accounted transactions. The instant case for the AY 2002-03 deals with the case of disturbing the completed assessment‟. Earlier the assessment was completed u/s 143(1) of the Act. Completeness of the summary assessment is considered and held in favour of the assessee vide many judgments cited above. In the assessment u/s 153A, the AO made (i) Addition u/s 68 on account of artificially inflated investment in house duly disclosed in the balance sheet of the asses .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... n used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. B. [2012] 28 Taxmann.com 328 (Mumbai Trib.) in the case of Gurinder Singh Bava vs. DCIT . Whether since assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A - Held, yes [Para 6.2] [In favour of assessee] Para 6.1 of the Order: The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person req .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... of the Act can also be issued to reiterate the returned income or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further, for the sake completeness of the order, we have perused the orders/judgments relied upon by Ld DR for the revenue and found they are distinguishable on facts for one reason or other. To start with, we have perused the judgment of Honble Hon‟ble Delhi High Court in the case of Madugula Venu (supra) and find that, though explained the provisions in plain language, it does not dealt with the relevance or factum of incriminating material. Further, the judgment of Andhra Pradesh High Court in the case of Gopal Lal Bhadruka (supra) is not on the notices issued u/s 153A of the Act and the same is pronounced in the context of the notice u/s 153C of the Act. Further, also, the Coordinate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s 153A of the Act was upheld. However, this order has not considered the then existing decision of the Coordinate Bench decision in the c .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nd on account of search or requisition, then the question of reassessment of the concluded assessments does not arise, which would more reiteration . . Thus, the judgment of Hon‟ble High court in the case of Jai Steel Ltd, supra and above decisions of the Tribunal are categorical in concluding that, in case of the concluded assessments like the present one, the additions are made only based on the incriminating material discovered during the search action. The facts of the Jai Steel Ltd (supra) are identical to the present one ie AO made additions by reassessing u/s 153A on the completed assessment u/s 143(1) of the Act. Thus, considering the judgment in the case of the Jai Steel Ltd (supra), the arguments on the legal issue raised before us stands covered. Therefore, considering the Rajasthan High Court‟s judgment in the case of Jai Steels Ltd, supra, we have no difficulty in (i) upholding the issue of notice u/s 153A of the Act and (2) in disapproving the making of the impugned additions u/s 68 and 14A of the Act, which are not backed by the incriminating materials. In the absence of incriminating material, the role of the AO is only to reiterate the returned incom .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... de under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges 9 into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 77; 4,00,00,000/- and hence the assessee was not left with any amount to give away the huge gifts totalling to ₹ 60,00,000/-. 14. Considering our decision given on the legal ground raised by the assessee in his appeal ITA No.3094/M/2013 in the above paragraphs of this order, which is decided in favour of the assessee, the adjudication of the grounds raised by the Revenue in the present appeal becomes academic. Accordingly, both the grounds raised by the Revenue are dismissed. 15. In the result, appeal of the Revenue is dismissed. II. Cross Appeals for the AY 2004-2005 ITA No.3095/M/2013 (Assessee s appeal) 16. This appeal filed by the assessee on 23.4.2013 is against the order of the CIT (A)-39, Mumbai dated 7.1.2013 for the AY 2004-05. In this appeal, assessee raised the following grounds which read as under: 1. The orders passed by the Ld Lower Authorities are bad in law and in facts. 2. The assessment order passed / upheld u/s 153A r.w.s 143(3) of the Act by the lower authorities is ab-initio void, inasmuch as, as no form of return of income was prescribed for the assessment year under appeal by the rule making authority, the whole ass .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... lowed. 19. In the result, appeal of the assessee is allowed. ITA No.2824/M/2013 (AY 2004-05) (Revenue s appeal) 20. This appeal filed by the Revenue on 10.4.2013 is against the said order of the CIT (A)-39, Mumbai dated 7.1.2013 for the AY 2004-05. In this appeal, Revenue raised the following grounds which read as under: 1. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in directing the Assessing Officer to verify the issue of advancement of gifts of ₹ 72,00,000/- against the action of the Assessing Officer in assessing the same as income from undisclosed sources. 2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has erred in not considering that as per her own decisions in assessee‟s case for the year 2003-2004, the assessee had no creditworthiness or financial capacity to give gift of ₹ 72,00,000/- during the year under consideration 21. Considering our decision given on the legal ground raised by the assessee in his appeal ITA No.3095/M/2013 in the above paragraphs of this order, which is decided in favour of the assessee, the adjudication of the grounds raise .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 8377; 2,25,125/- u/s 40(a)(ia) of the Act. Aggrieved, assessee carried the matter in appeal before the first appellate authority. 25. During the proceedings before the first appellate authority, after considering the submissions of the assessee CIT (A) upheld the decision of the AO and dismissed the appeal. Again aggrieved with the said decision of the CIT (A), assessee is in further appeal before the Tribunal by raising the above mentioned grounds. 26. During the proceedings before us, Ld Counsel for the assessee submitted that the assessee‟s proprietary concern M/s. Bombay Sales Corporation was having tenancy rights in a property situated at Mohamad Ali Road, Mumbai. The landlord was filed an eviction suit against a sub-tenant and all the relevant legal expenses were paid directly by the landlord. Since, the tenancy rights of the assessee were also being affected, even though the assessee is not a co-plaintiff to the said suit, agreed to share the legal expenses incurred by the land lord. Accordingly, assessee paid ₹ 2,55,125/- to the Smt. Shamin Bano Rathi, the spouse of the landlord. It is the contention of the ld Counsel that as there was no privity of contra .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates