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2015 (11) TMI 1516

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..... ial. In view of the facts and circumstances, CBDT instruction and various case laws relied on by the assessee, we are unable to uphold the additions made solely on the basis of statement recorded u/s 132(4) of the Act. Accordingly, we are of the opinion that for the assessment years 2005-06 to 2009-10 wherein assessments were framed not as a result of any material found during the course of search operation, in view thereof, the said additions cannot be sustained as they do not conform the mandate of section 153A of the Act. Assessment year 2010-11, there is time limit to issue notice u/s 143(2) upto 30.9.2011 as in this case, original return was filed on 25.9.2010. Therefore, in our opinion, even though there was no search material, the proceedings are pending on the basis of the return filed, therefore, the Assessing Officer has to pass a composite order for the undisclosed income and the normal income. In other words, one order has to be passed for the block period computing the taxable income including the undisclosed income, therefore, the Assessing Officer has to compute total taxable income on the basis of the material available on record. Since the assessee has admitted .....

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..... Assessment year Returns of income filed u/s 139 Returns of income u/s 153A/153C Additional income offered u/s 153A/153C Rs Date of filing Income returned Rs Dated of filing Income returned (Rs ) 2005-06 10.10.2005 79,807 28.06.2012 1,53,507 73,700 2006-07 20.10.2006 2,98,074 28.06.2012 5,08,072 2,09,998 2007-08 31.10.2007 8,51,570 28.06.2012 12,71,630 4,20,060 2008-09 29.9.2008 10,42,820 28.06.2012 10,98,532 55,712 2009-10 20.09.2009 7,32,510 28.06.2012 10,80,650 3,48,140 2010-11 25.09.2010 8,5 .....

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..... 2011-12 10,07,771 5. However, on appeal, the CIT(A) observed that no evidence was found during the course of search indicating that the undisclosed income generated by the assessee has been claimed for settling the losses supposed to have been incurred by the above concerns. Further examination of financials of M/s Fabric Style International, it is seen that the said concern has shown a loss of ₹ 15,510/- only for assessment year 2005-06, therefore, it is difficult to imagine how the said concern suffered a loss of ₹ 1. 75 crores in the said assessment year and the same was adjusted by the undisclosed income of the assessee. Further the CIT(A) observed that on perusal of ledger copy of M/s Lennex India, Chennai, the assessee has only one transaction with M/s Linnex India, Chennai on 10.10.2009 for a sum of ₹ 1,06,299/- with regard to cash sales for fabrics. There was no other transaction with M/s Lennex India, Chennai. Further while making such addition, the Assessing Officer also relied upon the statement given on oath by Shri N. Rajendran and there is no material to show that the assessee has stated to h .....

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..... /12/2010 2006-07 20/10/2006 31/10/2007 28/12/2010 2007-08 31/10/2007 30/09/2008 28/12/2010 2008-09 29/9/2008 30/09/2009 28/12/2010 2009-10 20/09/2009 30/09/2010 28/12/2010 8. According to the ld. Counsel, once the time limit to serve notice u/s 143(2) has expired and the search was conducted on 28.12.2010, the assessment proceedings on the basis of the returns filed u/s 139(1) were terminated by operation of law. In such a case, the Assessing Officer, while passing the independent assessment order u/s 153A r.w.s 143(3) of the Act could not have disturbed the concluded assessment which had attained finality unless the materials gathered in the course of search action to establish that there is under-assessment in these cases. According to the ld. Counsel, there is no material found indicting the assessee either suppressed its sales or inflated the expenditure during the course of search .....

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..... he Act on 9.12.2010 at the business premises of the assessee. There were certain documents indicating suppression of the actuals found during the course of survey. Later, the survey was converted into search u/s 132 of the Act and the search was conducted on 28.12.2010. Consequent to this, notice u/s 153A was issued for all these assessment years and also in response to notices, the assessee filed returns of income for the assessment years 2005-06 to 2011-12 on 28.6.2012. The Assessing Officer issued notices u/s 142(1) and also u/s 143(2) on 12.11.2012. The time limit for issuing notice u/s 143(2) for assessment years 2005-06 to 2009-10 has been lapsed by the date of search which was on 28.12.2010. Therefore, the assessment proceeding on the basis of the returns filed u/s 139(1) was terminated by operation of law for these assessment years 2005- 06 to 2009-10. Therefore, the Assessing Officer has to make assessment u/s 153C in the case of the person other than the searched person on the basis of the material found during the course of search operation. In other words, the assessment proceedings on the basis of return filed u/s 139(1) is not pending on the date of search, therefore, .....

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..... rse of search. What is applicable as above u/s 153A is squarely applicable to section 153C also. 13.2 In the case before us, no material was found indicating that there was any suppression of sales or inflation of expenditure during the course of search operation. Only on the basis of statement recorded from one Shri N. Rajendran and this statement of Shri N. Rajendran was retracted vide his letter dated 13.3.2012. The additions were made in these assessment years only on the basis of statement made u/s 132(4) which was retracted subsequently. In our opinion, the statement made by Shri N. Rajendran during the course of search operation u/s 132(4) is nowhere surviving and it is not possible to hold that the assessment u/s 153C could be made only on the basis of statement recorded u/s 132(4) without any support of corroborating material. Admission of the assessee in a statement recorded u/s 132(4) during the search proceedings is not conclusive proof as held by the Rajasthan High Court in the case of Ashok Kumar Soni, 291 ITR 172. Further, the Supreme Court in the case of Pullangode Rubber Produce Co. vs State of Kerala, 91 ITR 18, observed that an admission is an extremely piece .....

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..... , coming to assessment year 2010-11, there is time limit to issue notice u/s 143(2) upto 30.9.2011 as in this case, original return was filed on 25.9.2010. Therefore, in our opinion, even though there was no search material, the proceedings are pending on the basis of the return filed, therefore, the Assessing Officer has to pass a composite order for the undisclosed income and the normal income. In other words, one order has to be passed for the block period computing the taxable income including the undisclosed income, therefore, the Assessing Officer has to compute total taxable income on the basis of the material available on record. Since the assessee has admitted that calendaring, clearing and washing charges, staff salary were inflated, the same are to be considered. 15. For the assessment year 2011-12, the return of income was filed consequent to notice u/s 153C and no return was filed u/s 139. As discussed for assessment year 2010-11, the Assessing Officer has to pass a composite order for the undisclosed income and the normal income on the basis of material available on record. Being so, as discussed in assessment year 2010-11, the Assessing Officer is justified in pas .....

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