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2015 (11) TMI 1516 - ITAT CHENNAI

2015 (11) TMI 1516 - ITAT CHENNAI - TMI - Assessment u/s 153A - Held that:- Merely on the basis of statement which is not supported by the Department with cogent corroborative material cannot be a valid addition basis for sustaining such adhoc additions. It is the burden of the Department to prove that there existed relevant and cogent material to enable the Assessing Officer to make such additions. The Department has grossly failed to prove or demonstrate existence of any such relevant or cogen .....

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favour of search assessments being based on such disclosures, it wants them to be based on incriminating material. 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 .....

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disclosed 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.

Assessment year 2011-12, the return of income was filed conseque .....

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09-10 are allowed and appeals for assessment years 2010-11 and 2011-12 are dismissed. - I.T.A.Nos.788 to 794/Mds/2015, I.T.A.Nos.994 & 995/Mds/2015, C.O.Nos. 87 & 88/Mds/2015 - Dated:- 27-11-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER Appellant by : Shri S. Sridhar, Advocate (Erode) Respondent by : Dr. B. Nischal, JCIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER The assessee has filed appeals for assessment years 2005- 06 to 2011-12 against different .....

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e Gopalakrishna Fabrics at Salem. There was a survey u/s 133A of the Act at the business premises of the assessee on 9.12.2010. Subsequently, it was converted into search action u/s 132 both at the residence and business premises of the assessee on 28.12.2010. During the course of search action, various materials were found and seized. Accordingly, statement u/s 132(4) of the Act was recorded. Consequent to this, notices u/s 153A/153C of the Act were issued for the assessment years 2005-06 to 20 .....

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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 8,50,940 28.06.2012 11,47,590 2,96,650 2011-12 28.06.2012 17,81,030 17,81,030 3. However, during the course of assessment, one Shri N. Rajendran filed an affidavit dated 13.3.2012 retracting the disclosure made u/s 132(4) of the Act. The Assessing Officer overlooking the retracted statement, made additions in these assessment years to .....

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Nos.8,9 & 10, stated that huge loss was incurred in M/s Fabric Style International and the quantum of loss is of ₹ 1.75 crores during the financial year 2004-05 and this has been met out of unaccounted income generated from the business of assessee, M/s Sree Gopalakrishna Fabrics. This loss adjusted was disallowed by the Assessing Officer in assessment year 2005-06. Similarly, while making addition of ₹ 1.25 crores in assessment year 2007-08 the Assessing Officer has observed tha .....

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sment year Amount 2005-06 1,79,41,047 2006-07 3,95,388 2007-08 1,32,40,915 2008-09 8,93,702 2009-10 9,88,715 2010-11 7,86,849 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 conc .....

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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 have utilized its undisclosed income for setting off of losses of the said concerns, M/s Fabric Style International and M/s Lennex India, Chennai. Therefore, the additions made by the Assessing Officer are not based on any concrete ev .....

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he Revenue is in appeal before us and correspondingly the cross objections were filed by the assessee. 6. However, for assessment years 2005-06 to 2011-12, the CIT(A) sustained the additions relating to the inflation of expenditure in respect of calendaring, washing charges, staff salary etc made by the Assessing Officer. Against this, the assessee is in appeal before us stating that there is no incriminating material found during the course of search suggesting these additions and it was made o .....

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03 dated 18.9.2003, 263 ITR (St) 61 at page 107 issued by the CBDT wherein it was clarified that on initiation of proceedings u/s 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/re-assessment shall not abate. The ld. Counsel brought to our notice the details of the returns of income filed for assessment years 2005-06 to 2009-10 which are as follows: Assessment year Return of income filed on Time limit to serve notice Date of search 2005 .....

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e 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 action. The additions were made only on the basis of statement recorded b .....

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I.T.A.No. 707/2014 dated 28.8.2015 by Delhi High Court e) B.R. Machine Tools P. Ltd vs ACIT - I.T.A.Nos.4174 to 4177/Mum/2013 dated 6.12.2013 f) Shri Gopal Agarwal vs ACIT - I.T.A.No.4823/Mum/2012 dated 28.5.2014 g) Shri Gopal Agarwal vs ACIT - I.T.A.Nos.7075 & 7076/Mum/2012 dated 7.8.2015 h) Shri G. Munusamy vs ACIT - I.T.A.No.751/Mds/2013 dated 14.3.2014 i) Fashion Fabrics vs The Dy. CIT - I.T.A.Nos.776 and 782/Mds/2015 dated 6.8.2015 j) All Cargo Global Logistics Ltd vs DCIT, 137 ITD 287( .....

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ous materials were gathered indicating suppression of sales as well as inflation of expenditure and on the basis of that materials, the partner also admitted that they are in the habit of inflating various expenses at 20% in respect of weaving and staff salary and 10% in respect of calendaring and washing charges and the statement was recorded u/s 132(4) on 20.1.2011. The retraction was made only on 13.3.2012 which was only after filing the returns of income and it has to be considered as an aft .....

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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. Therefo .....

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Officer has to confine himself only to the material found during the course of search operation. 13.1 In this case, it is to be noted that search was took place on 28.12.2010 and the assessee had already filed the returns of income for the assessment years 2005-06 to 2009-10 and the time limit for issue of notice u/s 143(2) was already expired by this time and thereby the assessments said to be reached finality by operation of law. Being so, no assessment or re-assessment was pending at the time .....

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s. It is also clarified that assessments as well as re-assessments are possible in the case of pending assessments. It further clarified that where the assessments are completed and no assessment is pending at the time of assessment u/s 153A, re-assessment can be made only if any incriminating material are collected in the course of search and the items concluded in the earlier assessments cannot be reconsidered through a reassessment. In the case of Jai Steel (India) vs ACIT, 258 CTR 281(Raj), .....

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re-assessment for a single assessment year. In all the decisions cited by the ld. Counsel for the assessee, the above decision of Special Bench and the decisions of the High Courts have been followed and the Tribunal has been consistently held that a re-assessment/concluded assessment is permitted in an assessment u/s 153A only when incriminating materials are found in the course of search. What is applicable as above u/s 153A is squarely applicable to section 153C also. 13.2 In the case before .....

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rse 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 .....

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r a note giving the breakup of number of students who were admitted under different quotas in various courses, there was no incriminating material as to the receipt of capitation fee. Referring to the Instruction F.No.286/2/2003-IT(Inv.II) dated 10.3.2003 addition deleted after observing that admission made u/s 132(4) was not a valid evidence. Therefore, it is well settled judicial proposition that merely on the basis of statement which is not supported by the Department with cogent corroborativ .....

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he absence of proof supported with cogent material, the statement recorded u/s 132(4) by itself cannot be taken as conclusive. A perusal of the CBDT Instruction dated 10.3.2003 reveals that even the Board is aware of such laconic disclosures and excepts its officers to rely on incriminating evidence. The CBDT also is not in favour of search assessments being based on such disclosures, it wants them to be based on incriminating material. In view of the facts and circumstances, CBDT instruction an .....

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