TMI Blog2017 (7) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... ash of ₹ 49,50,000/- was money refunded by one Sh. Balwant Rai Rehawar given to him on account of a land deal and refunded since the deal did not mature. The explanation was duly substantiated by the various documents produced. The onus now rested with the Assessing Officer to prove that the explanation of the assessee was false. The AO having failed to discharge this onus, has made the addition merely on the basis of suspicion which is not permissible as held by the jurisdictional high court. Thus no addition under section 68 of the Act is called for - Decided in favour of assessee. - ITA No.537/Chd/2015 - - - Dated:- 3-4-2017 - SHRI C.M. GARG, JUDICIAL MEMBER, AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Appellant : Shri N.K. Saini For The Respondent : Shri Sushil Kumar, CIT DR ORDER PER ANNAPURNA GUPTA, A.M. : The appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (OSD), Gurgaon dated 12.03.2015, relating to assessment year 2009-10. 2. The assessee has raised the following Grounds of appeal: 1. The order passed by the learned CIT (A) is contrary to law facts of the case 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g additional grounds of appeal which read as under: Additional Ground no. 1: The learned assessing Officer has erred in law and facts in issuing notice under section 153C in the case of the assessee when no incriminating document was found during the search of the third party. Additional Ground no. 2: Whether the addition made to the income of the Assessee of ₹ 49,50,000/- for the AY 2009-10 under Section 68 of the Income Tax Act, 1961 ('Act'), was not sustainable because no incriminating material concerning such addition was found during the course of search and further no assessments for such year was pending on the date of search? 4. Further the assessee argued that the same should be admitted for adjudication since they were legal grounds challenging the issue of notice u/s 153C of the Income Tax Act, 1961 (in short the Act ) and addition made there-under in the absence of any incriminating material found during search. 5. Brief facts relating to the case are that search and seizure operation u/s 132(1) of the Act was conducted on 17.11.2010 in Dr.Naresh Mittal Group of cases. The assessee had filed return u/s 139 of the Act on 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that in any case the addition made in the impugned year is on the basis of cash entries found in the books of the assessee pertaining to cash received from one Shri Balwant Rai Rehawar amounting to ₹ 49,50,000/-. The said entry, Ld. counsel for the assessee pointed out, is not reflected in annexure A-7, seized during the course of search. Thus, the Ld. counsel for the assessee contended that no incriminating material pertaining to the impugned assessment year was available with the Assessing Officer and further since the assessment of the assessee was completed as the time period for issuing notice u/s 143(2) for the impugned year i.e A.Y 2009-10 had expired on 30-09-10,before the date of search on 17 11-10, the completed assessment could not have been disturbed. The Ld. counsel for the assessee relied upon following decisions in this regard: 1) M/s Mala Builders Pvt. Ltd. Vs. ACIT ITA Nos.433 to 437/Chd/2014(ITAT, Chandigarh Bench). 2) CIT Vs. RRJ Securities, 380 ITR 612 (Del.HC). 3) CIT Vs. IBC Knowledge Park (P) Ltd. 95 CCH 0253 (Kar HC). 4) CIT Vs. IBC Knowledge Park (P) Ltd. 95 CCH 0225 (Kar HC). 10. The Ld. DR, on the other hand, contended that proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the case of one Shri B.K. Dhingra, Smt.Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. and certain documents belonging to the assessee i.e. RRJ Securities Ltd. (supra) were seized during the course of search. The Assessing Officer of the searched person recorded satisfaction note that the documents belonged to the assessee and on this basis proceedings u/s 153C of the Act were initiated. Thereafter assessment for six years was completed on the assessee. One of the issues raised in the said case was that the documents found during the course of search pertaining to the assessee had no relevance with the assessment years in question and further no addition on account of the documents found was made. The question of law framed before the Hon'ble High Court in the said case was whether the Assessing Officer had jurisdiction to assess and re-assess income of the assessee u/s 153C of the Act in respect of the said assessment years. The Hon'ble High Court, on the issue of addition being made in the absence of any incriminating material, held that once the assessment of a third person has been proceeded with by the Assessing Officer of the third person on receiving the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. This Court had summarized the legal position in respect of Section 153A of the Act as under:- 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly applicable to proceedings initiated under Section 153C of the Act as Section 153C(1) of the Act expressly provides that once the AO has received money, bullion, jewellery or other valuable articles or thing or books of account or documents seized from the AO of the searched person, he would proceed to assess or reassess the income of the person to whom such assets/books belong in accordance with Section 153A of the Act. 14. The Hon'ble Court thereafter held that in the absence of documents seized having any relevance or bearing to the income of the assessee for the relevant assessment years, the Assessing Officer had no jurisdiction to make assessment u/s 153C of the Act. The findings of the Hon'ble High Court at paras 37 and 38 of the order are as follows: 37. As expressly indicated under Section 153C of the Act the assessment or reassessment of income of a person other than a searched person would proceed in accordance with the provisions of Section 153A of the Act. The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized. 38. As indicated above, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion that seized assets which belong to another person represent any undisclosed income. If the AO of a searched person is satisfied that an asset/documents seized belong to another person, he has a duty to forward the documents or the valuable assets seized to the AO of the person concerned; apart from doing so, the AO can do nothing more. 35. The AO of the person other than the one searched also, is not, at the stage of issuing notice under Section 153C/153A of the Act, required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the Assessee under his jurisdiction. As explained in SSP Aviation (supra), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, neither the seized documents pertained to the impugned assessment year, nor any other document was found, which reflected the addition made in the case of the assessee. Therefore, there was no incriminating material available with the Assessing Officer which pertained to the impugned assessment year and which could have led to the addition made in the present case. Further it is not denied that the assessment in the present case was completed on the date of search, since the time limitation for issue of notice u/s 143(2) had expired on 30-09-10 while search was conducted on 17 11-10. The facts of the present case and the issue in the present case, we find is, therefore, squarely covered by the decision of the Hon'ble Delhi High Court in the case of RRJ Securities (supra). 17. Respectfully following the same we hold that the AO had no jurisdiction to interfere in the completed assessment in the present case and frame the assessment u/s 153C making addition therein to the tune of ₹ 49,50,000/- in the absence of any incriminating material. 18. The additional grounds of appeal No.1 and 2 raised by the assessee are, therefore, allowed in above terms. 19. In Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely returned in consequence to the final settlement. (PB-18). b) Copy of Form No.34A applied for by Late Smt.Luxmi Devi Mittal in 1999, to the Income Tax Department, being application for issue of certificate on sale of immovable property, to evidence the source of payment of ₹ 50 lacs by late Smt.Luxmi Devi Mittal to late Shri Balwant Rai Rehawar. (PB-10 11). c) Affidavit of son of late Shri Balwant Rai Rehawar i.e. Shri Sukhdev Raj. (PB-15 16 24). d) Driving Licence of Shri Sukhdev Raj. (PB-17 ). e) Death Certificate of late Shri Balwant Rai Rehawar. (PB-14). f) Affidavits of Namberdar in whose presence the Behami Faisla (mutual agreement or community compromise) was written and affidavit of Shri Ram Karan S/o Shri Janak Raj, Namberdar in whose writing it was written. (PB-23) g) Confirmatory letters from four timber merchants of Jagadhri who has purchased timber from Shri Balwant Rai Rehawar amounting to ₹ 48,80,200/- which had been utilized by Shri Balwant Rai Rehawar for making repayment. (PB-19 to 22). h) Balance Sheets of the assessee HUF from 2004 05 to 2008-09, reflecting the advance given in the name of Shri Balwant Rai Rehawar of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the aforesaid transactions. The said Behami Faisla was written by a Namberdar Shri Ram Karan S/o Shri Janak Raj and witnessed by two Namberdars. The assessee had filed affidavit of Shri Sukhdev Raj S/o Shri Balwant Rai Rehawar to further substantiate his explanation and also affidavit of the writer of the Behami Faisla Shri Ram Karan and witness of Behami Faisla Shri Janak Raj. The creditworthiness of Shri Balwant Rai Rehawar in making the impugned cash payment was proved by way of the letters of confirmations of timber merchants who has purchased timber from him and paid ₹ 48,80,200/- in return for the same, which was explained by the assessee as the source of payment of the impugned amount of ₹ 49,50,000/-. The assessee to further substantiate its explanation produce Shri Sukhdev Raj S/o Shri Balwant Rai Rehawar, Shri Ram Karan, writer of the Behami Faisla and Shri Janak Raj, one of the witnesses to the Behami Faisla before the Assessing Officer for cross examination but the Assessing Officer did not cross examine them. All the above facts have not been disputed by the Revenue. The only contention of the Revenue is that the Behami Faisla was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /99 dated 29.1.2016. The Hon ble High Court has held that if the assessee fails to give a credible explanation the AO can draw inference against the assessee, but if the assessee gives a credible explanation and discharges the onus cast upon it under the deeming provisions, the onus reverts to the Revenue to prove the falsity in the facts and without doing so it cannot draw inference merely on suspicions and doubts. The question of law before the Hon ble High Court in the said case was; In my view, the following points of law need determination by the Court:- (i) Whether the assessee had discharged the onus of establishing that gifts of $200,000 made in favour of Ms Monica Oswal and Ms Ruchika Oswal through him by Shri O.S.Gill and Shri B.P. Bhardwaj were valid? (ii) Whether the amounts gifted by Shri O.S.Gill and Shri B.P.Bhardwaj to Miss Monica Oswal and Miss Ruchika Oswal are to be treated as the income of the assessee under section 69A of the Act? 26. The relevant observations of the Hon ble High Court are as under; Before answering the questions posed, it would be appropriate to record that suspicion and doubt may be the starting point of an investig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions. It would also be necessary to reiterate that it is not perceptions but concrete facts that underline quasi judicial determinations and where concrete facts are not available, relevant facts, as would raise a credible inference of culpability requiring an assessee to rebut the inference so raised. More often than not, revenue authorities, for want of relevant material, institute inquisitions , as opposed to inquiries and by addressing questions that the more inculpatory in nature, seek to build their case, from answers proffered by an assessee. The findings of fact recorded by the CIT (A) and the Tribunal regarding the gift made by Dr. O.S.Gill are plausible, though debatable, do not call for interference. The first question of law is, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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