TMI Blog2017 (10) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... us, the grounds in each of these assessment years relating to these additions stand allowed. Addition on basis of statement recorded in search - Held that:- we noted that the assessee himself before the Assessing Officer tried to explain the source of the investments made outside the books of account in the land transaction to the extent of ₹ 29,30,600/- by taking the loan from Reliance Capital, Barclays Bank and Standard Chartered Bank amounting to ₹ 7,50,000/-, ₹ 11,00,000/- and ₹ 15,00,000/- respectively. These loans were taken on 04/09/2008, 01/11/2008 and 04/09/2008 while the assessee has purchased the land vide sale deed registered on 18/06/2008, 02/07/2008 and 10/07/2008. We do agree with the contention of learned D.R. and the finding given by the authorities below that no seller would transfer the land until and unless he received the on-money agreed between the two. Explaining the source of onmoney does not prove that the assessee has paid the on-money for the purchase of land. In view of this fact, we do not find any illegality or infirmity in the order of CIT(A). This is the settled law that the statement recorded during the course of the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the issue for the purpose of determining the shortage of cash in respect of the agricultural income earned by Mini Eldhose. Thus, this ground is partly allowed. Treating the agriculture income to be the income from other sources - Held that:- We do agree that in view of the quantum of the agriculture income returned by the assessee, the assessee is not required to maintain the regular books of account for the agriculture income but keeping in view the quantum of the land holding, the agriculture income shown by the assessee is on a higher side but since in the preceding assessment year the income from the same land holding stand accepted by processing the return under section 143(1) to the extent of ₹ 2,00,000/- therefore, we treat the sum of ₹ 2,00,000/- following principle of consistency, although it is on higher side from the said agriculture land, to be the agriculture income and confirm the action of the authorities below treating the balance sum of ₹ 1,00,000/- as income from undisclosed sources. Thus, this ground taken by the assessee is partly allowed. Addition in respect of investment made in the land purchase - Held that:- The said sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieces but following the rule of consistency, we direct the Assessing Officer to treat the sum of ₹ 2,00,000/- out of the sum of ₹ 4,30,000/- to be the agriculture income earned by the assessee. - ITA No s.261 to 267/COCH/2016 - - - Dated:- 4-10-2017 - Shri P. K. Bansal And Shri George George K., JJ. Appellant by Shri T. M. Sreedharan Respondent by Shri Sudhanshu Shekhar, CIT, D.R. ORDER P. K. Bansal, All these appeals have been filed by the assessee against the consolidated order of CIT(A) dated 31/03/2016. 2. In the assessment year 2006-07 to 2010-11 and 2011-12 the assessee has taken the following common grounds of appeal except the change in figures in ground No. 4 6: 1. The Order of the Commissioner of Income Tax (Appeals) -IV, Kochi dismissing the appeal against the asst. order for 2006-07 as per common order in ITA No.E-75/CIT(A)-IV/14-15 dated 31.3.2016, is opposed to law, facts and circumstances of the case. 2. It is submitted that the assessments made u/s.153C r.w.s. 153A and 143(3) is void and without jurisdiction. 3. It is submitted that the conditions required to be fulfilled for making assessment u/s 153C are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... *In assessment year 2009-10 there is no ground relating to shortage of cash amounting to ₹ 2,70,658/- but ground No. 4 reads as under: 4. The addition on account of alleged investment in land amounting to ₹ 29,30,600/- is not legal or sustainable. The addition is not sustainable on the ground that there is no material or evidence justifying such addition. Ground Nos. 1, 2 3 in assessment year 2006-07 to 2011-12 are common and relate to the validity of the assessment made under section 153C read with section 153A and 143(3) of the Act. 3. The facts in the case of the assessee are that a search under section 132 was conducted on 02/11/2011 at the residence of the assessee in connection with the search warrant issued on Shri John Kuriakose of M/s Dentacare Group. At the time of search, certain documents were seized, which relate to the issue of blank cheques by M/s Lola N. Parithran and blank stamp paper signed by her. The assessee submitted the income tax return earlier prior to the date of search for the assessment year 2006-07 to 2010-11. The original return filed along with income returned are detailed as under: Assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Money received from Sri KO Varghese Father) 200000 Undisclosed income (money received from Sri Pelexy K Varghese, Brother) - - - - - - 1315000 Profit on sale of land - - - - - - 36000 Section 153C (B) (C) (B) (c) (B) (c) (B) (C) (B) (C) (B) (C) Interest under section 234A, 234B 234C (G) (G) (G) (G) (G) (H) Total 1103580 225558 341645 3574477 1454285 1940823 3262273 4. The assessee went in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly found. For this our attention was drawn towards the statement recorded during the course of the search in which the assessee has accepted the cash payment in reply to question No. 4 for the purchase of land. 6. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We have gone through the provisions of section 153C as well as the case laws as relied by learned A.R. Now the question before us whether the assessment made under section 153C in the case of the assessee for the assessment year 2006-07 to 2010-11 are valid or not, whether any addition can be made in absence of any incriminating material being found during the course of search if the assessment has already been completed before the date of search. To decide this issue, we have to look into the provisions of the section 153A under Chapter XIV under the title 'Assessment in case of search or requisition'. The provisions of section 153A, 153B 153C were inserted by the Finance Act, 2003 w.e.f 1.6.2003. Originally section 153A of the Act did not have any sub-section. However, sub-section (2) to Section 153A was inserted by the Finance Act, 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner : Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation For the removal of doubts, it is hereby declared that, (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section ; (ii) (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 153C ASSESSMENT OF INCOME OF ANY OTHER PERSON (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiating action U/S.153C of the Act and framing assessment U/S.153A of the Act, the pre-requisite is that the satisfaction of the Assessing Officer that the money, documents and papers, etc belongs to a person other than the person in whose case search is conducted u/s.132 of the Act. 6.2 It is apparent from the language of section that the section does not require that the documents belonging to the assessee must be incriminating documents. Section 153C gives the jurisdiction to the Assessing Officer once the documents belonging to the assessee are found in the case of the assessee in whose case the search had taken place. It is not the submission of learned A. R. that during the course of search, documents belonging to the assessee or pertaining to the assessee were not found. The submission of learned A.R. relates to that no incriminating documents have been found during the assessment year 2007-08 to 2010- 11. We, therefore, reject the contention of learned A.R. that the assessments framed under section 153C read with section 143(3) are invalid. 6.3 Now coming to the submission of learned A.R. whether any addition can be made in the assessment made under section 153C wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w. section 153A against the assessee in view of documents etc. belonging to the assessee are found in the case of the person in whose case search had taken place. Thus, this decision will help the assessee. 6.6 Similar view has been taken in the cases discussed as under: We noted that Hon'ble Delhi High Court in the case of Chetandas Laxmandas 254 CTR (Del) 392 has taken similar view. In para 11 of this judgement, the Hon'ble High Court held that obviously an assessment has to be made under this section only on the basis of the seized material . Even we noted that the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, 352 ITR 493 (Del), under para 20, it has been observed as under: Even if assessment order had already been passed in respect of one or any of the six relevant assessment years either under section 143(1)(a) or 143(3) prior to the initiation of search, still the Assessing Officer is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search. 20. A question may arise as to how this is sought to be achieved where an assessment order h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f search. In respect of assessment pending on the date of search which got abated in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. We noted that the decision of Special Bench has been confirmed by Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (NHAVA SHEVA) LTD. [2015] 374 ITR 645 (Bom). We noted that Hon'ble Kerala High Court in the case of CIT vs. Promy Kuriakose [2016] 386 ITR 597 (Ker) while discussing the provisions of section 153C under para 10 observed as under: 10. A comparative analysis of the provisions contained in sections 153A and 153C reveal that jurisdiction under section 153C can be invoked by the Assessing Officer only when money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned and it is found that the seized or requisitioned articles belongs or belong to a person other than the person referred to in section 153A. In such a case, the Assessing Officer shall hand over the books of account or documents or assets seized or requisitioned t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 6.8. We have also gone through other decisions, copy of which has been placed on record before us. The propositions of the law in all these decisions are that if during the course of search, documents pertaining to the assessee are found, the Assessing Officer has the jurisdiction under section 153C of the Act but the addition in respect of the assessment, which has not been abated, can be made only on the basis of the incriminating material found during the course of search not otherwise. 7. Now coming to assessment year 2006-07 to 2010-11. We noted that no incriminating material, during the course of search, was found in respect of the agricultural income treated as unexplained cash credit as well as cash shortage treated as unexplained investment. Therefore, no addition in respect of these can be made. We, therefore, delete the addition in each of the assessment years in respect of agricultural income treated as unexplained cash credit and cash shortage treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.491/2/2 in the name of father K.O. Varghese agrl. Land in ArakuzhaPanchayath 5 10.07.2008 4267/08 50,000 1,08,000 7,000 1,15,000 6 cents in Sy.No.698/ 5/3 Palpra Panchayat When the Assessing Officer asked the source of investment the assessee explained that the payment for all these investments was made out of the loan taken by the assessee as detailed below: 04/09/2008 Reliance Capital ₹ 7,50,000 04/09/2008 Standard Chartered Bank Rs.11,00,000 01/11/2008 Barclays Bank Rs.15,00,000 The Assessing Officer was not satisfied about the source as they were taken in the name of M/s Whitelines Marketing Associates, a partnership firm in which the assessee is the Managing Director and was credited in the books of account of the said firm. The Assessing Officer noted that after deducting the bank charges, the said loan has been credited into the books of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that the assessee, in the statement recorded during the course of search, has himself accepted of money being paid by him but he never retracted the said statement either before ADI or before the Assessing Officer. The statement was retracted only before the CIT(A) by filing an affidavit dated 09/03/2016 while the search had taken place on 02/11/2011. 9.1 It is settled law in view of the decision of ITAT, Mumbai Bench in the case of Hiralal Maganlal Co. vs. DCIT [2005] 96 ITD 113 that where the assessee had made voluntary declaration on oath under section 132(4) and induced the Departmental Authorities to act upon the same at the time of search and its acceptance by the Departmental Authorities but Departmental Authorities did not proceed further with the investigation in order to locate unaccounted income, the assessee cannot deny later the truth or the correctness of the declaration made at the time of search. Where the retraction was not supported by any independent or reliable evidence to prove incorrect nature of facts confined in the original statement, the Assessing Officer could be justified in making impugned addition on the basis of the statement at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndard Chartered Bank amounting to ₹ 7,50,000/-, ₹ 11,00,000/- and ₹ 15,00,000/- respectively. These loans were taken on 04/09/2008, 01/11/2008 and 04/09/2008 while the assessee has purchased the land vide sale deed registered on 18/06/2008, 02/07/2008 and 10/07/2008. We do agree with the contention of learned D.R. and the finding given by the authorities below that no seller would transfer the land until and unless he received the on-money agreed between the two. Explaining the source of onmoney does not prove that the assessee has paid the on-money for the purchase of land. In view of this fact, we do not find any illegality or infirmity in the order of CIT(A). This is the settled law that the statement recorded during the course of the search will be valuable evidence being incriminating document found during the course of search. Hon'ble Jurisdictional High Court in the case of CIT vs. St. Francis Clay D cor Tiles [2016] 385 ITR 624 (Ker) has held as under: 20. On a plain reading of section 153A, it is clear that once search is initiated under section 132 or a requisition is made under section 132A after the 31st day of May 2003, the Assessing Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 Income-tax (Mini Eldhose) 1,740 Other income 5,60,000 Personal expense 1,20,000 Personal expense (mini Eldhose) 60,000 Agriculture Income 3,00,000 Barclays Bank Principal 3,98,184 Agricultural Income (Mini Eldhose) 2,00,000 Barclays Bank-interest 85,680 Profit from business (Mini Eldhose) 3,65,000 Reliance capital Loan repayment principal 1,79,828 Ernakulam district co-op Bank Int.SB A/c.5245 (Mini Eldhose) 450 Reliance capital Loan repayment Interest 95,248 Ernakulam district co-op Bank IntSB A/c.61 35 (K O Varghese) 434 Standard Chartered Bank Loan Repayment Principal 3,62,722 Catholic Syrian Bank SB A/c. No.0200 interest 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken it to be one of the sources of the available cash while the Assessing Officer, when recasted the cash flow statement, ignored the said agriculture income. Since the facts relating to the agriculture income earned by Mini Eldhose and holding of the land by her are not before us, therefore, we cannot decide how much agriculture income would have been earned by Mini Eldhose. To the extent the agriculture income is earned by here, the same will be available as a source of receipt of the cash in the hands of the assessee. Since neither the Assessing Officer nor the CIT(A) and even the assessee has not brought out on record any document in this regard therefore, in the interest of justice and fair play to both the parties, we set aside the issue for the purpose of determining the shortage of cash in respect of the agricultural income earned by Mini Eldhose to the file of the Assessing Officer with the direction that the Assessing Officer, on the basis of the quantum of the land owned by Mini Eldhose, shall estimate the agriculture income and give the credit to the assessee in respect of the said income against the cash shortage. Therefore, except the estimation of the agriculture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lture income but the income from undisclosed sources. When the matter went before the CIT(A), the CIT(A) upheld the action of the Assessing Officer. Since in our opinion no addition can be made in the assessment year 2006-07 to 2010- 11 as those assessments were not abated and no incriminating material was found during the course of search which may prove that the assessee has not earned the agriculture income during those years as returned by the assessee therefore, we did not uphold the action of the Assessing Officer. Impliedly the agriculture income returned by the assessee stands duly accepted by the Revenue. The Learned A.R. before us even though vehemently contended that the assessee was having agriculture income to that extent and it is not necessary to maintain the books of account as mentioned by the Assessing Officer. We do agree that in view of the quantum of the agriculture income returned by the assessee, the assessee is not required to maintain the regular books of account for the agriculture income but keeping in view the quantum of the land holding, the agriculture income shown by the assessee is on a higher side but since in the preceding assessment year the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was of the view that within one month after the beginning of the financial year the whole of the income of the year could not have been received by the assessee therefore, the Assessing Officer did not accept the source of land purchase for ₹ 5,44,000/- and the made the said addition. When the matter went before the CIT(A), the CIT(A) did not give any finding on the said addition. 18. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that the assessee has taken the ground, being ground No. C, before the CIT(A) in respect of the said addition but the CIT(A) while passing the order has not given any finding on this but impliedly this addition gets deleted as the CIT(A) has accepted the sum of ₹ 18,15,000/- being received by the assessee from his brother out of which ₹ 5,00,000/- was duly accepted by the Assessing Officer but the Assessing Officer did not accept a sum of ₹ 13,15,000/- and made the addition for the same. The said sum of which represents ₹ 18,15,000/- which is the cash credit in the bank account of Eldhose K. Varghese on different dates i.e. &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned on the sale of the land is chargeable to tax. It is not the claim of learned A.R. that the assessee has not earned the income or the profit so earned is exempt from tax. We accordingly dismiss ground No. 4 of the assessee. 22. Ground No. 5 7 relate to agriculture income returned by the assessee at ₹ 4,30,000/-, which was treated by the Assessing Officer as undisclosed income. 23. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that during the impugned assessment year although the assessee has invested in five pieces of the land measuring 10 cent, 13 cent, 11.5 cent, 13 cent and 9.5 cent. Out of these lands, one is residential building measuring 9.5 cent while the rest are the land and all these lands are situated in the municipal limit of the concerned city. Except two pieces lands of 10 cent and 13 cent, which were bought on 06/05/2011 and 07/05/2011, rest of the lands were bought in December, 2011. In the earlier year, the income from agriculture has been accepted at ₹ 2,00,000/- but so far these lands are concerned, in our view, the onus lies on the assessee to prove that t ..... 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