TMI Blog2022 (7) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for the assessment year 2009-10. For AY-2010-11 and AY 2011-12 - Addition made by AO is not based on any seized material and the AO made additions in a routine manner which were disclosed to the department by way of regular return of income filed by the assessee and no incriminating material was found during the course of search and to come to conclusion that the expenses or allowances claimed by the assessee could be disregarded or income disclosed by the assessee could be considered as taxable. In our opinion, completed assessment cannot be tinkered without the support of any incriminating material found during the course of search. Therefore, the assessment framed for assessment 2011-12 without any incriminating material, the AO was not justified in framing assessment u/s 153A r.w.s. 143(3) of the Act. It is not the case of AO that the seized material, if any suggested the inflation of expenditure, inflation of agricultural income or change of head of income. AY 2012-13 - In this assessment year 2012-13, though there was no seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditures debited to the P L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inappropriate. Accordingly, we will delete this addition made in all these assessment years on adhoc basis. This ground of appeal of the assessee is allowed in all the above appeals. Correct head of income - treating of income offered under head Capital Gain OR business income - HELD THAT:- In this case, admittedly assessee treated the purchase of agricultural land as capital asset and on relinquishment of the same in favour of Shri Kempegowda, the income resulted was treated as Capital gain. However, the AO without any material came to conclusion of the assessee holding the property as stock in trade and arrived at business income instead of capital gain disclosed by the assessee. If there was no material in the hands of AO to consider as this transaction as adventure in the nature of trade, we are of the opinion that the land was held by assessee as capital asset for investment, the income generated from this transaction on entering into a relinquished deed, the income has to be considered as short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations. - ITA Nos.307 to 312/Bang/2020 - - - Dated:- 24-6-2022 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER Appellant by: Smt. Suman Lunkar, A.R. Respondent by: Shri Pradeep Kumar, CIT(DR) (Written submissions) Smt. Priyadarshini Basaganni, D.R. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER: These appeals by assessee are directed against the different orders of CIT(A) for the assessment years 2007-08 to 2012-13 dated 22.11.2019. The issue in all these appeals are common in nature, hence, these are clubbed together heard together and disposed of by this com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4. The learned CIT(A) has erred in confirming the addition made by the Assessing officer on account of opening capital balance being unexplained to the extent of Rs. 33,29,000/- On proper appreciation of facts and the law applicable, the entire opening capital balance is duly explainable and the addition as made/confirmed being contrary to available facts and law applicable is to be deleted in entirety. 5. The learned CIT(A) has erred in confirming the addition made by the assessing officer by treating the agricultural income as Income from other sources on the ground that the agricultural income as declared is at higher side considering the extent of land holding in year under appeal and the appellant had not filed any documentary evidence in support of the claim made. On the facts and circumstances of the case and the law applicable, the appellant actually earned the agricultural income as declared and the addition as made/confirmed is adhoc, without any basis and purely on conjectures and surmises is to be deleted 6. The Learned CIT(A) has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant that the application of section 153A of the Act lacked jurisdiction. The order passed by the Assessing officer is bad in law especially in the absence of satisfaction to be recorded before the issue of notice u/s 153A of the Act and such order is liable to be quashed. 3. In any case and without prejudice, the learned Commissioner of Income-tax (Appeals) has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4. The learned CIT(A) has erred in confirming the addition made by the assessing officer by treating the agricultural income as Income from other sources on the ground that the agricultural income as declared is at higher side considering the extent of land holding in year under appeal and the appellant had not filed any documentary evidence in support of the claim made. On the facts and circumstances of the case and the law applicable, the appellant actually earned the agricultural income as declared and the addition as made/confirmed is adhoc, without any basis and purely on conjectures and surmises is to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on an erroneous premise is to be deleted. 9. The learned CIT(A) has erred in holding that in terms of section 292C of the Act, any document found in the course of search shall be belonging to the appellant and the contents of these evidences can be used for the purpose of assessment. The conclusion drawn being wholly erroneous both on facts and law is to be rejected in toto. 10. The appellant denies the liability to pay interest u/s 234A and 234B of the Act. The interest levied being wholly erroneous is to be deleted. 11. In view of the above and on other grounds to be adduced t the time of haring it is requested that the impugned orders passed by the CIT(A) and the Assessing Officer be quashed or atleast the various additions made in the hands of the appellant be deleted and the interest levied is also to be deleted. 2.3 Main grounds for assessment year 2009-10 in ITA No.309/Bang/2020:- 1. The learned Commissioner of Income-tax (Appeals) has erred in partially confirming the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against the principles of natural justice and void-ab-initio was required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available and the 1w applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain under the head Short Term Capital Gain and same is to be accepted without any variation. 6.2 The learned CIT(A) has erred in confirming the disallowance made by the Assessing Officer amounting to Rs.66,47,430/- on account of cost of acquisition, selling expense and cost of improvement in the absence of supporting evidence. The cost of acquisition, selling expense and cost of improvement claimed is duly supported with documentary evidence and same is to accepted and the disallowance made is to be deleted. 7. The learned CIT(A) has erred in confirming the addition made by the Assessing Officer on account of unexplained expenditure amounting to Rs 20,00,000/- on the ground that during course of search proceedings, the appellant had admitted this sum as unexplained income. On proper appreciation of facts and the law applicable, the addition as made/confirmed is erroneous is to be deleted. 8. The appellant denies the liability to pay interest u/s 234A and 234B of the Act. The interest levied being wholly erroneous is to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted. 6.1 The learned CIT(A) has erred in confirming the action of the assessing officer in assessing the capital gain earned on sale of property as Income under the head Business holding that the appellant being a real estate businessman has failed to demonstrate that property sold was held as capital asset. On proper appreciation of facts, evidence available and the law applicable, the property sold was held as investment/ Capital Asset and the appellant had rightly declared the gain under the head Long Term Capital Gain and same is to be accepted without any variation. 6.2 The-learned CIT(A) has erred in confirming the recomputation of profit as done by the Assessing officer amounting to Rs. 30,75,670/- on account of sale of land as against the Long term Capital Gain offered by the appellant amounting to Rs. 9,94,700/- and assessing the same under the head Business by i) disallowing the entire cost of improvement claimed by the appellant totalling to Rs. 15,84,240/- being interest on loan and Development expenses ii) disallowing the commission paid on sale of land iii) Denying the benefit of indexation on cost of acquisition. The action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4. The learned CIT(A) has erred in confirming the addition made by the assessing officer u/s 68 of the Act amounting to Rs. 5,00,000/- on the ground that the appellant has not proved the identity, genuineness and creditworthiness of the transaction. On the facts and circumstances of the case and the law applicable, there is no unexplained cash credit at all. The addition made/confirmed is contrary to both facts and law is to be deleted. 5. The learned CIT(A) has erred in confirming the addition made by the assessing officer by treating the agricultural income as Income from other sources on the ground that the agricultural income as declared is at higher side considering the extent of land holding in year under appeal and the appellant had not filed any documentary evidence in support of the claim made. On the facts and circumstances of the case and the law applicable, the appellant actually earned the agricultural income as declared and the addition as made/confirmed is adhoc, without any basis and purely on conjectures and surmises is to be deleted. 6. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the order passed by Assessing Officer. The order passed by learned assessing officer being bad in law against the principles of natural justice and void-abinitio was required to be quashed in toto instead of being confirmed. 2. In any case, the learned Commissioner of Income-tax (Appeals) has erred in rejecting the contention of the appellant that the application of section 153A of the Act lacked jurisdiction. The order passed by the Assessing officer is bad in law especially in the absence of satisfaction to be recorded before the issue of notice u/s 153A of the Act and such order is liable to be quashed. 3. In any case and without prejudice, the learned Commissioner of Income-tax (Appeals)has erred in confirming various additions made by the Assessing officer. On proper appreciation of facts and the law applicable, the additions made/confirmed are wholly erroneous and are liable to be deleted. 4. The learned CIT(A) has erred in confirming the action of the assessing officer in adding a sum of Rs. 1,70,00,000/- as unexplained cash credit u/s 68 of the Act on the ground that the appellant has not established the Identity, credit worthiness of the creditors as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide. 4. The additional evidences submitted by the assessee in all the assessment years indexed in respective paper books for AYs 2007- 08 to 2012-13 in ITA Nos.307 TO 312/Bang/2020 are as follows:- 4.1 Additional evidences For assessment year 2007-08 in ITA No.307/Bang/2020:- Si. No. Particulars Page No. 1. Copy of Cash book for the period 01/04/2006 to 31/03/2007. 145 - 159 2. Copy of Ledger extracts of relevant expenditure debited to profit and Loss Account for the year 160 - 167 3. Copy of ledger extract of land at keragalli village 168 4. Copy of sale deed for purchase of property 169 - 179 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er extracts of relevant expenditure debited to profit and Loss Account for the year 427-443 3. Copy of Journal Voucher 444 4. Ledger extract of followings a) Sale of Sites at Gollahalli Village 445 b) Sites at Gollahalli village 446 c) Improvement expenditure of gollhalli sites 447-458 d) cash voucher of cost of improvement 459-567 5. Ledger extract commission on Gollahalli Sites 568 6. Copy of Journal voucher and ledger extract of Land at Bhugathahalli Village 569-571 7. Ledger extract of S C Rajesh along with copy of compliant lodge before the Police Commissioner Bangalore and English translation thereof 572-577 4.4 Additional evidences for assessment year 2010-11 in ITA No.310/Bang/2020:- Si. No. Particulars Page No. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edger extracts of relevant expenditure debited to profit and Loss Account for the year 181 - 196 3. Ledger extract of advance received from Shantha Sreedhar, Rajeshwari Minerals C Amaresh and Bhavana S and relevant bank account extract. 197 - 200 4. Copy of agreement to sell dated 26.03.2012 201 - 207 5. The assessee filed petitions for all these assessment years for admission of additional evidences, which were not filed before the lower authorities. It was submitted that out of these additional evidences certain evidences are not available at the time of assessment or at the time of first appellate authority. In these circumstances, assessee has no remedy except to file these additional evidences before this Tribunal. In our opinion, the action of the assessee is bonafide as the assessee was prevented by sufficient cause in not filing these documents during the course of assessment as well as first appellate stage. Being so, in our considered view, in the given facts and circumstances of the case, it is appropriate to adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact of the case we find that undisputedly no incriminating material was found during the course of search and these averments in this regard were not disputed by the Revenue. Isis also a fact that original assessment was completed as return of income was filed on 19.01.2003and the return was processed under section 143(1) of the Act. Thereafter, notice under section 153Aof the Act was issued on 18.06.2014. Since the time for issuing of notice under section 143(2) of the Act against the original return has been expired it is deemed that the assessment was concluded and by issuing notice under section 153A, the Revenue intent to reopen the concluded assessment without having any incriminating material found during the course of search. In the absence of any incriminating material, proceedings under section 153A cannot be initiated and the concluded assessment cannot he reopened. Therefore, we have no hesitation in holding that proceeding initiated under section 153A are not valid and we accordingly find ourselves in agreement with the order of the CIT(A) and rightly knock down the assessment completed under section 153A of the Act. We therefore confirm his order. 2) PCIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act. Accordingly all the three appeals of the assessee are allowed 4) In the case of Delhi International Airport Vs. Deputy Commissioner of Income-tax decided by Bangalore bench of ITAT in ITA No.592 to 594/Bang/2017 in which it was held as under:- Assessment framed u/s 153A of the Act in the absence of incriminating material is bad in law in the case of unabated and completed assessments. 6.3 Ld. D.R. submitted that in view of the judgement of Hon ble Karnataka High Court in the case of Canara Housing Development Company Vs. DCIT (274 CTR 122)(Kar), wherein it was held that once the assessment is validly reopened, AO has to take into account all the 3 types of income to complete the assessment or reassessment, as the case may be. The 3 types of income are: 1) Income disclosed in the return of income 2) Undisclosed income during the search 3) Any other income which is not disclosed in the earlier return and not unearthed during the search. 6.4 According to the Ld. D.R., there is an incriminating material foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessee paid Rs.1.5 crores only by cheque drawn on Indian Bank account and this amount was financed to the assessee by KCS Investment Consultancy Pvt. Ltd. According to the Ld. A.R., the assessment cannot be framed on the basis of agreement dated 8.5.2006, which is only a dummy document and which is not acted upon. More so, on said date Shri R. Sundar Raj is not at all owner of the said property. Actually, he bought that property from Shri Bhavani Housing Co-operative Society vide sale deed dated 19.5.2006 only. Therefore, by no stretch of imagination first agreement of sale could have been entered into on 18.5.2006 when Shri R. Sundar Raj was not even owner of the site on this day. In any case, Mrs. Sundar Raj never was owner of the said site No.8. This is the reason as to why the first purported agreement dated 18.5.2006, the history of the acquisition of the property is not mentioned in the preamble to the agreement, whereas mentioning of such history is must in all said agreements of sale. Thus, it was submitted that the transaction with Shri R. Sundar Raj is under any litigation and same has been contested by the assessee in the court of law with regard to title of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be no abatement of any proceedings. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 5. Notice u/s 143(2) issued and assessment pending u/s 143(3) Pending regular assessment proceedings would abate and would converge/merge in proceedings u/s 153A. Accordingly the scope of assessment under section 153A would cover the pending return filed as well and would not be restricted to incriminating material found during the course of search. 6. Assessment u/s 143(3) completed. Since regular assessment proceedings have been completed are not pending, there would be no abatement of proceedings. AO loses jurisdiction to review the completed assessment. Accordingly, the scope of assessment u/s 153A would be restricted to incriminating material found during the course of search. 7. Proceedings u/s 147 pending where: (a) Assessment originally completed u/s 143(3) OR (b) No assessment earlier completed u/s 143(3) Pending assessment/reassessment proceedings u/s 147 would abate and wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the search action in the case of assessee. Being so, the assessment cannot be framed u/s 153A of the Act. Findings:- 9.2. In this assessment year there is a seized material found and seized during the course of search action u/s 132 of the Act in the case of N.C. Mahesh which is marked as A/NCM/2, which is a loose slip, which shows various payments made by assessee to N.C. Mahesh. Thus, AO relied on the seized material procured during the course of search in the case of N.C. Mahesh for making addition of Rs.3,80,00,250/-. In this assessment year AO inter-alia framed the assessment as follows:- 1. Total income declared 10,37,580/- 2. Agricultural income declared by assessee Rs.14,06,026/- treated as non-agricultural income out of the above 12,00,000/- 3. Addition u/s 68 of the Act 2,36,34,000/- 4. Disallowance of expenditure debited to the P L account, total expenditure debited (at 50% of the above) 2,74,094/- 5. Capital gain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, the argument of assesse s counsel has no legs to stand on the reason that section 153C of the Act starts with non-absentee clause as follows: 153C(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where 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 section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A . 9.5 Being so, the assessment in this case was to be completed u/s 153A of the Act and the AO was under a statutory obligation to consider entire material irrespective of the place from where it was found whether assessee s own place or some other place. There cannot be two assessments in case of sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch proceedings are already concluded by the Assessing Officer by initiation of proceedings under Section 153A, the legal effect is the assessment gets reopened. The block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved; resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the total income of the six assessment years in question in separate assessment orders. The Assessing Officer is empowered to reopen those proceedings and reassess the total, income, taking note of the undisclosed income, if any, unearthed during the search. He has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. When once the proceedings are initiated under Section 153A of the Act, the legal effect is even in case where the assessment order is passed it stands reopened. In the eye of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was not unearthed during the search by separate assessment orders but in our considered view the completed assessments should be subject to the safeguards provided in IBC Knowledge Park (P) Ltd. supra. 54. On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that, Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person as observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. But, at the same time, such can be at three stages: on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) in the above judgement and the ratio laid down in the case of Canara Housing Development Company still holds good. The assessment can be made u/s 153A of the Act in respect of each of the six assessment years, in which both the disclosed and undisclosed income would be brought to tax. U/s 153A of the Act, assessing officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during search. After such reopening of the assessment, the AO is empowered to assess or reassess the total income of the six years. The condition precedent for application of section 153A of the Act is there should be a search u/s 132 of the Act. Initiation of proceedings u/s 153A of the Act is not dependent on any undisclosed income being unearthed during search. The proviso to the aforesaid section makes it clear that AO shall asses or reassess the total income in respect of each assessment year falling within such six assessment years. If any assessment proceedings are pending within the period of six assessment years, referred to in sub-section of section 153A of the Act on the date of initiation of the search u/s 132 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Total 172.42 10.1. The Ld. A.R. submitted that in this assessment year there is no seized material whatsoever. The AO is only considering the income disclosed in the return of income filed by assessee before search as additional income which cannot be possible without any seized material. She submitted that had it been there in seized material to show the above income as an additional income, the AO should have made an addition. According to her in the assessment year in 2009-10, there is no seized material of whatsoever to frame the assessment. Further, she submitted that the assessee has filed the original return of income on 9.5.2011. Time limit to issue notice u/s 143(2) of the Act was 30.9.2012. The case was not selected for scrutiny and there was no assessment u/s 143(3) of the Act. The assessment was already concluded for this assessment year and in view of the judgment of jurisdictional High Court in the case of Delhi International Airport cited (supra), the AO cannot frame the assessment without an iota of seized material in the present assessment year 2009-10. Accordingly, she prayed that assessment order to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating in nature, jurisdiction u/s 153C of the Act cannot be assumed. Further, in the case of Principal CIT Vs. Delhi International Airport Pvt. Ltd. in ITA No.322/2018 vide judgement dated 29.9.2021, the jurisdictional High Court followed the earlier judgement in the case of IBC Knowledge Park Pvt. Ltd. (supra). It is relevant to refer para 10 of the above judgement in the case of Delhi International Airport Pvt. Ltd. (supra) which reads as follows:- 30. Thus, it is clear that the Assessing Officer while passing the order under Section 153A read with Section 143(3) of the Act, ordinarily cannot disturb the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings establishes that the finalized assessments are contrary to the material unearthed during the course of 153A proceedings, as held by the Coordinate Bench of this Court in the case of IBC Knowledge Park (P) Ltd. supra. A concluded assessment could not be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good .. 10.4 The judgment of the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ether material existing or brought on the record of the AD. vi. 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. 10.5 The Hon ble jurisdictional High Court in the case of Pr.CIT v. M/s.Delhi International Airport Pvt. Ltd. (supra) had also referred to the judgment of the Hon ble Delhi High Court in the case of CIT v. Kabul Chawla (380 ITR 573) (Refer para 20 of the Karnataka High Court judgment). From the above judicial pronouncements, cited supra, it is clear that the assessments which are not pending and hence does not abate, the addition can be made only on the basis of incriminating material found during the course of search. 10.6 Therefore, as mentioned in the judgement of jurisdictional High Court in the case of Delhi International Airport Pvt. Ltd. (supra), it is clear that, in case of persons searched, the assessment for tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in this case filed original return of income on 1.9.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A of the Act for which assessment shall be made for each of 6 assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A of the Act will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of accounts, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. The argument of the Ld. Counsel is that in this assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law being these are concluded assessments, which cannot be reopened without any iota of seized material. She submitted that in this assessment year 2011-12, there was no seized material during the course of search action. In the case of assessee no assessment could be framed u/s 153A of the Act in the absence of seized material in the case of concluded assessment. 12.2. The Ld. D.R. relied on the order of the lower authorities. Findings:- 12.3. In assessment year 2011-12, the additions made by AO not based on any seized material found during the course of search action in the case of assessee. The assessee in this case filed original return of income on 15.12.2011. Time limit to issue a notice u/s 143(2) of the Act was on or before 30.9.2012. No notice u/s 143(2) of the Act was issued to the assessee on or before 30.9.2012. Being so, framing of assessment u/s 143(3) of the Act has already been concluded by operation of law on the date of search action i.e. on 5.11.2012. As held by Special bench in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 18 ITR (Trib) 106 (Mumbai)(SB) that in case of assessments that are abated, the AO retains the original jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized material, time limit to issue notice u/s 143(2) of the Act is not lapsed. The assessment is pending, which is abated and it is not a concluded assessment. Being so, the AO validly assumed jurisdiction u/s 153A of the Act consequent to the search action u/s 132 of the Act so as to frame the assessment u/s 153A of the Act. Accordingly, framing of assessment u/s 153A of the Act for the assessment year 2012-13 is valid. 13.2. Conclusion on legal issue :- The assessment for the assessment years 2009-10, 2010-11 and 2011-12 has been quashed on the basis that there was no seized material to frame assessment u/s 153A r.w.s. 143(3) of the Act as these assessments were not pending as on the date of assessment and these are already concluded assessments, which cannot be reopened without any seized materials. 14. Now we will decide each ground on merit in each appeal, without prejudice to our findings on legal issue in these assessment years i.e. 2009-10, 2010-11 2011-12. 15. First ground in ITA No.307/Bang/2020 in assessment year 2007-08 is with regard to unexplained opening balance at Rs.33.29 lakhs. 15.1 The assessee shown opening balance in this assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition cannot be made. 16.3 In assessment years 2007-08 2008-09 though there was seized material relating to some other particular additions, there is no seized material with regard to showing the agricultural income as non-agricultural income in these two assessment years. 16.4 The AO not brought any material to suggest that the income declared by the assessee as an agricultural income is earned from any other unknown sources. The AO made an allegation that assessee has not filed details of agricultural land owned, crafts cultivated in various seasons, gross income earned out of agricultural operations, details of expenditure income to earn that income and that the evidences, details of crop sold and not income earned and copies of RTC of the properties. In our opinion, in case of such assessments framed u/s 153A of the Act as held by the Delhi bench in the case of Ashok Kumar Tyagi Vs. ACIT in ITA No.5652 to 5654/Del/2017 dated 17.3.2022, it is not possible to treat the agricultural income as non-agricultural income without any seized material. Further, in a proceeding u/s 153A of the Act, addition has to be made on the basis of incriminating material found as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,67,031.00 6 160 - 167 2008-09 5,48,188.00 - 2,74,094.00 6 112 - 124 2009-10 951,057.00 * 4,75,528.00 5.1 427 - 443 2010-11 17,00,000.00 8,50,000.00 5 430 - 448 2011-12 10,90,000.00 5,45,000.00 6 866 -878 2012-13 11,10,000.00 5,55,000.00 5 181 - 196 17.4. We have carefully gone through the cash book for these assessment years and also ledger extracts filed by the assessee before us. Admittedly, these are the regular books of accounts maintained by assessee produced before the AO and only after going through the P L account, the AO disallowed these expenditures debited to the P L account at 50% as not incurred wholly and exclusively for the purpose of business. To come to that conclusion, the AO have no material which is inapp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as business income. This view of ours is supported by the order of the coordinate bench of Hyderabad in the case of M/s. SSPLL Ltd. Vs. PCIT in ITA No.976/Hyd/2012 dated 5.4.2013, wherein it was held as under and hence, this ground of assessee is allowed:- 32. We have to see the intention of the assessee at the time of acquiring the asset. The intention of he assessee herein is to construct a building for setting up of its corporate office and it was always a fixed asset and not a stock-in-trade. Even if the assessee is in the business of real estate, the property acquired by the assessee for the purpose of setting up of a corporate office cannot be construed as a trading asset. The profit realised by sale of current assets in the line of trading is income from business. On the other hand, if the assessee sells a capital asset as an investor it is income from capital gain. The dominant or even the sole intention to resell is a relevant factor and raises a strong presumption but by itself is not conclusive proof of trading. The intention to resell would, in conjunction with the conduct of the assessee and other circumstances, point to the business character of the transaction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The relinquishment of assets or extinguishment of any right in it which may not amount to a sale can also be considered as a transfer. Therefore, on this we do not agree with the findings of the CIT(A) that there is no transfer u/s. 45 of the Act and the assessee has done only business transaction. Accordingly, we reverse the findings of the CIT(A) on this issue and hold that the income accrued to the assessee out of relinquishment of right over the property is to be chargeable u/s. 45 of the Act and computation of capital gain has to be done in accordance with section 48 of the IT Act. Accordingly, we direct the Assessing Officer to compute the income under the head capital gain on relinquishment of right over the impugned landed property. 19.2 Accordingly, this issue remitted to AO to decide the same in the light of above observation after going through the additional evidence filed by the assessee before us. For assessment year 2008-09:- 20. In this assessment year assessee sold two pieces of land and on sale of said land, assessee offered income at Rs.4,23,065/- and Rs.14,664/- and offered it as short-term capital gain. However, the AO treated the income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions as discussed in earlier para in this order in earlier assessment years under consideration. For the assessment year 2010-11:- 22. The assessee purchased 445 sites vide sale deed dated 6.6.2006 from Shiva Shree Shelters and Shiva Shree Investments. Out of these sites, 10 sites were sold during the year under consideration for a total consideration of Rs.31.20 lakhs. The assessee filed copies of sale deed, which is filed at regular paper book page Nos.233 to 251 for assessment year 2010-11. The contention of the Ld. A.R. is that this property held by the assessee as capital asset and the gain arising out of these transactions to be considered as long term capital gain and prayed that the issue may be remitted to the AO to consider this fact from the evidence produced before him. On the basis of evidence, the expenditure incurred for the purpose of improvement of the property to be allowed as a deduction even if the income is computed under head Capital gain . As discussed earlier, without prejudice to our findings on legal issue, we remit this issue to the file of the AO to consider all the evidences to decide whether the impugned property held as a capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so placed by assessee in assessee s paper book pages 121 to 128. The assessee categorically denied the sale deed dated 18.5.2006. However, the AO made an addition of Rs.2 crores on invoking provisions of section 292C of the Act by observing that whatever documents/books of accounts/money/bullion found in the course of search shall be belonging to the assessee and contains all those evidences can be used for the purpose of assessment. According to the AO, there is a seized document showing the payment of Rs.2 crores by cash. Accordingly, he made addition of Rs.2 crores representing the undisclosed income of the assessee. Against this assessee is in appeal before us. 25.1. We have heard the rival submissions and perused the materials available on record. As per the seized material, there was an agreement dated 18.5.2006 wherein assessee alleged to be purchased a property bearing survey No.8, Khatriguppe village measuring 10320 sq.ft. Of land. As per this agreement, the assessee has paid Rs.2 crores in cash to R. Sundar Raj. The statement was recorded from the assessee by searched team u/s 131(1A) of the Act on 22.12.2012. For clarify, we reproduce the statement recorded from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hna has created this document. I have not received any amount either by way of cash or cheque from Shri.K G Krishna except for the loan amount of Rs. 50.00 lakhs as mentioned above. Though it is alleged that the above document was a forged document the intention behind creation of such documents is not explained. However, the agreement was duly signed by both the parties and it was mentioned that the cash portion of Rs.2.00 crores had been paid at the time of entering into the agreement. Therefore, both Shri.K G Krishna and Shri. R. Sunderaj have indulged in this unaccounted cash transaction and therefore the cash portion of Rs.2.00 crores should be taxed in the form of unexplained investment in the hands Sri K.G. Krishna. It is to be mentioned here that Sri. K G Krishna has replied that a sum of Rs.1.50 crore was paid through cheque and it was given by M/s. KCS Investment Consultancy Pvt. Ltd., whereas Sri. R Sunder Raj has denied even the cheque payment. Per contra the document found and seized has revealed a fact that the entire sum was paid through cash. As per section 292C of the IT Act the AO can presume that whatever document/books of account/money/bullion found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of imagination the agreement dated 18.5.2006 found during the course of search cannot be considered as a valid agreement. Admittedly, during the course of search action the searched team unearthed the agreement dated 18.5.2006 entered by the assessee with Smt. R. Sundar Raj, S/o Late Ramaswamy, aged about 51 years residing at 1228, 4th Main, 5th Cross, Chandra Layout, Bengaluru 560040 for sale of property bearing no.8 situated at 17/12, 17/4 17/14 and other survey numbers in the layout formed by Bhavani Housing Cooperative Society Ltd., Khatriguppe village, Banashankari, 3rd Stage, Bangalore North Taluk, Bangalore, East to West 80 Ft., North to South 129 Ft. As per this, total consideration was Rs.2,29,62,000/-. Out of this, assessee said to be paid Rs.2 crores by way of cash and balance to be paid at Rs.29.62 lakhs, which is mentioned in the clause (3) of this agreement. However, clause (4) shows that assessee paid entire sale consideration and the other party has received entire sale consideration. 25.3. The sale agreement dated 6.6.2006 shows that Shri R. Sundar Raj, S/o Late Shri Ramaswamy, 50 years residing at 1228, 4th Main, 6th Cross, 1st Stage, 3rd Phase, Chandra Lay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard the rival submissions and perused the materials available on record. The assessee has taken this plea before lower authorities that the payment is accounted in his books of accounts. However, Ld. CIT(A) sustained the addition. In our opinion, there is no necessity of making such addition when the transaction is duly reflected in the books of accounts as shown in the ledger extract in page no.170 of the paper book. Accordingly, we delete this addition. 27. Cash credit in the assessment year 2008-09 in ITA No.308/Bang/2020: 27.1 In this assessment year assessee challenged the addition of Rs.2,36,34,000/- made u/s 68 of the Act as unexplained credit. The AO made addition u/s 68 of the Act in respect of following credits:- Vikram Jain 1,03,50,000/- Manchaiah 50,00,000/- B.M. Kumar 25,00,000/- A.N. Nanjaiah 57,84,000/- Total 2,36,34,000/- 27.2. According to the above, credits were not explained satisfactorily before him. As such, the transactions cannot be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,97,764/- 28.3. The AO asked the assessee to explain the nature of sources of these advances. The assessee explained the receipt of money from Shri Baldev and repaid him on 2.4.2011. In case of Chandra Sekhar, confirmation was submitted. However, in the remaining cases, no details were given. Being so, the AO considered the following credits as unexplained credits u/s 68 of the Act. 1. Narasimha Murthy 75,00,000/- 2. Shanta Sridhar 3,97,764/- Total 78,97,764/- 28.4. On appeal, assessee explained that a sum of Rs.75 lakhs from Narasimha Murthy is received through banking channel and in case of Smt. Shanta Sridhar a sum of Rs.3,97,764/- which was received through bank account and repaid the entire amount in subsequent assessment years. He also submitted before Ld. CIT(A) that total amount of advance received from Smt. Shanta Sridhar was Rs.20,64,768/- and the same was repaid on 29.3.2012 for which cheque No.6544 drawn on Vysya Co-operative Bank, APMC yard branch, Bengaluru, which was pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs and Rs.5 lakhs in assessment year 2011-12 in ITA No.311/Bang/2020, as unexplained credit. These findings are without prejudice to our findings on legal issue in these assessment years. 31.1. The assessee deposited cash to the extent of Rs.36 lakhs to the bank account, which was not satisfactorily explained before the lower authorities. Hence, it was treated as unexplained credits. Without prejudice annulling of assessment of legal issue in the assessment year 2010-11, we are inclined to remit this issue to the file of AO for fresh consideration since there is no much discussion in the order of the lower authorities on this issue and there was no proper enquiry by the AO on this issue. Similar is with regard to addition of Rs.5 lakhs in assessment year 2011-12. 32. In ITA No.312/Bang/2020 in assessment year 2012-13, addition of unexplained credit of Rs. 83 lakhs was made. 32.1. The assessee deposited Rs.83 lakhs into his bank account for which no satisfactory explanation is given. Hence, it is treated as unexplained income of the assessee. After hearing both the parties, we are of the opinion that this issue was not properly examined of the addition and proper e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized material. The contents of the seized material is explicit and gives no room for ambiguity the fact that assessee does not want to reveal anything about the transaction only gives one impression that he has good reason to hide as implications/consequences would be more than what the material reveals. Be it as it may, one has to confine oneself to the seized material and not speculate on aspect not known. Accordingly, he observed that the assessee has disclosed Rs.125 lakhs out of the payment shown in the seized material at Rs.4,80,00,250/-. Accordingly, he deleted another Rs.25 lakhs out of addition made by AO at Rs.3,80,00,250/- and sustained addition of Rs.3,55,00,250/-. Against this assessee is in appeal before us. 33.4. The Ld. A.R. submitted that on close perusal of noting/loose slips seized from Shri N.C. Mahesh as recorded at internal page No.7 of the assessment order shows the top lines as below:- Land registration to Krishnappa It is therefore, a noting from same transaction with the same Krishnappa and not with the present assessee whose name is K.G. Krishna. In the order at page No.9 of the assessment order, it was stated that before the investigation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO should also take note that addition cannot be made only on the basis of noting on loose slips unless it is substantiated or corroborated by any material evidence in support of such notings in the loose slips or notings in diary. The suspicion in the minds of the revenue authorities that the assessee made certain payments as per the loose slips cannot be reason to make an addition. In the absence of concrete evidence brought on record by the authorities concerned, the addition cannot be made. The suspicion cannot replace the material evidence brought on record. It is also be noted that authorities have to follow the principles of natural justice and the discovery of the documents in the form of loose slips not enough to make an addition without giving an opportunity of cross examination of the concerned parties. The lose slips having certain jottings are not speaking one and it cannot be basis for any inference to make an addition. Accordingly, this issue remitted to the AO for fresh consideration to decide in the light of above observations. 33.7 For brevity, we enclose herewith the ground-wise chart with result of each appeal as Annexure -1. 34. In the result, ITA Nos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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