TMI Blog2023 (12) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... ction note, on the basis of which the assumption of jurisdiction could be questioned, is conspicuous by its absence, even as Sri. Mathew, the ld. counsel for the assessee, was specifically queried in its respect during hearing. It is the assessments in case of the person searched, that the Hon ble Apex Court has in Abhishar Buildwell ( 2023 (4) TMI 1056 - SUPREME COURT ) reading down the provision held as obtaining only on the strength of incriminating material, which was always the case for an assessment u/s. 153A r/w s. 153C, i.e., in case of a person other than the person searched. In other words, the said decision impacts only an assessment u/s. 153A, i.e., in the case of the person searched, and reliance thereon is misplaced qua a s. 153C, which obtains in the instant case. The assessee is merely trying to take advantage of the said decision, clearly inapplicable in the facts of it s case. No books of account were found maintained during search or even produced during assessment proceedings. In fact, in the absence of the returns filed, as indeed accounts, the entire material found during the search is liable to be regarded as incriminating. In concluding whether the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee for two consecutive assessment years (AYs.), i.e., AYs. 2008-2009 and 2009-2010, agitating the Order dated 22.06.2022 by the Commissioner of Income-tax (Appeals)-3, Cochin [CIT(A), or the first appellate authority (FAA)], partly allowing it s appeals contesting it s assessments under section 153C r.w.s. 144 of the Income-tax Act, 1961 (`the Act hereinafter) for the said years vide separate orders dated 31.07.2014. 2. At the outset, it was observed by the Bench that the appeals, filed on 10.10.2022, are with a delay of 27 days. An affidavit of even date by Dr. V.N. Radhakrishnan, Managing Trustee, explains the reasons leading to the same. The contents of the affidavit, carefully perused, cites reasons personal in nature. The same have not been disputed by the Revenue. Under the circumstances, we, accepting the assessee s application for condonation of delay, admit the instant appeals. Hearing was accordingly proceeded with. 3. The assessee is a private trust formed on 01.01.2007 (02/11/2004, as per the impugned order) with the object of construction of a herbal city, apartments/villas, etc. for the promotion of herbal treatment, herbal tourism, farms, etc. by Dr. V.N. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for both the years, shows, the AO got the cooperation from the assessee in the second round, a complete absence of which had led to the best judgment assessments u/s. 144 in the first, with even returns of income having not been furnished in response to notices u/s. 153A r/w s. 153C: 3 ..This time the assessee s authorized representative [hereinafter called AR] Sri. Mathew Joseph, Chartered Accountant, appeared. Each and every document seized analyzed, re-classified between various assessment entities and the assessment years. Through this process, all the multiple assessment of the same asset, over the various assessees of the group and years were eliminated. This exercise was carried out over several days of sitting spread over five months. Also, credits in the bank accounts analyzed. Based on this analysis, a category-wise statement of investment was prepared and sent to the assessee seeking the sources thereof vide letter dated 16/01/2014. The AR appeared with books of accounts maintained and on detailed verification of these accounts the assessment is concluded as under: (emphasis, ours) Assessments, which though in view of the non-furnishing of the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any incriminating material found or seized during search dated 17/9/2008, the assessee does not assail the assumption of jurisdiction u/s. 153C, which is only on the basis of a satisfaction recorded by the AO of the person searched in this case, VRN, that material having a bearing on the income of the assessee stands found, so that it s income would require being assessed. This material, absence of which is being now contended, is the very basis, the foundation, on which the assessment in case of a person other than the person searched, i.e., u/s. 153A r/w s. 153C, rests, which otherwise, a special jurisdiction, is restricted to the person searched. Reference, apart from the clear and unambiguous language of the statute, may in this context be made to the decision in CIT v. Calcutta Knitwears [2014] 362 ITR 673 (SC).This aspect, understandable in view of the materials seized, and even as the matter travelled up to the Tribunal, was not challenged in the first round and, which, rather, would be the first thing that an assessee, had that been the case, done, i.e., in the normal course of conduct. The decision in Abhishar Buildwell (supra) impacts only the assessment of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for challenge, not assumed at any stage earlier. 4.5 Coming to the merits of the assessee s case, it is, both on facts and in law, misconceived. Quite apart from the fact that reference to a wrong section, i.e., assuming so, is immaterial, as long as the authority has the power to sustain the impugned action (Hukumchand Mills Ltd. v. State of Madhya Pradesh [1964] 52 ITR 583 (SC); Isha Beevi v. TRO [1975] 101 ITR 449 (SC)), the addition in the instant case is, for both the years, only u/s. 69. It is the investment in property, found unexplained by the AO, which led to the addition for Rs. 17.08 lakh for AY 2008- 2009. It was the assessee s case that the same stands financed by VNR, which was found false, with VNR being unable to explain even the source of the properties purchased in his name. For AY 2009-2010, it was the assessee s claim that the source of funds for the purchase of properties is not the credits appearing in the name of VNR. And which led the ld.CIT(A) to direct the AO to verify the availability of cash with the assessee, stated to arise on the sale of properties, so that, where available, no addition would hold (para 5.26 of the impugned order). The fact of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings, leading to the assessments being framed u/s. 144. Why, no returns were filed even in response to the notices u/s. 153C and, despite reminders and extended time being allowed for the purpose. The returns filed on 31.12.2010 are non-est in the eyes of law. In the absence thereof, the entire material found and seized in relation to the assessee, it may be appreciated, becomes incriminating, particularly considering that the transactions in land dealings, huge in number, were in cash. The observation by the AO in the second round, reproduced supra, is also telling inasmuch as, as against material seized in 2008, the books of account produced in 2013, i.e., in the second round, or much later in time, upon collecting the entire data gathered, cannot by any stretch of imagination be regarded as the books of account being maintained in the regular course of its business by the assessee. In this context, it may be clarified, that an addition u/s.68, i.e., even assuming for the sake of argument of it being the correct provision, is misplaced, and for which reference be made to the decisions in Hukumchand Mills Ltd. (supra); Isha Beevi (supra). 5.1 The only other ground ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 143 shall not include the additional income-tax, if any, payable under section 143. Explanation 3. Where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section. Explanation 4. [* * *] (2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section. (3) Where the return of income for any assessment year, required by a notice under section 148 or section 153A issued after the determination of income under subsection (1) of section 143 or after the completion of an assessment under sub-section (3) of section 143 or section 144 or section 147, is furnished after the expiry of the time allowed under such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one per cent for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time allowed as aforesaid, and, (a) where the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest is charged, which gets crystallized on the completion of regular assessment for the first time. True, the original assessment/s stands set aside, but the same is accompanied by a direction to frame a fresh assessment/s, which thus is in consequence thereof. The order u/s. 254(1), it may be noted, has not led to the obliteration of the demand raised earlier, but only in scaling it down, as envisaged u/s. 234A(4), and which revision could be upward as well. Whether the said set aside was at the instance of the assessee who was responsible by its conduct for the same, or the Revenue, is immaterial for the purpose of levy of interest u/s. 234A, which is only towards the delayed filing of the return. And which default, and with enough justification, receives closure by law on the completion of the assessment in the first instance. The only thing therefore relevant from the stand point of charge of this interest with reference to the subsequent proceedings is the revision in the assessed tax and, accordingly, the concomitant interest liability. Sec. 234A(4) only contemplates revision in the amount charged or chargeable, even if nil, as where the first assessment yields a nil ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plated by the Act for income being undisclosed, as: (a) where the income has clearly not been disclosed, and (b) where the income would not have been disclosed. In concluding whether the income would or would not have disclosed, reliance, it explained, is to be placed on the surrounding facts and circumstances of the case. The only manner for disclosing income, it went on to explain, on the part of the assessee, is filing a return as stipulated in the Act. The non-filing of the return by the assessee was thus regarded by it as a fair inference as to the satisfaction of the condition that the income would not have been disclosed. The controversy regarding the applicability of section 68 or 69 is, again, contrived and, in any case, of no consequence, even as clarified by the courts, as in Namdev Arora v. CIT [2016] 389 ITR 434 (P H), as and when this issue came up before them. No books of account were found during the search, nor indeed presented during the original assessment proceedings. That produced in the set aside proceedings in 2013 incorporating the investment in properties, documents in respect of which were found during the search, is, thus, only aruse so as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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