Income Tax Appellate Tribunal - Panji
P.Rama Raju,, Visakhapatnam vs The Dcit, Central Circle-1,, ... on 31 July, 2017
ITA Nos.424, 425 & 426/Vizag/2013
P. Rama Raju, Visahkapatnam
आयकर अपीलीय अिधकरण,
अिधकरण िवशाखापटणम पीठ,
पीठ िवशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
ी वी.
वी दुगा राव,
ाव
याियक सद य एवं
ी िड.एस
िड एस.
एस सु
दर सह,
सह लेखा सद य के सम
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.Nos.424, 425 & 426/Vizag/2013
(िनधा रण वष / Assessment Years: 2005-06, 2007-08 & 2009-10
respectively)
P. Rama Raju, DCIT, Central Circle-1,
Visakhapatnam Visakhapatnam
[PAN No.AGIPP5262B]
अपीलाथ / Appellant)
(अपीलाथ याथ / Respondent)
( याथ
अपीलाथ क ओर से / Appellant by : Shri G.V.N. Hari, AR
याथ क ओर से / Respondent by : Shri R. Govinda Rajan, DR
सुनवाई क तारीख / Date of hearing : 25.07.2017
घोषणा क तारीख / Date of Pronouncement : 31.07.2017
आदेश / O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
These appeals are filed by the assessee against order of the Commissioner of Appeals-I {CIT(A)-I}, Hyderabad vide ITA Nos.0496 to 0501/CC-1, Vizag/CIT(A)-I/10-11 dated 28.2.2013 for the assessment years 2005-06, 2007-08 & 2009-10. Since, the facts are identical and the issues are common, they are clubbed, heard together and disposed-off by way of this common order for the sake of convenience. 1
ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam ITA No.424/Vizag/2013 A.Y. 2005-06:
2. Ground nos.1 & 5 are general in nature which does not require specific adjudication.
3. Ground no.4 is inter-related with the ground nos.2 & 3. The issue raised by the assessee in ground no.4 is related to the jurisdiction of the assessment made u/s 153A of the Income Tax Act, 1961 (herein after called as 'the Act') which is adjudicated along with the grounds in ground nos.2 & 3. Therefore, no separate adjudication is necessary for ground no.4.
4. Ground no.2 is related to the addition of Rs.10.00 lakhs, unexplained investment in shop at Sri Ram Residency for the A.Y. 2005-
06. The assessee filed the return of income declaring total income of Rs.11,38,900/- on 1.11.2005. A search u/s 132 of the Act was conducted in the residential premises as well as business premises of the assessee on 22.8.2008. During the course of search proceedings, the incriminating material relating to the assessee was found and seized by the investigation wing of the Income Tax Department and issued a notice u/s 153A of the Act and the assessment was completed u/s 143(3) r.w.s. 153A of the Act. One of the additions made in the assessment order was unexplained investment relating to shop in Sri Ram Residency amounting to Rs.10.00 lakhs which was added by the 2 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam A.O. u/s 69 of the Act and confirmed by the Ld. CIT(A). Hence, the assessee filed appeal before us.
5. During the course of search and seizure operation in the residential premises of the assessee, the investigation wing found a loose sheet containing the details of investments on the letter head of Shri P. Somaraju, father of the assessee. As per the loose sheet, the amount of Rs.10.00 lakhs was shown against Sri Ram Residency shop in the name of Shri P. Rama Raju. On an enquiry it was explained that he has constructed a shop in the Sri Ram Residency for which no approval was given by the Municipal authorities and the municipal authority is at liberty to demolish the shop at any point of time, and hence the assessee has not declared the value of shop in his regular return of income. Not convinced with the assessee's explanation, the assessing officer made the value of unaccounted investment in the shop as unexplained investment in Sri Ram Residency and brought to tax. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and challenged the addition technically as well as on merit. Not being successful before the CIT(A), the assessee is in appeal before us.
6. During the appeal hearing, the assessee argued that the loose document found was on the letter head of his father and it is not 3 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam pertaining to the assessee, hence there is no incriminating material found in this case for making addition as unexplained investment. Further, the Ld. A.R. also argued that the assessee is following the mercantile system of accounting and as per the system of accounting followed by the assessee, the cost or market value of work in progress or the stock in trade whichever is lower in required to be accounted in the books of accounts. In the assessee's case, the shop was constructed with a nominal expenditure and no approval was accorded by the municipal authorities and the shop is liable to be demolished by the municipal authorities at any point of time and the assessee was under the impression that the value of the stock was nil, hence, it was not declared the in the work in progress of the assessee. Therefore, the Ld. A.R. was of the view that both on merits and on technical grounds, there is no case for making the addition which requires to be deleted. 6.1 On the other hand, the Ld. D.R. argued that during the course of search, it was found by the department that the assessee has constructed a shop in the ground floor of Shri Ram Residency but not declared in the returns of income. Though there was no approval, it is the practice of the builders in the Andhra Pradesh to construct the Pent houses in the top floors and shops in the cellars and selling the same to the customers. Customers are available to purchase the shops and pent 4 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam houses even though there is no approval taking the risk of demolition by the municipal authorities. Apart from the above, the fact remained that the assessee has constructed a shop in Sri Ram Residency, till the date of search it was not demolished and asset remained intact in as is where is condition and the value of which was declared by the assessee's father at Rs.10 lakhs. The loose sheet was written for the sake of their information and the same cannot be ignored. The unaccounted asset found during the course of search and the document found at the time of search indicating the value of the asset at Rs.10 lakhs constitutes incriminating material within the meaning of section 132 & 153A of the Act and thus, the Ld. D.R. argued that there was no error in the order of the assessing officer in issuing the notice and making the assessment u/s 153A of the Act and the same to be upheld. Further, the Ld. D.R. submitted that there is an asset in the Sri Ram Residency (shop), which was an undisputed fact and the same was found at the time of search. The cost of asset was not declared in the balance sheet and the assessee himself has valued the asset at Rs.10 lakhs. Therefore, there is no reason to suspect the investment or value of the asset at Rs.10 lakhs. Since the asset is outside the books of accounts, the same required to be brought to tax as unexplained investment u/s 69 of the Act, which the A.O. has rightly did. Therefore, the Ld. D.R. argued that 5 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam there is no infirmity in the order of the Ld. CIT(A) or lower authorities, and the same is to be upheld.
7. We have heard both the parties and perused the materials available on record. A search u/s 132 of the Act was conducted in the various premises of the assessee on 22.8.2008 and during the course of search, a loose sheet was found indicating the value of shop at Sri Ram Residency in the name of Sri P. Rama Raju at Rs.10 lakhs. The document was found in the residential premises of the assessee. Similarly, the assessee has constructed a shop in Sri Ram Residency which fact has been accepted by the assessee. The asset (shop) found in Sri Ram Residency and the document found during the course of search indicating the value of the shop constitutes the incriminating material and therefore, we hold that the A.O. has rightly initiated the proceedings u/s 153A of the Act. Accordingly, the argument of the assessee that there is no incriminating material, cannot hold waters and the same is rejected.
The Next argument of the Ld A.R is the assessee is following the mercantile system of accounting and the value of asset at cost or market price whichever is lower required to be adopted for the purpose valuing closing stock/work in progress. In this case, the asset is said to be constructed with a nominal or negligible amount without the approval of 6 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam the municipal authorities. Municipal authorities can demolish shop at any time, since it was constructed without authorization. Therefore, according to the Ld. A.R., the value of the asset was nil, and rightly adopted by the assessee in the financial statements and no addition is warranted.
8. In this case, it is an undisputed fact that the assessee has created an asset and the value of the same was not taken in the work in progress. Though the asset was constructed without the approval, the assessee has incurred the expenditure for construction of the shop and the asset created out of the same was not declared in the balance sheet which constitutes the asset outside the books of accounts. The value of Sri Ram Residency shop should to be brought to the books of accounts in the stock in trade or work in progress. In this case, the assessee failed to disclose the value of the asset in the balance sheet. The only evidence available which was found at the time of search was the loose sheet indicating the value of the shop at Rs.10 lakhs. The loose sheets were found in the residence of the assessee and the burden is cast on the assessee to prove the contents of the loose sheets were not correct as per section 292C of the Act. The assessee has not established that the value of the asset was less than Rs.10 lakhs and the fact that the assessee has constructed a shop in the Sri Ram Residency 7 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam is an undisputed fact. The assessee has not furnished details of the expenditure incurred for construction of the shop. Therefore, in the absence of any evidence to show that the value of the asset was less than Rs.10 lakhs, we do not find any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. This ground of appeal is dismissed.
9. Ground no.3 of the assessee is related to the addition of Rs.2,50,000/- towards unexplained creditors. During the course of assessment proceedings, the A.O. found a sum of Rs.2,50,000/- as unsecured credit in the name of B.V.R. Murthy. The A.O. brought to tax the above amount u/s 68 of the Act. The assessee challenged the addition on technical grounds objecting the jurisdiction of assessment u/s 153BA of the Act. In this case, the assessee filed the return of income for the assessment year 2005-06 on 1.11.2005. The time limit for issue of notice u/s 143(3) of the Act was expired on 31.3.2007. The assessment for the assessment year 2005-06 deemed to have been completed by 31/03/2007. The ld. A.R. argued that where the assessments are deemed to have been completed or abated, the addition cannot be made without the incriminating material. In the instant case, as far as the unsecured credit of Rs.2,50,000/- is concerned, there is no material found during the course of search. 8
ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam Therefore, according to the Ld. A.R., there is no case for making any addition u/s 153BA r.w.s. 143(3) of the Act. The Ld. A.R. relied on the orders of this Tribunal in the case of Y.V. Anjaneyulu Vs. DCIT, Central Circle, Vijayawada in ITA Nos.513 & 514/Vizag/2013. On the other hand, the Ld. D.R. relied on the orders of the lower authorities.
10. We have heard both the parties and perused the materials available on record. In this case, search was conducted on 22.8.2008 and the assessment under the consideration is the A.Y. 2005-06. Time limit for issue of notice u/s 143(2) of the Act is expired on 31.3.2007. Since the period of limitation for issue of notice u/s 143(2) of the Act has been expired, the assessment deemed to have been completed and reached finality. As per the judicial precedents and the ruling of this Tribunal in the case law cited (supra), the coordinate bench held that where the assessment have been reached finality cannot be tinkered with unless there was a seized document indicating undisclosed income or the asset. For ready reference, we extract the relevant para of the order cited (supra):
11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The only issue that arises for our consideration is whether on the facts and in the circumstances of the case, the A.O. is right in making additions without any seized materials in respect of assessment years for which the assessment proceedings have been concluded as on the date of search.
The Ld. A.R. for the assessee, submitted that the issue has been already considered by the coordinate bench of Visakhapatnam ITAT in the case of Sri Hari Prasad Bhararia Vs. DCIT in ITA Nos.435 to 441/Vizag/2014, 9 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam wherein it has been observed that the A.O. has no jurisdiction to make additions in the absence of any seized materials in the assessments made u/s 143(3) r.w.s. 153A of the Act, for the assessment years which are concluded and no proceedings are pending as on the date of search. The relevant portion of the order is extracted below:
12. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. Consequent to the search, the assessee case was centralized and accordingly, notice u/s 153A of the Act was issued requiring assessee to file return for 6 assessment years immediately preceding the assessment year in which search is conducted. The assessee filed returns in response to notice u/s 153A of the Act. The A.O. completed the assessment u/s 143(3) r.w.s. 153A of the Act and made additions towards deemed dividend under the provisions of section 2(22)(e) of the Act. The A.O. was of the opinion that transactions between the assessee and his company is coming within the definition of deemed dividend under the provisions of section 2(22)(e) of the Act. It is the contention of the assessee that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act, for the assessment years 2005- 06 to 2009-10 is null and void as the A.O. has made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials. The assessee further contended that as per section 153A of the Act, de-novo assessment can be made only in respect of assessment year for which the assessment proceedings has been abated and that in respect of assessment years for which the assessment had already been completed, no additions can be made u/s 153A of the Act unless there was incriminating material found during the course of search.
13. The A.O. has passed assessment orders u/s 153A of the Act, for all the six assessment years, immediately preceding the year in which the search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessment on the powers of the A.O. for making assessment/re-assessment and the A.O. is not required to confine his assessments on the materials found during the course of search as was the case in the old procedure of block assessments. It is the contention of the assessee that the A.O. cannot disturb the completed assessment unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notice u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to re-assess the income of those completed assessment years. We find force in the arguments of the assessee, for the reason that the coordinate bench of this Tribunal in ITA Nos.300 to 305/Vizag/2012, in case of L. Suryakantham Vs. ACIT, 10 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam has considered similar issue and held that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search and also the time limit for issue of notice u/s 143(2) of the Act has been expired. The relevant portion of the order is extracted below:
19. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix of the case is that there was a search action u/s 132 of the Act. During the course of search, incriminating documents found reveals that the assessee has inflated labour charges for the assessment years 2008-09 & 2009-
10. Based on the documents found during search, the assessee has accepted that he has inflated 10% labour charges and which is common in this line of business. Consequent to search action u/s 132 of the Act, the assessee case has been centralized and accordingly fresh assessment proceedings have been initiated by issuing notice u/s 153A/153C of the Act for the six assessment years immediately preceding the assessment year in which search was conducted. The assessee has filed revised returns in response to notice u/s 153A of the Act and admitted the additional income disclosed during the course of search. The case has been selected for scrutiny. During the course of assessment proceedings, the assessee was asked to produce books of accounts and relevant bills & vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished.
Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated.
In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there was no incriminating material found during the course of search for the above assessment years and as such no additions can be made to the returned income. It is further submitted that as per sec. 153A of the Act, de-novo assessment can be made only in respect of the assessment year for which the assessment proceedings had been abated and that in respect of assessment years for which the assessment had already been reached a finality, such assessment could not be made u/s 153A of the Act unless there was seized materials.
20. The A.O. has passed reassessment orders u/s 153A/153C of the Act for all the six assessment years immediately preceding the year in which search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessments on the powers of A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the material 11 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam found during the course of search as was the case in the old procedure of block assessments. The new procedure of block assessment was explained by way of provisions of section 153A of the Act. As per section 153A of the Act, the A.O. shall assess or reassess the total income of the specified six assessment years irrespective of the fact that the assessment of the said years were completed or pending as on the date of search. Therefore, the A.O. has reassessed the income of six assessment years and recomputed the profits afresh after considering the relevant facts available on record. It was the contention of the assessee that the A.O. cannot disturb the completed assessments unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notices u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no power to reassess the income of those completed assessment years.
21. We find force in the arguments of the assessee for the reason that the issue no longer res integra, as the issue has been already decided by the ITAT, special bench and held that where the assessments are not pending as on the date of search, the A.O. losses jurisdiction u/s 153A of the Act to reassess the income of those completed assessments. Though the provisions of section 153A of the Act does not specify abated and completed assessments, the natural meaning assigned to it should be given to interpret the provisions in such a way that which shall not cause undue hardship to the tax payers. The provisions of section 153A of the Act explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed assessment should be treated so as to understand that those assessments are reached finality and which cannot be tinkered with unless there was a seized document. Therefore, we are of the considered opinion that where search is initiated, all pending assessments are merge into one and only one assessment for each assessment year shall be made separately on the basis of findings of search and other material existing or brought on record by the A.O. In respect of non abated or completed assessments, the assessment will be made on the basis of books of accounts or other relevant documents found during the course of search, but not produced in the course of original assessment.
22. In the present case on hand, on perusal of the document available on record, we find that the assessment for the 12 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam assessment year 2004-05 to 2007-08 were not pending as on the date of search. The fact that the assessment has been completed u/s 143(1) & 143(3) of the Act are not material. The time limit for issue of notice u/s 143(2) of the Act has been expired. On further verification of the documents available on record, we find that there was no incriminating documents found during the course of search in respect of assessment year 2004-05 to 2007-08. Therefore, we are of the opinion that the A.O. was not correct in reassessing the total income of the assessment year 2004-05 to 2007-08 in the absence of any seized materials. Accordingly, we direct the A.O. to delete the additions made for the assessment year 2004-05, 2005-06 & 2007-08.
23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate bench of this Tribunal, while deciding the issue in favour of the assessee held as under:
"In assessments that are abated, the AO aretains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately. In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means - (i) books of account, 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."
24. The assessee relied upon, A.P. High Court decision in the case of CIT Vs. M/s. AMR India Ltd. in ITTA No.354 of 2014 dated 12.6.2014. The Hon'ble High Court held that the A.O. has no jurisdiction to re-agitate the assessments which were already completed and subsiding. The relevant portion is extracted below:
"We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgement and order of the learned Tribunal.
It appears that the learned Tribunal found on fact that after completion of assessment proceedings and after reaching finality thereon, the Assessing Officer tried to reagitate the assessments. According to us, the learned Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal.13
ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam Hence, the appeal is dismissed. There will be no order as to costs."
25. The assessee has relied upon the coordinate bench decision of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder:
"22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):-
"57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR
57)(SC), it has been mentioned in the last paragraph of the judgment that the court has to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. Our decision is in consonance with this observation".
The decision rendered by the Special bench that the assessing officer can make additions in the case of concluded assessments on the basis of incriminating materials is also based upon the decision rendered by Honble supreme Court in the case of Parashuram Pottery works Co. Ltd (supra).
23. We have earlier noticed that the Hon'ble jurisdictional Andhra Pradesh High Court has also upheld by the orders passed by the Tribunal by following the decision rendered by the Special bench in the case of All Cargo Global logistics Ltd (supra) in the following cases:-
(a) Sree Lalitha Constructions (J1TA No 368 of 2014)
(b) M/s. Hyderabad House Pvt Ltd (ITTA No.266 of 2013)
(c)M/s. AMR India ltd (FITA No.357 /v/2014) Further we agree with the contentions of the assessee that the decision rendered by the jurisdictional High Court in the case of Gopal Das Bhadruka (supra) have been rendered on the facts prevailing in those cases, since the issue relating to concluded assessments and pending assessments was not before the I1on'ble Andhra Pradesh High Court On the contrary, the above said three decisions of the jurisdictional High Court comes to the support of the assessee's contentions with regard to the legal proposition agitated before us, besides the decisions rendered by various other High Courts.
Accordingly, we are of the view that the scope of enquiry in the case of unabated assessments, i.e., the assessment years in which proceedings are not pending, is that the undisclosed income should be ascertained only on the basis of materials found during the course of search. If no incriminating 14 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam material showing any undisclosed income was found in the case of concluded proceedings, then the question of making any addition does not arise. in that case, the assessing officer should complete the assessment of those years by determining the very same total income that was assessed in the earlier proceeding.
24. In view of the above, We are unable to agree with the contentions of Ld Standing Counsel that the assessing officer would get unfettered powers in the case of unabated assessments, once they were reopened us 153A of the Act. In our view, in the case of unabated assessments, the total income should be determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory views have been expressed by the High Courts. In the instant case the Hon'ble jurisdictional High Court comes to the support of the assessee in respect of the legal proposition in addition to the decision rendered by the Hon'ble Bombay High Court. Accordingly, we find merit in the contentions of the assessee on the legal issue."
26. Considering the facts and circumstances of the case and also respectfully following the coordinate bench decision in the case of All Cargo Logistics Pvt. Ltd. (supra), we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007-08, were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2004-05 to 2007-08 in the absence of any incriminating materials. Hence, we delete the additions made by the A.O. for the assessment year 2004-05, 2005-06 & 2007-08. Accordingly, the ground raised by the assessee is allowed.
14. In this view of the matter and considering facts and circumstances of this case and also respectfully following the decision of co-ordinate bench of Visakhapatnam, in the case of L. Suryakantham Vs. ACIT, in ITA Nos.300 to 305/Vizag/2012, we are of the view that the A.O. has made reassessment u/s 153A/153C of the Act, on the basis of information/material available in the return of income, without 15 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act, for the assessments which are not pending as on the date of search. The assessment for the assessment years 2005-06 to 2009-10 were not pending as on the date of search. The time limit for issue of notice under sec. 143(2) has been expired. Therefore, the A.O. has no jurisdiction to reassess the income for the assessment year 2005-06 to 2009-10 in the absence of any incriminating materials. The CIT(A) has rightly deleted the additions. We do not see any reason to interfere with the order of CIT(A). Hence, we inclined to uphold CIT(A) order and direct the A.O. to delete the additions made towards deemed dividend for the assessment year 2005-06 to 2009-10.
12. In this case, search was taken place on 24.7.2008. As on the date of search, the assessments for the assessment years 2004-05 & 2005-06 are already concluded and there is no pending proceeding for those assessment years. The time limit for issue of notice u/s 143(2) of the Act, for the assessment years 2004-05 & 2005-06 has been expired. The A.O. made additions towards deemed dividend u/s 2(22)(e) of the Act without any incriminating materials and also based on the books of accounts and financial statements, which were already part of regular return of income filed by the assessee u/s 139(1) of the Act, for those assessment years. Therefore, considering the facts and circumstances of the case and also respectfully following the decision of coordinate bench of ITAT, Visakhapatnam in the case of Sri Hari Prasad Bhararia Vs. DCIT (supra), we are of the view that the A.O. has no jurisdiction to make additions in respect of concluded assessments in the absence of any incriminating materials found during the course of search. In this case, undoubtedly the A.O. has made additions towards deemed dividend on the basis of financial statements filed by the assessee along with regular return of income without any material found during the course of search. Therefore, we direct the A.O. to delete additions made towards deemed dividend u/s 2(22)(e) of the Act for the assessment years 2004-05 & 2005-06.
11. The similar issue has been considered by the Hon'ble ITAT Kolkata bench in the case of Smt. Yamini Agarwal Vs. DCIT (Central Circle)-3, Kolkata reported in 83 Taxman.com 209 after considering the decision of special bench ruling in the case of All Cargo Lotistics and the decision of 16 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam Hon'ble Karnataka High Court in the case of Canara Housing and the Bombay High Court decision in the case of Anil Kumar Bhatia expressed a view that in respect of assessments completed prior to the date of search the scope of proceedings u/s 153A of the Act has to be confined only to the material found in the course of search. For the sake of convenience, we extract the relevant para-25 & 26 of the cited order.
25. We therefore hold that the scope of the proceedings u/s.153A in respect of assessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s.139 of the Act are shown to have been accepted without an intimation u/s.143(1) of the Act or without any notice issued u/s.143(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and when neither an acknowledgement or intimation u/s.143(1)of the Act is issued nor a notice u/s.143(2) of the Act is issued within the time limit laid down in the proviso to Secc.143(2) of the Act, the proceedings initiated by filing the return are closed. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice u/s.143(2) of the Act within the time limit laid down in the proviso to Sec.143(2) of the Act, results in an assessment proceedings and where such assessment proceedings are completed prior to the date of search then they do not abate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above.
26. In the light of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s.153A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.153A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s.143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s.153A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.153A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No.1 raised by the Assessee in both the appeals are accordingly allowed. 17
ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam
12. Respectfully following the decision of this coordinate bench in the case cited (supra) and the decision of Hon'ble ITAT Kolkata bench, we hold that the addition of Rs.2,50,000/- is squarely covered by the above case laws in favour of the assessee and the same is deleted. The appeal of the assessee is allowed on this ground.
13. In the result, appeal filed by the assessee for the assessment year 2005-06 in ITA No.424/Vizag/2013 is partly allowed. ITA 425/Vizag/2013 A.Y. 2007-08:
14. All grounds of appeal are related to the addition of Rs.15 lakhs towards the unexplained investments. During the course of assessment proceedings, the assessing officer made the addition of Rs.35 lakhs towards unexplained creditors, since the assessee has not produced the details and confirmations from the creditors. Out of addition made by the A.O. of Rs.35 lakhs, a sum of Rs.20 lakhs was deleted by the CIT(A) relating to M. Raju & P.R. Srinivasa Rao and the amount of Rs.5 lakhs in the case of D.V. Subba Raju and Rs.10 lakhs in the case of R. Purushottam was confirmed by the CIT(A). Therefore, the assessee is in appeal before us. The Ld. A.R. argued that the assessee has admitted additional income of Rs.1,50,00,000/-, during the search and requested for telescoping the addition from the undisclosed income admitted by 18 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam him. The ld. A.R. further argued that in this case, the time limit for issuing the notice was expired by the time the search was conducted and the assessment was completed, no addition can be made in the hands of the assessee.
15. On the other hand, the ld. D.R. relied on the order of the lower authorities.
16. We have heard both the parties and perused the material available on record. In this case, the assessee filed return of income on 19.11.2007 for the assessment year 2007-08. The time limit for issuing notice u/s 143(2) of the Act expires on 30.9.2008 by the date of conducting the search the time limit for issue of notice u/s 143(2) of the Act has not expired and the assessment remained not completed and abated therefore, the A.O. is permitted to verify all the relevant incriminating material as well as regular books of accounts and make the assessment. This issue was settled by this Tribunal in the order cited (supra) in the A.Y.2005-06 in appeal No.424/2013 and the Ruling of Hon'ble Kolkata Tribunal which was cited (supra). Therefore, the A.O. has rightly invoked the provisions of section 153A of the Act and assessee's appeal on this ground is dismissed.
17. The next argument against the addition was that the assessee has disclosed the undisclosed income of Rs.150,00,000/- during the search 19 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam and the addition of ` 15 lakhs should be set off against the undisclosed income. The Ld. A.R. has not furnished the statement of assets, investments for which the amount of undisclosed income was admitted. Therefore, we are unable to accept the request of the Ld. A.R. for giving telescoping benefit of the amount of Rs.15.00 lakhs from the undisclosed income admitted by the assessee. In this case, there are creditors to the extent of Rs.15 lakhs in the name of Dr. Subba Raju and R. Purushottam introduced during the year for which the assessee required to establish the identity, genuineness and creditworthiness of the creditors and the assessee failed to establish the same. Though the assessee has explained that the loans were wrongly categorized as unsecured loans instead of advances still the assessee has to prove the capacity, credit worthiness and the identity of the creditors since the credits were introduced in the books of accounts in the year under consideration. The assessee failed to establish that the amount outstanding was in fact advances and got adjusted against the sale of flats. In nutshell, the assessee failed to offer any explanation with regard to the credits introduced during the financial year. Therefore, the A.O. rightly brought the unexplained credits u/s 68 of the Act, which the CIT(A) has upheld the order of the A.O. and we do not find any 20 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam infirmity in the order of the Ld. CIT(A) and the same is upheld. The appeal of the assessee is dismissed.
ITA No.426/Vizag/2013 A.Y. 2009-10:
18. All the grounds of appeal are related to the addition of Rs.7,88,000/- assessed against unexplained investment and jewellery. During the course of search, the investigation wing found the gold and jewellery weighing around 1044 gms and the Silver articles weighing 5840 gms in the premises of the assessee. At the time of search, the assessee explained that 430 gms. of gold was belonging to him and the balance of gold was belonging to his father and sister. Accordingly, the value of 473 gms. was admitted by the assessee in his hands. With regard to the 614 gms. of gold, which was said to be belonging to his sister and silver articles which was said to be belonging to the father of the assessee was treated as unexplained investment in the hands of the assessee by the A.O. and brought to tax a sum of Rs.7,88,000/-. Aggrieved by the order of the A.O., the assessee went on appeal before the Ld. CIT(A) and the Ld. CIT (A) has confirmed the order of the A.O. as per the discussion in para-12 of the order, which is reproduced as under for the sake of convenience:
"I have gone through the facts of the case and the submissions of the appellant. From the facts, it is clear that out of 1044 gms. of gold jewellery found in the course of search, jewellery that of 430 gms. only was claimed as belonging to the appellant, his wife and daughter. In view 21 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam of such admission, no further allowance is required to be given in their hands even with reference to the Board's instruction. As regards the remaining gold of 614 gms., it was only in the course of assessment proceedings that the appellant claimed those belonging to his father, mother and sister. However, this contention could not be established with any documentary evidence. Besides, it has also not been proved that gold of Rs.6 lakhs admitted towards unexplained gold for the assessment year 2008-09 only was found in the course of search. Accordingly, finding no infirmity in the action of the Assessing Officer, the addition of Rs.7,88,880/- towards unexplained gold/silver in assessment year 2009-10 is upheld and the grounds raised in this regard are decided against the appellant".
19. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal. Appearing for the assessee, the Ld. A.R. argued that during the course of search, the A.O. found the gold weighing around 1044 gms. and silver articles 5840 gms. Out of which, 430 gms. was claimed to be belonging to the assessee and the balance gold was stated to be belonging to his sister and also the silver articles were belonging to his father. The Ld. A.R. stated that the gold was not found in the residence of the assessee but found from the lockers. The lockers were not belonging to the assessee. The lockers were belonging to his father or his sister. Therefore, except 430 gms. of gold, the remaining gold and silver should not be assessed in the hands of the assessee.
20. On the other hand, the Ld. D.R. relied on the orders of the lower authorities.
21. We have heard both the parties and perused the materials available on record. During the course of search conducted in the 22 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam residence of the assessee, gold weighing around 1044 gms. and silver articles 5840 gms. was found from the lockers. The assessee has stated that there were no lockers in his name. This is evident from question No.6 of the statement recorded from the assessee on 22.8.2008 and in response to question No.10, the assessee has reiterated that lockers were belonging to his father and his sister. For ready reference, we reproduce the question No.10 and answer of the statement dated 22.8.2008 from page 28 of paper book.
"Q.10. During the course of S&S operations, we opened two lockers at HDFC Bank, Dwarakanagar and SBI, Dondaparthi, wherein we found jewellery articles of gold & silver. Please explain the sources and also state whether you have filed any wealth tax returns.
A. Actually these two lockers belong to my father and my sister. However, my father will explain all the sources for acquisition of gold and silver articles. The detailed explanation will be submitted to you within a week."
22. The assessee also in his written statement reiterated the fact that the gold weighing around 430 gms. was belonging to him and the balance gold around 614 gms. was belonging to his sister and silver articles were belonging to his father. Though assessee stated that the lockers were not belonging to him in response to question no.10 of the statement recorded, which was reproduced above, the A.O. has not rebutted the claim made by the assessee. As per section 292C of the Act, the onus is on the assessee to prove the material found during the course of search is not true with tangible evidence. In this case, the 23 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam assessee has stated in his statement recorded at the time of search and subsequently during the post search operation and enquiries during the assessment proceedings that the gold weighing around 640 gms. and silver articles were not belonging to him but belonging to his father and sister. The lockers from the gold and silver found were also not belonging to the assessee as stated by him. The assessing officer has not made any enquiry with regard to the ownership of the gold and silver articles found at the time of search and to rebut the claim made by the assessee that the articles were belonging to his father and sister. When the fact that lockers were not belonging to the assessee is accepted and the assessee explains that the gold and silver articles were not belonging to him but belonged to his father and sister the burden shifts to the department and the onus is on the department to prove that the articles were belonging to the assessee. In this case, the department has not discharged the onus by conducting the necessary enquiries. When assessee has given a submission that the gold and silver articles were belonging to his father and sister, the same required to brought to tax or examine the sources in the hands of his sister and father but not in the hands of the assessee. Accordingly, the addition made by the A.O. in the hands of the assessee cannot be sustained and 24 ITA Nos.424, 425 & 426/Vizag/2013 P. Rama Raju, Visahkapatnam we set aside the order of lower authorities and delete the addition made by the A.O. The appeal of the assessee is allowed.
23. In the result, the appeals of the assessee for the assessment year 2005-06 in ITA No.424/Vizag/2013 is partly allowed, for the assessment year 2007-08 in ITA No.425/Vizag/2013 is dismissed and for the assessment year 2009-10 in ITA No.426/Vizag/2013 is allowed. The above order was pronounced in the open court on 31st Jul'17.
Sd/- sd/-
वी.
वी दुगा राव)
(वी ाव िड.एस
िड एस.
(िड एस सु
दर सह)
सह
(V. DURGA RAO) (D.S. SUNDER SINGH)
याियक सद य/JUDICIAL
सद य MEMBER लेखा सद य/ACCOUNTANT
सद य MEMBER
िवशाखापटणम /Visakhapatnam:
दनांक /Dated : 31.07.2017
VG/SPS
आदेश क ितिलिप अ ेिषत/Copy of the order forwarded to:-
1. अपीलाथ / The Appellant - Shri P. Rama Raju, Prop. Vigneswara Constructions, D.No.49-54-9, Flat No.401, Sanjana Residency, R.K. Layout, Visakhapatnam-530
013.
2. याथ / The Respondent - The DCIT, Central Circle-1, Visakhapatnam
3. आयकर आयु / The CIT (Central), Hyderabad
4. आयकर आयु (अपील) / The CIT (A)-I, Hyderabad
5. िवभागीय ितिनिध, आय कर अपीलीय अिधकरण, िवशाखापटणम / DR, ITAT, Visakhapatnam
6. गाड फ़ाईल / Guard file आदेशानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM 25