Sreekumari Amma, Thiruvananthapuram V. DCIT, Central Circle, Thiruvananthapuram, Thiruvananthapuram

ITA 604/COCH/2022

AI Insights

The case involves appeals by Smt. Sreekumari Amma against the common order passed by the CIT(A)-3, Kochi, which upheld the additions and disallowances made by the Assessing Officer for the assessment years 2011-12 to 2017-18. The main contention was that the additions were not based on any incriminating material found during the search and were thus bad in law. The Tribunal noted the absence of clear evidence on whether the assessments were abated or unabated and remitted the matter back to the CIT(A) for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 115384 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 12-05-2022
• Other Referred Cases: Pr.CIT vs. Meeta Gutgutia Prop. Ferns 'N' Petals, Kabul Chawla vs. Income Tax Department, CIT vs. Continental Warehousing Corpn (Nhava Sheva) Ltd., Ralhan Construction Company vs. ITA No 3928/ del/2016, New Delhi Tyre House vs. ITA No 2359/Del/2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 132; 143(3); 153A; 153; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA Nos. 601 to 607/Coch/2022 Assessment Years : 2011-12 to 2017-18 Smt. Sreekumari Amma, T.C. 27/2188 CRRA-45, Chirakulam Road, Trivandrum, Thiruvananthapuram – 695 001. Kerala. PAN: ARVPS5864Q Vs. The Deputy Commissioner of Income Tax, Central Circle, Trivandrum. APPELLANT RESPONDENT Assessee by : None Revenue by : Smt. J M Jamuna Devi, Sr DR Date of Hearing : 13-01-2023 Date of Pronouncement : 20-01-2023 ORDER PER PADMAVATHY S, ACCOUNTANT MEMBER These appeals are against common order passed by the CIT(A)-3, Kochi dated 18.03.2022 for A.Ys. 2011-12 to 2017-18. 2. The only issue contended by the assessee through grounds of appeal is that the order of assessment passed u/s. 143(3) r.w.s. 153A is not based on any incriminating material found during the course of search and accordingly is bad in law. Page 2 of 7 ITA Nos. 601 to 607/Coch/2022 3. The assessee is an individual and had filed her return of income for A.Ys. 2011-12 to 2017-18, the details of which are as below. Assessment Year Date of filing of return of income Return of income (in Rs.) 2011-12 15.05.2012 8,64,110 2012-13 26.10.2012 9,53,770 2013-14 01.07.2014 10,50,610 2014-15 27.03.2015 10,34,550 2015-16 02.08.2018 10,70,390 2016-17 02.08.2018 61,100 2017-18 19.10.2018 2,62,690 4. There was a search u/s. 132 of the IT Act (“the Act”) was carried out in the case of Shri Vinodkumar Kuttappan group on 05.05.2016 and the assessee is wife of Shri Vinod Kumar Kuttappan. The assessee is the Managing Director of Keranadu Printing and Publishing (P) Ltd. and Nightingale College of Nursing, Trivandrum. Warrant of authorisation was also served on the assessee and accordingly, a notice u/s. 153A was served on the assessee. The assessee response to the notice u/s. 153A filed the return of income returning the same income as in the original return of income filed. The Assessing Officer made addition towards depreciation claimed on asset which was not there in the original return of income on the ground that in the absence of any proof of the asset brought in and that the assessee could not prove that the asset was exclusively used for the purpose of business and therefore disallowed 50% of the depreciation claimed. The Assessing Officer also made an addition towards LIC premium paid by the assessee for the reason that the same is not reflected in the outflow of the cash flow statements submitted and no proof was submitted to substantiate the LIC premium paid. The summary of the additions / disallowances made by the Assessing Officer for the years under consideration is as given below: Page 3 of 7 ITA Nos. 601 to 607/Coch/2022 Assessment Year Depreciation / disallowance (in Rs.) LIC (in Rs.) 2011-12 20,576 57,002 2012-13 38,066 - 2013-14 2,25,923 - 2014-15 3,86,753 48,252 2015-16 3,29,573 - 2016-17 2,80,137 - 2017-18 2,38,116 - 5. For A.Ys. 2016-17 and 2017-18, the Assessing Officer made addition towards agricultural income as income from other sources. Aggrieved by the order of the Assessing Officer, the assessee preferred further appeal before the CIT(A). The CIT(A) upheld the additions / disallowances made by Assessing Officer with respect to addition towards depreciation. The CIT(A) held that “4.3 The appellant took grounds regarding disallowance of depreciation for the A.Ys 2011-12 to 2017-18. The appellant submitted that the additions to motor cars are disclosed in the balance sheets filed along with the returns of income. The appellant made additions to motor cars during A.Ys 2011-12, 2013-14 and 2015-16 being Mahindra Jeep, Jaguar car and Range Rover car respectively. The appellant submitted that the claim of depreciation was not made on Range Rover car since the same was used exclusively for the personal purposes The appellant submitted that the said motor cars were used for the appellant's business of catering and Yoga classes. The appellant contended that disallowance on adhoc basis is not justified. The appellant also submitted that the disallowance on depreciation claim was made in the hands of appellant's spouse. The appellant relied on the decisions of ITAT Delhi in the case of Ralhan Construction Company in ITA No 3928/ del/2016. New Delhi Tyre House in ITA No 2359/Del/2019. 4.4 The Assessing Officer reported that the appellant failed to produce the trip sheets of the motor cars to prove that the same were exclusively used for the purposes of business. 4.5 The submissions made and decisions relied on by the appellant and the report of the Assessing officer are carefully considered. Having made a claim for depreciation on motor cars, the burden of proving the exclusive use for exclusive business purpose is on the appellant. The appellant failed to produce the trip sheets of the motor Page 4 of 7 ITA Nos. 601 to 607/Coch/2022 cars to prove that the same exclusively used for the purposes of her business. Considering the nature and size of appellant's businesses of catering and Yoga classes, and the absence of evidence in support of exclusive business use of the motor cars, the Assessing Officer rightly restricted the claim of depreciation on motor cars. Hence the appellant's grounds are rejected and the additions made by the Assessing Officer are upheld for the A.Ys 2011-12 to 2017-18.” 6. The CIT(A) also upheld the additions made with regard to deduction claimed u/s.80C by the assessee towards payments made to LIC on the ground that the necessary documents have not been submitted evidencing the claim. 7. Aggrieved, the assessee is before the Tribunal. 8. The Ld.AR submitted that the additions made by the Assessing Officer are not based on any incriminating material found during the course of search. The disallowance of depreciation is made on an estimated basis but not based on any incriminating material. The disallowance of depreciation is done for the reason that the assessee did not substantiate the usage of the two cars for the purpose of business and disallowed 50% of the depreciation from which it is evident that no incriminating material is found based on which the said disallowance is made. The Ld.AR in this regard relied on the decision of Hon’ble Delhi High Court in case of Pr.CIT vs. Meeta Gutgutia Prop. Ferns ‘N’ Petals reported in [2017] 395 ITR 526 (Del) where it is held that If no incriminating material was found during the course of search in respect of an issue, then no additions in respect of such an issue can be made to the total income in the assessment under sections 153A and 153C of the Act. The Ld.AR also submitted that the SLP filed by department before the Hon’ble Supreme Court against the above order of Hon’ble Delhi High Court has already been dismissed by the Hon’ble Supreme Court reported in (2018) 257 Taxman 441 (SC). Page 5 of 7 ITA Nos. 601 to 607/Coch/2022 9. With regard to addition made on the LIC premium paid, the Ld.AR submitted that the assessee had made the payment and claimed the same u/s. 80C in the return of income and the addition is made for the reason that the evidence in support of the claim is in husband’s name. Accordingly, the Ld.AR submitted that the impugned addition is not again based on any incriminating material but is made towards a deduction which is already claimed in the return of income. Accordingly, the Ld.AR prayed for deletion of addition / disallowance made. 10. The Ld.DR relied on the order of CIT(A). 11. We have heard the rival submissions and perused the material on record. We notice that in the case law relied on by the ld AR Meeta Gutgutia (supra) it is held that – 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. Page 6 of 7 ITA Nos. 601 to 607/Coch/2022 iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. 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." 12. The ratio laid down in the above decision where the decision of Hon’ble Supreme Court is followed in the case of Kabul Chawla (supra) is that in the case of abated assessments the scope of making additions by the AO is restricted only to income that is not disclosed which is detected or which emanates from material found in the course of search which are incriminating. The assessee has raised the legal contention with respect to additions made Page 7 of 7 ITA Nos. 601 to 607/Coch/2022 u/s.153A are not based on incriminating material first time before the Tribunal and not before the CIT(A). During the course of hearing the ld AR presented the arguments with regard to this stating the additions are not based on incriminating material. However both the ld AR and the ld DR did not make any submissions with regard to whether the assessment years under consideration are abated or unabated. From the perusal of assessments order and other materials on record, the details of whether the assessments for these assessment years are abated or not is not coming out clearly. Since this legal contentions are not raised before the CIT(A) and the facts in this regard needs verification, we remit the legal issue contented in this appeal back to the CIT(A) for examination of facts. The CIT(A) is directed to keep in mind the decision rendered in the case of Meeta Gutgutia (supra) and decide the issue in accordance with law. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on 20 th January, 2023. Sd/- Sd/- (BEENA PILLAI) (PADMAVATHY S) Judicial Member Accountant Member Cochin, Dated, the 20 th January, 2023. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Cochin 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Cochin