Sushil Kumar Singhal, Shahdol V. Deputy Commissioner of Income Tax,Circle-Jabalpur, JABALPUR

ITSSA 39/JAB/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2769 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 13-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 11-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Search and seizure
• Section: 132; 143(3); 153A; 143(2); 158BC; 153C

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI SANJAY ARORA, HON‟BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T. (SS) A. No. 39/JAB/2018 (Asst. Year: 2015-16) Appellant by : Shri Sapan Usrethe, Advocate Respondent by : Shri Shravan Kumar Gotru, CIT-DR Date of hearing : 14/09/2022 Date of pronouncement : 20/09/2022 O R D E R Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order dated 31/08/2018 by the Commissioner of Income Tax (Appeals)-1, Jabalpur („CIT(A)‟, for short), partly allowing the assessee‟s appeal contesting his assessment under section 143(3) of the Income Tax Act, 1961 („the Act‟ hereinafter) dated 09/12/2016 for the Assessment Year (AY) 2015-16. 2. The brief facts of the case are that a search u/s. 132 was carried out by the Revenue at the assessee‟s, a Chartered Accountant by profession, residence at Jabalpur on 16/10/2014, whereat cash (at Rs. 7,40,510) and gold coins/jewellery (at 1041.5 grams), valued at Rs. 26.72 lacs, was found. Allowing credit for the gold coins (530 gms.), the balance, being cash and gold jewellery (511.5 gms.), was added in assessment as unexplained assets u/s. 69A/69B. In appeal, the ld. Sushil Kumar Singhal, HIG 423, New Housing Board Colony, Shahdol (MP) [PAN : AQHPS 2422 F] vs. Dy. CIT, Central Circle, Jabalpur. (Appellant) (Respondent) IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 2 | P a g e CIT(A) allowed relief for Rs. 4 lacs in respect of cash, on the basis of Rs. 6.50 lacs withdrawn from bank on 11/07/2014, as well as 500 grams of gold jewellery, in terms of Board Instruction 1916, dated 11/05/1994, so that addition qua the balance cash (Rs. 3,40,510) and gold jewellery (11.5 grams), valued at Rs. 29,506, was confirmed. Aggrieved, the assessee is in second appeal. 3. We have heard the parties, and perused the material on record. 3.1 The assessee has before us, as indeed before the first appellate authority, challenged the assessment on legal grounds, which we shall take up in seriatim. To begin with, it is claimed that search itself was invalid inasmuch as the warrant of authorisation u/s. 132(1) was meant for another person of like name, a contractor, even as subsequently confirmed by CBDT on a complaint thereto, as conveyed by PMO vide its reply dated 22/06/2017 on a reference thereto by the assessee (PB-1, pg.3/PB-2, pg.1-3). The search at the assessee‟s residence was thus illegal. We were accordingly urged to quash the assessment. 3.2 We find no merit in the assessee‟s claim. The assessment under reference is not u/s. 153A, i.e., consequent to search or requisition in the assessee‟s case, invalidating his Ground-1 before us. The impugned assessment is u/s. 143(3), i.e., a regular assessment, as defined u/s. 2(40) of the Act, which does not require search or requisition as a jurisdictional fact. Rather, but for the fact that the authorisation u/s. 132 stands admitted by the Revenue to have not been issued on the assessee, but instead on a like named person, i.e., of it being a case of mistaken identity, the Tribunal, as explained by the Hon'ble jurisdictional High Court in Gaya Prasad Pathak vs. CIT [2007] 290 ITR 128 (MP), is not competent to decide on the validity or legality of a search u/s. 132 or a requisition u/s. 132A. As explained by it, a valid authorisation u/s. 132A is not a jurisdictional or even an adjudicatory fact for an assessment u/s. 158BC which, as an assessment u/s. 153A, was an assessment pursuant to a search or requisition under Chapter XIV-B of the Act, since discontinued. The Tribunal being a creature of the statute, it‟s power is IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 3 | P a g e limited to that conferred under the provisions of the Act. The order by the Tribunal, holding likewise, was accordingly upheld. To the same effect is the decision by other Hon'ble High Courts, including the Hon'ble Delhi High Court in S.K. Industries Pvt. Ltd. v. DGIT [2007] 290 ITR 359 (Del). The only condition precedent for a valid assumption of jurisdiction for an assessment u/s. 143(3) is a service of notice u/s. 143(2) within the prescribed time which, as admitted by Shri Usrethe, the ld. counsel for the assessee, is not in dispute even though the assessee has raised a Ground (Gd.2) in its respect, which was accordingly not pressed by him during hearing. The order by the Tribunal in Jindal Stainless Ltd. v. Asst. CIT [2009] 19 DTR_TRIB 345 (Del.) quashing an assessment u/s. 153A, relied upon before us, though qua an assessment u/s. 153A, so that it is not applicable in the instant case, is itself per incuriam inasmuch as it is contrary to the decision by the Hon'ble jurisdictional High Court. Likewise, is the case of the order by the Tribunal in Divya Shivhare, Gwalior vs. DIT (in ITA No. 193-198/Agr./2012), also referred to in the assessee‟s paper-book, being subject to the jurisdiction of Hon'ble High Court of MP. The assessee‟s claim thus fails. 3.3 The assessee‟s next legal challenge, per it‟s additional ground, is to the issue of notice u/s. 143(2). This stands made by the assessee on the strength of the CBDT Instruction 04/2016, dated 13/07/2016 (PB-3, pgs.1-2), referred to by the AO in his order, adverting to para 1(iii) thereof, which reads as under, clearly exhibiting that a scrutiny assessment is to be made for the assessment year relevant to the previous year in which authorisation for search or requisition is executed: “(iii) Assessments in search and seizure cases to be made under section(s) 158B, 158BC, 158BD, 153A & 153C read with section 143(3) of the Act and also for the returns filed for the assessment year relevant to the previous year in which authorization for search and seizure was executed u/s. 132 or 132A of the Act.” The Authorisation in the instant case being not on the assessee, but qua a different person, the assessee‟s return for the current year, filed on 26/03/2016, could not IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 4 | P a g e therefore be subject to scrutiny assessment. The argument, in our considered view, is not valid. The opening part of the said Instruction reads as under:- “Subject: Compulsory manual selection of cases for scrutiny during the Financial Year 2016-17 – regd. 1. In supersession of earlier Instructions on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/cases for compulsory scrutiny during the financial-year 2016-17.” The Instruction, thus, requires a compulsory scrutiny of the specified cases/returns. That would not by itself make the issue of notice u/s. 143(2), which reads as under, also read out during hearing, in other cases, as in the instant case, invalid:- “Assessment. 143 (2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.” Shri Usrethe was at loss to point us of any bar in law on the AO‟s inherent power of assessment, or its exercise, none being apparent from the clear language of s. 143(2). Rather, that, where so, would be a fetter on his independence, inconsistent with the independent status conferred on him under and, thus, per the scheme of the Act. Though the law in the matter is well-settled, reference in its respect be made to the decision by the Apex Court in CIT vs. Greenworld Corporation [2009] 314 ITR 81 (SC), as well as the recent decision by the Tribunal in Vinod Rajput & Others v. Pr. CIT (in ITA Nos. 15/JAB/2021 & 22/JAB/2022, dated 31/08/2022), discussing this aspect in detail. The issue of notice u/s. 143(2) on 15/9/2016 is thus valid in law. The assessee‟s challenge, accordingly, fails. IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 5 | P a g e 3.4 We may next discuss the merits of the two additions made in assessment, being agitated per Gds. 3 & 4 before us. The ld. CIT(A) has allowed relief of Rs. 4 lacs in respect of the addition for the cash found (Rs. 7.41 lacs). The assessee‟s explanation is the cash withdrawal of Rs. 6.50 lacs on 11/07/2014 (bank statement at PB-1, pgs. 57-66), which is stated to have been for the purchase of property, which though did not materialise, and was accordingly retained by the assessee and kept at his residence and locker, whereat Rs. 2.76 lacs and Rs. 4.64 lacs respectively were found during search on 16/10/2014. We agree with the ld. CIT(A) in that it is immaterial that the cash found was located not at one but at two different places, i.e., at residence and in the bank locker. We are also in agreement with the Revenue in it not accepting the assessee attributing a part of the cash found to that of the CA firm in which he is a partner (Rs. 1.35 lacs). The accounts of the firm were not complete and, two, there is nothing to corroborate the assertion of the entire cash of the firm being kept by the assessee, a partner, at his residence/locker. The assessee‟s case is not without blemish. There is, firstly, no explanation for the cash in excess of Rs. 6.50 lacs, i.e., Rs. 0.91 lacs. Further, he does not state the purpose for which the cash, in no unsubstantial sum of Rs. 6.50 lacs, was withdrawn from the bank and, more particularly, why was it not deposited in bank once the said, unstated purpose did not fructify, but kept at home and in locker. Though the Revenue is constrained not to appeal, we are unable to agree with the ld. CIT(A) as, once the cash withdrawn stands accepted by him as the source of the cash available with the assessee, restricting it to Rs. 4 lacs, as he does, would be in our view arbitrary, particularly in view of no reason for the same being stated by him. The Apex Court in Saroj Aggarwal v. CIT [1985] 156 ITR 497 (SC) explained that where two inferences are possible from the facts, and there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw an inference that would lead to equity and justice, so IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 6 | P a g e that, in the absence of compelling circumstances of a particular case, a benevolent and justice oriented inference is drawn. In the facts of the case, the assessee has not explained the source of household withdrawal; there being almost no cash withdrawals during the year, i.e., prior to the date of withdrawal (11/07/2014), and up to 08/11/2014. A part of the cash withdrawal of Rs. 6.50 lacs must under the circumstances be appropriated toward household/personal withdrawals. There is nothing on record to exhibit the assessee‟s living standard or his withdrawals for the current or preceding year/s. We, accordingly, estimate the same at Rs. 50,000/- for the period 11/07/2014 to 16/10/2014. The assessee would accordingly be allowed a credit of Rs. 6 lacs, as against for Rs. 4 lacs allowed by the ld. CIT (A). The assessee gets part relief of Rs. 2 lacs on its Gd.3. 3.5 The ld. CIT(A) has allowed a part relief of 500 grams on gold jewellery to the assessee in view of the Board Instruction 1916, dated 11/05/1994. The same is a generalized instruction by the Board, to be observed by the search party for making seizure in view of the customary practices in Indian households, the primary being the user of gold ornaments as personal effects by women, and has nothing to do with the requirement of law to satisfactorily explain the source of a valuable found u/s. 69A/69B. This also explains it being restricted to gold ornaments, but not to any other valuable, including diamond, silver, etc. The matter is purely factual, to be decided in the facts and circumstances of the each case. However, to even suggest that the assessee has satisfactorily explained 500 gms., but not 511.5 grams, as the ld. CIT(A) holds, is, to our mind, ludicrous, particularly considering that the gift of gold jewellery to the assessee‟s wife at the time of her marriage, which stands disclosed per her return for AY 2001-02 at 500 gms., can only be regarded as an estimate. We, accordingly, find no reason to confirm the addition qua the balance 11.5 grams of gold jewellery. We decide accordingly, allowing Gd. 4. IT(SS)A No. 39/JAB/2018 (A.Y. 2015-16) Sushil Kumar Singhal v. Dy. CIT 7 | P a g e 4. We may before parting clarify that it is perfectly legal to rely in assessment on materials found during the course of a search, even if illegal; the test of admissibility of evidence lies in its relevancy, as explained by the Apex Court in Pooran Mal v. DoI [1974] 93 ITR 505 (SC); Dr. Pratap Singh & Anr. v. DoE [1985] 155 ITR 166 (SC). 5. In the result, the assessee‟s appeal is partly allowed. Order pronounced in open Court on September 20, 2022 Sd/- S d/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member [ Dated: 20/09/2022 vr/- Copy to: 1. The Appellant: Sushil Kumar Singhal, HIG 423, New Housing Board Colony, Shahdol (MP). 2. The Respondent: Dy.CIT, Central Circle, Jabalpur. 3. CIT, Central, Bhopal. 4. CIT( A)-1, Jabalpur. 5. The CI T-D.R., I TAT, Jabalpur. 6. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.