JCIT(OSD),CIRCLE-1, SALEM V. SHRI NARAYANASAMY GUNASEKAR, SALEM

ITA 638/CHNY/2023

AI Insights

The case revolves around an appeal by the Revenue against the order of the CIT(A), which had deleted an addition of Rs.2,94,19,950 to the assessee's income for the assessment year 2010-11. The Revenue contended that there was incriminating material justifying the addition, whereas the CIT(A) and the Tribunal found that the additions made by the Assessing Officer (AO) were not supported by any incriminating material specifically related to the assessment year in question. The Tribunal referenced several precedents, including decisions from the jurisdictional ITAT, which supported the view that additions cannot be made in unabated assessments without incriminating material.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315531 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Other Referred Cases: Smt. Rita Agarwal vs DCIT, ACIT vs Saravana Stores (Thanga Nagai Maligai)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E.PAVUNA SUNDARI
• Assessee Lawyers: T.VASUDEVAN
• Keywords: Reassessment proceedings; Corroborative evidences; Gift; Search and seizure
• Section: 143(3); 142(1); 132; 153A

Judgement Text

"आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं श्री अयिताभ शुक्ला, लेखा सदस्य क े समक्ष BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.638/Chny/2023 Assessment Years: 2010-11 The Joint Commissioner of Income Tax(OSD), Circle-1, Salem Shri Narayanasamy Gunasekar, No.196-C, Anna Nagar, Shyamala Nivas, Kannankurichi, Salem, Tamil Nadu-636 008. [PAN: AJOPG3410B] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri T.Vasudevan, Advocate प्रत्यर्थी की ओर से /Revenue by : Ms.E.Pavuna Sundari, CIT सुनवाई की तारीख/Date of Hearing : 13.05.2025 घोषणा की तारीख /Date of Pronouncement : 16.05.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the Revenue against the order bearing ITA Nos, 996 to 998 dated 24.03.2023 of the Learned Commissioner of Income Tax [herein after “CIT(A)], Chennai for the assessment years 2010-11. ITA No. 638 /Chny/2023 Page - 2 - of 12 2.0 The only issue contested by the Revenue through the grounds of appeal are regarding deletion of an addition of Rs.2,94,19,950/- by the Ld.CIT. It is the case of the Revenue that the case laws relied upon the Ld.CIT(A) are those where there were no incriminating material to support the addition and that in the present case incriminating material was the basis for the additions made by the Ld.AO. 3.0 The Ld. AR argued in favour of the order of Ld.CIT(A). It was also contended that even on merits the assessee’s case is supported by favourable orders from this tribunal. 4.0 We have heard rival submissions in the light of material available on records. Brief factual matrix of the case, as seen from the order of the Ld.AO, is that the assessee had entered into a partnership for carrying land development activities with one Cholan Building & Estates. Return of income was filed u/s 139(4) on 06.02.2011 declaring an income of Rs.3,05,61,060/- and agriculture income of Rs.36,80,000/-. The return was accepted u/s 143(1) on 07.07.2011. Meanwhile, a search was conducted u/s 132 on 20.10.2011 at the premise of the assessee leading to seizer of incriminating documents marked as annexure-A / NG / B & D / 1-4. The assessee filed a return of income for AY-2011-12 disclosing an amount of Rs.3,75,00,000/- as additional income declared u/s.132. ITA No. 638 /Chny/2023 Page - 3 - of 12 Post centralization of this case, notice u/s 153A was issued on 29.08.2012. Notice u/s 143(2) / 142(1) was issued on 23.12.2012. In response thereof assessee filed return of income again declaring an income of Rs.3,05,61,060/- and agriculture income of Rs.36,80,000/-. In para 5 of the order the Ld.AO has recorded that incriminating documents were seized vide annexure page 45 of NR / PKM / L&S / S-2 indicating that the assessee has purchased 250 acres of agricultural land. It was submitted that the statement of affairs as on 31.03.2010 of the assessee showed investment of Rs.55,80,050/- against ‘agricultural land at Trichy’. The assessee had further declared a sum of Rs.3,75,00,000/- as additional income u/s 132 for AY-2011-12. Before the Ld.AO the assessee had admitted that the investment in ‘agricultural land at Trichy’ was of Rs.3,50,00,000/- and that the amount declared in the statement of affairs as on 31.03.2010 of Rs.55,80,050/- was based on guidelines value of the land. The Ld. AO noted that amount of Rs.3,00,00,000/- is to be considered as undisclosed investment in ‘agricultural land at Trichy’. It was noted that the assessee has made declaration of undisclosed income u/s 153A for AY-2011-12 of Rs.3.70,00,000/- (or Rs. Rs.3.75,00,000/- mentioned elsewhere in the order). The Ld. AO further observed that total investment in the ‘agricultural land at Trichy’ was of Rs.3,50,00,000/- and that the assessee had only disclosed Rs.55,80,050/-. He therefore proceeded to make an addition of Rs. ITA No. 638 /Chny/2023 Page - 4 - of 12 2,94,19,950/- as undisclosed income in the Trichy land. Similarly the Ld. AO noted that the assessee had declared agriculture income of Rs.36,80,000/-. Holding the assessee accountable for not providing suitable explanation and supporting evidences the Ld. AO treated the agriculture income as unexplained income. 5.0 The Ld. DR has vehemently argued that the order of the Ld.CIT(A) is incorrect as there was incriminating material seized and the same was utilized for the assessment. The Ld.DR also argued that no case of double taxation is made out as the Ld.AO has given due relief of the total disclosure minus the amounts already declared. 6.0 The Ld.Counsel for the assessee vehemently supported the order of the Ld.CIT(A). 7.0 We have heard rival submissions in the light of material available on records. At the outset, we have noted that there are contradictory indications qua figures of transactions in the assessment order alluding towards non-application of mind by the Ld.AO, in itself an incurable defect in an order. In para 6.7 of his order Ld.CIT(A) has indicated that return of income for AY-2010-11 was filed on 06.02.2011 u/s 139(4) and that the search action u/s 132 had taken place on 20.10.2011. As per ITA No. 638 /Chny/2023 Page - 5 - of 12 records, on the date of search, no scrutiny proceeding was pending for earlier years on date of search . Thus, no assessment proceeding was pending on the date of search to have got it abated. The Ld.CIT(A) recorded that for AY-2010-11 the Ld.AO had made additions of Rs.2,94,19,950/- and Rs.36,86,000/- even though no seized material for the impugned year was found. In this regard, we have noted from para 6.8 to 6.11 of order of Ld.CIT(A) that he has relied upon the decisions of this tribunal in the case of Smt.Rita Agarwal, ITA No.3264/Chny2019 and M/s.Saravana Stores ITA No.676/Chny / 2017 before deleting the impugned additions. Thus, it has been observed :- “…6.8 The decisions relied upon by the Appellant, more particularly by the Jurisdictional ITAT will support the contention that addition in respect of unabated assessment cannot be made without any reference to the seized material. The jurisdictional tribunal in the case of Smt.Reeta Agarwal vs DCIT in ITA No.3264/Chny/2019 has clearly held that no addition can be made in an unabated assessment where assessment was not pending as on the date of search and no in criminating material was seized during the search. 6.9 Further, the Jurisdictional tribunal in the case of ACIT vs Saravana Stores (Thanga Nagai Maligai) in ITA No.676/Chny/2017 dated 25.02.2022 hs re-affirmed the earlier decision taken upon this issue. ITA No. 638 /Chny/2023 Page - 6 - of 12 6.10 The undersigned being the Judicial Authority under the Act is bound to follow the decision of the Higher Judicial Forum. In this regard, the observation of the Hon’ble Apex Court in the case of CIT vs Ralson Industries Ltd.-(2007) 288 ITR 322(SC) is reproduced as under:- “When an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline. This aspect of the matter has been highlighted by this Court in Bhopal Sugar Industries vs Income Tax Officer, Bhopal (AIR 1961 SC 182) in the following terms (Page 622) Please appreciate that, the law of contempt comes down heavily on judicial or quasi-judicial authority who fails to follow a binding judicial precedent of the jurisdictional High Court or the Supreme Court. Such a contempt would amount to civil contempt and the Assessing Officer, first Appellate Authority and Tribunal would be guilty of civil contempt if it chooses not to follow a binding precedent of the jurisdictional High Court or the Supreme Court. Civil Contempt means willful disobedience to any judgment, direction, orders, writ, process of a Court…” …………………………………………………………………………………… …………………………………………………………………………………… ITA No. 638 /Chny/2023 Page - 7 - of 12 I hold that the A.O cannot make addition without any reference to the seized material in the order passed u/s 143(3) r.w.s. 153A of the Act for the AY.2008-09, 2009-10 and 2010-11. In these orders the AO has made the regular addition without reference to the any seized material. In view of this, the AO is hereby directed to delete the following additions made…..” 8.0 We have noted that the Coordinate Bench of this tribunal in the case of M/s.Saravana Stores vide ITA No.676/Chny/2017 for Assessment Year-2006-07 in their order dated 25.02.2022 have held as under:- “….6. We have heard rival contentions and gone through facts and circumstances of the case. Admitted facts are that no incriminating material was found during the course of search on the business premises of the assessee conducted on 18.08.2011 in relation to the expenses of advertisement charges (TNM), advertisement charges (Textile), annual maintenance (TNM) and also in relation to interest paid on various loans and advances. The assessee filed original return of income for the relevant assessment year 2006-07 on 23.10.2006 and also has filed complete details in respect to the items added by the AO in consequence to search proceedings. We are of the view that once there is no incriminating material and assessment is concluded without any incriminating material, no addition or disallowance based on assessee’s documents can be made. We find the issue is covered in favour of the assessee by the Mumbai Bench of the Tribunal in ITA Nos.3575 to 3577, 2580 to 3584, 3736 & 3737/Mum/2011 & 7382 to 7385, 7387, 7388& 7390/Mum/2013, order dated 24.05.2017, wherein it was held as under:- 5. In view of the above given facts, the learned Counsel for the assessees’ argued that the issue of assumption of jurisdiction by the AO and making addition while framing assessment u/s 153A read with section 143(3) of the Act, the assessment is without jurisdiction in respect to assessment of gifts already disclosed. Now, before us the learned CIT DR. could not support the orders of CIT(A) or on query from the Bench could not produce any seized material pertaining to this AY relatable to assessee in regards to the additions made by AO. Once this is the position, the issue is squarely covered in favour of assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). ITA No. 638 /Chny/2023 Page - 8 - of 12 6. We find that this issue now stands covered in favour of assessee and against the Revenue by the decision of Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein considering the judgment of the Special Bench of the Mumbai Tribunal in the case of All Cargo Global Logistics 137 ITD 287(SB) (Mum), considered this issue that, whether there is scope of assessment u/s. 153A of the Act in respect to completed assessment which is limited only to undisclosed income and undisclosed assets found during the course of search or not? Hon'ble High Court held that on a plain reading of section 153 of the Act it becomes clear that on initiation of the proceedings u/s. 153A of the Act, it is only the assessment/reassessment proceedings that are pending on the date of conducting search u/s. 132 of the Act stand abated and not the assessments/reassessments already final for those assessment years covered u/s. 153A of the Act. Hon'ble High Court also discussed the CBDT Circular No. 8 of 2003 dated 18.09.2003 reported in 263 ITR (st.) 61 at page 107 wherein CBDT has clarified that on initiation of proceedings u/s. 153A of the Act the proceedings pending in appeal, revision or rectification proceedings against final assessment shall not abate. It is only because the final assessments do not abate the appeal, revision or rectification pending against final assessments would not abate. Therefore, Hon'ble High Court rejected the arguments of the Revenue that on initiation of proceedings u/s. 153A of the Act, the reassessment final for assessment years covered u/s. 153A of the Act stands abated. Only the pending assessments get revived u/s. 153A of the Act. Hon'ble High Court further held that once assessment has attained finality, then the AO while passing independent assessment order u/s. 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search u/s. 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. The relevant portion of the judgment reads as under: - “31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:- “The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other ITA No. 638 /Chny/2023 Page - 9 - of 12 hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not contain any word or words to the effect that no reassessment shall be made in respect of a completed assessment. The language is clear in this behalf and therefore literal interpretation should be followed. Such interpretation does not produce manifestly absurd or unjust results as section 153A (i)(b) and the first proviso clearly provide for assessment or reassessment of all six years. It may cause hardship to some assesses where one or more of such assessments has or have been completed before the date of initiation of search. This is hardly of any relevance in view of clear and unambiguous words used by the legislature. This interpretation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. Before proceeding further, we may now examine the provision contained in sub- section (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word \"incriminating document\". Clauses (a) and (b) of section 132(1) employ the words \"books of account or other documents\". For harmonious interpretation of this ITA No. 638 /Chny/2023 Page - 10 - of 12 provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. Having held so, an assessment or reassessment u/s 153A arises only when a search has been initiated and conducted. Therefore, such an assessment has a vital link with the initiation and conduct of the search. We have mentioned that a search can be authorised on satisfaction of one of the three conditions enumerated earlier. Therefore, while interpreting the provision contained in section 153A, all these conditions will have to be taken into account. With this, we proceed to literally interpret to provision in 153A as it exists and read it alongside the provision contained in section 132(1). The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is \"shall\" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is \"shall\" and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results: - a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, ITA No. 638 /Chny/2023 Page - 11 - of 12 (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search.” 7. We have examined the details and noticed that notice u/s 143(2) of the Act became time barred on 31.08.2004 at the time when the search took place much later on 03.08.2006. Therefore, it follows that as on the date of search, there was an assessment completed or processing of return of income of the assessee under section 143(1) of the Act. Subsequently, the A.O. initiated proceedings under s. 153A and in the assessment completed under s. 143(3) r.w.s 153A, the A.O. has brought to tax a sum of Rs. 10,00,000/- being the amount of gift received from Shri Gayanchand Jain without any incriminating material found during the course of search. Once this is the position the issue is clearly covered in favour of assessee and against the Revenue by the decision of Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (Supra). Respectfully, following the same and in the given said of facts, we are of the view that this gift received from Shri Gayandhand Jain for an amount of Rs.10,00,000/- disclosed in the return of income as evidence by the capital account and which has not been abated, the amount of gift cannot be added. Accordingly, we reverse the orders of CIT(A) as well as that of the AO and delete the addition in all these eleven appeals of the assessee. 6.1 In view of the above decision and the decision of Hon'ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom), we find no infirmity in the order of CIT(A) and hence, we confirm the same…..” 9.0 We have also noted that the Hon’ble Apex Court in the case of Abhisar Buildwel, affirming decision in the case of Kabul Chawla, have held that no addition can be made in respect of unabated assessments unless there is seizure of incriminating documents qua the impugned additions. Consequently, we are of the considered view that no intervention is required to be made to the order of the Ld.CIT(A) at this stage as the same is based upon correct understanding of facts of the case, contemporary statute as well as binding judicial precedents. ITA No. 638 /Chny/2023 Page - 12 - of 12 Accordingly, we uphold the order of the Ld.CIT(A) and dismiss all the grounds of appeal raised by the Revenue. 10.0 In the result, the appeal of the Revenue is dismissed. Order pronounced on 16th , May -2025 at Chennai. Sd/- (एबी टी. वर्की) (ABY T VARKEY) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 16th , May -2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Salem 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF "