Lakshmi Singh v. Dy. CIT

INCOME TAX ACT, 1961

--Search and seizure--Proceedings under section 153CAssessment under section 143(3) completed by accepting gift as genuine--The assessee was engaged in business of plying/hiring carriages on routes allotted by Government of Karnataka. Search under section 132 was carried out on 25-3-2008 in the group cases of B.P. The AO was satisfied that certain documents seized belonged to the assessee and accordingly, notice under section 153C was issued to the assessee. In response thereto, the assessee filed his return of income on 19-12-2008 declaring total income at Rs.10,56,520 at which the original assessment under section 143(3) was completed in the case of the assessee by the AO. During the impugned assessment year, the assessee received gifts of Rs. 90 lakhs by way of cheques of Rs. 5 lakhs each from H of Dubai. Rs. 45 lakhs was received on 10-5-2004 and was invested in RBI Bonds on 24-4-2004 and another Rs. 45 lakhs received on 10-5-2004 were withdrawn in the same month. The AO required the assessee to state her relation with the said H or any business connection with the said person. The assessee confirmed that the said money was gift and the same was confirmed by the donor vide his letter. The AO took the view that the said gifts are not genuine by taking into account the circumstantial evidence and human probabilities with a finding that the donor, an NRI, having address at Delhi, is not a relative. The AO thus made addition under section 68. The assessee went in appeal before CIT(A) who upheld the addition and dismissed the appeal of the assessee. The AR vehemently contended that the assessee had declared gift in the original return and during the course of the original assessment inquiry was conducted with regard to the gifts and genuineness of the same and assessment was completed under section 143(3). During the course of the search, no new material was found to justify the proceedings under section 153C. The AO did not record any satisfaction for initiating proceedings under section 153C. It was further submitted that even on merit the impugned addition was uncalled for as the donor was identified and he had confirmed the gifts. The gifts had been received through banking channel. Held: Where an assessment order has already been passed for a year of years within the relevant six assessment years, then the AO is duly bound to reopen those proceedings and reassess the total income but by taking note of the undisclosed income, if any, unearthed during the search. The expression 'unearthed during the search is quite significant to denote that in respect of completed or non-pending assessment, the AO is, albeit, duty bound to assess or reassess the total income but if there is scope for additions in such assessment, on the basis of income „unearthed during the search, he can make the addition. In other words, the determination of total income in respect of the assessment years for which the assessments are already completed on the date of search, shall not be influenced by the items of income, other than those based on the material unearthed during the course of search. However, the scope of such determination of total income is different in respect of the years for which the assessments are pending vis-a-vis the years for which assessments are non-pending. The total income shall be determined in respect of assessment year for which original assessments have already been completed on the date of search by restricting additions only to those which flow from incriminating material found during the course of search. If no incriminating material is found in respect of such completed assessment, then the total income in the proceedings under section 153A shall be computed by considering the originally determined income. If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search. In respect of assessment pending on the date of search which got abated in terms of second proviso to section 153A(1), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material. It was observes that no incriminating material had been found relating to the year in which the assessee had received gifts. Therefore, no addition on account of the gifts could be sustained. Accordingly, on this basis itself, the addition on account of gifts was deleted. Accordingly the additional grounds were allowed. Since the addition on the basis of the additional grounds taken by the assessee was deleted, therefore, the grounds taken by the assessee on merit did not require adjudication.

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