The Assessing Officer has the power under Section 153A to make assessment for all the six years and compute the total income of the assessee, including the undisclosed income, notwithstanding that the assessee filed returns before the date of search which stood processed under Section 143(1)(a). The other reason given by the Tribunal in the same paragraph of its order that no material was found during the search is factually unsustainable since the entire case and arguments before the departmental authorities as well as the Tribunal had proceeded on the basis that the document embodying the transaction with Mohini Sharma was recovered from the assessee. While summarizing the contentions of the assessee in Paragraph 5 of its order, the Tribunal itself has referred to the contention that no document much less incriminating material was found during the search of the assessee‟s premises, except one unsigned undertaking for loan. Again in Paragraph 10 of its order, while dealing with the assessee‟s contention against the addition of `1,50,000/- being unexplained loan given to Mohini Sharma, the Tribunal has stated that it has analyzed “the subject document carefully, recovered from search”suggesting that the document was recovered during the search from the assessee. The Tribunal has even proceeded to delete the addition of `1,50,000/- as well as the notional interest on merits, holding that the document was unsigned, that Mohini Sharma was not examined by the income tax authorities and there was no corroboration of the unsigned document. If it is not in dispute that the document was found in the course of the search of the assessee, then Section 153A is triggered. Once the Section is triggered, it appears mandatory for the Assessing Officer to issue notices under Section 153A calling upon the assessee to file returns for the six assessment years prior to the year in which the search took place. There are contradictions in the order of the Tribunal. We are unable to appreciate how the Tribunal can say in Para 9.6 that no material was found during the search and at the same time in Paragraph 10 deal with the merits of the additions based on the document recovered during the search which allegedly contain the loan transaction with Mohini Sharma. Therefore, both the reasons given by the Tribunal for holding that the assessments made under Section 153A were bad in law do not commend themselves to us. The result is that the first substantial question of law is answered in the negative, in favour of the Revenue and against the assessee.
HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 7th August, 2012
ITA 1626/2010, ITA 1632/2010, ITA 1998/2010, ITA 2006/2010, ITA 2019/2010, ITA 2020/2010
CIT Versus ANIL KUMAR BHATIA
ORDER
R.V. EASWAR, J.:
ITA Nos.1626, 1632, 1998, 2006, 2019 and 2020 of 2010 are six appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961, which is hereafter referred to as the „Act‟. The assessment years involved are 2000-0 1 and 2002-03 to 2005-06.
2. On 14th May, 2012, the following substantial questions of law were framed, which are common to all the six appeals and they were heard: –
“1 Whether the Income Tax Appellate Tribunal was right in holding that the Assessing Officer had wrongly invoked Section 153A of the Income Tax Act, 1961?
2. Whether the Income Tax Appellate Tribunal was right in deleting the addition of Rs. 1, 50,000/- made in the assessment year 2000-01 on account of unexplained unaccounted loan to Mohini Sharma and interest thereon of Rs. 27,000/- in the assessment year 2003-04 to 2005-07?”
3. We may clarify that in Q. No.2 the reference to the assessment year “2000 01” should rightly be “2003-04” and to the assessment year “2005-07” should be 2005-06.
4. The brief facts giving rise to the present appeals may be noted. The assessee is an individual. He was carrying on business in hing under the name and style of M/s. A.K. Traders. On 13.12.05, there was a s arch of the assessee‟s residence and business premises under Section 132 of the Act. Pursuant to the search, the Assessing Officer issued notices under Section 1 53A of the Act and called upon the assessee to file the returns of income for the six years as envisaged in the Section. Notices under Sections 142(1) and 143(2) along with a detailed questionnaire were issued on 20.11.2007 in response to which the assessee submitted his explanation on 29.11.2007. After considering the explanation and details submitted by the assessee, the Assessing Officer made additions to the income returned in respect of the assessment years under consideration, which included an amount of Rs. 1,50,000/- given by the assessee as a loan to one Smt.Mohini Sharma on 10.2.2003. The information that the assessee had given the loan was allegedly available at page 68 of Annexure A-III seized from premises No.3 1B/2, Rajpura Road, Civil Lines, Delhi. The loan was not reflected in the return of income filed by the assessee for the assessment year 2003-04. The Assessing Officer, therefore, concluded vide Para 5 of the assessment order for the assessment year 2003-04 that the loan was given out of the unaccounted income of the assessee. Accordingly, the same was added as the assessee‟s income in the assessment order for the assessment year 2003-04.
5. Against the addition of Rs. 1,50,000/- made by the Assessing Officer in respect of the assessment year 2 003-04, the assessee filed an appeal before the CIT(Appeals) and contended that the seized paper, on the basis of which the addition was made, did not contain the signature of the assessee, that the assessee had not given any loan to Mohini Sharma, that there was no admission or statement of Mohini Sharma to the effect that she took a loan from the assessee on the security of some property, that there was only a proposal by Mohini Sharma that if the assessee gave an amount of Rs. 1,50,000/-, the same would be returned after selling the property, that these facts have been placed before the Assessing Officer and have not been controverted and, therefore, it was not proper for the Assessing Officer to make an addition without any supporting or corroborative evidence.
6. The CIT(Appeals) however, confirmed the addition, holding as under:-
“In so far as loan of Rs.1,50,000/- to Smt. Chander Mohini Sharma, on perusal of details, it is seen that a copy of the undertaking on Rs.100/- rupee stamp paper is found during action u/s 132 in assessee’s premises. This undertaking was executed by Smt.Mohini Sharma on 10 th day of Feb., 2003 in favour of Sh.Anil Bhatia acknowledging acceptance of loan of Rs.1,50,000/- from him for a period of 18 months on interest @ 18% per annum. It was specifically mentioned that the said amount was received in cash. In lieu of the above referred loan she has executed a general power of attorney in favour of the assessee transferring the legal titles and rights on the house bearing Municipal No.3601, Raja Park, Shakur Basti, Delhi-34. It was further undertaken to forgo all her rights on the property mentioned above if she failed to pay back the loan amount within the stipulated period of 18 months. A copy of the general power of attorney also recovered from the assessee during search. After considering the above over whelming evidences, it is incomprehensible to believe the assessee that he has no connection whatsoever with the documents found during search. The duty casts on the appellant to rebut the evidences found during search with cogent material that he has no connection with these contents of the documents found during search. In stead of leading any evidence in his support, the appellant is trying to explain in a very casual and evasive manner on the clinching evidence found from him. In the absence of any explanation much less the reasonable explanation the amount of Rs.1,50,000/- mentioned on the undertaking which was executed by an independent person on stamp paper, the same is to be added as income of the assessee from undisclosed sources. Thereby no interference is called for on the action of the A.O. in assessing the above sum in the total income of the assessee.”
On the aforesaid reasoning, the CIT (Appeals) confirmed the addition of Rs. 1 ,50,000/-.
7. In respect of the assessment years 2004-05 and 2005-06, the assessee had filed appeals before the CIT(Appeals) questioning the additions made in the assessment orders for those years. While disposing of those appeals by orders dated 17.3.09 (separate orders), the CIT(Appeals) directed the Assessing Officer to assess the notional interest of Rs. 27,000/- on the loan of Rs. 1,50,000/-given to Mohini Sharma, which addition he had confirmed in his appellate order for the assessment year 2003-04. He held as under:-
“In the appeal proceedings for the A.Y. 2003- 04 n assessee’s own caseI have held that a sum of Rs.1,50,000/- given as loan to Smt. Chander Mohini Sharma as income of the assessee from undisclosed sources. In the course of search u/s 132, some incriminating documents were found which suggest that the assessee is to get interest on the above loan @18% per annum from Smt. Chander Mohini Sharma. However, the appellant had not declared any income on this loan while filing return of income. Accordingly the A.O. is directed to assess Rs. 27,000/- being the interest on the loan component of Rs.1,50,000/- for whole of the year, while computing the total income of the assessee.”
8. The assessee filed further appeals before the Tribunal. In the appeal for the assessment year 2003-04, he challenged the addition of Rs. 1,50,000/- being the loan given to Mohini Sharma and in the appeals for the assessment years 2004-05 and 2005-06, he questioned, inter alia, the addition of Rs. 27,000/-for each of these years made by the CIT(Appeals) for notional interest on the loan.
9. Thus, the Tribunal was called upon to decide the correctness of the addition of Rs. 1 ,50,000/- being loan given to Mohini Sharma in the previous year relevant to the assessment year 2003-04 and the notional interest of Rs. 27,000/- each on the aforesaid loan for the assessment years 2004-05 and 2005-06.
10. In respect of the other assessment years, the Assessing Officer had made several additions to the income returned and the following additions were challenged by the assessee before the Tribunal: –
