The Kerala High Court has held that AO cannot reassess without taking into consideration incriminating material in respect of completed assessments.
The bench of Justice A.K.Jayasankaran Nambiar and Justice K.V.Jayakumar has observed that the documents relating to identity, genuineness of the transaction and creditworthiness, then it is for the Assessing Officer to conduct a further enquiry and call for more details before invoking Section 68 of the I.T. Act. It is his submission that it is only if the assessee is not able to provide a satisfactory explanation of the nature and source of the receipt that the Revenue can treat the receipt as income in accordance with Section 68 of the Income Tax Act.
The assessee and his family members run various business concerns that are grouped together under the umbrella of M/s.Sreevalsam Group of concerns. There was a search conducted under Section 132 of the I.T. Act at the residential and office premises of the proprietors and the business concerns on 08.06.2017, pursuant to which, a notice was issued to the assessee under Section 153A of the Income Tax Act.
The assessee, is a partner to the extent of 39% in one of the partnership concerns namely, M/s.Money Muttam Finance, and has a limited shareholding of approximately 11% and 15% respectively in M/s.Mooneymuttathu Nidhi Limited and M/s.Allebasi Builders and Developers (P) Limited.
His wife and children are proprietors and partners respectively in other business concerns that come under the umbrella of M/s.Sreevalsam group. The respondent/assessee and his family members, as well as all the entities of the group, are separately assessed to income tax and it is not disputed that the respondent/assessee does not hold any position in the management and control of the majority of the firms/corporate entities of M/s.Sreevalsam group.
On receipt of the notice under Section 153A of the Income Tax Act, the respondent/assessee filed a return of income on 01.12.2018 declaring an income of Rs.6.17 lakhs. Notices under Section 143(2) and Section 142(1) were issued on various occasions to the assessee requiring it to file requisite documents including cash flow statements and statements of assets and liabilities.
Although the assessee raised objections with regard to the issuance of notice to him by contending inter alia that the proceedings initiated against him were without jurisdiction, and alternatively, sought time from the Assessing Authority for filing applications for settlement before the Income Tax Settlement Commission, the Assessing Authority did not accede to the said requests and the assessments were completed against the assessee on 17.03.2020.
In the assessment order, the Assessing Officer found that substantial additions had to be made to the declared income of the assessee towards (i) credit receipts from 38 bank accounts of Nagaland based entities/concerns (ii) cash deposits found in the bank accounts of the assessee and his family members (iii) cash deposits in Vrindavan Builders Private Limited (iv) cash component in land transactions and (v) other credits in bank accounts of the assessee and his family members. The total additions made by the Assessing Officer was in an amount of Rs.305.59 crores. It is understood that protective assessments for the aforementioned assessment years were also made in relation to the other business concerns and family members of the assessee.
The assessee preferred appeals before the First Appellate Authority which granted limited relief to the assessee but largely confirmed the demand in the assessment orders. It was therefore that the assessee preferred further appeal before the Appellate Tribunal which partly allowed the appeal by the order impugned in these appeals preferred by the department.
The court noted that with regard to the said amounts of Rs.3.22 crores and Rs.8.49 crores, the assessee had placed on record copies of the PAN and Aadhar cards, Income Tax exemption certificates issued under Section 10(26), copies of work order issued by the Government, copies of immovable property ownership certificates etc. along with audited financial statements, turnover certificates and affidavits affirming the loan transactions, all of which clearly aided the assessee in discharging his initial burden of proof that the persons from whom the amounts were received had advanced these amounts as loans to the assessee and they were persons who had the requisite means to advance the said amounts.
The court held that in case no incriminating material is unearthed during the search, the Assessing Officer cannot assess or reassess taking into consideration other material in respect of completed assessments/unabated assessments and no addition can be made in the absence of such incriminating material found during the course of search under Section 132 of the I.T. Act.
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Case Details
Case Title: Pr. Commissioner Of Income Tax (Central) Versus M.K. Rajendran Pillai
Case No.: I.T.A.NO.27 OF 2024
Date: 03/12/2024
Counsel For Appellant: Susie B Varghese
Counsel For Respondent: R.V.Easwar
