ACIT vs. Jayendra P. Jhaveri In the Income Tax Appellate Tribunal Mumbai Benches “J”, Mumbai Before P M Jagtap (A. M.) & Sanjay Garg(J. M.) ITA Nos.2141 to 2144 /Mum/2012 Asst.Year 2003-04. Decided on 20th February 2014 Counsel for Revenue / Assessee: S. D. Srivastava / Dharmesh Shah

Facts:
A search and seizure operation was carried out in the case of the assessee on 14-08-2008 u/s. 132 of the Income- tax Act. Pursuant thereto, the AO issued notice u/s. 153A to the assessee to file the return of income for six years subsequent to the search. In response to the notice, the assessee filed return of income before the AO. The AO, thereafter, issued notice u/s. 143(2) and 142(1). The assessee submitted before the AO that books of account and other details were destroyed in the flood in the year 2005 and, therefore, the same could not be produced. Since the assessee failed to produce the books of accounts, the AO passed the order u/s. 144 r.w.s. 153A. On the basis of net profit ratio of certain other persons who were engaged in a similar business as that of the assessee, the AO made the additions to the total income of the assessee. The CIT(A) upheld the action of the AO. However, he directed the AO to re-compute the net profit of the assessee by adopting the net profit of 0.14%. The revenue appealed against the action of the CIT(A) in directing the AO to rework the net profit of the assessee at the lower rate of 0.14% as against the 0.99% estimated by the AO. Whereas the assessee has filed the cross objections against the action of the CIT(A) in upholding of assessment proceedings made by the AO u/s. 153A. Before the Tribunal, the assessee contended that since no incriminating material was found during the search and seizure operation, the re-assessment made by the AO u/s. 153 A was not valid. He has further submitted that since the limitation period for issuing notice u/s. 143(2) had already been expired and as such the assessments in relation to above mentioned assessment years had attained finality. The contention of the revenue was that the absence of the books of accounts, itself, was the incriminating evidence against the assessee necessitating initiation of assessment proceedings u/s. 153A.

Held:
The tribunal noted that in the present case the return was processed u/s. 143(1) and the same had attained finality due to the expiry of limitation period of 12 months from the end of the month in which the return was filed. Further, no incriminating material was found from the premises of the assessee during the search u/s. 132. In view of the same and the decisions of the Rajasthan High Court in the case of Jai Steel (India) vs. ACIT (2013) 259 CTR 281, the Andhra Pradesh High Court in the case of Gopal Lal Badruka vs. DCIT, 346 ITR 106 and of the Delhi High Court in the case of CIT vs. Chetan Dass Lachman Dass [2012] 211 Taxmann 61, the Tribunal observed that when no incriminating evidence was found during the search, it was not open to the AO to make re-assessment of concluded assessment in the garb of invoking the provisions of section 153A. According to it the contention of the revenue that since no books of account were found during the search action that itself was the incriminating material against the assessee had no force of law. Inference of concealment of income cannot be made just on mere assumptions, presumptions or suspicion. Relying on the Tribunal decision in the case of Jitendra Kumar Jain vs. DCIT (ITA Nos. 5951- 5953/M/2011 decided on 16-01-2014) it held that that such an assumption cannot be said to be having any value of evidence in eyes of law and even the assessee cannot be called to disapprove such type of assumptions and presumptions based on mere suspicions. It observed that it is not open to the revenue to rely on the weakness of the evidence produced by the assessee to make any adverse presumption or conclusion of his indulging in any illegal activity, without being there any direct or even circumstantial evidence on record against him.

In view thereof, the Tribunal held that the reassessments made by the AO u/s. 153A, without any incriminating material being found during the search action conducted u/s. 132, were not in accordance with law and the same were set aside.