Gaurav Sharma v. Asstt. CIT

INCOME TAX ACT, 1961

--Search and seizure--Assessment under section 153AComputation of undisclosed income--A search and seizure action was conducted under section 132 in the residential premises of the assessee, thereby incriminating documents, valuables, undisclosed cash, foreign exchange and other assets had been found and seized from the premises of the assessee. Before search, the assessee had filed returns of income under section 139(1) for each of the assessment years declaring the income. In response to notice under section 153A, assessee filed his return of income for the different assessment years showing the net taxable income. The AO noted that assessee was a student up to November, 2006. He, therefore, was of the opinion that assessee could not have earned the salary income. In this regard, the AO also noted that in the statement of the assessee, recorded during the course of search, assessee stated that he was not aware of the affairs of the company in which he is a director from which he was receiving salary. The AO was of the opinion that as a result of search, the pattern adopted by the assessee revealed that undisclosed income of Dr. Y has been diverted in the hands of the family members by showing bogus income such as agricultural income, tuition income, salary income, etc. The motive was not to save tax but to save Dr. Y from violation of service rules. The AO, therefore, assessed the salary income and interest income as well as income surrendered by the assessee from the business substantively in the hands of Dr. Y and protectively in the hands of the assessee. The AO also observed that the business income has also been diverted to cover up the undisclosed investment for Dr Yogiraj Sharma in construction of house. The AO treated these gifts also under section 68 protectively in the hands of the assessee and substantively in the hands of Dr. Y. The AO ultimately made the assessment in each of the assessment years, adding the income protectively in the hands of the assessee and substantively in the hands of Dr. Y. Held: 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 to be deleted.