Sri Syed Farahathulla (Alias) Javeed, Bangalore V. The Deputy Commissioner Of Income Tax, Central Circle-2(2), Bangalore

ITSSA 1/BANG/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0959 (ITAT-BANGALORE)
• Duration Of Justice: 9 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 11-10-2022
• Assessment Year: misc
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Document seized; Retrospective amendment; Block assessment; Documents seized
• Section: 132; 158BC; 113; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “A”, BANGALORE Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM IT(SS)A No.1/Bang/2013 Block period 01.04.1991 to 29.05.2001 Sri.Syed Farahathulla (Alias) Javeed, #93, 13 th Cross, 29 th Main II Phase, J.P.Nagar Bangalore – 560 070. PAN : ACBPS8140C. v. The Deputy Commissioner of Income-tax, Central Circle 2(2) Now DCIT, Circle 2(1) Bangalore. (Appellant) (Respondent) Appellant by : Sri.Narendra Sharma Advocate Respondent by : Sri.Dilip, Junior Standing Counsel Date of Hearing : 12.10.2022 Date of Pronouncement : 13.10.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against CIT(A)’s order dated 19.02.2013 for the block period 01.04.1991 to 29.05.2001. 2. The assessee in its memorandum of appeal has raised nine grounds. However, during the course of hearing, the learned AR had pressed only grounds 2, 3, 6 and 7. The surviving grounds, namely, grounds 2, 3, 6 and 7 read as follows:- “2. The order of block assessment passed is bad in law, in as much as, the very search proceedings initiated are ultra virus the provisions of sec.132(1) of the Act and consequently, the order of block assessment passed as a result of the illegal search also requires to be cancelled having regard to the ratio IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 2 of the decision of the Hon’ble Supreme Court in the case of AJIT Jain reported in 260 ITR 80 (SC). 3. The order of assessment passed u/s 158BC of the Act is bad in law and void-ab-initio in as much as the warrant of authorization issued in the joint names of the appellant and his brother does not confer jurisdiction to make an assessment u/s 158BC of the Act in the hands of the appellant in individual capacity and consequently, the impugned order passed deserves to be cancelled. 6. Without prejudice to the above, the learned CIT(A) is not justified in upholding the addition of Rs.87,00,000 made as unexplained investment under the facts and in the circumstances of the appellant’s case. 7. The appellant denies himself liable to be charged to surcharge for the tax determined u/s 113 of the Act, which requires to be cancelled under the facts and in the circumstances of the appellant’s case.” We shall adjudicate the above grounds as under: Ground No.2 3. In the above ground, the assessee challenges the validity of search u/s 132 of the I.T.Act. The Hon’ble jurisdictional High Court in the case of Prathibha Jewellery House v. CIT(A) in WP Nos.24646 to 24651 of 2015 (judgment dated 07.11.2017), had held that in view of the amendment by Finance Act, 2017 to section 132 of the I.T.Act with retrospective effect from 01.04.1962, the CIT(A) and the ITAT cannot examine the vires and validity of search. The relevant finding of the Hon’ble jurisdictional High Court in the case of Prathibha Jewellery House v. CIT(A), reads as follow:- “10. Having heard the learned counsels for the parties, this Court is satisfied that the present writ petitions deserve to be dismissed for the following reasons:- IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 3 (i) That the decision of this Court in the case of C.Ramaiah Reddy, which allowed the Appellate Authority to go into the question of validity of Search is a subject-matter of pending appeal before the Hon'ble Supreme Court and therefore, not only the Authorities of the Department, but even this Court should await the decision of Hon'ble Supreme Court on the said issue and cannot direct the Appellate Authorities like CIT (Appeal) below by way of a writ of mandamus to go into the question of validity of search under Section 132 of the Act and it would be incongruous and not in deference to the pendency of aforesaid Civil Appeal No.2734/2013 before the Hon'ble Supreme Court. (ii) That even the law has been amended by insertion of the aforesaid Explanation by Parliament in Section 132 of the Act by the Finance Act, 2017 with retrospective effect from 1.4.1962. That Explanation also prohibits the Appellate Authorities to go into the reasons recorded by the concerned Income Tax Authority for directing Search against the assessee or tax payer. (iii) That this Amendment came after both, ITAT passed the order in the present case on 21.11.2014 as also the learned CIT(A) passed the impugned order on 11.2.2015. Nonetheless, retrospective effect of the said Amendment, will have its effect on the present case as well so long that the said Amendment holds the field. Therefore, the Appellate Authorities of the Department cannot be expected to go into the said question. It is only for the Constitutional Courts to examine the vires and validity of such Amendment and for that, a separate writ petition is already said to be pending. However, no such challenge to the Amendment has been made in the present case. (emphasis supplied) 11. In these circumstances, the impugned order Annexure-A dated 11.2.2015 passed by the learned CIT(A) cannot be faulted and it stands to the reason for the learned CIT(A) to have followed the Chattisgarh High Court's decision and refused to do so. 12. The assessee-petitioner obviously had an alternative, adequate and efficacious remedy against the said order passed by the learned CIT(A) before the Income Tax Tribunal again under Section 253 of the Act. There appears to be no justification for cutting short that regular remedy at this stage and to entertain these writ petitions on merits. 13. The decisions relied upon by the learned counsel for the petitioner can also not enure to the benefit of assessee-petitioner awaiting the final decision from the Hon'ble Supreme Court in Civil Appeal No.2734/2013 against the decision of Division Bench of this Court in C.Ramaiah Reddy's case (supra) and also the question of validity of Explanation'' is yet to be examined by the Constitutional Courts. Without that, the lower Appellate Authorities of the Income Tax Department cannot be expected to look IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 4 into these questions of validity of search under Section 132 of the Act at their own level independently...................” (emphasis supplied) 4. In view of the above judgment of the Hon’ble Karnataka High Court, we reject ground 2. Ground No.3 5. In the above ground, the assessee challenges the validity of assessment made u/s 153BC of the I.T.Act on the ground that warrant of authorization has been issued in the case of Sri.Naveed and the assessee. The contention raised in the above ground needs to be rejected, in view of section 292CC of the I.T.Act inserted by Finance Act, 2012 with retrospective effect from 01.04.1976. Section 292CC of the I.T.Act reads as follows:- “292CC. Authorisation and assessment in case of search or requisi tion.—(1) Notwithstanding anything contained in this Act,— (i) it shall not be necessary to issue an authorisation under section 132 or make a requisition under section 132A separately in the name of each person ; (ii) where an authorisation under section 132 has been issued or requisition under section 132A has been made mentioning therein the name of more than one person, the mention of such names of more than one person on such authorisation or requisition shall not be deemed to construe that it was issued in the name of an association of persons or body of individuals consisting of such persons. (2) Notwithstanding that an authorisation under section 132 has been issued or requisition under section 132A has been made men tioning therein the name of more than one person, the assessment or reassessment shall be made separately in the name of each of the persons mentioned in such authorisation or requisition." 6. The assessee, however, placing reliance on the judgment of the Hon’ble jurisdictional High Court in the case of IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 5 Ramnath Santu Angolkar v. DCIT reported in (2020) 422 ITR 508 (Kar.), contended that since the warrant has not been produced before the ITAT, adverse inference is to be drawn that the assessee’s name does not find a place in warrant of authorization. In the instant case, admittedly, the assessee does not have a case that his name is not mentioned in the warrant of authorization (refer ground 3). In fact it is the case of assessee it a joint warrant in his name and in the name of his brother. This fact is also borne out from the Panchnamas drawn on 29.05.2001 and 19.07.2001, which is placed on record at pages 10 to 13 of the paper book filed by the assessee, which clearly mentions the name of the assessee. Therefore, in view of section 292CC of the I.T.Act, we reject ground 3 raised by the assessee. Ground No.6 7. The brief facts in relation to the above ground are as follows: During the course of search at the residence of the assessee, certain agreements were seized as A/NVD/01. Page No.1 to 18 of this seized material contains a memorandum of understanding entered on 29.05.1995 between Mr. N. Ramakrishna and the assessee representing M/s. Cool 'N' Freezing Center. By the above said agreement, property bearing Sy. No.56/17, measuring 1 acre 11 guntas, situated at Hongasandra Village, Begur Hobli, Bangalore South Taluk, was to be purchased by the assessee, for which the consideration has been fixed at Rs.l,92,00,000/-. As on IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 6 the date of agreement, an amount of Rs.30.00 Iakhs has been paid to Sri.N. Ramakrishna. On the reverse of this document, it is mentioned (writing in hand) that the assessee has paid further advance to Sri. N., Ramakrishna, totaling to Rs.1,12,00,000/-. The seized document A/DD-1/2 also indicate that the property has been handed over to the Sri.Javeed (assessee) of M/s. Cool 'N' Freezing Centre. This hand-written portion is duly signed by Sri. N. Ramakrishna in the presence of witnesses on 01.09.1995. The Impounded document (l/NR/l) in the case of Sri.N.Ramakrishna reveal that this property has been subsequently sold to Mr.Akram Khan vide an agreement of sale dated 22.07.1998. This document clearly mentions that an advance of Rs.1,12,00,000/- has already been paid before the date of this agreement (ie., before 22.07.1998). This document shows sale consideration at Rs.2,12,00,000/-, which has been subsequently paid by Sri. Akram Khan. During the course of post search proceedings, it was claimed that one Sri Raffi Baig has actually purchased this property through Mr. Akram Khan. From the above fact, the A.O. was of the view that the assessee has paid as on 01.09.1995, total sum of Rs.1,12,00,000 to Sri.N.Ramakrishna. The A.O. was further of the view that out of Rs.1,12,00,000, the assessee has been able explain only cheque of Rs.25,00,000 and balance of Rs.87,00,000 is unexplained (1,12,00,000 – 25,00,000). Accordingly, the A.O. brought to tax a sum of Rs.87,00,000 as unexplained investment. The relevant finding of the A.O. reads as follows:- IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 7 “3.1 The fact remains that the assessee has paid, an amount of Rs.1,12,00,000/- as on 01.09.1995. .Out of this amount, sources for about Rs.25,00,000/- have been explained as amounts received from M/s. Kool Nest (Rs.10,00,000) and loan from M/s.Amanath Cooperative Bank (Rs.15,00,000). These amounts of Rs.25.00 lakhs has been paid by cheques to Mr. N. Ramakrishna. The balance cash component of Rs.87,00,000 remains unexplained as on 01.09.1995. Since these amounts have been paid by the assessee and acknowledged by Mr. N. Ramakrishna, the onus is on him to prove the sources for these amounts. It is also a fact that the original copy of this document has been seized from his residence. 3.2 The assessee was asked to explain the sources vide order sheet noting dated 26.05.2003. Assessee filed a reply vide letter dated 29.05.2003 in which he has only mentioned that the property was ultimately registered in the name Mr.Raffi Baig and the payment of Rs.l,12,00,000 has not been made by him. The . assessee's assertion that no amount has been paid by him is misleading since, the original amount of Rs.25.00 lakhs paid by him through cheques and the sources are also explained by the group during the course of search proceeding, which has been mentioned above. It is a fact that Mr.N. Ramakrishna has acknowledged that the payments have been received from the assessee and the original document was also found at the residence of the assessee. In view of this, the sources as on 01.09.1995 for an amount of Rs.87.00 lakhs remains unexplained and hence brought to tax as undisclosed income of the assessee.” 8. Aggrieved by the addition made by the A.O, the assessee raised this issue before the first appellate authority. The view taken by the A.O. was confirmed by the CIT(A). The relevant finding of the CIT(A) reads as follows:- 3.9 As regards the addition of Rs.87 lakhs made by the AO in the assessment, it is submitted that the appellant paid Rs.1,12,00,000/- to Shri N.Ramakrishna as per the seized document A/NVD-01 and A/DD1/2. The AO considered the sources for about Rs.25 lakhs and made the addition towards the balance amount of Rs.87 lakhs in respect of a property transaction in the assessment as unexplained investment. The details of the seized documents and the details of payment IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 8 are explained by the AO at para 3 in the assessment order. The AO made necessary enquiries and established that the appellant made unexplained investment of Rs.87 lakhs in the assessment order. The impugned property might have been sold to some other person subsequently but it does not come in the way of examining the sources of payments made by the appellant to Shri N.Ramakrishna in respect of the said property. The appellant was unable to explain the source for the said payments. In the elaborate submissions, the appellant was unable to explain the sources with necessary evidence for the said payment except disputing the same. As per the seized documents, the appellant made the payments and the presumption is that the said payments were made in his individual capacity as there was no material to show otherwise...........................” 9. Aggrieved by the order of the CIT(A), the assessee has raised this issue before the Tribunal. The learned AR reiterated the submissions made before the A.O. and the CIT(A). It was contended that the assessee has got nothing to do with the payments of Rs.1,12,00,000. It was stated that the property was ultimately purchased by Sri. Raffi Baig. The learned AR by referring to the assessment order in the case of Sri.Raffi Baig, which is placed on record at pages 43 to 70 of the paper book filed by the assessee, stated that the payments made by the assessee is only to the extent of Rs.25 lakh, which was accepted as the explained source by the A.O. Further, the learned AR had submitted that the assessee had sought for the sworn statement recorded from all the persons of the group, where search was conducted (search was conducted also in the premises of Sri.Raffi Baig and Sri.N.Ramakrishna). However, sworn statement recorded from such others were not furnished to the assessee. IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 9 10. The learned Standing Counsel, on the other hand, submitted that the search material clearly point to a situation that the assessee had paid a sum of Rs.1,12,00,000 as on 01.09.1995 and the assessee out of the above said amount, has been able to explain only a sum of Rs.25 lakh. Therefore, it was contended that the A.O. was justified in the addition of Rs.87 lakh as unexplained investment. 11. We have heard rival submissions and perused the material on record. There was search proceedings in the residence of the assessee on 29.05.2001. During the course of search proceedings, certain agreements / documents were seized. One of such documents was memorandum of understanding entered on 29.05.1995 between Sri.N.Ramakrishna and the assessee. Vide this document, property measuring 1 acre 11 guntas was purchased by the assessee for which consideration was fixed at Rs.1,92,00,000. On reverse of this document, it is mentioned that the assessee had paid advance to Sri.N.Ramakrishna totaling to Rs.1,12,00,000. The seized documents also indicated the property has been handed over to the assessee. This portion is duly signed by Sri.N.Ramakrishna in presence of witness on 01.09.1995. Therefore, the fact remains as on 01.09.1995 that an amount of Rs.1,12,00,000 has been paid. Out of the amount of Rs.1,12,00,000 paid on 01.09.1995, the assessee was able to explain a sum of Rs.25 lakh as amounts received from M/s.Kool Nest (Rs.10 lakh) and loan from M/s.Amanath Co-operative Bank Ltd. (Rs.15 lakh). This amount of Rs.25 IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 10 lakh was paid by cheque to Sri.N.Ramakrishna. The balance cash component of Rs.87 lakh remained unexplained as on 01.09.1995. Since the amount has been paid by the assessee and acknowledged by the seller, namely, Sri.N.Ramakrishna, the onus was on the assessee to prove the source of this amount. Even before the Tribunal, the learned AR had only asserted that no amounts were paid by the assessee apart from the amount of Rs.25 lakh. The assessee had further contended that the property was not ultimately purchased and the same was purchased by Sri.Raffi Baig through Sri.Akhram Khan. The Bench had given several opportunities to the learned AR to get the details how a sum of Rs.25 lakh paid by cheque was repaid by Sri.N.Ramakrishna, to the assessee. However, no material was produced to show how the deal did not go through and the sum of Rs.25 lakh, which was admittedly paid by the assessee had been repaid when the deal did go through Therefore, the facts remain that the seized material shows that sum of Rs.1,12,00,000 has been paid by the assessee to Sri.N.Ramakrishna on 01.09.1995 and Sri.N.Ramakrishna acknowledged the same in presence of witness. Therefore, the onus was on the assessee to prove the source of this amount. Having failed discharge the onus on the assessee, we affirm the addition made by the A.O. It is ordered accordingly. 12. Therefore, ground No.6 is dismissed. IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 11 Ground No.7 13. In the above ground, the assessee submits that he is not liable for surcharge for tax determined u/s 113 of the I.T.Act. It was fairly submitted by the learned Standing Counsel that this issue covered in favour of the assessee by the judgment of the Hon’ble Apex Court in the case of CIT v. Vatika Township P.Ltd. reported in (2014) 367 ITR 466 (SC). In view of the above submission, we hold that the assessee is not liable for surcharge in respect of tax determined u/s 113 of the I.T.Act. It is ordered accordingly. 14. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 13 th day of October, 2022. Sd/- (Laxmi Prasad Sahu) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 13 th October, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-1, Bengaluru. 4. The CIT-1, Bengaluru. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore IT(SS)A No.1/Bang/2013. Sri.Syed Farahathulla (Alias) Javeed. 12 Date Initial 1. Draft dictated on 12.10.2022 Sr.PS 2. Draft placed before author 13.10.2022 Sr.PS 3. Draft proposed & placed before the second member JM/AM 4. Draft discussed/approved by Second Member. JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading the order on website 8. If not uploaded, furnish the reason 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the AR 10. Date on which file goes to the Head Clerk. 11. Date of dispatch of Order. 12. Draft dictation sheets are attached Sr.PS