Maruthi Babu Jadav, V. DCIT, Calicut

ITSSA 1/COCH/2006

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9288 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 10-01-2013
• Assessment Year: misc
• Appeal Filed On: 09-01-2006
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Keywords: Unexplained investment; Search and seizure; Block assessment
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T(SS)A. NO.01/COCH/2006 BLOCK PERIOD : 01-04-1990 TO 15-11-2000 MARUTHI BABU RAO JADHAV, PROPRIETOR, DHANALAKSHMI REFINERIES, SHANTHAPURAM LODGE, CALICUT ROAD, PERINTHALMANNA-679 322. [PAN:AGNPJ 4163F] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, CALICUT. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI SHAJI POULOSE, REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR DATE OF HEARING 11/03/2013 DATE OF PRONOUNCEMENT 07/06/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 08-08-2005 PASSED BY LD CIT(A)-I, KOCHI AND IT RELATES TO THE BLOCK PERIOD ENDING 15.11.2000. 2. THE ASSESSEE HAS FILED APPEAL BEFORE US IN RESPE CT OF THE FOLLOWING ISSUES:- (A) CASH BALANCE FOUND AT THE TIME OF SEARCH RS .1,30,000/- (B) UNEXPLAINED INVESTMENT IN GOLD BISCUITS - R S.4,70,000/- (C) EXCESS OF EXPENSES OVER RECEIPTS - RS .6,28,882/- (D) ADJUSTMENT OF EXCESS OF EXPENSES AGAINST OTH ER INCOME. (E) INCOME FOR ASSESSMENT YEAR 1994-95 TO 1999-200 0, BEING BELOW TAXABLE LIMIT, IS REQUIRED TO BE EXCLUDED FROM UNDI SCLOSED INCOME. THE ITEMS LISTED OUT AS (D) AND (E) HAVE BEEN CONT ESTED BY RAISING ADDITIONAL GROUNDS BEFORE US. I.T(SS)A. NO. 01/COCH/2006 2 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS CARRYING ON GOLD AND SILVER JEWELLERY BUSINESS AT PERINTHALMANN A. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE A SSESSEE ON 15.11.2000. THE BLOCK ASSESSMENT WAS COMPLETED BY MAKING VARIOUS ADDITION S. IN THE APPEAL FILED BEFORE THE LD CIT(A), THE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITIONS LISTED AS (A) TO (C) IN THE PRECEDING PARAGRAPH. AGGRIEVED BY THE SAME, THE AS SESSEE HAS FILED THIS APPEAL BEFORE US. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS IN RESPECT OF ITEMS LISTED AS (D) AND (E) IN THE PRECEDING PARAGRAPH. 4. WE HAVE HEARD THE RIVAL CONTENTIONS ON VARIO US ISSUES. THE FIRST ISSUE RELATES TO THE ASSESSMENT OF CASH BALANCE OF RS.1,30,000/- FOU ND AT THE TIME OF SEARCH. BEFORE THE ASSESSING OFFICER, THE ASSESSEE CLAIMED THAT TH E SAID AMOUNT BELONGS TO HIS BROTHER NAMED SHRI MANOHAR BABURAO JADAV, WHO WAS THE PROPR IETOR OF A JEWELLERY SHOP NAMED M/S DHANALAKSHMI JEWELLERY. ACCORDING TO THE ASSES SEE, THE MANAGER OF THE SAID CONCERN HANDED OVER THE ABOVE SAID AMOUNT OF RS.1,3 0,000/- TO THE ASSESSEE HEREIN ON THE IMMEDIATELY PREVIOUS DAY TO THE DATE OF SEARCH, SINCE THE BROTHER OF THE ASSESSEE WAS OUT OF STATION. IT IS NOTICED THAT THE DEPARTM ENT CARRIED OUT SURVEY OPERATION U/S 133A OF THE ACT IN THE BUSINESS PREMISES OF M/S DHA NALAKSHMI JEWELLERY ON THE VERY SAME DAY ON WHICH THE SEARCH WAS CONDUCTED IN THE H ANDS OF THE ASSESSEE. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE BOOKS OF ACCOUNTS OF THE SAID CONCERN WAS WRITTEN UP TO 20.10.2000. HENCE BOTH THE TAX AUTHO RITIES DID NOT ACCEPT THE SAID CLAIM OF THE ASSESSEE AND ACCORDINGLY ASSESSED THE CASH B ALANCE OF RS.1,30,000/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 5. THE UNDISPUTED FACT REMAINS THAT THE BOOKS O F ACCOUNTS OF M/S DHANALAKSHMI JEWELLERY WAS WRITTEN UP TO 20.10.2000 ONLY ON THE DATE OF SURVEY, I.E., ON 15.11.2000. FURTHER, IT IS ALSO A FACT THAT THE ASSESSEE ALSO D ID NOT RECORD IN ANY OF THE DOCUMENTS ABOUT THE RECEIPT OF MONEY FROM THE CONCERN BELONGI NG TO HIS BROTHER. THUS, IT IS SEEN THAT THE ASSESSEE COULD NOT PROVE HIS CLAIM BY SHOW ING THAT THE SAID TRANSACTION WAS RECORDED IN ANY OF THE DOCUMENTS PRIOR TO THE DATE OF SEARCH. THE ASSESSEE IS PLACING I.T(SS)A. NO. 01/COCH/2006 3 RELIANCE ON THE ENTRIES RECORDED IN THE BOOKS OF AC COUNTS OF M/S DHANALAKSHMI JEWELLERY, APPARENTLY AFTER THE DATE OF SEARCH. UN DER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ASSESSMENT OF RS.1,30,000/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 6. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF UNEXPLAINED INVESTMENT IN GOLD BISCUITS. DURING THE COURSE OF SEARCH, 18 GOLD BIS CUITS VALUED AT RS.9,36,000/- WAS FOUND. THE ASSESSEE SURRENDERED A SUM OF RS.4,66,0 00/- AS HIS UNDISCLOSED INCOME OUT OF THE ABOVE SAID AMOUNT OF RS.9,36,000/-. WITH RE GARD TO THE BALANCE AMOUNT OF RS.4,70,000/-, THE ASSESSEE CLAIMED THAT HE RECEIVE D THE SAME FROM HIS BROTHER SHRI MANOHAR BABU RAO JADHAV. WITH REGARD TO THE SOURCE S OF HIS BROTHER, IT WAS CLAIMED THAT SHRI MANOHAR BABU RAO JADHAV WITHDREW A SUM OF RS.3.00 LAKHS FROM HIS PROPRIETARY CONCERN, VIZ., M/S DHANALAKSHMI JEWELLE RY AND FURTHER REALISED A SUM OF RS.1.70 LAKHS ON SALE OF JEWELLERY BELONG TO HIS WI FE. BOTH THE TAX AUTHORITIES REJECTED THE SAID CLAIM OF THE ASSESSEE. 7. THE LD CIT(A) HAS POINTED OUT THAT THE ASSESS EE HEREIN DID NOT MAINTAIN ANY BOOKS OF ACCOUNT, MEANING THEREBY, THE TRANSACTION OF REC EIPT OF RS.4.70 LAKHS WAS NOT RECORDED IN ANY OF THE DOCUMENTS PRIOR TO THE DATE OF SEARCH. EVEN THE PURCHASE OF GOLD BISCUITS WERE NOT RECORDED ANYWHERE. THE ASSE SSING OFFICER ALSO FOUND THAT THE ASSESSEE DID NOT HAVE ANY SALES TAX REGISTRATION NU MBER ALSO. THUS, IT IS SEEN THAT THE ASSESSEE IS TRYING TO LINK THE WITHDRAWAL OF RS.3.0 0 LAKHS MADE BY HIS BROTHER WITH THE CLAIM OF RECEIPT OF LOAN OF RS.4.70 LAKHS FROM HIM. SINCE THE WITHDRAWAL WAS LESS THAN RS.4.70 LAKHS, A FURTHER CLAIM WITH REGARD TO THE S ALE OF JEWELLERY BELONGING TO THE WIFE OF HIS BROTHER SEEN TO HAVE BEEN MADE. THUS, IT IS SEEN THAT THE ASSESSEE IS TRYING TO EXPLAIN THE INVESTMENT OF RS.4.70 LAKHS WITHOUT ANY CREDIBLE EVIDENCES. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN CON FIRMING THE ASSESSMENT OF RS.4.70 LAKHS, REFERRED ABOVE, IN THE HANDS OF THE ASSESSEE 8. THE NEXT ISSUE RELATES TO THE ASSESSMENT OF EXCESS OF EXPENDITURE OVER RECEIPTS. DURING THE COURSE OF SEARCH, THE DEPARTMENT UNEARTH ED A NOTE BOOK CONTAINING THE CASH I.T(SS)A. NO. 01/COCH/2006 4 TRANSACTIONS BETWEEN 03-09-2000 TO 14.11.2000. THE SAID TRANSACTIONS CONTAINED RECEIPTS TO THE TUNE OF RS.73,345/- AND AGGREGATE E XPENDITURE TO THE TUNE OF RS.7,02,227/-. THUS, THE EXCESS OF EXPENDITURE OVE R THE RECEIPT WAS TO THE TUNE OF RS.6,28,882/-. THE ASSESSEE CLAIMED THE SOURCES OF THE SAME AS AGRICULTURAL INCOME. IN THE CASH FLOW STATEMENT, THE ASSESSEE CLAIMED AG RICULTURAL INCOME OF RS.2,50,000/- AND RS.4,00,000/- RESPECTIVELY FOR THE FINANCIAL YE ARS 1997-98 AND 1998-99. THE AO REJECTED THE CLAIM OF RECEIPT OF AGRICULTURAL INCOM E AND ACCORDINGLY ASSESSED THE CASH DEFICIT OF RS.6,28,882/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE. THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE AO ON THIS ISSUE. 9. WE NOTICE THAT THE ASSESSEE HAS CLAIMED THE RECEIPT OF AGRICULTURAL INCOME IN THE CASH FLOW STATEMENT. AS POINTED OUT BY THE TAX AUT HORITIES, THE ASSESSEE DID NOT FURNISH ANY MATERIAL TO SUBSTANTIATE THE CLAIM OF RECEIPT O F AGRICULTURAL INCOME. IT IS ALSO SEEN THAT THE DEPARTMENT DID NOT UNEARTH ANY EVIDENCE RE LATING TO THE AVAILABILITY OF AGRICULTURAL INCOME IN THE HANDS OF THE ASSESSEE. FURTHER, THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT, WHEREIN HE COULD REC ORD THE TRANSACTIONS RELATING TO THE AGRICULTURAL INCOME. THOUGH THE ASSESSEE HAS DISPU TED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER REGARDING THE AVAILABILITY OF AGR ICULTURAL INCOME IN THE HANDS OF THE ASSESSEE, BUT THE BASIC FACT REMAINS THAT THE CLAIM OF AGRICULTURAL INCOME IS MADE IN THE CASH FLOW STATEMENT FILED SUBSEQUENT TO THE DATE OF SEARCH, THAT TOO WITHOUT BRINGING ANY MATERIAL TO SUBSTANTIATE THE SAID CLAIM. THE A SSESSEE FURTHER PLACES RELIANCE ON THE ASSESSMENT PASSED IN THE HANDS OF THE BROTHER OF TH E ASSESSEE IN ORDER TO SUBSTANTIATE HIS CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME. THE FACT REMAINS THAT THE PRESENT ASSESSMENT IS A BLOCK ASSESSMENT, WHICH IS A SEPARA TE ASSESSMENT PROCEDURE AND IT RUNS PARALLEL TO THE REGULAR ASSESSMENT PROCEEDINGS . IT IS A WELL SETTLED PROPOSITION OF LAW THAT THE BLOCK ASSESSMENT PROCEEDINGS SHOULD BE MADE ONLY ON THE BASIS OF SEIZED MATERIAL. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE TAX AUTHORITIES ARE JUSTIFIED IN REJECTING THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME, WHEN THE SAID CLAIM WAS NOT SUBSTANTIATED WITH ANY EVIDENCE. IN THE ABSENCE OF AGRICULTURAL INCOME, THE SOURCES FOR THE EXCESS CASH OUTFLOW COULD NOT BE PROVED AND HEN CE THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE ASSESSMENT OF RS.6,28,882/- AS THE U NDISCLOSED INCOME OF THE ASSESSEE. I.T(SS)A. NO. 01/COCH/2006 5 10. IN THE ADDITIONAL GROUNDS, THE ASSESSEE HAS RAISED A PLEA FOR TREATING THE ABOVE SAID AMOUNT OF RS.6,28,882/- AS LOSS FROM BUSINESS AND CONSEQUENTLY HAS SOUGHT FOR SET OFF OF THE SAME AGAINST OTHER INCOME ASSESSED A S UNDISCLOSED INCOME. IN OUR VIEW, THE SAID CLAIM OF THE ASSESSEE IS LIABLE TO BE REJE CTED ON TWO GROUNDS. FIRST RS.6,28,882/- REPRESENTS EXPENDITURE INCURRED OUT O F UNDISCLOSED SOURCES AND WHAT WAS ASSESSED IS NOT THE EXPENDITURE, BUT THE QUANTUM O F UNDISCLOSED SOURCES. THE CASH OUTFLOW FROM UNDISCLOSED SOURCES CANNOT BE CONSIDER ED AS A BUSINESS LOSS, AS CLAIMED BY THE ASSESSEE. SECONDLY, THE UNDISCLOSED SOURCE WAS DETERMINED ON THE BASIS OF TRANSACTIONS PERTAINING TO A PART OF YEAR, I.E, FOR THE PERIOD FROM 03-09-2000 TO 14.11.2000. THE PROFIT OR LOSS OF ANY BUSINESS CON CERN ACCRUES ONLY AS ON THE LAST DAY OF THE FINANCIAL YEAR AND ACCORDINGLY, THE EXCESS C ASH OUTFLOW IN THE FORM OF EXPENDITURE CANNOT BE CONSIDERED AS A BUSINESS LOSS . IN VIEW OF THE ABOVE, WE REJECT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THI S ISSUE. 11. THE ASSESSEE HAS ALSO RAISED ANOTHER ADDITION AL GROUND, VIZ., THE INCOME DETERMINED FOR THE ASSESSMENT YEAR 1994-95 TO 1999- 2000, AFTER GIVING EFFECT TO THE ORDER OF LD CIT(A), WAS LESS THAN THE NON-TAXABLE L IMIT IN EACH OF THE ABOVE SAID YEARS AND HENCE THEY ARE LIABLE TO BE EXCLUDED FROM THE A MBIT OF UNDISCLOSED INCOME. APPARENTLY, THE ASSESSEE IS SEEKING DEDUCTION ON TH E BASIS OF PROVISIONS OF CLAUSE (C) OF SUBSECTION (1) OF SEC. 158BB OF THE ACT. A CAREFUL PERUSAL OF THE SAID PROVISION WOULD SHOW THAT SUCH A DEDUCTION IS PERMISSIBLE ON THE B ASIS OF ENTRIES AS RECORDED IN THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF SEARCH. HOWEVER, IN THE INSTANT CASE, BOTH THE TAX AUTHORITIES HAVE GIVEN A FINDING THAT THE ASSESSEE HEREIN DID NOT MAINTAIN A NY BOOKS OF ACCOUNTS. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED TO SEEK DEDUCTION AS PER THE PROVISIONS OF CLAUSE (C) OF SUBSECTION (1) OF SEC. 158BB OF THE ACT. ACCORDINGLY, WE REJECT THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE. I.T(SS)A. NO. 01/COCH/2006 6 12. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 07-06-2 013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 7TH JUNE, 2013 GJ COPY TO: 1. MARUTHI BABU RAO JADHAV, PROPRIETOR, DHANALAKSHM I REFINERIES, SHANTHAPURAM LODGE, CALICUT ROAD, PERINTHALMANNA-679 322. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL C IRCLE, CALICUT. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4.THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER R (ASSISTANT REGISTRAR ) I.T.A.T, COCHIN I.T(SS)A. NO. 01/COCH/2006 7