Smt. Sivabala Devi.R, CHENNAI V. ACIT, Chidambaram

ITSSA 112/CHNY/1998

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8153 (ITAT-CHENNAI)
• Duration Of Justice: 14 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-06-2012
• Assessment Year: misc
• Appeal Filed On: 12-05-1998
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Keywords: Unexplained investment; Gift; Depreciation; Source of fund; Wrong claim; Block assessment
• Section: 260A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI V.DURGA RAO, JUDICIAL MEMBER IT(SS)A NO.112(MDS)/1998 BLOCK ASSESSMENT YEARS : 1986-87 TO 1996-97 (UPTO 1 9-1-1996) SMT. SIVABALA DEVI, FLAT NO.6, BLOCK K-III, BOGANVILLA APARTMENTS, 15 TH STREET, ANNA NAGAR, CHENNAI-600 012. PA/GIR NO.24703-B. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE II(4), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.SRINIVASAN, CHARTE RED ACCOUNTANT RESPONDENT BY :SHRI SHAJI P JACOB, IRS, ADDL .CIT DATE OF HEARING : 21 ST JUNE, 2012 DATE OF PRONOUNCEMENT : 25 TH JULY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS IS A BLOCK ASSESSMENT APPEAL. THE BLOCK ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3), READ WITH SECTIONS 158BC AND 158BD OF THE INCOME-TAX ACT, 196 1. THE - - IT(SS)A 112 OF 1998 2 IMPUGNED BLOCK ASSESSMENT IS THE ONE GOVERNED BY TH E PROVISIONS OF SECTION 158BD OF THE INCOME-TAX ACT, 1961. 2. THERE WAS A SEARCH UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 ON 19/20-1-1996 IN THE CASE OF THE CO- BROTHER OF THE ASSESSEE. ACCORDING TO THE ASSESSIN G OFFICER, THE DOCUMENTS AND MATERIALS SEIZED WITH REFERENCE TO TH E ABOVE SEARCH HAVE LED TO THE FRAMING OF THE IMPUGNED BLOC K ASSESSMENT ON THE ASSESSEE UNDER SECTION 158BD OF T HE ACT. ACCORDINGLY, THE RELEVANT ASSESSMENT YEARS INVOLVED IN THE IMPUGNED BLOCK PERIOD ARE THE ASSESSMENT YEARS FROM 1986-87 TO 1996-97 (UPTO 19-1-1996). 3. ACCORDING TO THE ASSESSING OFFICER, THE SEIZED RECORDS AND MATERIALS MADE OUT A CASE OF UNDISCLOSE D INCOME AGAINST THE ASSESSEE. THEREFORE, HE ISSUED NOTICE UNDER SECTION 158BC ON 7-3-1997, WHICH WAS SERVED ON THE ASSESSEE ON 18-3-1997. THE ASSESSEE FILED THE RETURN IN FORM N O.2B ON 26-5-1997. SHE ADMITTED AN UNDISCLOSED INCOME OF ` 2,31,098/- AND PAID TAX OF ` 1,38,659/-. 4. LATER ON, THE ASSESSING OFFICER ISSUED NOTICE U NDER SECTION 143(2) ON 29-5-1997 AND SET IN MOTION THE P ROCESS OF - - IT(SS)A 112 OF 1998 3 ASSESSMENT OF UNDISCLOSED INCOME IN THE CASE OF THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IS TH E PROPRIETRIX OF THREE BUSINESS CONCERNS, NAMELY M/S.BHARANI YOLK AM INTERNATIONAL, M/S. BHARANI REAL ESTATE AND SRI BAL A & CO. M/S.BHARANI YOLKAM INTERNATIONAL IS DOING BUSINESS AS COMMISSION AGENT FOR M/S.THE KARUR CO-OPERATIVE HAN DLOOM EXPORT PRODUCTION PROJECT LIMITED. THE SAID BUSINE SS WAS SAID TO BE COMMENCED FROM THE ASSESSMENT YEAR 1984-85. THE RATE OF COMMISSION ENTITLED FOR THE ASSESSEE WAS 10%. T HE ASSESSEE CLAIMED VARIOUS EXPENDITURE IN RESPECT OF THE SAID BUSINESS IN THE FORM OF SALARY, RENT, ELECTRICITY A ND OTHER ESTABLISHMENT CHARGES AND HAD SHOWN CERTAIN AMOUNTS AS INCOME FROM THE SAID CONCERN FOR ALL THE ASSESSMENT YEARS INCLUDED IN THE BLOCK PERIOD. BUT THE ASSESSING OF FICER WAS OF THE VIEW THAT THE ASSESSEE HAS WORKED OUT THE INCOM E AND EXPENDITURE ON AN ESTIMATE BASIS AND THEREFORE THE INCOME DISCLOSED BY THE ASSESSEE FOR THE VARIOUS YEARS FRO M THE SAID BUSINESS CONCERN CANNOT BE ACCEPTED AS SUCH. INSTEA D, HE TREATED 60% OF THE COMMISSION RECEIPTS AS INCOME OF THE ASSESSEE AND THE DIFFERENTIAL AMOUNTS WERE TREATED AS - - IT(SS)A 112 OF 1998 4 UNDISCLOSED INCOME. THE TOTAL COMMISSION INCOME SO DETERMINED BY THE ASSESSING OFFICER FOR THE PURPOSE OF THE BLOCK ASSESSMENT COMES TO ` 5,99,405/- AS SHOWN BELOW:- ASSESSMENT YEAR AMOUNT 1986-87 ` 48,610/- 1987-88 ` 20,016/- 1988-89 ` 23,485/- 1989-90 NIL 1990-91 ` 1,86,805/- 1991-92 ` 1,87,986/- 1992-93 ` 34,969/- 1993-94 ` 9,500/- 1994-95 ` 29,124/- 1995-96 ` 41,116/- 1996-97(UPTO 19.1.96) ` 17,794/- ----------------- ` 5,99,405/- ----------------- 5. M/S.BHARANI REAL ESTATE IS A CONCERN HAVING REA L ESTATE BUSINESS. THE ASSESSING OFFICER ACCEPTED TH E NET INCOME FROM BHARANI REAL ESTATE AS RETURNED BY THE ASSESSE E (PARAGRAPH 2.3.2 OF THE ASSESSMENT ORDER). THE ASS ESSEE HAS CLAIMED AN INCOME OF ` 20,000/- PER ANNUM FROM THE ASSESSMENT YEAR 1991-92 ONWARDS ON SALE OF THORN TREES FROM THE PATCHES OF LAND PURCHASED FOR DEVELOPMENT AND SALE AS HOUSE PLOTS. - - IT(SS)A 112 OF 1998 5 THESE RECEIPTS WERE TREATED BY THE ASSESSING OFFICE R AS UNDISCLOSED INCOME OF THE ASSESSEE. HE COMPUTED AN UNDISCLOSED INCOME OF ` 1,16,000/- AGAINST THE SALE OF THORN TREES AS DETAILED BELOW:- ASSESSMENT YEAR AMOUNT 1991 - 92 ` 20000/ - 1992 - 93 ` 20,000/ - 1993 - 94 ` 20,000/ - 1994 - 95 ` 20,000/ - 1995 - 96 ` 20,000/ - 1 996 - 97 (UPTO 19.1.96) ` 16,000/ - ------------- ` 1,16,000/ - -------------- 6. THE OTHER CONCERN OF THE ASSESSEE, SRI BALA & C O, DEALT WITH A PROPERTY KNOWN AS LOCH END COMPOUND IN KODAIKANAL. THE ASSESSEE HAD ENTERED INTO A PURCHA SE AGREEMENT WITH INDIAN EVANGELICAL LUTHERAN CHURCH T RUST ASSOCIATION ON 29.4.1991. THE ASSESSEE HAD ORIGINA LLY INVESTED A SUM OF ` 10 LAKHS BY WAY OF ADVANCE TO THE TRUST FOR PURCHA SE OF THE PROPERTY. THE ASSESSEE ALSO INVESTED ` 5 LAKHS THEREAFTER. EVEN THOUGH THE ASSESSEE HAS TAKEN OVER THE POSSESS ION OF THE PROPERTY, THE PROPERTY COULD NOT BE REGISTERED IN H ER NAME FOR A - - IT(SS)A 112 OF 1998 6 NUMBER OF LITIGATIONS. THE ASSESSEE HAD SPENT MONE Y TO DEVELOP THE PROPERTY FOR RUNNING THE BUSINESS OF A GUEST HOUSE. SHE WAS EARNING RENTAL INCOME FROM THE ASSESSMENT Y EAR 1993-94 ONWARDS. THE ASSESSEE DID NOT ADMIT SUCH R ENTAL INCOME FROM THE GUEST HOUSE AS INCOME, BUT ON THE O THER HAND, SET OFF THE INCOME AGAINST THE WORK IN PROGRESS FOR THE REASON THAT THE MAIN BUSINESS OF REAL ESTATE DID NOT COMME NCE. THE ASSESSING OFFICER RELYING ON VARIOUS COURT DECISION S, INCLUDING THAT OF THE HONBLE SUPREME COURT IN TUTICORIN ALKA LI CHEMICASLS VS CIT (227 ITR 172) HELD THAT THE RENTALS CONSTITU TED INCOME AND TREATED SUCH RECEIPTS AS UNDISCLOSED INCOME OF THE ASSESSEE. A TOTAL AMOUNT OF ` 10,85,000/- HAS BEEN ADOPTED AS THE UNDISCLOSED INCOME OF THE ASSESSEE ON THIS GROU ND. THE DETAILS ARE AS BELOW:- ASSESSMENT YEAR AMOUNT 1993-94 ` 2,50,000/- 1994-95 ` 2,75,000/- 1995-96 ` 3,00,000/- 1996-97 (UPTO 19.1.96) ` 2,60,000/- ------------------- ` 10,85,000/- ------------------- - - IT(SS)A 112 OF 1998 7 IT IS TO BE STATED THAT THE ABOVE INCOME HAS BEEN W ORKED OUT BY THE ASSESSING OFFICER ON AN ESTIMATE BASIS AND NOT ON THE BASIS OF EXACT ACCOUNTS. 7. AS PER THE STATEMENTS AND DETAILS FURNISHED BY THE ASSESSEE, THE SOURCE OF INVESTMENTS MADE BY HER IN VARIOUS BUSINESSES WAS AVAILED BY WAY OF LOANS FROM ABOUT 4 2 PERSONS. SHE HAS FURNISHED THE DETAILS OF THOSE PERSONS FROM WHOM SHE AVAILED SUCH LOANS. ACCORDING TO THE ASSESSING OFF ICER, THE GENUINENESS OF THOSE LOANS WAS NOT PROVED AND ACCOR DINGLY HE TREATED THE ENTIRE LOAN AMOUNTS AS ASSESSEES UNDIS CLOSED INCOME. A TOTAL OF ` 75,31,500/- IS TAKEN AS THE UNDISCLOSED INCOME OF THE ASSESSEE AGAINST THE LOAN CREDITORS. THE YEAR- WISE PARTICULARS ARE AS BELOW:- ASSESSMENT YEAR AMOUNT 1991-92 ` 16,92,000/- 1992-93 ` 19,90,000/- 1993-94 ` 9,60,000/- 1994-95 ` 8,10,000/- 1995-96 ` 16,27,000/- 1996-96(UPTO 19.1.96) ` 4,52,000/- ------------------- ` 75,31,500/- ------------------- - - IT(SS)A 112 OF 1998 8 8. WHILE PREPARING THE CASH FLOW STATEMENTS FOR TH E VARIOUS ASSESSMENT YEARS INCLUDED IN THE IMPUGNED B LOCK PERIOD, THE ASSESSEE HAS TAKEN CREDIT FOR CERTAIN G IFTS SAID TO BE RECEIVED BY HER. THE ASSESSING OFFICER DID NOT ACC EPT THE GENUINENESS OF THE GIFTS AND TREATED THE GIFTS AS T HE UNDISCLOSED INCOME OF THE ASSESSEE. THE TOTAL AMOUNT ON THIS P OINT TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE IS ` 1,20,700/-, AS SHOWN BELOW:- ASSESSMENT YEAR AMOUNT 1986-87 ` 3,000/- 1987-88 ` 3,500/- 1989-90 ` 4,000/- 1990-91 ` 42,500/- 1991-92 ` 4,200/- 1992-93 ` 7,500/- 1993-94 ` 15,000/- 1994-95 ` 11,000/- 1995-96 ` 28,000/- 1996-97(UPTO 19.1.96) ` 2,000/- ------------------ ` 1,20,700/- ------------------ 9. THE ASSESSEE HAS TAKEN CREDIT FOR AGRICULTURAL INCOME OBTAINED FROM VARIOUS PROPERTIES OWNED AND H ELD BY HER DURING THE BLOCK PERIOD. BUT THE ASSESSING OFFICE R DID NOT - - IT(SS)A 112 OF 1998 9 ACCEPT THE QUANTUM OF THE AGRICULTURAL INCOME CLAIM ED BY THE ASSESSEE AS SUCH. HE TREATED A PORTION OF SUCH AGR ICULTURAL INCOME AS NON-AGRICULTURAL IN NATURE AND THEREBY UN DISCLOSED INCOME IN SUBSTANCE. SUCH PARTIAL DISALLOWANCE OF AGRICULTURAL INCOME AND IMPRESSING IT AS UNDISCLOSED INCOME AMOU NTED TO ` 1,97,200/-. THE DETAILS ARE AS BELOW:- ASSESSMENT YEAR AMOUNT 1989-90 ` 12,000/- 1990-91 ` 17,000/- 1991-92 ` 17,000/- 1992-93 ` 34,000/- 1993-94 ` 34,000/- 1994-95 ` 34,000/- 1995-96 ` 34,000/- 1996-97(UPTO 19.1.96) ` 15,200/- ----------------- ` 1,97,200/- ----------------- 10. THE ASSESSEE HAS CLAIMED INCOME BY WAY OF COMMISSION FROM M/S.CHENKUMAR WEAVERS CO-OPERATIVE PRODUCTION AND SALES SOCIETY. THE ASSESSING OFFICE R TREATED THE SAID COMMISSION INCOME ALSO AS THE UNDISCLOSED INCO ME OF THE ASSESSEE. THE TOTAL COMES TO ` 38,538/- AS STATED BELOW: - - IT(SS)A 112 OF 1998 10 ASSESSMENT YEAR AMOUNT 1991-92 ` 10,986/- 1992-93 ` 7,669/- 1993-94 ` 1,112/- 1994-95 ` 18,771/- --------------- ` 38,538/- -------------- 11. WHILE CONSIDERING THE UNDISCLOSED INCOME FOR T HE ASSESSMENT YEAR 1991-92, THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE THAT SHE HAD RECEIVED A L OAN OF ` 2 LAKHS FROM P.C.PALANISWAMY OF ERODE FOR MAKING IN VESTMENTS IN SRI BALA & CO AND M/S.BHARANI REAL ESTATE. THIS LOAN OF ` 2 LAKHS IS ALSO ADDED BY THE ASSESSING AUTHORITY AS UNDISCLOSED INCOME. 12. WHILE MENTIONING ABOUT M/S.BHARANI REAL ESTATE , WE HAVE MENTIONED THAT THE ASSESSING OFFICER HAS AC CEPTED THE INCOME AS RETURNED BY THE ASSESSEE. ACCORDINGLY, H E HAS TREATED ` 1242 AS THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1993-94. IN THE CASE OF THE SA ME BUSINESS, THE ASSESSEE HAS CLAIMED A DEPRECIATION O F ` 15,228 FOR THE ASSESSMENT YEAR 1994-95 IN RESPECT OF AN AI R CONDITIONER. THE ASSESSING OFFICER HELD THAT THE AIR CONDITIONER WAS INSTALLED - - IT(SS)A 112 OF 1998 11 IN ASSESSEES RESIDENTIAL HOUSE AND THEREFORE THE S AME COULD NOT BE ALLOWED. THE SAID AMOUNT OF ` 15,228/- WAS ALSO TREATED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. 13. THE ASSESSEE HAD SOLD A PLOT OF LAND AT KARUR FOR A CONSIDERATION OF ` 1,80,000/-. THE LAND WAS PURCHASED IN 1988. THE ASSESSING OFFICER COMPUTED A CAPITAL GAINS OF ` 1,50,650/- AGAINST THE ABOVE TRANSACTION AND TREATED THE SAME AS THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSME NT YEAR 1996-97. DURING THE SAME ASSESSMENT YEAR, THE ASSE SSEE HAS CLAIMED THAT SHE RECEIVED A SUM OF ` 9,50,000/- BY WAY OF COMPENSATION FROM ONE DR. SURIYA SHEKHAR IN CANCELL ATION OF AN AGREEMENT DATED 9-2-1992 BY WHICH THE ASSESSEE AGRE ED TO PURCHASE A PROPERTY AT PLOT NO.4530, Y-201, 5 TH AVENUE, ANNA NAGAR, MADRAS-40. THE ASSESSING OFFICER TREATED TH E SUM OF ` 9,50,000/- AS THE INCOME OF THE ASSESSEE, AS ACCOR DING TO HIM, THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO ESTABL ISH THAT THE SAID AMOUNT WAS RECEIVED BY WAY OF COMPENSATION. FO R BRINGING THE AMOUNT TO TAX, THE ASSESSING OFFICER ALSO RELIE D ON THE DECISION OF THE HONBLE SUPREME COURT IN CIT V. G.R.KARTHEKEYAN (201 ITR 866). - - IT(SS)A 112 OF 1998 12 14. IN HER CASH FLOW STATEMENT FILED ALONG WITH TH E BLOCK RETURN, THE ASSESSEE HAS SHOWN THE RECEIPT OF AGRIC ULTURAL INCOME FROM M/S.MBS GRANITES AND ACCORDING TO THE A SSESSEE THE AMOUNT RECEIVED FROM M/S.MBS GRANITES WERE HER SHARE FROM THE AGRICULTURAL INCOME EARNED BY THE SAID FIR M. BUT THE ASSESSING OFFICER TREATED THOSE RECEIPTS AS THE UND ISCLOSED INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSES SEE HAS NOT PRODUCED ANY PROOF IN SUPPORT OF HER CONTENTION. A TOTAL AMOUNT OF ` 4,66,000/- HAS BEEN TREATED BY THE ASSESSING OFFIC ER AS UNDISCLOSED INCOME ON THE ABOVE GROUND. THE DETAIL S ARE AS FOLLOWS:- ASSESSMENT YEAR AMOUNT 1993-94 ` 1,25,000/- 1994-95 ` 1,25,000/- 1995-96 ` 1,20,000/- 1996-97(UPTO 19.1.96) ` 96,000/- ------------------ ` 4,66,000/- ------------------- 15. THE ASSESSING OFFICER HAS ALSO TREATED THE INT EREST ACCRUED IN THE BANK ACCOUNTS MAINTAINED IN THE NAME OF THE ASSESSEES MINOR CHILDREN BY CLUBBING THE SAME UNDE R SECTION - - IT(SS)A 112 OF 1998 13 64 OF THE INCOME-TAX ACT. THE TOTAL AMOUNT COMES T O ` 30,375/- AS FOLLOWS:- ASSESSMENT YEAR AMOUNT 1992-93 ` 6,375/- 1993-94 ` 6,000/- 1994-95 ` 6,000/- 1995-96 ` 6,000/- 1996-97 (UPTO 19.1.96) ` 6,000/- -------------- ` 30,375/- --------------- 16. FOR THE ASSESSMENT YEAR 1996-97 THE ASSESSEE H AD SHOWN AN OPENING CAPITAL OF ` 60,000/-. THIS WAS NOT ACCEPTED BY THE ASSESSING OFFICER AND THE SAME IS TREATED AS THE ASSESSEES UNDISCLOSED INCOME. 17. A SUM OF ` 32,150/- WAS FOUND IN THE COURSE OF SEARCH. OUT OF THE ABOVE SUM, THE ASSESSING OFFICE R TREATED ` 30,000/- AS THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1996-97. 18. AS SEEN FROM THE ABOVE PARAGRAPHS, THE ASSESSI NG OFFICER HAS WORKED OUT THE UNDISCLOSED INCOME IN TH E CASE OF THE ASSESSEE BY ESTIMATING COMMISSION INCOME; DISBELIEV ING THE - - IT(SS)A 112 OF 1998 14 GIFTS RECEIVED BY THE ASSESSEE; DISALLOWING THE OPE NING CAPITAL; TREATING THE CASH FOUND IN THE COURSE OF SEARCH AS UNDISCLOSED INCOME; DISALLOWING A PORTION OF THE AGRICULTURAL I NCOME RETURNED BY THE ASSESSEE; TREATING THE GUEST HOUSE INCOME AS UNDISCLOSED INCOME; TREATING THE LOAN AMOUNTS AS UN DISCLOSED INCOME; AGRICULTURAL SHARE INCOME FROM M/S.MBS GRAN ITES TREATED AS UNDISCLOSED INCOME; INCOME FROM SALE OF THORN TREES TREATED AS UNDISCLOSED INCOME, ETC., ETC. AT ` 1,15,75,840/-. 19. THE ABSTRACT OF THE UNDISCLOSED INCOME AS COMPUTED BY THE ASSESSING OFFICER IS EXTRACTED BELO W:- ASST. YEAR TOTAL ADMITTED UNDISCLOSED 1986-87 ` 1,11,610/- -- ` 1,11,610/- 1987-88 ` 23,516/- -- ` 23,516/- 1988-89 ` 23,485/- -- ` 23,485/- 1989-90 ` 16,000/- ` 16,000/- --- 1990-91 ` 2,46,305/- -- ` 2,46,305/- 1991-92 ` 21,32,172/- -- ` 21,32,172/- 1992-93 ` 21,00,513/- -- ` 21,00,513/- 1993-94 ` 14,21,854/- -- ` 14,21,854/- 1994-95 ` 13,44,123/- -- ` 13,44,123/- 1995-96 ` 21,76,616/- -- ` 21,76,616/- 1996-97 ` 19,95,644/- -- ` 19,95,644/- -------------------- TOTAL UNDISCLOSED INCOME ` 1,15,75,838/- OR ` 1,15,75,840/- ---------------------- - - IT(SS)A 112 OF 1998 15 20. IT IS AGAINST THE ABOVE BLOCK ASSESSMENT THAT THE ASSESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL. IN THE EXHAUSTIVE GROUNDS OF APPEAL FILED BEFORE US, RUNNI NG TO 23 GROUNDS, THE ASSESSEE HAS VIRTUALLY CHALLENGED EVER Y ADDITION MADE BY THE ASSESSING OFFICER IN THE IMPUGNED BLOCK ASSESSMENT. IN ADDITION TO THE GROUNDS RAISED ON T HE MERITS OF THE VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER , THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS, WHICH ARE LEGAL IN NATURE. 21. ONE OF THE LEGAL GROUNDS RAISED BEFORE THE TRI BUNAL IS THAT THE INFORMATION AND MATERIALS USED BY THE A SSESSING OFFICER TO COMPLETE THE IMPUGNED BLOCK ASSESSMENT U NDER SECTION 158BD HAD IN FACT ALREADY BEEN FURNISHED TO THE ASSISTANT DIRECTOR OF INCOME-TAX (INVESTIGATION), M ADURAI, AS EARLY AS ON 15-5-1995 ITSELF, WHO HAD SOUGHT THE RE LEVANT INFORMATION FROM THE ASSESSEE. IN THE COURSE OF SE ARCH, NO DOCUMENTS, MATERIALS OR INFORMATION OTHER THAN THOS E DOCUMENTS, MATERIALS OR INFORMATION FURNISHED TO TH E ASSISTANT DIRECTOR OF INCOME-TAX(INVESTIGATION), MADURAI, ON 15-5-1995 - - IT(SS)A 112 OF 1998 16 HAVE BEEN RECOVERED. THEREFORE, THERE IS NO UNDIS CLOSURE AS FAR AS THE CASE OF THE ASSESSEE IS CONCERNED AND, T HEREFORE, THE IMPUGNED ASSESSMENT IS VOID AB INITIO. 22. THIS LEGAL GROUND WAS ACCEPTED BY THE TRIBUNAL AND IT WAS HELD THAT THE ITEMS REFLECTED IN THE LETTER DATED 15-5-1995 COULD NOT BE CONSIDERED AS PART OF UNDISCLOSED INCO ME. THE TRIBUNAL HELD THAT THOSE ITEMS, WHICH WERE NOT REFL ECTED IN ASSESSEES LETTER DATED 15-5-1995, ALONE COULD BE C ONSIDERED FOR IMPUTING A CASE OF UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. 23. ON THE BASIS OF THE ABOVE FINDING THE TRIBUNAL DELETED THE ADDITIONS MADE BY THE ASSESSING AUTHORI TY RELATING TO THOSE ITEMS WHICH WERE REFLECTED IN THE LETTER DATE D 15-5-1995, FURNISHED BY THE ASSESSEE TO THE ASSISTANT DIRECTOR OF INCOME- TAX (INVESTIGATION) AT MADURAI. THE REMAINING ADDI TIONS WERE CONSIDERED BY THE TRIBUNAL ON MERITS. SOME ADDITIO NS WERE CONFIRMED AND THE OTHERS WERE DELETED. IN THAT MAN NER THE APPEAL WAS DISPOSED OF BY THE TRIBUNAL THROUGH ITS ORDER DATED 14-2-2003. - - IT(SS)A 112 OF 1998 17 24. THE REVENUE WAS AGGRIEVED BY THE LEGAL PROPOSITION MADE BY THE TRIBUNAL THAT THE REPLY DAT ED 15-5-1995 FILED BY THE ASSESSEE TO THE ASSISTANT DIRECTOR OF INCOME-TAX (INVESTIGATION) AT MADURAI AMOUNTED TO DISCLOSURE F OR THE PURPOSE OF CHAPTER XIV-B. IT WAS THE CASE OF THE R EVENUE THAT THE DESCRIPTION OF THE ITEMS MADE IN THE SAID LETTE R DOES NOT AMOUNT TO DISCLOSURE AS CONTEMPLATED IN THE PROVISI ONS OF LAW ARRANGED UNDER THAT CHAPTER. THEREFORE, THE ORDER OF THE TRIBUNAL WAS TAKEN IN APPEAL UNDER SECTION 260A OF THE INCOME- TAX ACT, 1961, BEFORE THE HONBLE JURISDICTIONAL HI GH COURT AT MADRAS. THE HONBLE HIGH COURT DISPOSED OF THE SAI D APPEAL FILED BY THE REVENUE THROUGH THE JUDGMENT OF THEIR LORDSHIPS DELIVERED ON 24-6-2010. AFTER CONSIDERING THE ISSU E IN A VERY DETAILED MANNER, THE HONBLE HIGH COURT HELD THAT T HE COMMUNICATION MADE BY THE ASSESSEE IN HER LETTER DA TED 15-5-1995 TO THE ASSISTANT DIRECTOR OF INCOME-TAX(I NVESTIGATION) DOES NOT AMOUNT TO DISCLOSURE, AS CONSTRUED UNDER C HAPTER XIV-B OF THE INCOME-TAX ACT, 1961. THE HONBLE HIG H COURT OBSERVED THAT THE NECESSARY INGREDIENTS SETTLED DOW N BY LAW HAVE BEEN SATISFACTORILY COMPLIED WITH BY THE ASSES SING OFFICER - - IT(SS)A 112 OF 1998 18 WHILE PASSING THE ORDER OF ASSESSMENT UNDER SECTION 158BD OF THE ACT AND IN THE ABSENCE OF ANY ILLEGALITY OR IRR EGULARITY IN MAKING SUCH AN ASSESSMENT OF INDIVIDUAL ITEMS POINT ED OUT BY THE TRIBUNAL, THE INTERFERENCE WITH THE ORDER OF TH E ASSESSING AUTHORITY BY THE TRIBUNAL WAS NOT JUSTIFIED. THE C OURT HELD THAT THE DISCLOSURE OF INCOME COULD BE MADE BY AN ASSESS EE ONLY THROUGH FILING RETURNS OF INCOME IN ACCORDANCE WITH LAW. THEREFORE, THE HONBLE HIGH COURT REMITTED THE MATT ER BACK TO THE TRIBUNAL FOR CONSIDERING THOSE ITEMS WHICH WERE HELD TO BE DISCLOSED INCOME BY THE TRIBUNAL IN VIEW OF THE LET TER DATED 15-5-1995. IT IS HOW THIS APPEAL HAS NOW COME UP B EFORE THE TRIBUNAL FOR THE SECOND TIME. 25. WE HEARD SHRI V.SRINIVASAN, THE LEARNED CHARTE RED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI SHAJ I P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FO R THE REVENUE. 26. NOW, AS THE MATTER STANDS, WE HAVE TO EXAMINE EACH AND EVERY ADDITION ON THE MERITS OF THE CASE, AS DIRECTED BY THE HONBLE JURISDICTIONAL HIGH COURT AT MADRAS. A CCORDINGLY WE ARE PROCEEDING HEREUNDER TO DECIDE THOSE ITEMS ONE BY ONE. - - IT(SS)A 112 OF 1998 19 27. THE GROUND NOS.1 TO 6 IN THE GROUNDS OF APPEAL ARE GENERAL IN NATURE. 28. THE SEVENTH GROUND IS THAT THE ASSESSING OFFIC ER HAS ERRED IN TAXING ` 60,000/-, BEING THE OPENING CAPITAL, WITHOUT APPRECIATING THE FACT THAT THE SAME IS REPRESENTED OUT OF INCOME EARNED PRIOR TO THE BLOCK PERIOD. THIS ISSUE WAS C ONSIDERED BY THE TRIBUNAL IN DETAIL IN ITS EARLIER ORDER DATED 1 4-2-2003. THE OPENING CAPITAL SHOWN BY THE ASSESSEE IS ` 60,000/-. THIS IS REFLECTED IN THE CASH FLOW STATEMENT FILED BY THE A SSESSEE. THE ASSESSEE COMES FROM AN AFFLUENT FAMILY. SHE HAS HE R OWN PROPERTIES AND BUSINESSES AT DIFFERENT PLACES. SHE HAS DIFFERENT SOURCES OF INCOME INCLUDING AGRICULTURAL INCOME. I N THESE CIRCUMSTANCES IT IS NOT POSSIBLE TO HOLD THAT THE A SSESSEE COULD NOT HAVE AN AMOUNT OF ` 60,000/- AS OPENING CASH CAPITAL IN HER HANDS. THE ASSESSEE HAS OFFERED A PLAUSIBLE EXPLAN ATION THAT THE AMOUNT WAS APPROPRIATED FROM HER PAST INCOME. THIS EXPLANATION IS JUST AND REASONABLE, WHICH HAS BEEN ALLOWED. ACCORDINGLY THIS ADDITION IS DELETED. 29. GROUND NO.8 RELATED TO THE ISSUE OF ` 3,55,361/- ADDED BY THE ASSESSING OFFICER ON AN ESTIMATE BASIS IN RESPECT - - IT(SS)A 112 OF 1998 20 OF COMMISSION INCOME. THE ASSESSEE WAS RUNNING A B USINESS CONCERN UNDER THE NAME AND STYLE OF M/S.SRI BHARANI YOLCKMS INTERNATIONALS, WHICH WAS EARNING COMMISSION INCOME FROM ORDERS PLACED WITH M/S.KARUR CO-OP. HANDLOOM EXPORT PRODUCTION PROJECT LTD. RIGHT FROM THE ASSESSMENT Y EAR 1984-85. THE ASSESSEE IS NOT MAINTAINING ANY REGULAR BOOKS O F ACCOUNT IN RESPECT OF THESE TRANSACTIONS. THE ASSESSEE ESTIMA TED INCOME BY WAY OF COMMISSION AT 10% OF THE ANNUAL TURNOVER. THE ASSESSING OFFICER ON THE OTHER HAND, AFTER ALLOWING AN EXPENDITURE OF 40%, TREATED 60% AS COMMISSION INCOM E OF THE ASSESSEE. IT IS HOW THE ADDITION OF ` 3,55,361/- HAS BEEN MADE BY THE ASSESSING AUTHORITY. IN THE PRESENT CASE, N ON MAINTENANCE OF ACCOUNTS IS NOT SO CRUCIAL, BECAUSE THE TOTAL TURNOVER IS ALWAYS AVAILABLE, AS THE TRANSACTIONS A RE WITH M/S.KARUR CO-OP. HANDLOOM EXPORT PRODUCTION PROJECT LTD. ONLY FOR THE REASON THAT THE ASSESSEE HAS NOT MAINTAINED PROPER ACCOUNTS TOWARDS EXPENDITURE, IT IS NOT JUSTIFIED T O ESTIMATE THE INCOME AT A VERY ABNORMAL RATE. IT IS TO BE SEEN T HAT IN THE COURSE OF SEARCH, NO INCRIMINATING MATERIALS WERE C OLLECTED TO SUPPORT THE CASE OF THE ASSESSING AUTHORITY. THE D ETAILS ARE - - IT(SS)A 112 OF 1998 21 AVAILABLE IN THE STATEMENT OF FACTS FILED BY THE AS SESSEE IN PARAGRAPH 7.01 AS AVAILABLE IN THE RECORDS OF THE C ASE. THE YEAR-WISE DETAILS OF THE RECEIPT OF COMMISSION HAVE BEEN FURNISHED BY THE ASSESSEE. THE ASSESSEE ALSO HAS T AKEN A GROUND THAT AT THE TIME OF SEARCH THE DUE DATE FOR FILING OF THE RETURN FOR THE ASSESSMENT YEAR 1996-97 WAS NOT DUE AND THEREFORE THE COMMISSION INCOME FOR THAT ASSESSMENT YEAR COULD NOT BE CONSIDERED AS UNDISCLOSED INCOME. THE HONB LE HIGH COURT OF KARNATAKA AT BANGALORE IN THE JUDGMENT DEL IVERED BY THEIR LORDSHIPS ON 19-9-2011 IN THE CASE OF CIT VS. M/S.GOWRI GOPAL TEXTILE PROCESSING PVT. LTD. (ITA NO.3051 OF 2005) HAS HELD THAT IN THE ENTIRE SCHEME OF ARRIVING AT THE U NDISCLOSED INCOME FOR THE BLOCK PERIOD THERE IS NO SCOPE FOR E STIMATING THE INCOME. THE COURT HELD THAT THE ASSESSING OFFICER CANNOT ESTIMATE THE UNDISCLOSED INCOME. HE HAS TO COMPUTE THE UNDISCLOSED INCOME AS PROVIDED UNDER SECTION 158BB( 1). IF IT IS A CASE OF ESTIMATION OF INCOME, THE COURT OBSERVED THAT IT FALLS OUTSIDE THE SAID PROVISION. THE HONBLE COURT FURT HER OBSERVED THAT IN SECTION 158BB THE PARLIAMENT HAS CONSCIOUSL Y USED TWO WORDS, ONE COMPUTING AND THE OTHER ASSESSMENT. THE WORD - - IT(SS)A 112 OF 1998 22 COMPUTATION HAS NOT BEEN DEFINED IN THE ACT. THE MEANING OF THE WORD IS TO BE GATHERED FROM THE SCHEME OF THE A CT HAVING REGARD TO ITS ORDINARY GRAMMATICAL MEANING. IN THE CONTEXT OF THE ACT COMPUTATION IS A CALCULATION, A METHOD OF DETER MINATION BY RECKONING THROUGH CALCULATION. IN INVOLVES SOME ME THODICAL PROCESS WITH SOME AMOUNT OF APPROXIMATE MATHEMATICA L PRECISION BASED ON THE CALCULABLE DATA AVAILABLE. THE WORD COMPUTATION IS COMPLETELY DISTINCT AND DIFFERENT FROM THE WORD ESTIMATE, WHICH MEANS: THE ACTION OF VALUING OR A PPRAISING: AN APPROXIMATE CALCULATION BASED ON PROBABILITIES. UN DER THE SCHEME OF THE ACT, THE ASSESSING OFFICER HAS TO COM PUTE THE UNDISCLOSED INCOME FALLING WITHIN THE BLOCK PERIOD. HE DOES NOT ESTIMATE OR APPRAISE THE UNDISCLOSED INCOME. IN VI EW OF THE ABOVE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THIS ADDITION MADE BY THE ASSESSING OFFICER, P URELY ON ESTIMATE BASIS, CANNOT BE SUSTAINED IN LAW. THEREF ORE, THE ADDITION OF ` 3,55,361/- IS DELETED. 30. THE NEXT GROUND NO.9 DEALS WITH THE ESTIMATED ADDITION OF ` 38,538/- AGAINST COMMISSION INCOME. FOR THE - - IT(SS)A 112 OF 1998 23 REASONS STATED IN THE ABOVE PARAGRAPH, THIS ESTIMAT ED ADDITION OF ` 38,538/- IS DELETED. 31. GROUND NOS.10 AND 11 RAISED BY THE ASSESSEE AR E AGAINST THE ADDITION OF ` 1,16,000/- MADE BY THE ASSESSING OFFICER IN THE CONTEXT OF SALE PROCEEDS OF THORN TR EES. THE CASE OF THE REVENUE IS THAT THE ASSESSEE WAS NOT MAINTAI NING ANY BOOKS OF ACCOUNT FOR HER REAL ESTATE BUSINESS. IN THE PROFIT AND LOSS ACCOUNT FOR THE ASSESSMENT YEARS 1991-92 TO 19 97-98 FILED AFTER THE SEARCH, THE ASSESSEE HAS CREDITED A SUM O F ` 20,000/- EACH YEAR AS INCOME FROM SALE OF THORN TREES BUT TH E SAME WAS NOT OFFERED FOR TAXATION ON THE GROUND THAT THE REA L ESTATE BUSINESS HAS NOT COMMENCED AND THAT IT WOULD ONLY G O TO REDUCE THE WORK-IN-PROGRESS. THE ASSESSING OFFICER HAS TR EATED IT AS INCIDENTAL INCOME, FOLLOWING THE PRINCIPLE LAID DOW N BY THE HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKA LI CHEMICALS & FERTILIZERS LTD. VS. CIT, 227 ITR 172. SINCE THE THORN TREES ARE NOT CULTIVATED BY THE ASSESSEE, IT WILL NOT FORM PA RT OF AGRICULTURAL INCOME, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RAMAKRISHNA DEO VS. CIT, 35 ITR 312. THE ASSESSEE S CONTENTIONS ARE REFLECTED IN PARAGRAPH 10.01 OF THE DETAILED - - IT(SS)A 112 OF 1998 24 STATEMENT OF FACTS FILED BY HER AND AVAILABLE IN TH E RECORDS. IT IS THE CONTENTION OF THE ASSESSEE THAT THE SALE OF THO RN TREES IS INTER-LINKED WITH THE MAIN BUSINESS OF REAL ESTATE. WE AGREE WITH THE REVENUE THAT THE SALE PROCEEDS OF THORN TREES W OULD NOT BE IN THE NATURE OF AGRICULTURAL INCOME, AS THOSE TREE S WERE NATURALLY GROWN. BUT AT THE SAME TIME IT DOES NOT TAKE THE C OLOUR OF INDEPENDENT INCOME TO BE TAXED AS SUCH. THE RATIO OF THE JUDGMENT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS CIT, 227 ITR 172 (S.C.) IS NOT APPLICABLE T O THE PRESENT CASE. THE ASSESSEE AS A REAL ESTATE DEVELOPER HAS BEEN DEVELOPING PROPERTIES BY INCURRING EXPENDITURE. IT IS IN THE COURSE OF THAT DEVELOPING THAT THORN TREES WERE REM OVED AND THEY WERE SOLD FOR NOMINAL AMOUNTS. THE SALE OF TH ORN TREES IS NOT A REGULAR ACTIVITY OF THE ASSESSEE AND THE INCO ME THEREFROM DOES NOT CONSTITUTE AN INDEPENDENT SOURCE OF INCOME . AS A MATTER OF FACT, IT GOES TO REDUCE THE EXPENSES OF T HE ASSESSEE IN DEVELOPING THE LAND. IN VIEW OF THE ABOVE, WE HOLD THAT THERE IS NO JUSTIFICATION IN TREATING THE AMOUNT OF ` 1,16,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE. IT WOULD GO TO REDUCE THE - - IT(SS)A 112 OF 1998 25 EXPENDITURE OF THE ASSESSEE. THEREFORE, THE ADDITI ON OF ` 1,16,000/- IS DELETED. 32. IN GROUND NO.12 THE ASSESSEE HAS CHALLENGED TH E DISALLOWANCE OF CLAIM OF DEPRECIATION ON AIR CONDIT IONER AT ` 8,750/-. THE CASE OF THE ASSESSING OFFICER IS THA T THE AIR CONDITIONER WAS INSTALLED AT THE RESIDENCE OF THE A SSESSEE AND, THEREFORE, THE SAME CANNOT BE CONSIDERED AS A BUSIN ESS ASSET AND THEREFORE DEPRECIATION SHOULD BE DISALLOWED. W E AGREE WITH THE ARGUMENT OF THE REVENUE AND THIS DISALLOWANCE O F ` 8,750/- IS CONFIRMED. 33. IN GROUND NOS. 13 AND 14 THE ASSESSEE ARGUES AGAINST ESTIMATION OF INCOME FROM KODAIKANAL GUEST HOUSE AT ` 10,85,000/-. THE ESTIMATION HAS BEEN MADE FOR THE ASSESSMENT YEARS 1993-94 TO 1996-97. IT IS THE CAS E OF THE REVENUE THAT THE ASSESSEE HAD ENTERED INTO A PURCHA SE AGREEMENT ON 29-4-1991 WITH INDIAN EVANGELICAL LUTH ERAN CHURCH TRUST ASSOCIATION FOR PURCHASE OF PROPERTY A T KODAIKANAL AND ADVANCED A SUM OF ` 10 LAKHS TO THE SELLER. SUBSEQUENTLY, ANOTHER SUM OF ` 5 LAKHS WAS ALSO PAID AS PART CONSIDERATION AND POSSESSION OF THE PROPERTY WAS TAKEN OVER. DUE TO LITIGATION, THE - - IT(SS)A 112 OF 1998 26 PROPERTY COULD NOT BE REGISTERED IN THE NAME OF THE ASSESSEE. THE REVENUE ARGUES THAT THE ASSESSEE HAS BEEN RUNNI NG THE GUEST HOUSE SINCE 1993-94 AND INCOME THEREFROM HAS BEEN RETURNED SO ALSO THE ASSESSEE HAS NOT MAINTAINED AN Y BOOKS OF ACCOUNT. IT IS IN THESE CIRCUMSTANCES, ACCORDING T O THE REVENUE, THAT ESTIMATION OF INCOME WAS WARRANTED AND AS SUCH THE ADDITION OF ` 10,85,000/- HAS BEEN MADE. THE CASE OF THE ASSESSEE IS THAT THE PROPERTY WAS NEVER FULLY FUNCT IONAL BECAUSE OF THE DISPUTE BETWEEN THE ASSESSEE AND THE SELLER OF THE PROPERTY. EVEN THE TITLE OF THE PROPERTY WAS NOT T RANSFERRED IN THE NAME OF THE ASSESSEE. THE LITIGATION REACHED UPTO THE HONBLE SUPREME COURT. MEANWHILE CERTAIN IRREGULAR INCOME WAS RECEIVED BY THE ASSESSEE BY OPERATING THE GUEST HOU SE IN A VERY NOMINAL WAY AND SUCH NEGLIGIBLE INCOME WAS ACTUALLY USED FOR MAINTAINING THE GUEST HOUSE PROPERTY. 34. THERE IS NO DISPUTE REGARDING THE BASIC FACT T HAT THE GUEST HOUSE PROPERTY WAS UNDER LITIGATION AND THE A SSESSEE COULD NOT GET THE TITLE TRANSFERRED IN HER NAME. TH IS DISPUTE IN FACT PREVENTED THE ASSESSEE FROM IMPROVING THE FACILITIE S AT THE GUEST HOUSE AND MAKING IT FULLY OPERATIONAL. AS THE GUES T HOUSE - - IT(SS)A 112 OF 1998 27 PROPERTY WAS NOT FULLY OPERATIONAL, THERE CANNOT BE A CASE THAT THE ASSESSEE WAS EARNING REGULAR INCOME BY WAY OF I TS COMMERCIAL OPERATION. THE ARGUMENT OF THE ASSESSEE THAT THE OPERATION OF THE GUEST HOUSE WAS ONLY ON A NOMINAL LEVEL IS TO BE ACCEPTED AS A CONSEQUENCE OF THE FACTS OF THE CASE STATED ABOVE. THEREFORE, NATURALLY, THE RECEIPTS ALSO WOU LD BE VERY NOMINAL. ANYHOW, THE ASSESSEE HAS TO KEEP THE PROP ERTY IN A GOOD CONDITION. THEREFORE, IT IS NECESSARY TO SEE THAT WHATEVER INCOME THE ASSESSEE HAD RECEIVED FROM THE OPERATION OF THE GUEST HOUSE WAS IN FACT SPENT FOR THE UPKEEP AND MA INTENANCE OF THE GUEST HOUSE PROPERTY. THEREFORE, IT IS OBVI OUS THAT THE ASSESSEE HAD NOT RECEIVED ANY TAXABLE INCOME FROM T HE SAID PROPERTY AT KODAIKANAL. MOREOVER, THE ASSESSING OF FICER HAS MADE THE ADDITION ON THE BASIS OF ESTIMATE. AS ALR EADY HELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S.GOWRI GOPAL TEXTILE PROCESSING PVT. LTD., ESTIM ATION IS NOT PERMISSIBLE IN COMPUTING THE UNDISCLOSED INCOME IN A BLOCK ASSESSMENT. IN THE LIGHT OF THE ABOVE FACTUAL POSI TION, WE FIND THAT THE SAID ADDITION OF ` 10,85,000/- IS NOT SUSTAINABLE. IT IS ACCORDINGLY DELETED. - - IT(SS)A 112 OF 1998 28 35. IN THE NEXT GROUND NO.15 THE CONTENTION RAISED RELATES TO THE ADDITION OF ` 75,16,875/- MADE BY THE ASSESSING AUTHORITY AS UNEXPLAINED INVESTMENT/CREDITORS NOT P ROVED. THE ASSESSEE HAS MADE INVESTMENTS IN THE BLOCK PERIOD I N HER OWN NAME AS WELL AS IN THE NAME OF HER BUSINESS CONCERN S. APART FROM HER OWN CAPITAL INTRODUCED IN THE BUSINESS, SH E HAS ALSO SHOWN HAVING RECEIVED LOANS FROM 42 PERSONS. THE A SSESSING OFFICER DID NOT ACCEPT THE GENUINENESS OF THESE LOA NS RECEIVED FROM 42 PERSONS. HE FOUND THAT THE LOANS ARE NOT E VIDENCED BY ANY PROMISSORY NOTE OR RECEIPT ISSUED BY THE ASSESS EE. ALL THE LOANS ARE CASH LOANS. CONFIRMATION LETTERS FILED B Y THE ASSESSEE DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS D O NOT INDICATE PARTICULARS SUCH AS ASSESSMENT DETAILS OF THE LENDERS, SOURCE OF FUNDS FOR MAKING THE ALLEGED LOANS, ETC. THE ASSESSING OFFICER, THEREFORE, REQUIRED THE ASSESSEE TO PRODUCE THE CREDITORS. THE ASSESSEE COULD PRODUCE SOME CRE DITORS AND COULD NOT PRODUCE THE REMAINING CREDITORS. ON EXAM INING ALL THESE FACTS AND EXAMINING THE CREDITORS, WHO APPEAR ED BEFORE HIM, THE ASSESSING OFFICER FOUND THAT MANY OF THE C REDITORS DID NOT HAVE ENOUGH CREDITWORTHINESS SO AS TO ADVANCE A MOUNTS TO - - IT(SS)A 112 OF 1998 29 THE ASSESSEE. IT IS IN THESE CIRCUMSTANCES THAT TH E ASSESSING OFFICER HAS DISBELIEVED THE CREDITS/LOANS AND MADE THE ADDITION OF ` 75,16,875/-. THE DETAILED SUBMISSIONS AND EXPLANA TIONS OF THE ASSESSEE IN THIS REGARD ARE MADE IN PARAGRAPH 1 3 OF THE STATEMENT OF FACTS AVAILABLE ON RECORD. IN SHORT, IT IS THE CASE OF THE ASSESSEE THAT SHE HAS TAKEN LOANS FROM 42 PERSO NS FOR BUSINESS PURPOSES. THE ASSESSEE HAD FILED CONFIRMA TION LETTERS BEFORE THE ASSESSING OFFICER IN SUPPORT OF THOSE CR EDITS. SHE COULD ALSO PRODUCE SOME OF THE CREDITORS BEFORE THE ASSESSING OFFICER. THOSE CREDITORS WERE EXAMINED. IT IS ONL Y FOR THE REASON THAT THE ASSESSING OFFICER HAS DISBELIEVED THEM, TH E ADDITIONS WERE MADE. 36. WE CONSIDERED THIS MATTER VERY SERIOUSLY. A S ET OF LOANS RECEIVED FROM TWELVE PERSONS LIKE BALU, VIJAY A, SRIRAMULU TOTALED TO ` 13,16,000/-. THE AMOUNT OF LOAN RANGED FROM ` 16,000/- TO ` 4 LAKHS. THE BIGGEST AMOUNT OF ` 4 LAKHS COMES FROM DHAMAN PRAKASH (DHARMABAL ASSOCIATE). THE REA SON POINTED OUT BY THE ASSESSING OFFICER TO DISBELIEVE THE CREDITS IS NOT CONVINCING. THE RELEVANT PARTICULARS, SUCH AS INCOME-TAX ASSESSMENT, ETC., MAY NOT BE APPLICABLE TO SMALL TI ME LENDERS - - IT(SS)A 112 OF 1998 30 WHO HAVE GIVEN LOANS OF ` 20,000/- AND THE LIKE. IN SUCH CASES A GENERAL APPRECIATION OF THE SITUATION IS CALLED FOR AND TO SEE WHETHER SUCH PERSONS EXISTED AND THEY HAD REASONABL E SOURCE TO ADVANCE SUCH AMOUNT TO THE ASSESSEE. REGARDING BIG AMOUNTS FROM LSP OIL MILLS, JAGANNATHAN, SADASIVAM, ETC., TOTALING TO ` 10,27,375/-, THE ASSESSEE HAS PROVED THE GENUINENESS UPTO A REASONABLE LEVEL. THE CASE OF T HE ASSESSING OFFICER IS THAT THE ADDRESSES OF THOSE PE RSONS ARE NOT AVAILABLE. IT DOES NOT LOOK TRUE. THE ASSESSING OF FICER MUST BE AWARE OF THE PARTICULARS OF THOSE PARTIES, WHO ARE OTHERWISE ASSESSEES AND CLOSELY CONNECTED TO THE ASSESSEE HER SELF. FOR EXAMPLE, M/S.LSP OIL MILLS IS A WELL KNOWN CONCERN IN SALEM. 37. ONE OF THE MAIN ASPECTS OF THE ISSUE, WHICH WE WOULD LIKE TO DISCUSS, IS THAT THE DETAILS OF THESE LOANS WERE AVAILABLE WITH THE DEPARTMENT IN THE COURSE OF SEAR CH ITSELF. THIS IS BECAUSE THE PARTICULARS OF THESE LOANS WERE FURN ISHED BY THE ASSESSEE TO THE ASSISTANT DIRECTOR OF INCOME-TAX(IN VESTIGATION) AT MADURAI IN HER LETTER DATED 15-5-1995. THESE AR E NOT THE LOANS FABRICATED BY THE ASSESSEE AFTER THE SEARCH. THEREFORE, WHAT IS THE POSITION AVAILABLE AT THE TIME OF SEARC H AND AVAILABLE - - IT(SS)A 112 OF 1998 31 IN THE RECORD MUST BE ACCEPTED AS TRUE UNLESS OTHER WISE PROVED. HERE, THE ASSESSEE HERSELF SUPPORTS THAT SHE HAD AV AILED LOANS FROM SUCH 42 PERSONS. THE DETAILS OF PARTICULARS W ERE AVAILABLE WITH THE DEPARTMENT EVEN BEFORE THE SEARCH AND EVEN IN THE COURSE OF SUCH. THEREFORE, UNLESS THEY ARE REBUTTED WITH STRONG EVIDENCE, THE GENUINENESS OF THE CREDITS CANNOT BE DOUBTED BY CITING GENERAL DEFICIENCIES IN THE CONDUCT OF THE A SSESSEE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE WE DO NOT FIND THAT THE ADDITION OF ` 75,16,875/- IS JUSTIFIED. ACCORDINGLY IT IS DELETED. 38. THE NEXT GROUND NO.16 RELATES TO THE CONTENTIO NS OF THE ASSESSEE AGAINST AN ADDITION OF ` 1,97,200/- MADE BY THE ASSESSING OFFICER TOWARDS BOGUS CLAIM OF AGRICULTUR AL INCOME. THE ASSESSEE HAD CLAIMED RECEIPT OF AGRICULTURAL IN COME IN THE BLOCK PERIOD OUT OF THE PROPERTY PURCHASED AT VELAY UDHAM PALAYAM IN THE FINANCIAL YEAR 1997-98. THE ASSESSE E EARNED AGRICULTURAL INCOME OF ` 1,97,200/- FOR THE BLOCK PERIOD. THIS WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA T NO EVIDENCE OF DOING AGRICULTURAL OPERATIONS WAS FURNISHED BY T HE ASSESSEE. - - IT(SS)A 112 OF 1998 32 IT IS ALSO THE CASE OF THE ASSESSING OFFICER THAT N O EXPENSES ALSO HAVE BEEN FOUND TO BE DEBITED TOWARDS EARNING SUCH INCOME. WE CONSIDERED THIS ISSUE. THERE IS NO DISPUTE REGA RDING THE HOLDING OF PROPERTIES BY THE ASSESSEE. IT IS ALSO UNDISPUTED THAT THE PROPERTY IS AGRICULTURAL PROPERTY. WHEN THE AS SESSEE IS HAVING AGRICULTURAL PROPERTY AND OFFERING AGRICULTU RAL INCOME, THE NORMAL PRESUMPTION IS THAT THE ASSESSEE IS CARRYING ON AGRICULTURAL OPERATIONS. DISCLOSURE OF AGRICULTURA L INCOME ITSELF IS PRIMA FACIE EVIDENCE OF CARRYING ON AGRICULTURAL OP ERATIONS. THE NEXT OBJECTION OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS NOT DEBITED EXPENSES TOWARDS AGRICULTURAL OPERATION S. IT IS TO BE SEEN THAT THE ASSESSEE HAS OFFERED NET AGRICULTURAL INCOME ON AN ESTIMATE BASIS. THEREFORE, IT IS OBVIOUS THAT NO S EPARATE EXPENDITURE ACCOUNT WOULD BE REFLECTED IN THE PARTI CULARS FILED BY THE ASSESSEE. IN THESE CIRCUMSTANCES WE FIND THAT THERE IS NO JUSTIFICATION IN REJECTING THE CLAIM OF THE ASSESSE E TOWARDS AGRICULTURAL INCOME. ACCORDINGLY, THE ADDITION OF ` 1,97,200/- IS DELETED. 39. IN GROUND NO.17 THE ARGUMENT OF THE ASSESSEE I S AGAINST THE ADDITION OF ` 4,66,000/- MADE BY THE ASSESSING - - IT(SS)A 112 OF 1998 33 OFFICER AFTER REJECTING THE CLAIM OF THE ASSESSEE T HAT SHE HAD RECEIVED MONEY FROM A FIRM M/S.MBS GRANITES, IN WHI CH THE ASSESSEE IS A PARTNER. IN THE CASH FLOW STATEMENT FILED BY THE ASSESSEE, THE ASSESSEE HAS SHOWN A TOTAL AMOUNT OF ` 4,66,000/- AVAILED FROM M/S.MBS GRANITES. THE ASS ESSING OFFICER ADDED THIS AMOUNT TO THE ASSESSEES UNDISCL OSED INCOME ON THE GROUND THAT NO EVIDENCE WAS PRODUCED TO SHOW THAT THE ASSESSEE HAD RECEIVED SUCH AMOUNT FROM M/S.MBS GRAN ITES, IN WHICH SHE IS A PARTNER. THE ASSESSEE HAS ALSO EXPL AINED THAT THE FIRM HAD GIVEN HER THE SUM OF ` 4,66,000/- OUT OF ITS AGRICULTURAL INCOME. THE ASSESSING OFFICER DISALLO WED THE CLAIM ON THE GROUND THAT THERE WAS NO EVIDENCE PRODUCED T O SHOW THAT THE FIRM M/S.MBS GRANITES HAD EARNED AGRICULTURAL I NCOME IN ITS HANDS. THE EXPLANATIONS OF THE ASSESSEE ARE MADE I N DETAIL IN PARAGRAPH 17 OF THE STATEMENT OF FACTS. AS RIGHTLY ARGUED BY THE ASSESSEE, THE DISALLOWANCE COULD AT BEST BE APPLICA BLE TO THE FIRM AND NOT TO THE ASSESSEE. IT IS FOR THE FIRM T O PROVE THE NATURE OF INCOME, WHETHER AGRICULTURAL INCOME OR NOT, IN I TS HANDS. M/S.MBS GRANITES AND THE ASSESSEE ARE DIFFERENT PER SONS. THEREFORE, IF THERE IS A DOUBT IN THE SOURCE, IT IS FOR THE FIRM TO - - IT(SS)A 112 OF 1998 34 EXPLAIN IT. THERE IS NO JUSTIFICATION IN MAKING AN ADDITION OF ` 4,66,000/- IN THE HANDS OF THE ASSESSEE. IT IS AC CORDINGLY DELETED. 40. THE NEXT GROUND NO.18 RAISED BY THE ASSESSEE I S AGAINST THE ADDITION OF ` 1,20,700/- MADE BY THE ASSESSING OFFICER AGAINST GIFTS STATED TO HAVE BEEN RECEIVED FROM RELATIVES. THE ASSESSEE HAS SHOWN AN AMOUNT OF ` 1,20,700/- IN HER CASH FLOW STATEMENT AS GIFTS RECEIVED FROM RELATIVES. T HIS WAS DISALLOWED BY THE ASSESSING OFFICER FOR WANT OF EVI DENCE. THIS MATTER HAS BEEN DISCUSSED IN DETAIL BY THE TRIBUNAL IN ITS EARLIER ORDER DATED 14-2-2003. THE SITUATION HAS NOT SO FA R IMPROVED BY THE ARGUMENTS OF THE ASSESSEE. THEREFORE, WE FIND THAT THE ADDITION IS JUSTIFIED. IT IS ACCORDINGLY CONFIRMED . 41. GROUND NOS.19 AND 20 RELATE TO THE ARGUMENTS O F THE ASSESSEE AGAINST ADDITION OF ` 1,50,650/-. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1996- 97 THE ASSESSEE HAD SOLD A PLOT OF LAND AT KARUR FOR A SUM OF ` 1,80,000/-. THIS IS A SMALL PLOT OF LAND PURCHASE D IN 1988 FOR A SUM OF ` 19,816/-. THE ASSESSING OFFICER WORKED OUT THE LO NG- TERM CAPITAL GAINS ON THIS TRANSACTION AT ` 1,50,650/-. IT IS THE - - IT(SS)A 112 OF 1998 35 CASE OF THE ASSESSEE THAT THE LAND WAS AGRICULTURAL IN NATURE AND THEREFORE THERE CANNOT BE LEVY OF CAPITAL GAINS. T HIS CLAIM WAS REJECTED BY THE ASSESSING OFFICER FOR WANT OF EVIDE NCE. IT WAS ALSO THE ARGUMENT OF THE ASSESSEE THAT IT WAS OFFER ED FOR ASSESSMENT FOR THE ASSESSMENT YEAR 1996-97 IN REGUL AR RETURN. BUT THERE IS NO EVIDENCE. IN THESE CIRCUMSTANCES W E CONFIRM THE ADDITION OF ` 1,50,650/-. 42. GROUND NOS.21 AND 22 RELATE TO THE ARGUMENTS O F THE ASSESSEE AGAINST THE ADDITION OF ` 9,50,000/-MADE BY THE ASSESSING OFFICER TOWARDS COMPENSATION RECEIVED BY THE ASSESSEE. THIS ISSUE WAS CONSIDERED BY THE TRIBUNA L IN ITS EARLIER ORDER DATED 14-2-2003. AFTER CONSIDERING T HE ISSUE IN DETAIL THE TRIBUNAL HAS HELD THAT THE ADDITION OF ` 9,50,000/- IS NOT JUSTIFIED. AS THERE IS NO CHANGE IN THE POSITION, WE HOLD THAT THE ADDITION OF ` 9,50,000/- IS NOT WARRANTED. IT IS ACCORDINGLY DELETED. 43. GROUND NO.23 RELATES TO THE ADDITION OF ` 30,000/- MADE BY THE ASSESSING OFFICER. THIS AMOUNT OF ` 30,000/- WAS THE CASH FOUND AT THE TIME OF SEARCH. THIS WAS ADD ED BY THE ASSESSING OFFICER AS UNDISCLOSED INCOME. IN VIEW O F THE TOTAL - - IT(SS)A 112 OF 1998 36 FINANCIAL INFLOW AND OUTFLOW OF THE ASSESSEE DURING THE BLOCK PERIOD, IT IS VERY ABSURD TO PRESUME THAT THE ASSES SEE COULD NOT HAVE AN AMOUNT OF ` 30,000/- IN HER HANDS OUT OF LEGITIMATE SOURCE OF INCOME. THEREFORE, WE DELETE THIS ADDITI ON OF ` 30,000/-. 44. WE HAVE CONSIDERED ALL THE 23 GROUNDS RAISED B Y THE ASSESSEE ON MERITS AGAINST VARIOUS ADDITIONS. WE HAVE DISPOSED OF ALL THE GROUNDS. 45. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 25 TH OF JULY, 2012 AT CHENNAI. SD/- SD/- (V.DURGA RAO) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 25 TH JULY, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.