DCIT, Ernakulam V. M/s New Pharma, Thrissur

ITSSA 125/COCH/2004

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8581 (ITAT-COCHIN)
• Duration Of Justice: 8 year(s) 18 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 19-11-2004
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: K K CHANDRASEKHARAN
• Keywords: Document seized; Documents seized

Judgement Text

1 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T(SS)A NO. 125/COCH/2004 (BLOCK PERIOD 01-04-1988 TO 30-07-1998) DY.CIT, CENT.CIR.II VS M/S NEW PHARMA ERNAKULAM PALAKKAD ANGADI, TRICHUR PAN : NOT AVAILABLE (APPELLANT) (RESPONDENT) C.O. NO.32/COCH/2005 (ARISING OUT OF I.T(SS)A NO. 125/COCH/2004) (BLOCK PERIOD 01-04-1988 TO 30-07-1998) M/S NEW PHARMA VS DY.CIT, CENT.CIR.II TRICHUR ERNAKULAM (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SMT. S VIJAYAPRABHA RESPONDENT BY : SHRI K.K. CHANDRASEKHARAN DATE OF HEARING : 04-12-2012 DATE OF PRONOUNCEMENT : 07-12-2012 O R D E R PER N.R.S. GANESAN (JM) THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI DATED 10-08- 2004 FOR THE BLOCK 2 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 PERIOD 01-04-1988 TO 30-07-1998. THE TAXPAYER HAS FILED THE CROSS OBJECTION. 2. SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE RE WAS A SEARCH IN THE PREMISES OF THE TAXPAYER ON 30-07-1998. DURING THE COURSE OF SEARCH OPERATION CASH OF RS.1,24,000 WAS FOUND AND SEIZED. CERTAIN OTHER MATERIALS WERE ALSO FOUND AND SEIZED BY THE REVENUE AUTHORITIES. THE ASSESSING OFFICER COMPUTED THE UNDISCLOSED INCOME A T RS.81,52,590. THE LD.DR SUBMITTED THAT THE UNDISCLOSED INCOME WAS COM PUTED ON THE BASIS OF THE SEIZED MATERIALS A-21 AND A-45. ACCORDING TO T HE LD.DR, THE TAXPAYER RECEIVED VARIOUS DEPOSITS WHICH WERE FOUND DURING T HE COURSE OF SEARCH OPERATION. SINCE THE TAXPAYER COULD NOT EXPLAIN TH E RECEIPT OF THE DEPOSITS THE SAME WERE TREATED AS BOGUS AND WERE TAXED AS UN DISCLOSED INCOME. ON A QUERY FROM THE BENCH WHETHER THE TAXPAYER HAS FIL ED RETURN OF INCOME REGULARLY BEFORE THE DATE OF SEARCH, THE LD.DR SUBM ITTED THAT IT IS NOT CLEAR FROM THE ORDER OF THE LOWER AUTHORITY WHETHER THE T AXPAYER HAS FILED RETURN OF INCOME REGULARLY OR NOT. ACCORDING TO THE LD.DR SINCE THE TAXPAYER COULD NOT EXPLAIN THE CREDITS WHICH WERE FOUND DURING THE COURSE OF SEARCH 3 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 OPERATION, THE ASSESSING OFFICER HAS RIGHTLY MADE A DDITION AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. ON A QUERY FROM THE B ENCH THAT THOUGH THE ASSESSING OFFICER TREATED AN AMOUNT OF RS.2,31,000 FOR THE ASSESSMENT YEAR 1990-91 AS UNDISCLOSED INCOME, NO REFERENCE HAS BEE N MADE IN THE ASSESSMENT ORDER ABOUT THE SEIZED MATERIAL AND THAT THE SEIZED MATERIALS A-21 AND A-45 RELATE TO ASSESSMENT YEARS 1994-95 TO 1997-98 ONLY, THE LD.DR CLARIFIED THAT THERE ARE OTHER SEIZED MATERIA LS AVAILABLE ON RECORD WHICH WERE NOT REFERRED TO IN THE ASSESSMENT ORDER. THE LD.DR SUBMITTED THAT THE OTHER SEIZED MATERIALS NEED TO BE VERIFIED . SIMILARLY FOR THE ASSESSMENT YEARS 1990-91 TO 1993-94 THOUGH THE ASSE SSING OFFICER COMPUTED THE UNDISCLOSED INCOME, THERE WAS NO REFER ENCE ABOUT THE SEIZED MATERIAL IN THE ASSESSMENT ORDER. 3. WE HEARD SHRI K.K. CHANDRASEKHARAN, THE LD.COUNS EL FOR THE TAXPAYER ALSO. THE LD.COUNSEL FOR THE TAXPAYER SUBMITTED TH AT THERE WAS NO SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N. THE SEIZED DOCUMENTS A-21 AND A-45 ARE NOTHING BUT BOOKS OF AC COUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS. ACCORDING TO THE L D.COUNSEL FROM THE 4 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 ASSESSMENT YEARS 1990-91 TO 1993-94 THERE IS NO SEI ZED MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. THEREFORE, THERE CANNO T BE ANY UNDISCLOSED INCOME FROM THE ASSESSMENT YEARS 1990-91 TO 1993-94 . FOR THE ASSESSMENT YEARS 1994-95 TO 1996-97 THE LD.REPRESEN TATIVE SUBMITTED THAT THE DEPARTMENT COULD NOT FIND ANYTHING EXCEPT THE B OOKS OF ACCOUNT MAINTAINED DURING THE REGULAR COURSE OF BUSINESS, I .E. SEIZED MATERIALS, A-21 & A-45. THE TAXPAYER HAS ALSO FILED RETURN OF INCO ME IN THE REGULAR COURSE BEFORE THE DATE OF SEARCH DISCLOSING ALL THE RECEIP TS. THEREFORE, ACCORDING TO THE LD.COUNSEL, FOR THE ASSESSMENT YEARS 1994-95 TO 1996-97 ALSO THERE CANNOT BE ANY UNDISCLOSED INCOME. FOR THE ASSESSME NT YEAR 1997-98, ACCORDING TO THE LD.COUNSEL, THE DUE DATE FOR FILIN G OF THE RETURN HAD NOT EXPIRED AS ON THE DATE OF SEARCH. THE TAXPAYER HAS FILED THE RETURN OF INCOME IN THE REGULAR COURSE DISCLOSING ALL THE REC EIPTS WHICH WERE ENTERED IN THE REGULAR COURSE OF BUSINESS. THE DEPARTMENT HAS TAKEN THE ENTRIES FOUND IN THE BOOKS OF ACCOUNT MAINTAINED IN THE REG ULAR COURSE OF BUSINESS AND TREATED IT AS UNDISCLOSED INCOME. ACCORDING TO THE LD.COUNSEL, THE DUE DATE FOR FILING THE RETURN OF INCOME HAS NOT BEEN E XPIRED, THEREFORE, THE RECEIPTS ENTERED IN THE REGULAR BOOKS OF ACCOUNT CA NNOT BE TREATED AS 5 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 UNDISCLOSED INCOME. THE LD.COUNSEL FURTHER SUBMITT ED THAT THE SEIZED MATERIAL A-45 IS CONTINUATION OF SEIZED MATERIALS I N A-21. ALL ENTRIES IN THE SEIZED MATERIALS, I.E. A-21 AND A-45 ARE MADE IN TH E RELEVANT BOOKS OF ACCOUNT OF THE RESPECTIVE BUSINESS IN NORMAL COURSE OF BUSINESS. FROM THE ORDER OF THE LOWER AUTHORITY IT APPEARS THAT THE BO OKS RELATE TO THE BUSINESS TRANSACTION OF THE TAXPAYER FIRM. THE TAXPAYER IS ALSO HAVING BUSINESS IN THE NAME OF NEW ASSOCIATES, NEW AGENCY, ETC. THE LD.RE PRESENTATIVE FURTHER SUBMITTED THAT THE DEPOSITOR / LOAN CREDITORS ARE H AVING RUNNING ACCOUNT AND THE BALANCES IN THEIR ACCOUNTS ARE FLUCTUATING. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OTHER TH AN THE BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS, ACCOR DING TO THE LD.COUNSEL, THERE CANNOT BE ANY UNDISCLOSED INCOME AT ALL. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER FOUND THAT THE TAXPAYER HAS RECEIVED DEPOSITS TO THE EXTENT OF RS.70,88,500 FOR THE FINANCIAL YEARS 1990-91 TO 1999-2000 PART. THE ASS ESSING OFFICER PLACED RELIANCE ONLY ON THE SEIZED MATERIALS A-21 AND A-45 FOR COMPUTING THE TOTAL 6 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 INCOME AT RS.81,52,590. FROM THE ASSESSMENT ORDER IT APPEARS THAT THE SEIZED DOCUMENTS A-21 AND A-45 RELATE TO ASSESSMENT YEARS 1994-95 TO 1996-97. IN RESPECT OF OTHER ASSESSMENT YEARS THER E IS NO REFERENCE ABOUT THE SEIZED MATERIAL IN THE ASSESSMENT ORDER AS WELL AS IN THE ORDER OF THE FIRST APPELLATE AUTHORITY. EVEN FOR THE ASSESSMENT YEARS 1994-95 TO 1996- 97, THE LD.COUNSEL FOR THE TAXPAYER CONTENDED THAT WHAT WAS FOUND DURING THE COURSE OF SEARCH IS BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS AND THE TAXPAYER HAS ALREADY FILED THE RET URN OF INCOME DISCLOSING ALL THE DEPOSITS RECEIVED. THE LD.COUNSEL CLARIFIE D THAT THE DEPOSIT WAS SHOWN IN THE BALANCE-SHEET AND OTHER ENCLOSURES FIL ED ALONG WITH THE RETURN OF INCOME. FOR THE ASSESSMENT YEARS 1997-98 , 1998-99 AND 1999- 2000 THERE IS NO REFERENCE ABOUT THE SEIZED MATERIA L IN THE ASSESSMENT ORDER. 5. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 158BB(1) OF THE ACT WHICH READS AS FOLLOWS: 158BB. COMPUTATION OF UNDISCLOSED INCOME OF THE BLO CK PERIOD 7 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, IN ACCORDANCE WIT H THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE AS REDUCED BY THE AGGREGATE OF THE TOTAL I NCOME, OR AS THE CASE MAY BE, AS INCREASED BY THE AGGREGAT E OF THE LOSSES OF SUCH PREVIOUS YEARS, DETERMINED,- (A) TO (F) XXXXXXXXXXXXXXX EXPLANATION.- (A) TO (C) XXXXXXXXXXXXXXXXX 6. IN VIEW OF THE LANGUAGE EMPLOYED BY THE LEGISLAT URE IT IS INCUMBENT UPON THE ASSESSING OFFICER TO CONFINE HIMSELF ONLY TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION OR THE INFORM ATION WHICH IS RELATABLE TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH O PERATION. SINCE THE LEGISLATURE HAS PRESCRIBED SPECIAL PROCEDURE FOR AS SESSMENT OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD, THE ASSESSING OFFICER IS BOUND TO CONFINE 8 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 HIMSELF ONLY TO THE MATERIAL FOUND DURING THE COURS E OF SEARCH OPERATION OR THE INFORMATION WHICH RELATES TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION. IF THE TAXPAYER HAS FILED THE RE TURN OF INCOME BEFORE THE DATE OF SEARCH DISCLOSING THE DEPOSITS RECEIVED, TH EN THE INFORMATION AVAILABLE WITH THE DEPARTMENT IN THE FORM OF RETURN ALONG WITH ITS ENCLOSURES CANNOT BE CONSTRUED AS MATERIAL UNEARTHE D DURING THE COURSE OF SEARCH OPERATION. THEREFORE, THE DEPOSIT OR INCOME WHICH WAS DISCLOSED IN THE FORM OF REGULAR RETURN BEFORE THE DATE OF SEARC H CANNOT BE TREATED AS UNDISCLOSED INCOME. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION, THE ASSESSING OFFICER C ANNOT TREAT ANY AMOUNT AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. IN RES PECT OF ASSESSMENT YEAR 1999-2000, THE TIME LIMIT FOR FILING THE RETURN OF INCOME WAS NOT EXPIRED. THEREFORE, WHATEVER INCOME OR DEPOSIT ENTERED IN TH E BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS CANNOT BE TREATED AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. IN THE CA SE BEFORE US THE TAXPAYER CLAIMS THAT THE RETURN OF INCOME WAS REGULARLY FILE D BEFORE THE DATE OF SEARCH DISCLOSING ALL THE DEPOSITS SAID TO BE RECEI VED. THE TAXPAYER HAS FILED THE COPIES OF THE RETURN, BALANCE-SHEET AND OTHER E NCLOSURES IN THE PAPER 9 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 BOOK. FOR THE ASSESSMENT YEAR 1999-2000 THE DUE DA TE FOR FILING THE RETURN HAS NOT BEEN EXPIRED. THEREFORE, THE ENTRIES FOUND IN THE BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE CANNOT BE TREATED AS UNDISCLOSED INCOME. FOR THE ASSESSMENT YEARS 1990-91 TO 1993-94 THERE W AS NO SEIZED MATERIAL. SIMILARLY FOR THE ASSESSMENT YEARS 1997-98 AND 1998 -99 ALSO THERE IS NO REFERENCE ABOUT THE SEIZED MATERIAL IN THE ORDER OF THE LOWER AUTHORITIES. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BEF ORE MAKING AN ADDITION, THE ASSESSING OFFICER HAS TO BRING ON RECORD ALL TH E SEIZED MATERIAL AND IT HAS TO BE DISCUSSED HOW IT IS RELATABLE TO THE UNDISCLO SED INCOME. SINCE THE LD.DR CLAIMS THAT THERE ARE OTHER MATERIALS AVAILAB LE ON RECORD OTHER THAN DOCUMENTS A-21 & A-45, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OF FICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASS ESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE DIR ECTIONS OF THIS TRIBUNAL AND THEREAFTER COMPUTE THE UNDISCLOSED INCOME ON THE BA SIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION OR INFO RMATION WHICH IS RELATABLE TO THE SEARCH OPERATION. WE MAKE IT CLEA R THAT THE ASSESSING 10 IT(SS)A NO.125/COCH/2004 CO 32/COCH/2005 OFFICER SHALL BRING ON RECORD ALL THE MATERIALS FOU ND DURING THE COURSE OF SEARCH OPERATION AND DISCUSS IN THE ASSESSMENT ORDE R HOW IT IS RELATABLE TO THE INCOME ASSESSED AS UNDISCLOSED INCOME. AS DISC USSED EARLIER, IF ANY INCOME IS DISCLOSED IN THE RETURN OF INCOME FILED B EFORE THE DATE OF SEARCH, THE SAME CANNOT BE TREATED AS UNDISCLOSED INCOME. 7. WITH THE ABOVE OBSERVATIONS, BOTH THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE TAXPAYER ARE ALLOWED, FOR STA TISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DECEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 07 TH DECEMBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH