Smt. Sudesh Soni, New Delhi V. ACIT, New Delhi

ITSSA 13/DEL/2011

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 0061 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 20-02-2014
• Assessment Year: misc
• Appeal Filed On: 24-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDRA
• Assessee Lawyers: LALITHA KRISHNAMURTHY
• Keywords: Unexplained expenditure; Period of limitation; Block assessment
• Section: 69C; 201(1); 148; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI A. D. JAIN, JUDICIAL MEMBER IT SS(A) NO. 13/DEL/2011 (BLOCK PERIOD-01.04.1988 TO 14 .10.1998) SMT. SUDESH SONI, E-263, GREATER KAILASH-II, NEW DELHI VS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-23(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. ABFPS8764B ASSESSEE BY: MS. LALITHA KRISHNAMURTHY REVENUE BY: SHRI RAMESH CHANDRA DATE OF HEARING 20.2.2014 DATE OF PRONOUNCEMENT 21.2.2014 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 4.2.2011 IN RELATION TO THE BLOCK PERIOD 1.4.1988 TO 14.10.1998. 2. BRIEFLY STATED THE FACTS OF THE CASE THAT A SEAR CH WAS CONDUCTED IN THE CASE OF SHRI ASHISH SONI, SON OF T HE ASSESSEE, ON 14.10.1998. DURING THE BLOCK ASSESSMENT PROCEEDINGS OF SHRI ASHISH SONI, IT WAS NOTICED THAT SOME DOCUMENTS SEI ZED DURING THE COURSE OF SEARCH ALSO HAD LINK WITH THE ASSESSEE. N OTICE U/S 158BD WAS ISSUED ON 1.9.2002 REQUIRING THE ASSESSEE TO FI LE RETURN FOR UNDISCLOSED INCOME. NO RETURN WAS FILED. PAGE 131 OF ANNEXURE I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 2 A-6 FOUND DURING THE COURSE OF SEARCH, IS A COPY OF ACCOUNT OF M/S SONI & ASSOCIATES, THE PROPRIETORSHIP CONCERN OF TH E ASSESSEE, IN THE LEDGER OF M/S APOORVE APPARELS, THE PROPRIETORS HIP CONCERN OF SHRI ASHISH SONI. ON THIS PAGE, THERE WAS SHOWN OP ENING BALANCE OF RS. 53,529/- AND BELOW THAT THE WORDS `FABRICATI ON CHARGES WERE MENTIONED WITH PENCIL AND CORRESPONDING ENTRY IN THE LEDGER IN FRONT OF THIS DESCRIPTION WAS RS. 4,35,300/-. WH ILE REPLYING TO THE DEPARTMENTAL QUERY, SHRI ASHISH SONI SUBMITTED IN THE BLOCK PROCEEDINGS U/S 158BC THAT THE FABRICATION CHARGES CLAIMED IN THE BOOKS OF M/S APOORVE APPARELS WERE ONLY TO THE TUNE OF RS.55,300 AND SIMILAR ENTRY WAS PASSED IN THE ACCOUNTS OF M/S SONI & ASSOCIATES TOWARDS JOB WORK INCOME, FOR WHICH THE R ETURN WAS FILED BEFORE SEARCH. ON BEING CALLED UPON TO EXPLAI N DURING THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE, AS TO WHY F ABRICATION CHARGES OF RS. 4,35,300/- BE NOT TAXED AS ASSESSEE S INCOME, THE ASSESSEE STATED THAT THE SAID AMOUNT WAS ADDED IN T HE HAND OF SHRI ASHISH SONI AS UNEXPLAINED EXPENDITURE U/S 69C VIDE ASSESSMENT ORDER DATED 29.12.2000 PASSED U/S 158BC OF THE ACT. IT WAS, THEREFORE, CLAIMED THAT THE SIMILAR INCOME COULD NO T BE TAXED AGAIN IN THE HANDS OF THE ASSESSEE. NO CONVINCED WITH THE ASSESSEES SUBMISSION, THE ASSESSING OFFICER MADE ADDITION OF RS. 4,35,300/- TO THE TOTAL INCOME OF THE ASSESSEE. THE LD. CIT(A) WAS PLEASED TO CONFIRM THE ADDITION AS MADE IN THE ASSESSMENT ORDE R. THE I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 3 ASSESSEES ADDITIONAL GROUND TAKEN UP BEFORE THE LD . CIT(A) CHALLENGING THE JURISDICTION OF THE A.O TO FRAME BL OCK ASSESSMENT, WAS ALSO REJECTED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. AR SUBMITTED THAT THE A CTION OF THE A.O IN INITIATING THE PROCEEDINGS FOR ASSESSMENT U/S 15 8BD BY WAY OF NOTICE DATED 1.9.2002 WAS TIME BARRED IN VIEW OF TH E FACT THAT THE SEARCH WAS CONDUCTED ON SHRI ASHISH SONI ON 14.10.1 998. SHE RELIED ON CERTAIN ORDERS TO CONTEND THAT SUCH A BEL ATED INITIATION AND COMPLETION OF ASSESSMENT WAS LIABLE TO BE QUASHED. 4. WE DO NOT FIND ANY FORCE IN THE SUBMISSIONS OF T HE LD. AR IN THIS REGARD. SEC. 158BE DEALS WITH THE `TIME LIMIT FOR COMPLETION OF BLOCK ASSESSMENT. WHEREAS SUB-SEC. (1) DEALS W ITH PERIOD OF LIMITATION IN RESPECT OF ASSESSMENT U/S 158BC, SUB- SEC. (2) DEALS WITH THE PERIOD OF LIMITATION FOR COMPLETION OF BLO CK ASSESSMENT U/S 158BD. CLAUSE (B) OF SUB-SEC. (2) PROVIDES THAT WHERE SEARCH HAS TAKEN PLACE AFTER 1.1.1997, THE ASSESSMENT U/S 158BD SHOULD BE `COMPLETED BEFORE TWO YEARS FROM THE END OF THE MONTH IN WHICH THE NOTICE UNDER THIS CHAPTER WAS SERVED ON S UCH OTHER PERSON. COMING TO THE FACTS OF THE INSTANT CASE, W E FIND THAT NOTICE IN THE CASE OF THE ASSESSEE WAS ISSUED U/S 158BD ON 1.9.2002 AND THE ASSESSMENT HAS BEEN COMPLETED ON 28.9.2004, WHI CH IS WELL I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 4 WITHIN THE TIME PERIOD OF TWO YEARS FROM THE END OF THE MONTH IN WHICH NOTICE UNDER THIS CHAPTER WAS SERVED ON THE A SSESSEE. 5. NOW COMING TO THE INITIATION OF BLOCK ASSESSME NT, IT HAS BEEN FAIRLY ADMITTED BY BOTH THE SIDES THAT THERE IS NO PRESCRIPTION UNDER THE ACT FOR SUCH INITIATION OF BLOCK ASSESSMENT U/S 158BD. UNDER SUCH CIRCUMSTANCES, THE QUESTION ARISES AS TO WHETH ER THE DEPARTMENT SHOULD HAVE UNLIMITED TIME LIMIT AT ITS DISPOSAL FOR INITIATING THE BLOCK ASSESSMENT U/S 158BD. OBVIOUS LY, IT CANNOT BE SO BECAUSE TIME LIMIT IS THE ESSENCE OF EVERY ACTIO N. WHEREAS CERTAIN PROVISION EXPRESSLY PROVIDE TIME LIMIT FOR TAKING UP NECESSARY ACTION, IN CERTAIN CASES THERE IS NO SUCH EXPRESS TIME LIMIT PROVIDED. IN SUCH LATER SITUATIONS, ONE HAS T O READ AND DRAW INFERENCE ABOUT SUCH TIME LIMIT QUA THAT ASPECT BY CONSIDERING THE OVERALL SCHEME OF THE ACT. THE SPECIAL BENCH OF TH E TRIBUNAL IN MAHINDRA & MAHINDRA LTD. VS DCIT (2009) 122 TTJ (MU M) (SB) 577 DEALT WITH ALMOST SIMILAR ISSUE IN THE CONTEXT OF SEC. 201(1) FOR WHICH ALSO NO TIME LIMIT HAS BEEN PRESCRIBED FOR TA KING ACTION. THE SPECIAL BENCH, AFTER CONSIDERING THE RELEVANT ASPE CTS, CAME TO HOLD THAT THE ACTION UNDER THE PROVISIONS U/S 201(1 ) CAN BE INITIATED WITHIN THE TIME PERIOD PRESCRIBED U/S 149. SINCE I N THAT CASE, SUM PAID WITHOUT TDS WAS MORE THAN RS. 1 LAC., THE SPE CIAL BENCH OF THE TRIBUNAL UPHELD THE VALIDITY OF INITIATION OF A CTION WITHIN A PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 5 6. WE ARE DEALING WITH AN ASSESSMENT GETTING STARTED U/S 158BD AFTER THE ASSESSEE HAD FILED RETURN ORIGINALLY DECL ARING INCOME OF RS. 55,300/-. SINCE SUCH ASSESSMENT WAS STARTED PUR SUANT TO CERTAIN MATERIAL FOUND IN THE HANDS OF SHRI ASHISH SONI IND ICATING THAT THE ASSESSEE HAD NOT CORRECTLY REFLECTED ACTUAL RECEIPT S FROM SHRI ASHISH SONI, SUCH AN ASSESSMENT IS FULFILLING THE R EQUIREMENTS OF SEC. 147. THIS SECTION PROVIDES THAT WHERE ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR, SUCH INCOME AND ALSO ANY OTHER INCOME WHICH COMES TO THE NOTICE OF THE A.O SUBSEQUENTLY, MAY BE ASSESSED OR REASSESSED SUB JECT TO THE PROVISION OF SECTIONS 148 TO 153. SEC. 149 DEALS WI TH TIME LIMIT FOR NOTICE U/S 148. CLAUSE (B) OF SEC. 149(1) PROVIDES THAT NO NOTICE U/S 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS HAVE ELAPSED FRO M THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE T O TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO A MOUNT TO ONE LAC RUPEES OR MORE. COMING BACK TO THE FACTS OF THE CASE, IT IS NOTICED THAT THE DISPUTE IS ABOUT THE FABRICATION C HARGES NOT OFFERED TO TAX AMOUNTING TO RS. 4,35,300/-. A PERIOD OF SI X YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ENDS ON 31.3.20 03. AS AGAINST THAT, THE NOTICE U/S 158BD WAS ISSUED ON 1.9.2002. IT SHOWS THAT THE DATE OF SUCH NOTICE IS WELL WITHIN THE PERIOD O F SIX YEARS AS PRESCRIBED U/S 149. IN SUCH A SITUATION, IT CANNO T BE HELD THAT THE I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 6 INITIATION OF PROCEEDINGS U/S 158BD WAS TIME BARRED . THIS ARGUMENT IS REPELLED. 7. THE NEXT CONTENTION URGED BY THE LD. AR WAS THAT THE ASSESSING OFFICER OF SHRI ASHISH SONI DID NOT MAKE A SPECIFIC MENTION IN HIS ASSESSMENT ABOUT THE TAXABILITY OF T HIS AMOUNT IN THE HANDS OF THE ASSESSEE. AS NO SATISFACTION WAS RECOR DED IN THAT CASE, THE LD. AR CONTENDED THAT THE PRESENT ASSESSMENT BE DECLARED AS NULL AND VOID. 8. WE ARE AGAIN AT LOSS TO APPRECIATE AS TO H OW THIS CONTENTION IS CAPABLE OF ACCEPTANCE. THE CASES, ON WHICH THE L D. AR IS RELYING ON, FALL IN ALTOGETHER DIFFERENT FIELD. SUCH CASES WERE CONCERNED WITH THE FINDING OF CERTAIN DOCUMENTS IN THE COURS E OF THE PERSON SEARCHED U/S 158BC SHOWING THE UNDISCLOSED INCOME F ROM SUCH DOCUMENTS AS RELATING TO THE OTHER PERSON. IN SUCH CIRCUMSTANCES, THERE IS A REQUIREMENT ON THE PART OF THE ASSESSING OFFICER OF THE PERSON SEARCHED TO RECORD SATISFACTION THAT SUCH IN COME SHOULD BE ASSESSED IN THE HANDS OF THE OTHER PERSON. THE FACT S BEFORE US LIE IN ALTOGETHER DIFFERENT REALM. WE ARE CONFRONTED WITH A SITUATION IN WHICH SHRI ASHISH SONI AVAILED THE SERVICES FROM TH E ASSESSEE FOR WHICH A CONSIDERATION OF RS. 4,35,300/- WAS AGREED UPON. THE SAID SUM WAS NOT INCLUDED BY HIM IN HIS EXPENDITURE, FOR WHICH THE ASSESSING OFFICER MADE ADDITION U/S 69C AS UNEXPLA INED I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 7 EXPENDITURE. SUCH EXPENDITURE OF SHRI ASHISH SONI WAS THE INCOME OF THE ASSESSEE, WHO FAILED TO REFLECT THIS AMOUNT IN HER RETURN. IT SHOWS THAT THE INCOME ARISING FROM PAGE 131 OF ANNEXURE A-6, BEING LEDGER OF M/S APOORVE APPARELS, IS THE INCOME OF THE ASSESSEE AND EXPENDITURE OF M/S APROOVE APPARELS. S INCE, SUCH EXPENDITURE WAS NOT RECORDED BY SHRI ASHISH SONI IN HIS BOOKS OF ACCOUNT, IT WAS TO BE CONSIDERED AS UNEXPLAINED EXP ENDITURE U/S 69C AND SIMULTANEOUSLY IT WAS TO BE CONSIDERED AS T HE INCOME OF THE ASSESSEE AS IT CONSTITUTED A RECEIPT IN HER HAN DS. THUS, THERE IS NO QUESTION OF RECORDING SATISFACTION BY THE A.O OF SHRI ASHISH SONI THAT PAGE 131 OF ANNEXURE A-6 IS RELATABLE TO THE ASSESSEE IN QUESTION ALONE AND NOT SHRI ASHISH SONI. WE, THEREF ORE, REJECT THIS CONTENTION RAISED ON BEHALF OF THE ASSESSEE. 9. THE NEXT ARGUMENT MADE BY THE LD. AR WAS THAT TH E ADDITION OF RS. 4,35,300/- MADE IN THE HANDS OF SHRI ASHISH SONI STANDS DELETED BY THAT TRIBUNAL AND CONSEQUENT RELIEF SHOU LD BE ALLOWED TO THE ASSESSEE AS WELL. A COPY OF THE TRIBUNAL ORDER IN THE HANDS OF SHRI ASHISH SONI IS AVAILABLE ON PAGES 17 ONWARDS O F THE PAPER BOOK. SUCH ORDER IN IT(SS)A NO. 272/DEL/2001 DATED 7.4.2006 DEALS WITH THE ADDITION OF RS. 4,35,300/- IN PARA 3 . THE TRIBUNAL, VIDE PARA 3.4 OF ITS ORDER, HAS RECORDED THAT A SUM OF RS. 4,35,300/- WAS CREDITED TO THE ACCOUNT OF M/S SONI & ASSOCIATE S AS FABRICATION CHARGES WITH A PENCIL ENTRY AND THE ASS ESSEE ACTUALLY I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 8 SHOWED A SUM OF RS. 55,300/- TOWARDS FABRICATION CH ARGES. THUS, THE SUM OF RS. 3,80,000/- INCURRED BY THE ASSESSEE REPRESENTED THE EXPENDITURE INCURRED BY THE ASSESSEE OUTSIDE THE BO OKS OF ACCOUNT. IT WAS FURTHER HELD BY THE TRIBUNAL THAT : ` THE ASSESSEE DID NOT EXPLAIN THE SOURCE OF SUCH EXPENDITURE BUT ONLY PLE ADED THAT THE ENTRY HAS BEEN WRONGLY MADE BY THE ACCOUNTANT OF TH E ASSESSEE. WE DO NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSE E AS MADE. IN OUR OPINION, ONUS IS ON THE ASSESSEE TO EXPLAIN THE SOURCE OF EXPENDITURE INCURRED BY HIM. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF EXPENDITURE, THEREFORE, THE CIT(A) IN OUR OPINION, HAS CORRECTLY SUSTAINED THE ORDER OF THE A.O TREATING T HIS UNEXPLAINED EXPENDITURE TO BE THE INCOME OF THE ASSESSEE TO THE EXTENT OF RS. 3,80,000/- U/S 69C OF THE ACT. IT IS FURTHER RELEVANT TO OBSERVE THAT THE TRIBUNAL PROCEEDED WITH THE ISSUE AT LENGTH AND HELD THAT THOUGH IT WAS UNEXPLAINED EXPENDITURE, BUT IT WAS E LIGIBLE FOR DEDUCTION IN THE COMPUTATION OF INCOME UNDER BLOCK ASSESSMENT. FROM THE ABOVE ORDER OF THE TRIBUNAL, IT AMPLY COM ES OUT THAT THE TRIBUNAL HAS CATEGORICALLY HELD THAT SHRI ASHISH SO NI INCURRED A LIABILITY OF RS. 4,35,300/- TOWARDS M/S SONI & ASSO CIATES AND THERE WAS NO SOURCE OF SUCH EXPENDITURE. THE REASON FOR T HE DELETION OF ADDITION IN THE HANDS OF SHRI ASHISH SONI WAS THAT THOUGH IT WAS UNEXPLAINED EXPENDITURE BUT SINCE THE SAME WAS INCU RRED FOR THE BUSINESS PURPOSES, IT WAS ELIGIBLE FOR DEDUCTION. T HE FACT THAT SHRI I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 9 ASHISH SONI DID INCUR EXPENDITURE OF RS. 4,35,300/ - AND PAID THE SAME OUT OF HIS UNEXPLAINED INCOME, HAS BEEN CONF IRMED BY THE TRIBUNAL. WE CANNOT DEVIATE FROM THE ORDER OF THE T RIBUNAL IN DEALING WITH A PART OF TRANSACTION, WHOSE SECOND PA RT IS NOW BEFORE US. ONCE THE TRIBUNAL HAS HELD THAT SHRI ASHISH SON I INCURRED EXPENDITURE OF RS. 4,35,300/- AND SHOWED ONLY A SUM OF RS. 55,300/- IN BOOKS, THE NATURAL COROLLARY WHICH FOL LOWS IS THAT THE EQUAL AMOUNT WILL HAVE TO BE CONSIDERED AS RECEIPT IN THE HANDS OF THE ASSESSEE. AS ONLY A SUM OF RS. 55,300/- WAS REC ORDED AGAINST THE ENTRY OF RS. 4,35,300/-, THERE WAS UNEXPLAINED EXPENDITURE IN THE HANDS OF SHRI ASHISH SONI AND UNDISCLOSED INCOM E IN THE HANDS OF THE ASSESSEE TO THE TUNE OF RS. 3,80,000/-. WE, THEREFORE, HOLD THAT ADDITION TO THE TUNE OF RS. 3,80,000/- REQUIRE S CONFIRMATION. 10. THE CONTENTION OF THE LD. AR THAT THE EN TIRE AMOUNT OF RS. 4,35,300/- CANNOT BE INCLUDED IN THE ASSESSEES TOT AL INCOME AND ONLY PROFIT MARGIN THEREFROM SHOULD BE ADDED, IS AG AIN DEVOID OF ANY FORCE. NO MATERIAL HAS BEEN PLACED ON RECORD TO DEMONSTRATE THAT THE ASSESSEE DID NOT ACCOUNT FOR CERTAIN EXPEN DITURE IN HER BOOKS ACCOUNT FOR WHICH SHE RENDERED JOB SERVICES T O M/S SONI & ASSOCIATES FOR A SUM OF RS. 4,35,300/-. IN SUCH A C ASE, IT IS GROSS RECEIPT AND NOT THE PROFIT ELEMENT THEREIN, WHICH E SCAPED TAXATION AND IS HENCE LIABLE TO TAX. THE IMPUGNED ORDER IS A CCORDINGLY MODIFIED AND THE ADDITION IS SUSTAINED AT RS. 3,80, 000/-. I T SS(A) NO. 13/DEL/2011 SMT. SUDESH SONI 10 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/02/2014. SD/- SD/- (A. D. JAIN) (R. S. S YAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21/02/2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 20.02.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 21.02.2014 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 PS/PS 6. KEPT FOR PRONOUNCEMENT ON 21.02.2014 PS 7. FILE SENT TO THE BENCH CLERK 24.02.2014 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *