Sri K Prasada Rao, Srikakulam V. The DCIT, Central Circle, Visakhapatnam

ITSSA 15/VIZ/2002

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8771 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-09-2010
• Assessment Year: misc
• Appeal Filed On: 13-03-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Search and seizure; Validity of assessment; Block assessment
• Section: 131

Judgement Text

IT(SS)A NO.15 OF 2002 KORADA PRASADA RAO, SRIKAKULAM PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER IT(SS)A NO.15/VIZAG/2002 B LOCK P ERIOD 1 - 4 - 1988 TO 3 - 9 - 1998 KORADA PRASADA RAO, SRIKAKULAM VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VISAKHAPATNAM (APPELLANT) GIR NO:P-176 (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI SUBRATA SARKAR, CIT(DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8-1-2002 PASSED BY LEARNED CIT(A)-I HYDERABAD AND IT RELATES TO THE BLOCK PERIOD ENDING 3-9-1998. THE ASSESSEE IS CHALLENGIN G THE VALIDITY OF ASSESSMENT OF RS.1,50,000/- AS THE UNDISCLOSED INCO ME IN HIS HANDS. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS THE PROPRIETOR OF M/S. PRASAD FILLING STATION AND IS AL SO A PARTNER IN FOUR PARTNERSHIP FIRMS. SEARCH AND SEIZURE OPERATIONS WE RE CONDUCTED IN THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 3-9-1998. D URING THE COURSE OF SEARCH, IN A STATEMENT RECORDED U/ S 131 ON 16-10-1 998, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCES OF INVESTMENT OF CAPIT ALS MADE IN THE FIRM M/S. PADMAPRIYA CEMENTS, WHICH STOOD TO THE TUNE OF RS.2 8.32 LAKHS. THE ASSESSEE REPLIED THAT THE PARTNERS COULD EXPLAIN SO URCES TO THE TUNE OF RS.25.32 LAKHS ONLY AND THE BALANCE AMOUNT OF RS.3. 00 LAKHS IS NOT EXPLAINABLE. HE FURTHER STATED THAT THE SAID AMOUNT OF RS.3.00 LAKHS WAS CONTRIBUTED EQUALLY BY HIM AND ANOTHER PARTNER NAME D SHRI D. BADRI NARAYANA. HOWEVER, THE ASSESSEE DID NOT OFFER THE AMOUNT OF RS.1.50 LAKHS IN HIS BLOCK RETURN. THE ASSESSING OFFICER CO MPLETED THE BLOCK ASSESSMENT BY TREATING THE ABOVE SAID SUM OF RS.1.5 0 LAKHS AS THE IT(SS)A NO.15 OF 2002 KORADA PRASADA RAO, SRIKAKULAM PAGE 2 OF 4 UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSING O FFICER ALSO ADDED THE SAID AMOUNT ON PROTECTIVE BASIS IN THE HANDS OF THE FIRM M/S PADMAPRIYA CEMENTS. THE LEARNED CIT (A) SUSTAINED THE ADDITIO N MADE BY THE ASSESSING OFFICER. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE CAPITAL AMOUNT OF RS.28.32 LAKHS HAVE ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT OF M/S PADMAPRIYA CEMENTS, THAT TOO, PRIOR TO THE DATE OF SEARCH. FURTHER THE SEARCH PARTY DID NOT UNEARTH ANY INCRIM INATING MATERIAL IN CONNECTION WITH THE SAID INVESTMENT. HENCE ACCORDI NG TO THE LEARNED AR, THE ENTIRE AMOUNT OF RS.28.32 LAKHS, WHICH WAS ALRE ADY FOUND RECORDED IN THE BOOKS OF ACCOUNT, WILL FALL OUTSIDE THE PURVIEW OF BLOCK ASSESSMENT PROCEEDINGS. THE LEARNED AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSING OFFICER IS LEGALLY NOT CORRECT IN ISS UING NOTICE TO THE ASSESSEE U/S 158BD OF THE ACT. ACCORDING TO HIM, THE PROCEED INGS UNDER SECTION 158BD CAN BE INITIATED IN THE HANDS OF THE ASSESSEE ONLY IF ANY UNDISCLOSED INCOME PERTAINING TO THE ASSESSEE WAS FOUND IN THE HANDS OF THE FIRM, M/S PADMAPRIYA CEMENTS. SINCE THE IMPUGNED AMOUNT OF R S.1.50 LAKHS (OUT OF RS.28.32 LAKHS) HAS ALREADY BEEN RECORDED IN THE BO OKS OF ACCOUNT AND SINCE IT FALLS OUTSIDE THE PURVIEW OF THE BLOCK ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER IS WRONG IN INITIATING PROCEEDING S UNDER SECTION 158BD OF THE ACT IN THE HANDS OF THE ASSESSEE. HE FURTHER SU BMITTED THAT THE CONCEPT OF PROTECTIVE ASSESSMENT IS NOT AVAILABLE IN BLOCK ASSESSMENT PROCEEDINGS. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAS HIMSELF ADMITTED TH E IMPUGNED SUM OF RS.1.50 LAKHS AS HIS UNDISCLOSED INCOME IN A SWORN STATEMENT RECORDED FROM HIM. HE FURTHER SUBMITTED THAT THE CLAIM OF TH E ASSESSEE THAT THE CAPITAL AMOUNT OF RS.28.32 LAKHS HAS ALREADY BEEN R ECORDED IN THE BOOKS OF ACCOUNT OF M/S PADMAPRIYA CEMENTS IS NOT BORN OUT O F RECORD AND REQUIRES VERIFICATION. WITH REGARD TO THE CLAIM OF AR WITH REGARD TO THE VALIDITY OF NOTICE ISSUED UNDER SECTION 158BD OF THE ACT, THE L EARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSMENT ORDER HAS BEEN FRAMED UNDER IT(SS)A NO.15 OF 2002 KORADA PRASADA RAO, SRIKAKULAM PAGE 3 OF 4 SECTION 158BC OF THE ACT AND THE LEARNED CIT (A) HA S ALSO STATED THAT THE NOTICE WAS ISSUED TO THE ASSESSEE ONLY UNDER SECTIO N 158BC OF THE ACT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. AS SUBMITTED BY THE LEARNED AR, THE ASSESSEE HAS AD MITTED ABOUT THE INADEQUACY OF SOURCES IN THE CAPITAL CONTRIBUTION M ADE IN THE FIRM M/S PADMAPRIYA CEMENTS ONLY IN A STATEMENT RECORDED UND ER SECTION 131 OF THE ACT. THE SEARCH HAS TAKEN PLACE ON 03.09.1998 AND THE DUE DATE FOR FILING THE RETURN OF INCOME OF THAT YEAR WAS AVAILABLE UP TO 31.08.1999. IT IS ALSO NOT DISPUTED THAT THE IMPUGNED ADDITION WAS MADE ON LY ON THE BASIS OF SWORN STATEMENT TAKEN UNDER SECTION 131 OF THE ACT. NOW THE CONTENTION OF THE ASSESSEE IS THAT THE IMPUGNED CAPITAL AMOUNT HA S ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT AND IT FALLS OUTSI DE THE PURVIEW OF BLOCK ASSESSMENT. ACCORDING TO THE DEFINITION OF UNDISC LOSED INCOME GIVEN IN SECTION 158B(B), THE UNDISCLOSED INCOME INCLUDES IN COME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT, WHERE SUCH ENTRY IN THE BOOKS OF ACCOUNT REPRESENTS INCOME WHICH HAS NOT BEEN OR WOULD NOT H AVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT. BY RELYING ON THE SAID DE FINITION, THE LEARNED AR HAS CONTENDED THAT THE SEARCH PARTY DID NOT UNEARTH ANY MATERIAL TO SUGGEST THAT THE ASSESSEE WOULD NOT DISCLOSE THE SA ID ENTRY TO THE DEPARTMENT. FURTHER THE LEARNED AR HAS ALSO CONTEN DED THAT SINCE THE IMPUGNED ENTRY HAS ALREADY BEEN RECORDED IN THE BOO KS OF ACCOUNT, THERE IS NO QUESTION OF NON-DISCLOSING THE SAME TO THE DEPAR TMENT. HOWEVER, ACCORDING TO LEARNED D.R, THE CLAIM OF THE ASSESSEE THAT THE IMPUGNED AMOUNT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT RE QUIRES VERIFICATION SINCE THE SAID CLAIM IS NOT BORNE OUT OF RECORD. T HOUGH WE FIND MERIT IN THE ARGUMENTS OF LEARNED A.R, SINCE IT IS NOT BORNE OUT OF RECORD THAT THE IMPUGNED AMOUNT OF CAPITAL WAS ALREADY RECORDED IN THE BOOKS OF ACCOUNT, WE DEEM IT PROPER TO SET ASIDE THE MATTER TO THE FI LE OF ASSESSING OFFICER FOR MAKING NECESSARY VERIFICATION. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER BACK TO THE F ILE OF ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE BOOKS OF ACCOUNT OF M/S PADMA PRIYA CEMENTS IN THIS REGARD AND DELETE THE IMPUGNED ADDITION IF THE IMPUGNED AMOUNTS IT(SS)A NO.15 OF 2002 KORADA PRASADA RAO, SRIKAKULAM PAGE 4 OF 4 HAVE ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT PRIOR TO THE DATE OF SEARCH. 6. THE LEARNED A.R ALSO CONTENDED ABOUT THE VAL IDITY OF ISSUING NOTICE UNDER SECTION 158BD OF THE ACT. AS POINTED OUT BY LEARNED D.R, IT IS NOT CLEAR FROM THE RECORD AS TO WHETHER THE NOTICE WAS ISSUED TO THE ASSESSEE UNDER SECTION 158BD OR UNDER SECTION 158BC OF THE A CT. THE ASSESSEE HAS ALSO FAILED TO SUBMIT ANY MATERIAL IN SUPPORT OF HI S CLAIM. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO EXPRESS ANY OPINION ON THE SAID LEGAL CLAIM OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 07-10-2010 COPY TO 1 SHRI KORADA PRASADA RAO, KATHEKA VEEDHI, SRIKAKUL AM 2 THE DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VISAKHAPATNAM 3 4. THE CIT CENTRAL, HYDERABAD THE CIT(A)-I HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM