ACIT, Calicut V. Shri Vishal Malpani, Calicut

ITSSA 192/COCH/2005

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7695 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 23-11-2011
• Assessment Year: misc
• Appeal Filed On: 17-11-2005
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: C R HARISH
• Keywords: Unexplained cash credit; Gift; Block assessment; Reason to believe
• Section: 143(3); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.(SS)A NOS. 190/COCH/2005 BLOCK PERIOD: 01-04-1990 TO 12-10-2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE. CALICUT. VS. SHRI DWARAKA PRASAD MALPANI, 8/88, CONVENT ROAD, CALICUT [PAN:ADXPM 0934H] (REVENUE-APPELLANT) (REVENUE-RESPONDENT) I.T.A (SS)NO. 192/COCH/2005 BLOCK PERIOD: 01-04-1990 TO 12-10-2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE. CALICUT. VS. SHRI VISHAL MALPANI, 8/88, CONVENT ROAD, CALICUT [PAN:ADVPM 05943N] (REVENUE-APPELLANT) (REVENUE- RESPONDENT) REVENUE BY SHRI S.R.SENAPATI, SR.DR ASSESSEE BY SHRI C.R. HARISH, CA DATE OF HEARING 23/11/2011 DATE OF PRONOUNCEMENT 03/02/2012 O R D E R PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE REVENUE IN RES PECT OF TWO ASSESSEES, FATHER (SHRI DWARKA PRASAD MALPANI) AND SON (SHRI VISHAL M ALPANI), DIRECTED AGAINST THE ORDER OF EVEN DATE, I.E., 08-08-2005 BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCHI (CIT(A) FOR SHORT), PARTLY ALLOWING THE ASSESSEES APPEALS CONTESTING THEIR ASSESSMENTS DATED 25-10-2002 U/S. 158BC R.W.S. 143(3) OF THE I NCOME-TAX ACT, 1961 ('THE ACT', HEREINAFTER) FOR THE BLOCK PERIOD 01-04-1990 TO 12/ 13-10-2000. I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 2 2. THE APPEALS, RAISING COMMON ISSUES, WERE HEARD T OGETHER, AND ARE BEING DISPOSED OF BY A COMMON, CONSOLIDATED ORDER. THE ASSESSMENT S IN THE INSTANT CASE ARE IN RESPECT OF THE SAME SEARCH CONDUCTED AT THE RESIDENTIAL PREMIS ES OF THE FATHER-ASSESSEE AT CALICUT AND THE SON-ASSESSEE AT AHMEDABAD ON 12-10-2000, AND W HICH CONTINUED UPTO 13-10-2000. THE APPEALS RAISING COMMON ISSUES, WE SHALL DEAL WI TH EACH OF THE ISSUES RAISED IN SERIATIM. THE PRINCIPAL ISSUE RAISED IS THE ASSESS MENT OF THE CREDITS IN RESPECT OF GIFTS CLAIMED TO BE RECEIVED BY THE ASSESSEES AS UNDISCLO SED INCOME FOR THE BLOCK PERIOD AT ` 10,20,756/- AND ` 8,65,300/- FOR THE FATHER AND SON RESPECTIVELY. TH E FIRST APPELLATE AUTHORITY HAS DELETED THE SAME ON THE BASIS THAT, F IRSTLY, THE SAME CANNOT BE SAID TO BE UNDISCLOSED AND, SECONDLY, NO MATERIAL TO IMPUGN TH E GENUINENESS OF THE CREDITS OR GIFTS WAS FOUND DURING THE SEARCH. 3.1 IT WOULD BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE. THE PRIMARY FACTS, WHICH HAVE NOT BEEN DISPUTED, ARE THAT THE A SSESSES WERE RECEIVING GIFTS FROM THE RELATIVES AND FRIENDS ON A REGULAR BASIS, SO MUCH S O THAT A PRINTED MEMORANDUM OF GIFT WAS IN USE, I.E., FOR BEING EXECUTED BY THE DONOR W HILE GIVING THE GIFT, AND WHICH WERE FOUND NOT ONLY IN THE CASE OF THE ASSESSES, BUT ALS O THEIR FAMILY MEMBERS. A SPECIMEN COPY THEREOF STANDS MADE A PART OF THE ASSESSMENT O RDER/S BY THE ASSESSING OFFICER (AO), BEING DY.CIT, CENTRAL CIRCLE, CALICUT BY WAY OF ANN EXURE THERE-TO. FURTHER, THE SEIZED MATERIAL INCLUDED A VOLUMINOUS FILE WHEREIN THE COM PLETE ACCOUNT OF THESE TRANSACTIONS WAS MAINTAINED, I.E., THE CAPITAL ACCOUNT, INCOME A ND EXPENDITURE ACCOUNT, BALANCE-SHEET, STATEMENT OF SOURCE AND APPLICATION OF FUNDS FOR EA CH OF THE YEARS, BESIDES THE COPY OF THE ACKNOWLEDGEMENT OF THE INCOME-TAX RETURNS. THE GIF TS WERE BEING RECEIVED YEAR AFTER YEAR AND THE DONORS WERE MAINLY FROM FANCY BAZAR, G AUHATI. SO, HOWEVER, NONE OF IT WAS FILED ALONGWITH THE RETURN OF INCOME FOR ANY OF THE YEARS COVERED BY THE BLOCK PERIOD. 3.2 ENQUIRIES WERE MADE BY THE AO IN THE MATTER DUR ING THE COURSE OF THE ASSESSMENT PROCEEDINGS, WHICH REVEALED THAT BARRING A FEW, MOS T OF THE DONORS WERE FRIENDS (AND NOT RELATIVES), AS CLAIMED, AND THE GIFTS WERE NOT RECEIVED ON ANY SPECIAL OR CEREMONIAL OCCASION. ON BEING CALLED UPON SPECIFICALLY TO EST ABLISH THE GENUINENESS OF THESE GIFTS, I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 3 THE ASSESSEE STATED THAT THE DONORS WERE IN FACT TA X PAYERS, AND HAD CONFIRMED THE GIFTS. BEING NOT SATISFIED WITH THE EXPLANATION, THE AO DE EMED THE SAME AS UNEXPLAINED CREDIT, AND ADDED THE SAME AS ASSESSEES UNDISCLOSED INCOM E U/S. 68 RELYING ON THE DECISION IN THE CASE OF RAJ RANI GUPTA VS. DY.CIT , 72 ITD 155 (MUMBAI) AND SHANTI DEVI JAIN VS. DIRECTOR OF ENFORCEMENT (1996) 89 TAXMAN 197 (FERAB). 3.3 THE ASSESSEE CARRIED THE MATTER IN APPEAL, WHE REAT, IN THE VIEW OF THE LD. CIT(A), THE GIFTS HAVING BEEN RECEIVED THROUGH THE NORMAL B ANKING CHANNEL, IN THE ASSESSEES REGULAR/BUSINESS BANK ACCOUNT, THE SAME COULD NOT B E CONSIDERED AS UNDISCLOSED. FURTHER, THE FUNDS WERE WITHDRAWN FROM THE BANK, AND INTRODU CED IN THE FIRM IN WHICH THE ASSESSEE/S IS A PARTNER, AND WHICH HAD DULY DISCLOS ED THE SAME AS CREDITS IN THE PARTNERS CAPITAL ACCOUNT. ONLY WHAT IS HIDDEN OR CONCEALED CAN BE SAID TO BE UNDISCLOSED INCOME, AS STATED IN THE CASE OF L.R.GUPTA VS. UOI (1992) 194 ITR 32 (DELHI). NO EVIDENCE HAD BEEN FOUND IN SEARCH WHICH DISCREDITS THE GENUINENE SS OF THE GIFTS RECEIVED BY THE ASSESSEE-APPELLANTS, AND WHICH STOOD REFLECTED IN T HE FINANCIAL STATEMENTS ACCOMPANYING THEIR INCOME TAX/WEALTH TAX RETURNS. MERE ABSENCE O F RELATIONSHIP WOULD NOT IMPUGN THE GIFTS, FOR WHICH FACTORS SUCH AS THE IDENTITY OF DO NOR, HIS FINANCIAL CAPACITY, ETC. ARE TO BE SEEN AND CANNOT BE IMPUGNED ON THE BASIS OF MERE SU SPICION. THE ADDITION/S WAS DIRECTED TO BE DELETED BY HIM. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 CLEARLY, TWO ISSUES ARISE FOR CONSIDERATION, EVEN AS RIGHTLY IDENTIFIED BY THE LD. CIT(A), AS:- A) WHETHER THE CREDITS COULD BE CONSIDERED AS UNDIS CLOSED INCOME IN TERMS OF 158B(B)?; B) WHETHER, EVEN SO, THE ASSESSEE HAS TO ESTABLISH THE GENUINENESS OF THE GIFTS? WE MAY, BEFORE WE PROCEED TO DISCUS THE SAID TWO IS SUES, REVIEW THE LAW IN THE MATTER. IT IS WELL SETTLED THAT THE ASSESSMENT OF INCOME UNDER CHAPTER XIV-B COULD ONLY BE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR MA TERIAL OR INFORMATION AVAILABLE WITH THE I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 4 AO RELATABLE TO SUCH EVIDENCE (S. 158BB). CLEARLY, IF THE EVIDENCE, AND WHICH WOULD INCLUDE THE MATERIAL/INFORMATION GATHERED THROUGH P OST SEARCH ENQUIRIES, CAME TO BE FOUND ONLY AS A RESULT OF SEARCH, WHERE IN RESPECT OF PAST TRANSACTIONS, OR THE CONDUCT SHOWS THAT SUCH EVIDENCE, REPRESENTING WHOLLY OR PA RTLY INCOME, WOULD NOT HAVE BEEN DISCLOSED BUT FOR THE SEARCH (I.E., EVEN THOUGH THE DATE OF FILING THE RETURN OF INCOME MAY NOT HAVE LAPSED), COULD IT BE SAID THAT THE SAME HA S NOT BEEN OR COULD NOT HAVE BEEN DISCLOSED, AS THE CASE MAY BE, FOR THE PURPOSE OF T HE ACT, THE QUALIFYING CONDITION FOR THE INCOME TO BE CONSIDERED AS UNDISCLOSED (S. 158B(B)) . THE PROVISION OF SEC. 158B(B), DEFINING THE UNDISCLOSED INCOME, IS THUS IN FULL H ARMONY WITH THE PROVISION OF S. 158BB, THE MACHINERY PROVISION FOR COMPUTING THE UNDISCLOS ED INCOME. THE TERM EVIDENCE IS OF WIDE IMPORT, AND IS JUDICIOUSLY WELL SETTLED TO BE A MATTER OF FACT, THE EFFECT, TENDENCY OR DESIGN OF WHICH IS TO PRODUCE IN THE MIND A PERSUAS ION, AFFIRMATIVE OR DISAFFIRMATIVE, OF THE EXISTENCE OF SOME OTHER MATTER OF FACT. FOR THE PURPOSE OF ASSESSMENT UNDER THE ACT, THE LAW PROVIDES FOR RELIANCE ON MATERIALS OR INFOR MATION IN THE POSSESSION OF THE AO, EVEN AS IT WOULD BE CLEAR THAT THE SAME WOULD ALSO STAND TO QUALIFY AS EVIDENCE, AND WHICH IS FURTHER CLARIFIED AS NOT ONLY AS FOUND DUR ING, BUT IN CONSEQUENCE OF SEARCH AS WELL. THE PURPOSE IS NOT TO RESTRICT THE ADMISSION TO ONLY THOSE EVIDENCES DIRECTLY DISCOVERED DURING THE SEARCH, BUT TO INCLUDE THAT D ISCOVERED THROUGH POST SEARCH ENQUIRIES, AND THAT IS HOW THE HIGHER COURTS OF LAW HAVE CONSISTENTLY VIEWED THE SAME, SO THAT IT FORMS A PART OF TRITE LAW. 4.3 COMING TO THE FACTS OF THE CASE, THE FIRST QUES TION IS WHETHER THE CREDITS WERE DISCLOSED TO THE DEPARTMENT OR NOT, THE REQUIREMENT OF THE ACT BEING FOR THE PURPOSE OF THE ACT. IN THIS REGARD, WE FIRSTLY OBSERVE THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE AND, IN FACT, BEFORE ANY AUTHORITY, TO EXHIBIT THE DISCLOSURE OF THE IMPUGNED CREDITS. IN FACT, HIS ARGUMENT THAT THERE IS NO RE QUIREMENT FOR FURNISHING EITHER THE CAPITAL ACCOUNT OR THE BALANCE-SHEET ALONG WITH THE RETURN, I.E., AS PER LAW, WITH THERE BEING NO SPECIFIC COLUMN IN THE RETURN FOR DECLARING THE CRE DITS/GIFTS RECEIVED, OR THAT THE CREDITS STOOD REFLECTED BY WAY OF CAPITAL BALANCE OF THE AS SESSEE-PARTNER PER THE RETURN OF INCOME OF THE PARTNERSHIP FIRM/S (WHICH IS AGAIN, THOUGH N OT PROVED), IS ITSELF AN ADMISSION OF THE I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 5 NON DISCLOSURE OF THE GIFTS BY THE ASSESSEE. WE, A CCORDINGLY, FIND NO BASIS FOR THE FINDING BY THE LD. CIT(A) THAT THE CREDITS STOOD DULY COMMU NICATED TO THE REVENUE PER THE FINANCIAL STATEMENTS ACCOMPANYING THE RETURN/S OF I NCOME, WHICH (FINDING) IS, OF COURSE, WITHOUT REFERENCE TO OR DE HORS ANY MATERIAL. THERE IS NO WHISPER OF THE CREDITS, MUCH LESS OF BEING IN THE FORM OF GIFTS, IN THE RETURNS OF INCOME FURNISHED BY THE ASSESSEE FROM YEAR TO YEAR. THE AO IS CATEGORICAL IN THE MATTER; THE SAME RATHER FORMS THE BASIS OF THE REVENUES CASE, AND WHICH HAS, IN FACT, NOT BEEN, A S AFORE-NOTED WITH REFERENCE TO THE LEGAL ARGUMENT ADOPTED BY THE ASSESSEE, DISPUTED BY THE ASSESSEE/S, AND WHICH, EVEN IF SO, COULD ONLY BE WITH REFERENCE TO AND ON THE BASIS OF SOME MATERIAL, COMPLETE ABSENCE OF WHICH IS OBSERVED BY US. IN FACT, THE AO EXPRESSES A SURPRISE, SUGGESTING A DELIBERATENESS IN THE SAID NON DISCLOSURE, IN VIEW OF THE COMPLETE AND METICULOUS RECORD HAVING BEEN KEPT BY THE ASSESSEE IN RESPECT OF THE FINANCIAL TR ANSACTIONS, NONE OF WHICH, OF COURSE, ACCOMPANIED THEIR RETURNS. 4.3 WE MAY, AT THIS STAGE, CONSIDER THE ASSESSEES LEGAL ARGUMENT, I.E., OF THEIR BEING NO LEGAL REQUIREMENT OF DISCLOSURE OF THE GIFTS REC EIVED BY THE ASSESSEE DURING THE PREVIOUS YEAR/S, SO THAT THE ASSESSEE COULD NOT BE FAULTED WITH ON THAT SCORE. THE ARGUMENT IS NOT WITHOUT ANY MERIT, AS IF THE ASSESS EE HAS COMPLIED WITH THE LAW, AN INCIDENTAL NON-DISCLOSURE OUGHT NOT TO BE IMPUGNED FOR WANT OF DISCLOSURE. HOWEVER, SUB CLAUSE (I) OF CLAUSE (D) OF EXPLANATION TO S. 139(9) CLEARLY REQUIRES THE ASSESSEE TO FURNI SH HIS FINANCIAL STATEMENTS, INCLUDING BALANCE-SHEET, ALONG WITH THE RETURN OF INCOME. THE ASSESSEE/S, THUS, OUGHT TO HAVE FILED THE INCOME AN D EXPENDITURE ACCOUNT AS WELL AS THE BALANCE-SHEET, ALONG WITH HIS RETURNS OF INCOME, AN D WHICH HAVE ADMITTEDLY NOT BEEN, WITH THE AO GOING ON TO STATE THAT THE CAPITAL ACCO UNT OR THE COPY OF THE BANK ACCOUNT BEARING THE SAID CREDITS THE GIFTS BEING CLAIMED TO HAVE BEEN BANKED - HAD NOT BEEN FILED ALONG WITH THE RETURNS. THE ASSESSEE/S CLAIMS THAT THE SAID PROVISION APPLIES ONLY WHERE THE ASSESSEE IS UNDERTAKING BUSINESS OR PROFESSION. WE CAN HARDLY AGREE. THERE IS NOTHING IN THE PROVISION OF LAW INDICATING SO; THE ONLY QUA LIFICATION FOR ATTRACTING THE SAME BEING THAT THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF A CCOUNTS, AND ON WHICH THERE IS NO DISPUTE, EVEN AS THE RECORDS MAINTAINED BY THE ASSE SSEE EXHIBIT IT TO BE THE CASE. THE SAID I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 6 REQUIREMENT OBTAINS IN AN INDIRECT MANNER THOUGH - EVEN WHERE NO REGULAR BOOKS OF ACCOUNTS ARE BEING MAINTAINED (REFER CLAUSE (F) OF EXPLANATION TO S. 139(9)). THE WHOLE PURPORT OF THE PROVISIONS IS A DISCLOSURE OF THE TR ANSACTIONS HAVING A BEARING ON THE ASSESSEES INCOME FOR THE YEAR, INCLUDING HIS OUTGO INGS (FOR THE YEAR) AND ASSETS (AS AT THE YEAR-END), AND THE MANNER IN WHICH THESE ARE FINANC ED, INCLUDING THE LIABILITIES ASSUMED. THE ASSESSEE FURTHER CLAIMS THAT, EVEN SO, NO DEFEC T NOTICE WAS ISSUED TO HIM FOR ANY OF THE YEARS. IN THIS REGARD, THE QUESTION THAT ARISE S IS: HOW DOES THE DEPARTMENT COME TO KNOW THAT THE ASSESSEE IS MAINTAINING BOOKS OF ACCO UNTS, FOR IT TO REQUIRE OF IT TO FURNISH INCOME AND EXPENDITURE ACCOUNT AND THE BALANCE-SHEE T?, AND WHICH ONLY WOULD REVEAL THE CREDITS BY WAY OF ACCRETION TO THE CAPITAL ACCOUNT DURING THE YEAR AS WELL AS THE MANNER OF THEIR UTILISATION. SECONDLY, EVEN OTHERWISE, THE O NLY CONSEQUENCE OF THE SAME, I.E., THE NON-ISSUE OF A DEFECT NOTICE, IS THAT THE ASSESSEE/ S RETURNS WOULD NOT STAND TO BE CATEGORISED AS DEFECTIVE RETURNS. IN FACT, A STRIC T VIEW OF THE MATTER; THE ASSESSEE NOT DECLINING THE MAINTENANCE OF REGULAR ACCOUNTS, FOR WHICH ITSELF NO SPECIFIC FORMAT IS STIPULATED, WOULD IMPUGN HIS RETURN/S AS DEFECTIVE. WE, HOWEVER, DO NOT CONSIDER IT NECESSARY TO PURSUE THIS ASPECT ANY FURTHER; THE PA RTIES HAVING NOT ARGUED THE MATTER ALONG THESE LINES. THIS IS AS, DEFECTIVE OR NOT, THERE H AS IN ANY CASE BEEN NO DISCLOSURE OF THE GIFT TRANSACTIONS, I.E., AS A MATTER OF FACT. WHET HER THE NON-DISCLOSURE IS BONA FIDE OR NOT SO, WHICH IS IN SUBSTANCE THE IMPORT OF THE ASSESSE ES LEGAL ARGUMENT MADE WITH REFERENCE TO S. 139(9), WOULD NOT ALTER THE FACTUM OF NON-DIS CLOSURE. FURTHER, IN OUR VIEW, THE SAME, APART FROM THE INTERPRETATION OF THE LEGAL REQUIREM ENT PER S. 139(9), WOULD ALSO INVOLVE A DEFINITE FINDING AS TO THE NON-DISCLOSURE OF THE FA CT OF MAINTENANCE OF ACCOUNTS BY THE ASSESSEE PER THE RETURN/S OF INCOME. WE, THEREFORE , LEAVE THE MATTER HERE, THERE BEING ADMITTEDLY, AND AS A MATTER OF FACT, NOT AN IOTA OF EVIDENCE PER THE RETURNS FILED, FROM YEAR TO YEAR, TO INDICATE RECEIPT OF GIFTS BY THE ASSESS EE/S, WHICH CAME TO THE KNOWLEDGE OF THE REVENUE ONLY ON THE SEARCH, SO THAT THERE WAS NO DI SCLOSURE FOR THE PURPOSE OF THE ACT IN TERMS OF S. 158B(B). FURTHER, THOUGH IT IS CLAIMED , AND AGAIN DE HORS ANY MATERIAL, THAT THE GIFTS STAND DISCLOSED PER THE WEALTH TAX RETURN S UPTO A.Y. 1994-95 IN THE CASE OF DWARKAPRASAD MALPANI, THE SAME CANNOT BE CONSIDERED AS DISCLOSURE FOR THE PURPOSE OF THE ACT, WHICH IS A COMPLETE CODE IN ITSELF. I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 7 4.4 THE ASSESSEES RELIANCE ON THE DECISION IN THE CASE OF L.R.GUPTA VS. UNION OF INDIA (SUPRA) IS, AGAIN, MISCONCEIVED. IN THAT CASE, THE HONBLE COURT FOUND THAT THE SEARCH IS BAD IN LAW IN VIEW OF THE NON-SATISFACTION OF THE I NGREDIENTS OF S. 132 OF THE ACT, ACTION UNDER WHICH IS UNCHALLENGED IN THE PRESENT CASE, SO THAT THE SEARCH IS ADMITTEDLY VALID, IMPLYING SATISFACTION OF THE REQUIREMENTS OF S. 132 OF THE ACT. SECONDLY, THE DEFINITION OF UNDISCLOSED INCOME U/S. 158B(B), WHICH ALONE IS REL EVANT IN THE PRESENT CASE, IS MUCH WIDER THAN THAT PER S. 132(1)(C) OF THE ACT. THE S AME INCLUDES ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS O R TRANSACTIONS, AND WHICH IS COMPLETELY MISSING IN S.. 132(1) (C). AS SUCH, WHI LE THE ENTRIES IN THE BOOKS OF ACCOUNTS OR DOCUMENTS OR TRANSACTIONS MAY BE OF RELEVANCE AN D CONSEQUENCE IN ASSAILING A SEARCH ACTION U/S. 132, WHERE THAT IS THE ONLY INFORMATION IN POSSESSION OF THE REVENUE, LEADING TO A REASON TO BELIEVE BY IT, THE SAME WOULD BE A DEQUATE AND/OR SUFFICIENT TO QUALIFY IT TO BE AN UNDISCLOSED INCOME U/S. 158B(B), WHERE THE SA ME REPRESENTS, WHOLLY OR PARTLY, INCOME FOR PROPERTY. 4.5 WE, NEXT, CONSIDER THE ASSESSEES ARGUMENT, WHI CH FOUND ACCEPTANCE BY THE LD. CIT(A), THAT NO MATERIAL DISCREDITING THE GIFTS AS NOT GENUINE WAS FOUND IN SEARCH. THE SAME IS RELEVANT, AS THE DISCOVERY OF GIFTS WOULD N OT BY ITSELF LEAD TO THE INFERENCE THAT THE SAME REPRESENTS INCOME AND, THUS, UNDISCLOSED INCOM E. WITHOUT DOUBT, A CREDIT TRANSACTION BY ITSELF CANNOT BE CONSIDERED AS INCOM E (TO WHATEVER EXTENT) UNLESS ACCOMPANIED BY A NON-SATISFACTION BY THE AO AS TO I TS NATURE AND SOURCE. NOW, WHERE IS THE QUESTION OF THE AO SEEKING EXPLANATION IN ITS R ESPECT FROM THE ASSESSEE/S WHEN HE IS NOT AWARE OF THE SAME? THAT IS, WHILE THE ASSESSMEN T U/S. 68 IN A BLOCK ASSESSMENT WOULD GENERALLY OBTAIN ONLY WHERE INFORMATION IMPUGNING I TS GENUINENESS, OR AS TO ITS TRUE NATURE AND SOURCE, IS FOUND AS A RESULT OF SEARCH ( REFER CAS CARD FINANCE LT. VS. ASST. CIT , 84 ITD 1 (AHD.) (TM), IN THE INSTANT CASE, HOWEVER, THE TRANSACTION BEING NOT DISCLOSED, THE FAILURE OF THE ASSESSEE TO ESTABLISH ITS GENUIN ENESS, OR THE NON-SATISFACTION OF THE AO WITH THE EXPLANATION FURNISHED BY HIM AS TO ITS NAT URE AND CONCERN, WHETHER VALID, WOULD ITSELF BE SUFFICIENT TO QUALIFY IT AS UNDISCLOSED I NCOME, AS THE SAME ONLY FOLLOWS AND FLOWS OUT OF THE INFORMATION AVAILABLE WITH THE AO AS A R ESULT OF SEARCH. THE PROVISIONS OF THE I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 8 ACT MUST BE READ HOLISTICALLY AND HARMONIOUSLY, AND IN THE MANNER WHICH MAKES THEM WORKABLE. IT IS ONLY AS A RESULT OF SEARCH THAT THE IMPUGNED CREDIT TRANSACTION/S STOOD FOUND, AND WHICH THE ASSESSEE WAS FOUND UNABLE TO S ATISFACTORILY EXPLAIN BY THE AO. THE SCOPE OF ASSESSING THE SAME UNDER THE REGULAR ASSES SMENT PROCEEDINGS DOES NOT ARISE, EVEN THOUGH THAT AGAIN IS NOT BY ITSELF A DETERMINA TIVE FACTOR (REFER: CAS CARD FINANCE LTD. VS. ASST. CIT (SUPRA)). IN FACT, THIS IS PRECISELY WHAT MAKES TH E SECOND QUESTION POSED AS ABOVE (REFER PARA 4.1) RELEVANT IN THE BLO CK ASSESSMENT PROCEEDINGS. WE SHALL, HOWEVER, AND WITHOUT PREJUDICE TO THE FOREGOING, AL SO SHOW THAT THE INFORMATION DISCREDITING THE CREDITS, BEING GIFTS, AS GENUINE, CAME TO THE POSSESSION OF THE REVENUE AS A RESULT OF SEARCH. IN OTHER WORDS, THESE TWO RELE VANT CONSIDERATIONS WOULD BE EXAMINED BY US SIDE BY SIDE. 4.7 CONTINUING FURTHER, THE VERY FACT THAT THE GIFT S ARE BEING RECEIVED FROM YEAR TO YEAR IS ITSELF A VERY INCRIMINATING PIECE OF INFORMATION , THOUGH WITHOUT DOUBT NOT CONCLUSIVE IN ITSELF, AND WHICH CAME TO LIGHT ONLY ON SEARCH. THIS IS AS GIFTS OF HARD EARNED MONEY ARE VERY DIFFICULT TO COME BY, AND BY THEIR VERY NA TURE GIVEN, FIRSTLY, VOLUNTARILY, OUT OF NATURAL LOVE AND AFFECTION AND/OR SECONDLY, TO (SAY ) BAIL OUT THE DONEE - A LOVED AND DEAR ONE - OF A DIFFICULT SITUATION OR FOR A PARTICULAR PURPOSE OR AN AUSPICIOUS/SPECIAL OCCASION, ETC. IT IS IN THIS CONTEXT THAT THE COURTS/TRIBUNA LS ARE GENERALLY INCLINED TO TAKE JUDICIAL NOTICE OF THE GIFTS BEING DEPLOYED AS A METHOD OF M ONEY LAUNDERING, IN CIRCUMSTANCES THAT ARE UNUSUAL AND NOT IN ACCORD WITH THE TEST OF HUMA N PROBABILITIES AS TO CONDUCT. THE OBSERVATION BY THE HONBLE COURT IN THE CASE OF ADDL.CIT VS. C.R. RANGANATHAN CHETTY & ORS. , 153 ITR 456 (MAD.) (AT PG. 466) ARE RELEVANT IN T HIS REGARD:- LOOK AT THE WAY THE GIFTS WERE MADE. NOT ONLY WER E THEY MADE TO OTHER PEOPLES CHILDREN, BUT SOME OF THEM WERE MADE TO O THER PEOPLES WIVES. IN ANY PLACE, EXCEPTING IN A TAX COURT, GIFTS TO OTHER PE OPLES WIVES, EVEN IF THEY ARE WIVES OF CO-PARTNERS, WOULD RAISE A HOST OF QUESTIONS AN D NOT A FEW EYE-BROWS, EXCEPTING WHEN THERE IS AN UNDERSTANDING NOD, AH, IT IS ALL FOR THE PURPOSES OF INCOME-TAX. THE ITO SAW THE FACTS WITH A LAYMAN S EYES, WHICH WAS THE CORRECT WAY TO LOOK AT THEM. THE TRIBUNAL FOR THEIR PART, HOWEVER, GOT INVOLVED IN THE CONVOLUTIONS OF THE MITAKSHARA LAW OF GIFTS AND BR OUGHT TO BEAR A DRY AND UNREAL LEGALISTIC APPROACH TO THE APPLICATION OF S. 64, W HICH THE PROVISIONS DOES NOT CALL FOR, IF WE UNDERSTAND KOTHARIS CASE (1963) 49 ITR (SC) 107 ARIGHT. I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 9 COUPLE THIS INFORMATION WITH THE FOLLOWING, AGAIN, UNDISPUTED FACTS, ALL OF WHICH STAND FOUND AS A RESULT OF SEARCH, AND THE PICTURE IS COM PLETE IN THE INSTANT CASE/S, OR ALMOST SO; A) THE GIFTS HAD BEEN RECEIVED BY BOTH THE FATHER A ND SON AS ALSO BY OTHER FAMILY MEMBERS; B) THE REGULARITY AND VOLUME OF GIFTS, AS IF PRE-OR DAINED, OR PERHAPS DUE TO THE ASSESSEE/S BEING BESTOWED WITH PRESCIENCE, LEADING TO THEIR BE ING DOCUMENTED PER PRINTED CONFIRMATION LETTERS, INCLUDING IN THE CASE OF OTHE R FAMILY MEMBERS; C) THOUGH NORMALLY SUCH ELABORATE DOCUMENTATION AND RECORD KEEPING AS MAINTAINED BY THE ASSESSEE, WOULD BE TO MEET ADEQUATELY THE CONTI NGENCY OF ANY ENQUIRY IN ITS RESPECT, THERE WAS NOTHING TO INDICATE EVEN THE FACT OF IT B EING RECEIVED IN THE RETURN/S OF INCOME FILED BY THE ASSESSEE/S; THE CHARGE OF IT BEING DEL IBERATELY SO, EVEN AS THE LAW ITSELF ASCRIBES NON DISCLOSURE TO BE A RESULT OF CONSCIOUS EFFORT, IS UNMISTAKABLE; D) NO OCCASION MARKS THE GIFTS, WHICH, BARRING FEW, ARE FROM FRIENDS, FOR MEETING INVESTMENTS AND OTHER OUTGOINGS BY THE ASSESSEE/S, EVEN DESPITE WHICH THERE IS ADMITTED CASH DEFICIT FOR MOST OF THE YEARS; E) THE GIFTS CONSIST ONLY A FRACTION (1/3 RD ) OF THE ASSESSEES UNDISCLOSED INCOME, I.E., AT ` 10.2 LAKHS, OUT OF UNDISCLOSED INCOME AT ` 32.84 LAKHS, WHICH IS FOR MOST PART NOT DISPUTED, IN THE CASE OF SHRI DWARKAPRASAD MALPANI. FOR HIS SON, SHRI VISHAL MALPANI, GIFTS ( ` 8.65 LAKHS) COMPRISED ALMOST THE WHOLE OF HIS UNDIS CLOSED INCOME OF ` 8.78 LAKHS, WHICH EXCEEDS HIS INCOME PER THE RETURNED INCOME OF ` 7.10 LAKHS FOR THE BLOCK PERIOD. GIFTS ARE GENERALLY ALSO EXCHANGED BETWEEN CLOSE F RIENDS AND RELATIVES ON IMPORTANT OCCASIONS, AS NEW BORNS IN THE FAMILY; LA NDMARK BIRTH ANNIVERSARIES; WEDDINGS; ETC. IT IS NOTEWORTHY THAT NO GIFTS HAVE BEEN GIVE N BY BOTH THE ASSESSEES TO ANY OF THEIR `CLOSE FRIENDS AND RELATIVES, INCLUDING THOSE FROM WHOM GIFTS ARE BEING REGULARLY RECEIVED OVER THE YEARS. 4.7 FURTHER, NONE OF THE DONORS WERE PRODUCED FOR E XAMINATION BEFORE THE AO. THOUGH THE ASSESSEE WAS NOT SPECIFICALLY CALLED UPO N TO DO SO BY HIM, THE ONUS TO ESTABLISH THE GENUINENESS OF THE GIFTS, PARTICULARL Y WHERE BEING CALLED UPON TO DO SO, AND REPEATEDLY, BY THE ASSESSING AUTHORITY, IS ONLY ON THE ASSESSEE. NO EVIDENCE IN SUPPORT OF THEIR FINANCIAL CAPACITY ALSO STANDS SUBMITTED. IT IS WELL ACCEPTED THAT THE RECEIPT OF CREDIT THROUGH THE BANKING CHANNEL, OR OF IT BEING CONFIRM ED BY THE CREDITOR/DONOR, IS ITSELF NOT SUFFICIENT TO PROVE THE GIFTS IN TERMS OF S. 68. T HE WORD GENUINE, IN FACT, ITSELF SIGNIFIES I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 10 THAT WHAT IS APPARENT IS REAL, SO THAT IT REPRESENT S THE TRUTH. IF THE FOREGOING ATTRIBUTES WERE TO BE ITSELF SUFFICIENT, MERE ENTRIES IN THE B OOKS OF ACCOUNTS, WHICH CONSTITUTE EVIDENCE U/S. 34 OF THE EVIDENCE ACT, WOULD BY THEM SELVES BE SUFFICIENT TO PROVE THE CREDITS. AS EXPLAINED BY THE APEX COURT, TIME AND A GAIN THAT RECEIPT OF MONEY IS ITSELF AN EVIDENCE AGAINST THE ASSESSEE FOR RECEIPT OF INCOME , UNLESS OF COURSE HE ESTABLISHES THE GENUINENESS OF THE SAME ON THE PARAMETERS OF IDENTI TY, CREDITWORTHINESS OF THE CREDITOR, AND THE GENUINENESS OF THE TRANSACTIONS, AND FOR WH ICH THE ENTIRETY OF THE FACTS HAVE TO BE TAKEN INTO CONSIDERATION, INCLUDING THE SURROUNDING CIRCUMSTANCES AND THE TEST OF HUMAN PROBABILITIES BY THE ASSESSING AUTHORITY. THE LD. CIT(A) STATES THAT THE NRI GIFTS IN THE CASE OF SHRI VISHAL MALPANI HAVE BEEN ACCEPTED BY T HE AO PER HIS REMAND REPORT (DATED 18-02-2005). WE DO NOT FIND ANY SUBSTANCE IN THE SA ID STATEMENT. IT IS NOT THE OPINION EXPRESSED BY THE AO PER HIS REMAND REPORT, BUT THAT PER THE ASSESSMENT ORDER, THAT IS RELEVANT, WHICH THOUGH CAN BE REVERSED OR MODIFIED BY THE LD. CIT(A), IN WHOSE ORDER THAT BY THE AO MERGES. IN FACT, THE AO PER THE REMA ND REPORT EXPRESSES SURPRISE THAT THE BOOKS OF ACCOUNTS WERE NOT PRODUCED BEFORE THE AO D URING THE BLOCK ASSESSMENT PROCEEDINGS, FURTHER STATING THAT IT IS NOT UNDERST OOD OR SUBSTANTIATED AS TO WHY THE GIFTS SHOULD BE MADE BY THE ASSESSEES FATHERS FRIENDS A ND EX-EMPLOYEES. APART FROM THESE QUESTIONS, WHICH REMAIN UNANSWERED, THEIR FINANCIAL CAPACITY HAS ALSO NOT BEEN EXHIBITED, FOR WHICH ALSO THE MATTER WAS REMANDED BACK TO THE FILE OF THE AO IN THE ABSENCE OF CONFIRMATION LETTERS. 4.8 IN VIEW OF THE FOREGOING, WE ARE OF THE CLEAR VIEW THAT THERE WERE MATERIALS AND INFORMATION FOUND AS A RESULT OF SEARCH TO DISCREDI T THE GIFTS UNDER REFERENCE, I.E., AS NOT GENUINE. ALSO, THE TAKING THE TOTALITY OF THE FACT S AND CIRCUMSTANCES IN VIEW, WE ARE CLEARLY UNABLE TO UPHOLD THE VIEW OF THE LD. CIT(A) THAT THE GENUINENESS OF THE GIFTS STANDS PROVED OR SATISFACTORILY EXPLAINED, IN TERMS OF S. 68, DRAWING SUPPORT FROM THE FOLLOWING DECISIONS BY THE APEX COURT, LAYING DOWN THE LAW IN THE MATTER, AND DECIDE ACCORDINGLY, UPHOLDING THE ADDITION, SO THAT THE RE VENUE SUCCEEDS:- A. GOVINDA RAJULU MUDALIAR V. CIT (1958) 34 ITR 807 (SC) SREELEKHA BANERJEE & OTHRS. V. CIT (1963) 49 ITR 112 (SC) I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 11 KALEKHAN MOHAMMED HANIF V. CIT (!963) 50 ITR 1(SC) CIT V. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) CIT V. BIJU PATNAIK (1986) 160 ITR 674 (SC) S UMATI DAYAL V. CIT (1995) 214 ITR 801 (SC) CIT VS. P. MOHANAKALA &OTHERS , 291 ITR 278 (SC) 5. THE OTHER ISSUE ARISING FOR CONSIDERATION IS THE ADDITION IN THE SUM OF ` 1,06,000/-, BEING THE VALUE OF 250 GMS. OF GOLD JEWELLERY, ASSE SSED IN THE HANDS OF SHRI DWARKAPRASAD MALPANI. 1856 GMS. (NET WEIGHT) OF GO LD ORNAMENTS WERE FOUND IN THE LOCKER OWNED JOINTLY BY HIM AND HIS WIFE. THE SAME WAS EXPLAINED TO BE BELONGING TO THE ASSESSEES WIFE, GIVING THE BREAK-UP THEREOF. THE SAID BREAK-UP INCLUDED 250 GMS. STATED TO BE RECEIVED FROM CLOSE RELATIVES ON THE OCCASION OF THE ASSESSEES 25 TH MARRIAGE ANNIVERSARY ON 16-02-1997. THE SAME WAS ADDED IN T HE ABSENCE OF THE ASSESSEE BEING UNABLE TO FURNISH ANY EVIDENCE IN SUBSTANTIATION OF HIS CLAIM. IN APPEAL, THE ASSESSEE PLEADED NON-GRANT OF PROPER OPPORTUNITY TO PRESENT HIS CASE, WHICH HE SOUGHT TO SUPPORT WITH AFFIDAVITS FROM THE DONORS. THE MATTER, IN VI EW OF THE ASSESSEE CLAIM/S, WAS RESTORED BY THE LD. CIT(A) TO THE FILE OF THE AO FO R CONSIDERATION OF THE SAID MATERIAL. THE AO, HOWEVER, FOUND IT NOT ACCEPTABLE AS THE ASS ESSEES WIFE WAS A WEALTH TAX PAYER FOR THE RELEVANT YEAR, I.E., IN WHICH THE GIFT WAS RECEIVED, AND ALSO FOR THE SUBSEQUENT YEARS, WHILE THIS GIFT WAS NOT VERIFIABLE WITH REFE RENCE TO HER TOTAL WEALTH. THE LD. CIT(A), HOWEVER, WAS OF THE VIEW THAT THE AFFIDAVITS CONTAI NED FULL DETAILS OF THE GIFTED JEWELLERY, THE GENUINENESS OF WHICH HAS NOT BEEN DOUBTED BY TH E AO. AGGRIEVED, THE REVENUE IS IN APPEAL. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE REVENUE HAS NOT IMPUGNED THE ACTION OF THE LD. CIT(A) UNDER RUL E 46A, SO THAT AGREEABLY THERE WAS LACK OF PROPER OPPORTUNITY BEFORE THE AO. ONCE THE ASSESSEE HAS FURNISHED THE AFFIDAVITS, IT WAS INCUMBENT ON THE AO TO CROSS-EXAMINE THE DEP ONENTS. THE QUANTITY CLAIMED TO BE RECEIVED IN GIFT IS NOT VERY HIGH IN RELATION TO TH E STATUS OF THE ASSESSEES FAMILY OR, AS IT APPEARS, OF THE DONORS. ALSO, A REFERENCE TO THE W EALTH TAX RETURNS OF THE ASSESSEES WIFE I.T.(SS)A. NO.190 & 192/COCH/2005 ASSTT. CIT, CALICUT V. DWARKAPRASAD & VISHAL MALPAN I 12 IS NOT RELEVANT IN VIEW OF A CHANGE IN THE WEALTH T AX LAW W.E.F. A.Y. 1995-96. WE, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER ON THIS GROU ND. 7. THE ONLY ISSUE SURVIVING IN THESE APPEALS IS THE LEVY OF SURCHARGE ON THE TAX QUANTIFIED ON THE ASSESSEES UNDISCLOSED INCOME. TH E LD. CIT(A) HAS UPHELD THE SAME ON THE BASIS THAT THE AMENDMENT TO S. 113 COMES INTO E FFECT ONLY FROM 01-06-2002, WHILE THE SEARCH IN THE INSTANT CASE WAS ADMITTEDLY ON 12 TH AND 13 TH OCTOBER, 2000. THE MATTER HAS BEEN DECIDED BY THE APEX COURT IN FAVOUR OF THE LEV Y OF SURCHARGE, HOLDING THE SAID AMENDMENT AS CLARIFICATORY IN NATURE, SO THAT IT WO ULD APPLY TO THE IMPUGNED ASSESSMENTS AS WELL. REFERENCE FOR THE PURPOSE IS MADE TO THE DECISION IN THE CASE OF CIT VS. SURESH N.GUPTA, 297 ITR 322 (SC) AND CIT VS. RAJIV BATRA , 310 ITR 105 (SC). 8. IN THE RESULT, THE APPEAL IN THE CASE OF DWARKAP RASAD MALPANI IN I.T(SS)A. NO. 190/COCH/2005 IS PARTLY ALLOWED, AND THAT IN THE CA SE OF VISHAL MALPANI IN IT(SS)A NO. 192/COCH/2005, IS DISMISSED. SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 3RD FEBRUARY, 2012 GJ COPY TO: 1. SHRI DWARAKA PRASAD MALPANI, 8/88, CONVENT ROAD, CALICUT 2. SHRI VISHAL MALPANI, 8/88, CONVENT ROAD, CALICUT 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE, CALICUT. 4. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 5. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN BENCH