ITO, Ramanagar V. Sri. R. Srinivas, Bangalore

ITSSA 2/BANG/2015

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6459 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-03-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 22-06-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUZAFAR HUSSAIN
• Keywords: Income from undisclosed sources; Search and seizure; Document seized; Block assessment; Documents seized; Set aside
• Section: 143(3); 251; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B, BANGALORE BEFORE SHRI CHANDRA POOJARI, AM & SHRI GEORGE GEORGE K, JM IT(SS)A NO.2/BANG/2015 BLOCK PERIOD 1996-1997 TO 2002-2003 THE INCOME TAX OFFICER, WARD 1 RAMANAGARA. V. SRI.R.SRINIVAS AVR ROAD, KANAKAPURA BANGALORE RURAL 562 117. PAN : AFYPR2299R. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.MUZAFAR HUSSAIN, CIT-DR RESPONDENT BY : --- NONE --- DATE OF HEARING : 26.03.2021 DATE OF PRONOUNCEMENT : 31.03.2021 O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST CIT(A)S ORDER DATED 24.07.2014, PERTAINING TO BLOCK ASSESSMENT YEARS 1996-1997 TO 2002-2003. 2. THE GROUNDS RAISED READ AS FOLLOW: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN CANCELLING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER FOR LACK OF JURISDICTION WITHOUT APPRECIATING THE FACT THAT THE AO WAS HAVING FULL JURISDICTION OVER THE CASE AS PER THE DECENTRALIZATION ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (CENTRAL) BANGALORE DATED 09.06.2008. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN DELETING THE ADDITIONS / IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 2 DISALLOWANCES MADE BY THE A.O. WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS SHOWN INVESTMENT IN M/S.DEVI SILK AND INCOME FROM SILK TRADING BUSINESS IN HIS RETURN OF INCOME AND THE ASSESSEE ALWAYS HAD THE LICENSE IN HIS NAME FOR CARRYING ON THE BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN LAW IN DELETING THE ADDITIONS / DISALLOWANCES MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE, DURING THE REMITTED BACK ASSESSMENT PROCEEDINGS, COULD NOT PRODUCE ANY PROOF TO EVIDENCE THAT THE SAID SILK BUSINESS BELONGED TO MR.KRISHNA AND NOT MR.SRINIVAS. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IS SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS AN INDIVIDUAL. THERE WAS A SEARCH AND SEIZURE ACTION U/S 132 OF THE I.T.ACT IN THE PREMISES OF THE ASSESSEE. ASSESSMENT U/S 153BC R.W.S. 143(3) OF THE I.T.ACT WAS COMPLETED ESTIMATING THE UNDISCLOSED INCOME FROM M/S.DEVI SILK AT RS.88,80,312. THIS UNDISCLOSED INCOME ESTIMATED FROM M/S.DEVI SILK AT RS.88,80,312 WAS ASSESSED SUBSTANTIALLY IN THE HANDS OF THE ASSESSEE AND PROTECTIVELY IN THE HANDS OF ASSESSEES BROTHER, SRI.KRISHNA. ON FURTHER APPEAL, THE CIT(A) GIVE PARTIAL RELIEF ON VARIOUS ISSUES. AGAINST THE CIT(A)S ORDER, THE ASSESSEE AND THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL IN IT(SS)ANO.14/ BANG/2008 AND IT(SS)A NO.15/BANG/2008. THE TRIBUNAL VIDE ITS ORDER DATED 16.04.2010, RESTORED THE ISSUE OF ESTIMATION OF INCOME OF M/S.DEVI SILK TO THE FILES OF THE A.O. THE TRIBUNAL ALSO DIRECTED IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 3 THE A.O. TO DETERMINE WHO IS THE ACTUAL OWNER OF M/S.DEVI SILK. WHETHER IT BELONGS TO ASSESSEE OR HIS BROTHER AND ACCORDINGLY BRING TO TAX THE UNDISCLOSED INCOME OF M/S.DEVI SILK. THE RELEVANT FINDING OF THE TRIBUNAL ON THESE ISSUES ARE AS FOLLOW:- 14.3 WITH REGARD TO ARGUMENTS THAT THE ESTIMATED INCOME IS NOT UNDISCLOSED INCOME BY THE ASSESSEE. THE CIT(A) OBSERVED THAT THE CASE LAWS RELIED UPON BY HIM STATES THAT THE COMPUTATION OF UNDISCLOSED INCOME SHOULD BE STRICTLY RESTRICTED TO THE ANALYSIS OF MATERIALS FOUND DURING THE COURSE OF SEARCH ONLY AND NOT BEYOND THAT. THE SEIZED DOCUMENTS RELATES TO PURCHASE OF RAW MATERIALS, PRODUCTION EXPENSES, THE MANUFACTURING AND YIELD DETAILS. THE CIT(A) FOUND THAT SALES DETAILS OF THE FURNISHED PRODUCTS ARE MISSING FROM THE SEIZED LIST. SO, THE AO WENT FOR POST SEARCH INQUIRY TO DETERMINE THE SALE VALUE OF THE PRODUCTS AND ESTIMATION OF INCOME THEREFROM. THE ASSESSEE COULD NOT TAKE THE PLEA THAT NO INCOME WAS EARNED FROM THE SILK BUSINESS. THE QUANTUM OF LOSS OR INCOME HAS TO BE DETERMINED FROM THE ACTIVITIES AS REFLECTED IN SEIZED MEMOS OF A/RN BUNDLE. THE ASSESSEE COULD HAVE AT BEST QUESTIONED THE QUANTIFICATION OF INCOME. HE DOES NOT RAISE A WHISPER ON THAT. HE COULD NOT DENY THAT NO INCOME WAS EARNED FROM M/S. DEVI SILKS. IT WAS ALSO FOUND THAT THOUGH, CONCERN EXISTED SINCE 1995, NO INCOME AT ALL WAS DISCLOSED TO THE DEPARTMENT EITHER IN THE HANDS OF THE ASSESSEE OR HIS BROTHER KRISHNA. THUS, IT IS PROVED THAT UNACCOUNTED INCOME WAS EARNED EVEN PRIOR TO BLOCK PERIOD. THE DEFINITION OF UNDISCLOSED INCOME GIVEN IN SEC.158B(B) IS AN INCLUSIVE AND EXPANDATORY DEFINITION. IT ALSO INCLUDED THE INCOME WHICH HAS NOT BEEN SHOWN AT ALL OF COURSE WITHIN THE BLOCK PERIOD. SO SUCH INCOME HAS TO BE COVERED UNDER `UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 14.4 WITH REGARDS TO POST SEARCH INVESTIGATION, IT WAS FOUND THAT THE AO HAS NOT GONE BEYOND THE SEIZED MATERIAL. HE HAS ONLY TRIED TO ASCERTAIN THE SALE VALUE OF THE YIELD. AS TO THE OBJECTION THAT NO INCOME CAN BE DONE ON THE BASIS OF SEIZED MATERIAL, THE ANDHRA PRADESH HIGH COURT IN THE CASE OF RAJNIK & CO V. ACIT 251 ITR 561 HELD A DIFFERENT VIEW IN FAVOUR OF REVENUE, BUT IN THE CASE BEFORE US, DURING THE COURSE OF SEARCH LOOSE SHEETS RELATING TO THE SUPPRESSED SALE OF PARTS OF FINANCIAL YEAR 1995-96 AND 1996-97 WERE FOUND. THE AO ESTIMATED THE INCOME ON THIS BASIS NOT ONLY OF THE FY 1995-96 AND 1996-97 BUT ALSO AYS 1986-87 TO 1995-96. THOUGH, THE HIGH COURT REDUCED THE AMOUNTS OF ESTIMATION, IN PRINCIPLE, IT HELD THAT THE IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 4 ACTION OF AO WAS JUSTIFIED. IN THIS BACKGROUND, WITH REGARDS TO OBJECTION AS TO APPLICATION OF EXCLUSIONARY CLAUSE OF SEC.158BA(3) OF THE IT ACT. THE CIT(A) OBSERVED THAT IT IS NOT APPLICABLE SINCE NO BOOKS OR ENTRIES IN BOOKS WERE FOUND DURING THE COURSE OF SEARCH RELATING TO M/S DEVI SILKS AND THE SEIZED DOCUMENTS ALSO DOES NOT RELATE TO THE BROKEN PERIOD I.E. 01.04.2001 TO 06.11.2001. IN THIS BACKGROUND, THE CIT(A) OBSERVED THAT THE AO WAS JUSTIFIED IN ESTIMATING THE INCOME AT RS.88,80,312/- AND TREATED THE SAME AS INCOME IN THE HANDS OF THE ASSESSEE. WE FIND THAT THE ESTIMATION OF UNDISCLOSED INCOME HAS BEEN DONE IN THIS CASE. THE STAND OF THE ASSESSEE HAS BEEN CONSISTENT THAT THE PREMISES IN QUESTION IS USED ALONG WITH HIS BROTHER KRISHNA, WHO IS ALSO RENDERING THE SAME BUSINESS. IT IS ALSO SUBMITTED THAT THE SAID BROTHER KRISHNA HAS GOT INDEPENDENT LICENSE FOR THE SAME. LET THE ISSUE BE DECIDED BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE TO ASCERTAIN WHETHER THE UNDISCLOSED INCOME HAS TO BE ASSESSED IN THE HANDS OF THE KRISHNA OR ASSESSEE. COMING TO THE ESTIMATION, SINCE WE ARE RESTORING THE MAIN ISSUE OF THE BUSINESS IN QUESTION, SO THE ESTIMATION IS CONSEQUENT UPON SAME. SO THE ISSUE OF ESTIMATION IS ALSO RESTORED TO ASSESSING OFFICER WITH DIRECTION TO DECIDE THE SAME IN THE LIGHT OF THE ABOVE SAID OBSERVATION AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSING OFFICER WILL BE FREE TO ASCERTAIN FROM THE FACTS AND CIRCUMSTANCES WHETHER ESTIMATION HAS TO BE DONE FOR WHOLE OR LIMITED TO SEIZED MATERIAL. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 4. SUBSEQUENT TO THE REMAND BY THE TRIBUNAL, THE A.O. PASSED ASSESSMENT ORDER VIDE ORDER DATED 28.12.2011, WHEREIN HE WORKED OUT THE ESTIMATION OF UNDISCLOSED INCOME FROM M/S.DEVI SILK AT THE SAME FIGURE OF RS.88,80,312. AS REGARDS THE OWNERSHIP OF M/S.DEVI SILK, THE A.O. HELD THAT THE ASSESSEE HAS NOT LED ANY FRESH EVIDENCE TO DISPROVE THAT HE IS THE OWNER OF M/S.DEVI SILK. 5. AGGRIEVED BY THE ASSESSMENT COMPLETED VIDE ORDER DATED 28.12.2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE FIRST APPELLATE AUTHORITY, THE IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 5 ASSESSEE RAISED ADDITIONAL GROUND THAT THE ASSESSING OFFICER BEING THE INCOME TAX OFFICER, WAS NOT COMPETENT TO FRAME A BLOCK ASSESSMENT ORDER IN VIEW OF SECTION 158BG OF THE I.T.ACT. IT WAS CONTENDED THAT, THUS THE ASSESSMENT BEING BAD, DESERVE TO BE ANNULLED. 6. THE CIT(A) DECIDED THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE THAT THE ITO IS NOT COMPETENT TO PASS THE IMPUGNED ASSESSMENT ORDER. FURTHER, ON MERITS THE CIT(A) HELD THAT THE ASSESSEES BROTHER IN WHOSE CASE PROTECTIVE ASSESSMENT HAS BEEN MADE OF UNDISCLOSED INCOME OF RS.88,80,312, HAS ADMITTED THAT HE IS THE LICENSED SILK DEALER AND INCOME FROM M/S.DEVI SILK IS TO BE ASSESSED IN HIS HANDS. ACCORDINGLY, THE ADDITION ON MERITS WAS ALSO DELETED BY THE FIRST APPELLATE AUTHORITY. 7. AGGRIEVED BY THE ORDER OF THE FIRST APPELLATE AUTHORITY, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THOUGH SEVERAL NOTICES OF HEARING HAD BEEN SERVED ON THE ASSESSEE THROUGH ITAT REGISTRY AND DRS OFFICE, THE ASSESSEE HAS NOT APPEARED. THEREFORE, WE PROCEED TO DISPOSE OF THE CASE ON MERITS AFTER HEARING THE LEARNED DR. 8. THE LEARNED DR RELIED ON THE ASSESSMENT ORDER AND THE GROUNDS RAISED. 9. WE HAVE HEARD LEARNED DR AND PERUSED THE MATERIAL ON RECORD. AS REGARDS THE ISSUE ON THE JURISDICTION OF THE A.O. TO PASS THE IMPUGNED ASSESSMENT ORDER, WE NOTICED THAT THE CASE WAS DECENTRALIZED BY THE CIT (CENTRAL) BANGALORE IN HIS IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 6 NOTIFICATION DATED 09.06.2008. HENCE, THE ITO CONCERNED HAD THE JURISDICTION TO PASS THE IMPUGNED ASSESSMENT ORDER. THEREFORE, THE FINDING OF THE CIT(A) THAT THE A.O. DID NOT HAVE JURISDICTION TO FRAME THE IMPUGNED ASSESSMENT IS SET ASIDE. 9.1 AS REGARDS THE ISSUE ON MERITS, IT IS NOT CLEAR WHAT IS THE FATE OF THE ASSESSMENT IN THE HANDS OF THE ASSESSEES BROTHER WHETHER THE PROTECTIVE ASSESSMENT HAS BEEN CONVERTED INTO A SUBSTANTIVE ASSESSMENT SUBSEQUENT TO THE IMPUGNED ORDER OF THE CIT(A). SINCE THE ASSESSEE IS NOT COOPERATING AND HAS FAILED TO APPEAR BEFORE THE TRIBUNAL, THE RELEVANT FACTS ARE NOT FORTHCOMING. IT IS THE CASE OF THE CIT(A) THAT THE ASSESSEES BROTHER HAD ADMITTED TO THE OWNERSHIP OF M/S.DEVI SILK. HOWEVER, THERE IS NOTHING ON RECORD BEFORE US TO COME TO THE ABOVE CONCLUSION. WE ARE OF THE VIEW THAT THE ASSESSEES CASE AS WELL AS HIS BROTHERS CASE NEEDS TO BE CONSIDERED TOGETHER. SINCE THE RELEVANT FACTS ARE NOT READILY AVAILABLE BEFORE THE TRIBUNAL, WE RESTORE THE CASE BACK TO THE FILES OF A.O. FOR DE NOVO CONSIDERATION. THE AO SHALL LOOK INTO THE ASSESSMENT IN CASE OF THE ASSESSEES BROTHER, SRI.KRISHNA TO DETERMINE WHETHER THE PROTECTIVE ASSESSMENT HAS BEEN COMPLETED ON A SUBSTANTIVE BASIS AND IF SO, THE ADDITION SHALL BE DELETED IN THIS CASE. IF THERE IS CONFIRMATION BY ASSESSEES BROTHER OF THE OWNERSHIP OF M/S.DEVI SILK AND IF THE A.O. DOUBTS THE SAME, HE SHALL CROSS-EXAMINE HIM AND COME TO THE CORRECT PICTURE FOR ASSESSING UNDISCLOSED INCOME OF M/S.DEVI SILK. FOR THE ABOVE SAID PURPOSE, THE ISSUES RAISED IN THIS APPEAL IS RESTORED TO THE FILES OF THE A.O. THE A.O. IS DIRECTED TO AFFORD A REASONABLE IT(SS)A NO.2/BANG/2015 SRI.R.SRINIVAS. 7 OPPORTUNITY OF HEARING TO THE ASSESSEE AND SHALL DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2021. SD/- SD/- ( CHANDRA POOJARI ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE; DATED : 31 ST MARCH, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-V, BANGALORE. 4. THE CIT-IV, BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE