ACIT, Calicut V. Real Forts & Resorts P.Ltd, Kannur

ITSSA 217/COCH/2005

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7687 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2012
• Assessment Year: misc
• Appeal Filed On: 28-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: U MOHANANCA
• Keywords: Search and seizure; Loose papers; Document seized; Block assessment; Documents seized
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A. NO. 217/COCH/2005 BLOCK PERIOD : 01-04-1996 TO 29-01-20 03 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, CALICUT. VS. M/S. REAL FORT & RESORTS (P) LTD., CITY CENTRE, FORT ROAD, KANNUR. [PAN: AABCR 1681A] (REVENUE-APPELLANT) (ASSESSEE- RESPONDENT) C.O. NO. 14/COCH/2006 (ARSG. OUT OF I.T.(SS)A. NO. 217/COCH/2005 BLOCK PERIOD : 01-04-1996 TO 29-01-2003 M/S. REAL FORT & RESORTS (P) LTD., CITY CENTRE, FORT ROAD, KANNUR. [PAN: AABCR 1681A] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, CALICUT. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) REVENUE BY SMT. VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI U.MOHANAN,CA DATE OF HEARING 15/02/2012 DATE OF PRONOUNCEMENT 23/03/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE AND THE CROSS OBJECT ION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 23-09-2005 PASSED BY LD CIT (A)-I, KOCHI AND THEY RELATE TO THE BLOCK PERIOD FROM 01-04-1996 TO 29-01-2003. IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 2 2. THE REVENUE IS ASSAILING THE DECISION OF LD C IT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING ADDITIONS:- (A) PROFIT ON SALE OF PENT HOUSE - RS.21.00 LAKHS. (B) UNDISCLOSED PROFIT ON SALE OF LAND AND C ONSTRUCTED AREA RS.50,81,874/-. (C) UNRECORDED RECEIPTS ON SALE OF SHOP TO S HRI PREMARAJAN RS .8,22,000/- (D) UNRECORDED RECEIPTS ON SALE OF SHOPS TO SRI JAMALUDEEN AND SHRI MUNEER RS.50. 00 LAKHS. (E) REDUCTION OF PROFIT ON SALE OF LAND TO RS.2,08,750/-. 3. IN THE CROSS OBJECTION, THE ASSESSEE IS ASSA ILING THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.4,90,915/- RELATING T O SALE OF PROPERTY LOCATED AT THANKAKKUNNU. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN REAL ESTATE BUSINESS. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATION IN THE HANDS OF THE ASSESSEE HEREIN ON 29-01-2003. THE AS SESSEE COMPANY HAD ENTERED INTO AN AGREEMENT FOR DEVELOPMENT OF 86 CENTS LAND LOCATED AT FORT ROAD, KANNUR AND CONSTRUCTION OF COMMERCIAL COMPLEX THEREON BY THE N AME CITY CENTRE THEREAFTER BOTH THE COMPANY AND THE LAND OWNERS WOULD SELL THE SPAC E IN THE COMMERCIAL COMPLEX ALONG WITH THE PROPORTIONATE LAND AREA. ACCORDINGLY, THE Y STARTED SO SELLING THE COMMERCIAL SPACE AND THE PROPORTIONATE SHARE OF LAND FROM THE YEAR 2000 ONWARDS. THE LAND OWNERS WOULD SELL THE PROPORTIONATE SHARE OF LAND AND THE COMPANY WOULD SELL THE COMMERCIAL SPACE. SIMULTANEOUSLY THE SEARCH AND SEIZURE OPERA TIONS WERE ALSO CARRIED ON IN THE HANDS OF THE OWNERS OF 86 CENTS OF LAND VIZ., SHRI ARUNKUMAR H DATTANI AND SHRI SATISH CHANDRA H DATTANI. 5. CONSEQUENT TO THE SEARCH OPERATIONS, THE BLO CK ASSESSMENT WAS COMPLETED IN THE HANDS OF THE ASSESSEE HEREIN BY MAKING VARIOUS ADDI TIONS. THE ASSESSEE CHALLENGED ALL THE ADDITIONS BEFORE LD CIT(A) AND GOT PARTIAL RELI EF. AGGRIEVED BY THE RELIEF GRANTED, THE IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 3 REVENUE IS IN APPEAL BEFORE US. IN THE CROSS OBJEC TION, THE ASSESSEE IS CHALLENGING ADDITION CONFIRMED BY THE LD CIT(A). 6. WE SHALL TAKE UP THE APPEAL OF THE REVENUE F IRST. THE ASSESSMENT UNDER CONSIDERATION IS CONSEQUENT TO THE SEARCH OPERATION S, WHICH IS POPULARLY CALLED BLOCK ASSESSMENT AND THE SAME IS CARRIED OUT IN ACCORDAN CE WITH THE PROVISIONS OF CHAPTER XIV-B OF THE ACT. THE BLOCK ASSESSMENT IS IN ADDIT ION TO AND PARALLEL TO THE REGULAR ASSESSMENT PROCEEDING. IN THE BLOCK ASSESSMENT, T HE UNDISCLOSED INCOME OF THE ASSESSEE IS DETERMINED. THE TERM UNDISCLOSED INCO ME IS DEFINED UNDER SEC. 158B(B) OF THE ACT, WHICH READS AS UNDER:- UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION, J EWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON AN Y ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHER E SUCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BE EN DISCLOSED FOR THE PURPOSES OF THIS ACT, OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. ON A CAREFUL READING OF THE ABOVE PROVISIONS, WE NO TICE THAT THE UNDISCLOSED INCOME MAINLY INCLUDES ASSETS ETC. OR INCOME BASED ON TRAN SACTIONS ETC., WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF T HE ACT. CONSEQUENTLY, IT HAS BEEN WELL SETTLED THAT IF ANY ASSET ETC. OR INCOME BASED ON TRANSACTIONS ETC. HAS ALREADY BEEN DISCLOSED UNDER THE ACT PRIOR TO THE DATE OF SEARCH , THE SAME WOULD FALL OUTSIDE THE SCOPE OF BLOCK ASSESSMENT PROCEEDING. SUCH KIND OF DISCL OSED THINGS CAN BE CONSIDERED ONLY IN THE REGULAR ASSESSMENT PROCEEDINGS. 7. KEEPING IN MIND THE LEGAL PROPOSITION DISCUS SED ABOVE, WE SHALL DEAL WITH THE VARIOUS ISSUES AGITATED BEFORE US BY BOTH THE PARTI ES. THE FIRST ITEM IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION OF RS.21.00 LAKHS P ERTAINING TO THE PROFIT ON SALE OF PENT IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 4 HOUSE. THE FACTS RELATING TO THE SAME ARE DISCUSSE D IN BRIEF. THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY NAMED SHRI ABDULLA ZUBAIR AGRE ED TO PURCHASE THE PENT HOUSE HAVING AN AREA OF 7747.2 SQ. FT IN THE COMMERCIAL C OMPLEX AND FOR THAT PURPOSE HE ENTERED INTO AN AGREEMENT WITH THE ASSESSEE COMPANY ON 05-4-1999, WHICH WAS RENEWED LATER ON 27.7.2000. AS PER THE AGREEMENT, THE COST OF PENT HOUSE WAS DETERMINED AT RS.71.00 LAKHS. ACCORDING TO THE AO, THE COMPANY H AS DEBITED A SUM OF RS.50.00 LAKHS ONLY IN ITS BOOKS OF ACCOUNT AND ACCORDINGLY BROUGH T THE DIFFERENCE OF RS.21.00 LAKHS (RS.71.00 (-) RS.50.00) AS UNDISCLOSED INCOME IN TH E HANDS OF THE COMPANY. 7.1 BEFORE THE LD CIT(A), THE ASSESSEE COMPANY S UBMITTED THAT THE CONSTRUCTION OF PENT HOUSE WAS NOT COMPLETE AND IN FACT, IT HAD SPENT ON LY RS.50,000/- TOWARDS ITS CONSTRUCTION. IT ALSO PRODUCED A NON-COMPLETION CE RTIFICATE IN SUPPORT OF ITS CLAIM. THE LD CIT(A) ALSO OBSERVED THAT THERE IS NO SEIZED MAT ERIAL IN THIS REGARD. ACCORDINGLY HE DELETED THE ABOVE SAID ADDITION OF RS.21.00 LAKHS. 7.2 WE HAVE HEARD THE RIVAL CONTENTIONS. THE D EPARTMENT CONTENDS BEFORE US THAT THE LD CIT(A) HAS VIOLATED RULE 46A OF THE INCOME TAX R ULES BY NOT CONFRONTING THE NON- COMPLETION CERTIFICATE WITH THE AO. HOWEVER, WE NO TICE THAT THE LD CIT(A) HAS DELETED THE ABOVE SAID ADDITION MAINLY ON THE GROUND THAT T HERE WAS NO SEIZED MATERIAL IN THIS REGARD. ON A CAREFUL PERUSAL OF THE ASSESSMENT ORD ER, WE NOTICE THAT THE AO IS SILENT ABOUT THE AVAILABILITY OF SEIZED MATERIAL. THERE I S ALSO CONTRADICTION ABOUT THE ACTUAL AMOUNT OF COST OF PENT HOUSE DEBITED IN THE BOOKS O F ASSESSEE-COMPANY. ACCORDING TO AO, IT IS RS.50.00 LAKHS, WHEREAS BEFORE THE LD CIT (A), THE ASSESSEE HAS CONTENDED THAT IT HAS INCURRED ONLY RS.50,000/-. 7.3 THERE CANNOT BE ANY DISPUTE THAT THE BLOCK ASSESSMENT SHOULD ENTIRELY BE BASED UPON THE SEIZED MATERIALS. THE ADDITION, IF ANY, I N RESPECT OF PENT HOUSE COULD, IN OUR VIEW, BE POSSIBLE EITHER TOWARDS SUPPRESSED COST OF CONSTRUCTION OR TOWARDS SUPPRESSED SALE RECEIPTS, PROVIDED THERE ARE EVIDENCES IN SUPP ORT THEREOF. THE ASSESSMENT ORDER IS SILENT ON BOTH THESE POINTS. THE LD CIT(A) HAS ALS O CONSIDERED FRESH EVIDENCE WITHOUT IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 5 CONFRONTING THE SAME TO THE AO. HENCE, WE ARE OF T HE VIEW THAT THIS MATTER REQUIRES RE CONSIDERATION IN THE LIGHT OF SEIZED MATERIALS. AC CORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO EXAMINE T HIS ISSUE AFRESH IN THE LIGHT OF SEIZED MATERIALS AND DECIDE THE SAME IN ACCORDANCE WITH TH E LAW AFTER MAKING SPECIFIC REFERENCE TO THE SEIZED MATERIALS. 8. THE NEXT ISSUE RELATES TO THE UNDISCLOSED P ROFIT OF RS.50,81,874/- ON SALE OF LAND AND CONSTRUCTED AREA. FROM THE ASSESSMENT ORDER, WE NO TICE THAT THE AO HAS MADE HIS OWN COMPUTATIONS ON THE BASIS OF CERTAIN FIGURES, WHICH APPEAR TO HAVE BEEN TAKEN FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. ON TH E BASIS OF SAID COMPUTATIONS, THE AO HAS DETERMINED THE UNDISCLOSED PROFIT AND TREATED I T AS THE UNDISCLOSED INCOME OF THE ASSESSEE. AS IN THE CASE OF PREVIOUS ISSUE, THE AO DID NOT MAKE ANY REFERENCE TO THE SEIZED MATERIALS. THE LD CIT(A) HAS DELETED THIS A DDITION WITH THE OBSERVATION THAT THERE IS NO SEIZED MATERIAL IN THIS REGARD. 8.1 AS STATED EARLIER, THE UNDISCLOSED INCOME I N THE BLOCK ASSESSMENT SHOULD BE DETERMINED ONLY ON THE BASIS OF THE SEIZED MATERIAL S. THERE IS NO SCOPE FOR MAKING ANY PRESUMPTIONS. THOUGH THE AO HAS MADE HIS OWN COMPU TATIONS TO DETERMINE THE UNDISCLOSED PROFIT ON SALE OF LAND AND BUILDING, IT IS NOT CLEAR WHETHER THE DATA COLLECTED BY HIM TO MAKE THOSE COMPUTATIONS WERE TAKEN FROM T HE SEIZED RECORD OR FROM THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE PRIOR TO THE DATE OF SEARCH. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE INCOME RELATING TO THE TRANSACTIONS ALREADY RECORDED IN THE BOOKS OF ACCOUNT PRIOR TO THE DATE OF SEARCH CANNOT BE CONSIDERED IN THE BLOCK ASSESSMENT PROCEEDING. HENCE THESE ASPECTS ALSO NEED TO BE VE RIFIED AT THE END OF THE AO. 8.2 THERE IS DISPUTE WITH REGARD TO THE VIEW O F THE AO WITH REGARD TO THE SALE PRICE OF LAND. THE AO HAS NOTICED THAT THE AMOUNT REALISED ON SALE OF PROPORTIONATE LAND SHOULD BELONG TO THE OWNERS OF THE LAND. IT WAS ALSO NOTI CED THAT THE AMOUNT PAYABLE TO THE OWNERS HAD BEEN FIXED BY THE COMPANY @ RS.5.00 LAKH S PER CENT. HOWEVER, THERE WERE VARIATIONS IN THE COST OF LAND SOLD TO THE VARIOUS PROSPECTIVE BUYERS. THE CONTENTION OF IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 6 THE ASSESSEE, WHICH HAS ALSO BEEN ACCEPTED BY LD CI T(A), IS THAT THE COST OF LAND PERTAINING TO EACH SHOP MAY VARY ON THE BASIS OF LO CATION OF THE SHOP. HOWEVER, FROM THE POINT OF VIEW OF THE BLOCK ASSESSMENT PROCEEDING, W HAT IS IMPORTANT IS ABOUT THE ASSESSABILITY OF THE DIFFERENCE, IF ANY, BETWEEN TH E ACTUAL SALE VALUE OF LAND AND THE PRICE AGREED TO BE GIVEN TO THE LAND OWNERS. IN OUR VIEW , THE AO HAS TRIED TO QUANTITY THE SAID DIFFERENCE AND TREATED THE SAME AS THE UNDISCLOSED INCOME OF THE ASSESSEE. HOWEVER, HE HAS FAILED TO HIGHLIGHT/CONSIDER THE TERMS OF AGREE MENT BETWEEN THE ASSESSEE COMPANY AND THE LAND OWNERS IN THIS REGARD. IF ACCORDING T O THE AGREEMENT, THE ASSESSEE COMPANY IS ENTITLED TO ENJOY THE EXCESS PRICE REALISED ON S ALE OF LAND AND FURTHER IF IT HAS FAILED TO ACCOUNT THE SAME AS ITS INCOME, THEN THE SAID DIFFE RENCE, IN OUR VIEW, CAN BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE COM PANY. WE MAY MENTION HERE THAT ALL DEPENDS UPON THE TERMS OF AGREEMENT BETWEEN THE ASS ESSEE COMPANY AND LAND OWNERS, WHICH REQUIRES EXAMINATION, AS THE SAME WAS NOT BRO UGHT ON RECORD BY THE AO. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW TH AT THIS ISSUE ALSO REQUIRES RE- EXAMINATION IN THE LIGHT OF DISCUSSIONS MADE ABOVE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH BY MAKING PROPER REFERENCE TO THE SEIZED MATERIALS AND DECIDE THE SAME IN ACCORDANCE WITH LAW. 9. THE NEXT ISSUE RELATES TO THE ADDITION OF RS .8,22,000/- RELATING TO THE UNDISCLOSED SALE VALUE OF SHOP SOLD TO SHRI PREMARAJAN. THE ASSESSE E COMPANY HAD SOLD 292 SQ. FT. OF SPACE IN THE COMMERCIAL COMPLEX TO THE ABOVE SAID P ERSON FOR A SUM OF RS.10.22 LAKHS ON 10.11.2000. DURING THE COURSE OF ASSESSMENT PROCEE DING, THE AO VERIFIED THE BANK ACCOUNT OF THE ABOVE SAID PERSON AND NOTICED THAT H E HAD WITHDRAWN FURTHER AMOUNTS AGGREGATING TO RS.10,22,000/- THROUGH FOUR BEARER C HEQUES. OUT OF THE FOUR BEARER CHEQUES, THREE CHEQUES AGGREGATING TO RS.8,22,000/- WERE FOUND TO HAVE BEEN ENCASHED BY THE EMPLOYEE OF THE ASSESSEE COMPANY. HENCE THE AO TREATED THE ABOVE SAID AMOUNT OF RS.8,22,000/- AS THE SUPPRESSED RECEIPTS AND ADD ED THE SAME TO THE UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THE LD CIT(A) DELETED THE SAID ADDITION BY HOLDING THAT THE BANK ACCOUNT IS NOT THE MATERIAL REFERRED TO IN SEC . 158BB OF THE ACT. WE FIND MERIT IN IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 7 THE SAID OBSERVATION OF LD CIT(A). ADMITTEDLY, THE BANK ACCOUNT OF SHRI PREMARAJAN DID NOT FORM PART OF SEIZED RECORD AND THE SAME WAS COL LECTED BY THE AO POST SEARCH OPERATIONS. WE ALSO NOTICE THAT THE ABOVE SAID SHR I PREMARAJAN HAS ALSO OFFERED EXPLANATIONS ABOUT THE PURPOSE OF WITHDRAWALS. APP ARENTLY, THERE IS NO SEIZED MATERIAL TO SUGGEST THAT THE ABOVE SAID PERSON HAS PAID MONEY O VER AND ABOVE THE AGREED CONSIDERATION. IN THESE CIRCUMSTANCES, WE ARE ALSO OF THE VIEW THAT NO ADDITION COULD BE MADE IN BLOCK ASSESSMENT PROCEEDING ON THE BASIS OF POST SEARCH DOCUMENTS THAT TOO ON THE BASIS OF INFERENCES. ACCORDINGLY, WE UPHOLD TH E ORDER OF LD CIT(A) ON THIS ISSUE. 10. THE NEXT ISSUE RELATES TO THE ADDITION OF RS. 50.00 LAKHS RELATING TO THE UNACCOUNTED RECEIPTS ON SALE OF COMMERCIAL SPACE TO M/S MALABAR TOWER AND SUPERIOR DCOR, THE PARTNERSHIP FIRMS IN WHICH SHRI JAMALUDDIN AND SRI V. MUNEER TOGETHER WITH OTHERS WERE PARTNERS. THE DEPARTMENT CARRIED OUT SURVEY OP ERATIONS IN THE CASE OF TWO FIRMS CITED ABOVE PRIOR TO THE DATE OF SEARCH OPERATIONS IN THE HANDS OF THE ASSESSEE COMPANY. DURING THE COURSE OF SURVEY PROCEEDINGS, CERTAIN LOOSE PAP ERS EVIDENCING ON-MONEY PAYMENT MADE TOWARDS THE PURCHASE OF COMMERCIAL SPACE FROM THE ASSESSEE COMPANY WERE FOUND. IN THE SWORN STATEMENT TAKEN U/S 131 OF THE ACT, SHRI V. MUNEER ADMITTED THAT THEY ENTERED INTO AN AGREEMENT WITH THE ASSESSEE COMPANY FOR PURCHASE OF ABOUT 2633 SQ. FT. (1711 SQ. FT. + 922 SQ. FT.) OF COMMERCIAL SPACE FO R A VALUE OF RS.1,01,50,000/-, OUT OF WHICH ONLY RS.51,50,000/- ONLY WAS DOCUMENTED. 10.1 SUBSEQUENTLY, DURING THE COURSE OF SEARCH A ND SEIZURE PROCEEDINGS IN THE HANDS OF THE COMPANY, CERTAIN LOOSE PAPERS NUMBERED 1 TO 27 INVENTORISED AS ORF 67 WERE SEIZED. ACCORDING TO THE AO, THE PAGE NO.16 OF THE SAID DOC UMENTS REPRESENTS PAGE NO.2 OF AN AGREEMENT ENTERED INTO BY SHRI JAMULDEEN FOR PURCHASE OF 1711 SQ. FT. OF COMMERCIAL SPACE @ RS.5000/- PER SQ.FT. THE SAID PAGE OF THE AGREEMENT, THOUGH NOT SIGNED BY THE SELLER, WAS SIGNED BY THE BUYER. THE SAID DOCUMENT COULD BE CORROBORATED WITH THE STATEMENT TAKEN FROM SHRI V.MUNEER DURING THE SURVE Y OPERATION CARRIED OUT IN HIS HANDS. ACCORDINGLY, THE AO CONFRONTED THE SAID STATEMENT W ITH SHRI P.V.RAGHAVAN, OFFICER IN CHARGE OF THE ASSESSEE COMPANY HEREIN, BUT HE DENIE D THE RECEIPT OF ANY ON-MONEY. IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 8 HOWEVER, THE AO CONCLUDED THAT THE INCRIMINATING DO CUMENTS FOUND DURING THE COURSE OF SURVEY AND THE STATEMENT OF SHRI MUNEER CONSTITUTED ANY OTHER MATERIAL IN POSSESSION OF THE ASSESSING OFFICER WITHIN THE MEANING OF SEC. 1 58BB OF THE ACT AND ACCORDINGLY HELD THAT THE ASSESSEE HAS OMITTED TO ACCOUNT THE ON-MON EY AMOUNT OF RS.50.00 LAKHS. CONSEQUENTLY, HE TREATED THE SAID AMOUNT AS THE UN DISCLOSED INCOME OF THE ASSESSEE. 10.2 THE LD CIT(A) DELETED THE SAID AMOUNT O F RS.50.00 LAKHS WITH THE FOLLOWING OBSERVATIONS:- (A) EVIDENCE ON OATH FROM SHRI V.MUNEER WAS TAKEN ABOUT 40 DAYS BEFORE SEARCH. AS PER SEC. 158BB OF THE ACT, AS AMENDED BY FINANC E ACT, 2002 AND EXPLAINED BY THE CBDT IN CIRCULAR REPORTED IN 258 ITR (ST.) 58, ONLY EVIDENCES COLLECTED DURING POST SEARCH ENQUIRIES COULD BE RELIED UPON BY THE AO TO DETERMINE THE UNDISCLOSED INCOME. (B) THE BASIS FOR MAKING THE IMPUGNED ADDITION IS THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY IN THE HANDS OF THE FIRM BELO NGING TO SHRI V.MUNEER AND OTHERS AND ALSO THE SWORN STATEMENT TAKEN FROM HIM . (C) THOUGH THE AO REFERS TO A DOCUMENT SEIZED FRO M THE ASSESSEE, VIZ., ORF 67 IN THE ASSESSMENT ORDER, IT CANNOT BE SAID THAT THE A O HAS RELIED ON THE SAID DOCUMENT AS HE DID NOT REFER THE SAME WHILE CALLING FOR EXP LANATION FROM THE ASSESSEE. . (D) THE STATEMENT TAKEN ON OATH DURING THE COURSE OF SURVEY HAS NO EVIDENTIARY VALUE (263 ITR 101 (KER)). 10.3 BEFORE EXAMINING THE VIEW EXPRESSED BY LD CIT(A), WE FEEL IT PERTINENT TO DISCUSS THE EVENTS CONCERNING THE ISSUE CHRONOLOGIC ALLY. ACCORDING TO THE DEPARTMENT, AS POINTED OUT IN ITS GROUNDS OF APPEAL, THE INFORMATI ON COLLECTED DURING THE COURSE OF SURVEY IN THE CASE OF SHRI JAMULDEEN, SHRI V.MUNEER AND OT HERS HAS CULMINATED INTO SEARCH IN THE HANDS OF ASSESSEE HEREIN. WE MAY RECALL THAT DU RING THE COURSE OF SURVEY OPERATION CONDUCTED IN THE HANDS OF SHRI JAMULDEEN, SHRI V.MU NEER AND OTHERS, CERTAIN LOOSE PAPERS EVIDENCING ON-MONEY PAYMENT WERE FOUND. THEY WERE CONFRONTED WITH SHRI V.MUNEER WHILE EXAMINING HIM U/S 131 OF THE ACT AND AT THAT TIME, HE HAS AGREED THAT THERE WAS ON-MONEY PAYMENT OF RS.50.00 LAKHS TO THE ASSESSEE HEREIN. IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 9 10.4 THE LD CIT(A) HAS TAKEN THE VIEW THAT THE STATEMENT TAKEN FROM SHRI V.MUNEER DOES NOT HAVE EVIDENTIARY VALUE AND FOR THAT PURPOS E HE HAS TAKEN SUPPORT FROM THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE O F PAUL MATHEW & SONS (263 ITR 101). WE HAVE CAREFULLY GONE THROUGH THE SAID DECI SION AND NOTICE THAT THE SAME IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. IN TH E CASE OF PAUL MATHEW & SONS, SUPRA, THE HONBLE KERALA HIGH COURT CONSIDERED THE EVIDENTIAR Y VALUE OF THE STATEMENT TAKEN DURING THE COURSE OF SURVEY OPERATION U/S 133A OF T HE ACT AND THE STATEMENT TAKEN U/S 132(4) OF THE ACT DURING THE SEARCH OPERATION. SIN CE THE STATEMENT U/S 133A IS TAKEN WITHOUT TAKING OATH, THE COURT OBSERVED THAT IT DOE S NOT HAVE EVIDENTIARY VALUE. IN THE INSTANT CASE, SHRI V.MUNEER HAS BEEN EXAMINED ON OA TH U/S 131 OF THE ACT. FURTHER THE SAID EXAMINATION WAS WITH REFERENCE TO CERTAIN LOOS E PAPERS EVIDENCING PAYMENT OF ON- MONEY, WHICH WERE FOUND DURING THE COURSE OF SURVEY . IN THE SWORN STATEMENT SHRI V.MUNEER HAS ACCEPTED THE FACT OF PAYMENT OF ON-MON EY. HENCE, IN OUR VIEW, THE SAID STATEMENT OF SHRI V.MUNEER DOES HAVE EVIDENTIARY VA LUE. 10.5 THE LD CIT(A) HAS EXPRESSED THE VIEW THAT THE EVIDENCES COLLECTED DURING POST SEARCH ENQUIRIES CAN ONLY BE USED FOR THE PURPOSE O F DETERMINING THE UNDISCLOSED INCOME U/S 158BB OF THE ACT. FOR THE SAID PROPOSITION, HE HAS TAKEN SUPPORT FROM THE CIRCULAR ISSUED BY CBDT EXPLAINING THE AMENDMENT BROUGHT BY FINANCE ACT 2002 IN SEC.158BB OF THE ACT. A CAREFUL READING OF THE SAID CIRCULAR CLEARLY SHOW THAT THE AMENDMENT WAS BROUGHT IN TO OVERCOME CERTAIN JUDICIAL INTERPRETAT IONS WHICH APPEAR TO HAVE HELD THAT THE POST SEARCH ENQUIRIES EVEN IF IT WAS RELATED TO THE EVIDENCES FOUND DURING THE COURSE OF SEARCH CANNOT BE THE BASIS FOR DETERMINING THE UNDI SCLOSED INCOME. THE SETTLED PROPOSITION, AS EXPLAINED BY US IN EARLIER PARAGRAP H, IS THAT THE BLOCK ASSESSMENT SHOULD BE MADE ONLY ON THE BASIS OF EVIDENCE FOUND AS A RE SULT OF SEARCH. THE AMENDMENT BROUGHT BY THE FINANCE ACT 2002 WAS ONLY TO EXPLAIN THAT THE AO CAN MAKE POST SEARCH ENQUIRIES WITH REGARD TO THE EVIDENCES FOUND DURING THE COURSE OF SEARCH. HENCE, IN OUR VIEW, IT IS NOT CORRECT TO INTERPRET THE CIRCULAR T O MEAN THAT THE EVIDENCES FOUND DURING THE COURSE OF POST SEARCH ENQUIRIES ONLY CAN BE USED FO R DETERMINING THE UNDISCLOSED INCOME. IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 10 IN OUR VIEW, THE INFORMATION/MATERIAL AVAILABLE WIT H THE AO CAN BE USED FOR THE PURPOSE OF DETERMINING THE UNDISCLOSED INCOME SO LONG AS IT IS RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF SEARCH. THIS VIEW HAS BEEN AC TUALLY EXPRESSED BY HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. KHUSHLAL CHAND NIRMAL KUMAR (263 ITR 77), WHICH WAS RELIED UPON BY THE ASSESSEE. 10.6 THE INFORMATION RELATING TO THE ON-MONEY P AYMENT MADE BY SHRI JAMULDEEN, SHRI V.MUNEER AND OTHERS TO THE ASSESSEE HEREIN WAS AVAI LABLE WITH THE AO EVEN PRIOR TO THE DATE OF SEARCH. IN FACT, ACCORDING TO THE DEPARTME NT, THE SEARCH OPERATION WAS CONDUCTED IN THE HANDS OF THE ASSESSEE COMPANY ON THE BASIS O F SAID INFORMATION ONLY. DURING THE COURSE OF SEARCH OPERATIONS, EVIDENCE CONCERNING SH RI JAMULDEEN IN THE FORM OF PAGE NO.2 OF AGREEMENT WAS FOUND, WHICH WAS INCLUDED IN ORF 67. IN THE SAID DOCUMENT, THE SALE PRICE OF 1711 SQ. FT. COMMERCIAL SPACE SOLD TO SHRI JAMULDEEN WAS SHOWN AS RS.5000/- PER SQ. FT. THE AO COULD LINK THIS DOCUM ENT TO THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY AND ALSO THE SWORN STATEMENT TAKEN FROM SHRI V. MUNEER. IN THE SWORN STATEMENT, SHRI V. MUNEER HAS STATED THAT THE PURCH ASES WERE INITIALLY NEGOTIATED @ RS.4400/- PER SQ. FT. FOR 1711 SQ. FT OF AREA AND @ RS.4000/- PER SQ.FT. FOR 922 SQ. FT. OF AREA. HOWEVER THE DEAL WAS FINALLY STRUCK FOR A TO TAL CONSIDERATION OF RS.1,01,50,000/-, OUT OF WHICH RS.51,50,000/- ONLY WAS DOCUMENTED, ME ANING THEREBY THERE WAS ON-MONEY PAYMENT OF RS.50.00 LAKHS. THE QUESTION OF ON-MONE Y PAYMENT CAME TO BE POSED TO SHRI V.MUNEER ONLY ON THE BASIS OF CERTAIN LOOSE SHEETS EVIDENCING SUCH PAYMENT FOUND DURING THE COURSE OF SURVEY. 10.7 THUS THE INFORMATION RELATING TO RECEIPT O F ON-MONEY AMOUNT OF RS.50.00 LAKHS COULD BE LINKED BY THE AO TO THE EVIDENCE FOUND DUR ING THE COURSE OF SEARCH. WHEN SUCH EVIDENCE IS AVAILABLE, THE ENQUIRY WITH REGARD TO T HE ON-MONEY RECEIPT WOULD NOT LOOSE ITS VALUE SIMPLY BECAUSE THE AO FAILED TO MAKE A REFERE NCE TO THE SAID EVIDENCE. WE NOTICE THAT THE AO HAS CONFRONTED THE INFORMATION AVAILABL E WITH HIM TO THE OFFICER IN CHARGE OF THE ASSESSEE. THOUGH THE SAID OFFICER IN CHARGE OR ALLY DENIED ANY SUCH RECEIPT, YET THE ASSESSEE COULD NOT DISPROVE THE STATEMENT GIVEN BY SHRI V.MUNEER. ACCORDINGLY, IN THE IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 11 FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE AO WAS RIGHT IN LAW IN ASSESSING THE ON-MONEY AMOUNT OF RS.50.00 LAKHS IN THE HANDS OF THE ASSESSEE COMPANY AS ITS UNDISCLOSED INCOME. ACCORDINGLY, WE SET ASI DE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE ADDITION MADE BY THE AO. 11 THE NEXT ISSUE RELATES TO THE REDUCTION OF PROF IT ON SALE OF 41.75 CENTS OF LAND TO RS.2,08,750/-. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT THE ASSESSEE HAD PURCHASED 246.75 CENTS OF LAND IN THE YEAR 1994, OU T OF WHICH 100.37 CENTS WERE SOLD PRIOR TO THE COMMENCEMENT OF BLOCK PERIOD. THUS AN AREA OF 146.38 CENTS WAS AVAILABLE WITH THE ASSESSEE AT THE BEGINNING OF BLOCK PERIOD. THE SEIZED DOCUMENTS INDICATED OMISSION OF SALE OF FOLLOWING LANDS. 21 CENTS SOLD TO SHRI P.V. KUNHIKKANNAN- PROFIT RS. 1,68,210/- 14-1/4 CENTS SOLD TO SHRI M. RAJAN - PROFIT - RS. 1,13,955/-. THUS, IT WAS NOTICED THAT THE ASSESSEE HAS SUPPRESS ED SALE OF LAND DURING THE BLOCK PERIOD. IN THE COURSE OF ENQUIRY, THE ASSESSEE ADMITTED, VI DE HIS LETTERS DATED 13.12.2004 AND 14.1.2005, THAT THERE WAS OMISSION IN ACCOUNTING SA LE OF LAND. THE ASSESSEE ITSELF POINTED OUT THAT IT DID NOT ACCOUNT SALE OF 41.75 CENTS OF LAND SOLD TO SHRI TUNOLI RAMESHAN. BUT THE ASSESSEE DID NOT STATE THE DETAILS OF PROFIT RE ALIZED ON THE SAID SALES. HENCE THE AO ESTIMATED THE PROFIT ON SALE OF 41.75 CENTS OF LAND AT RS.4,55,420/-, WHICH WAS REDUCED TO RS.2,08,750/- BY LD CIT(A). THE AO ALSO ADDED THE AMOUNTS OF RS.1,68,210/- AND RS.1,13,955/- REFERRED ABOVE AND THE SAME WAS CONFI RMED BY LD CIT(A). 12. THE DEPARTMENT IS ASSAILING THE REDUCTION IN THE PROFIT ON SALE OF 41.75 CENTS OF LAND. THE ASSESSEE, IN ITS CROSS OBJECTION, CONTENDS THAT THE DEPARTMENT DID NOT SEIZE ANY MATERIAL TO SUGGEST SUPPRESSION OF SALES. 13. HOWEVER FROM THE ASSESSMENT ORDER, WE NOTICE THAT THE DEPARTMENT SEIZED DOCUMENTS WITH REGARD TO SALE OF 21 CENTS TO SHRI P.V.KUNHIKKANNAN AND 14-1/4 CENTS TO SHRI M.RAJAN. IN THE POST SEARCH ENQUIRY CONDUCTED WITH REGARD TO THESE EVIDENCES, IT CAME TO THE NOTICE OF THE AO THAT THERE WAS SUPPRES SION OF SALE OF 41.75 CENTS OF LAND IT(SS)A NO. 217/COCH/2005 & C.O. NO. 14/COCH/2006 12 ALSO. HENCE, WE ARE OF THE VIEW THAT THE SEARCH DO CUMENT HAS ONLY GIVEN RISE TO THE DISCLOSURE OF SUPPRESSION OF SALE OF 41.75 CENTS OF LAND. ACCORDINGLY, WE DO NOT FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE RAISED IN THE CROSS OBJECTION.. ACCORDINGLY, THE C.O FILED BY THE ASSESSEE IS DISMISSED. 14. IN RESPECT OF PROFIT RELATING TO SALE OF 41.7 5 CENTS OF LAND, WE NOTICE THAT THE SAID PROFIT WAS ESTIMATED BY THE AO AND IT HAS BEEN SUBS TITUTED BY LD CIT(A). THE DEPARTMENT DID NOT FILE ANY MATERIAL TO COMPEL US T O INTERFERE WITH THE ESTIMATE MADE BY THE LD CIT(A). ACCORDINGLY, WE DO NOT FIND IT NECE SSARY TO INTERFERE WITH THE DECISION OF LD CIT(A) ON THIS ISSUE. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSES SEE IS DISMISSED. PRONOUNCED ACCO RDINGLY ON 23-03-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 23 MARCH, 2012 GJ COPY TO: 1.M/S. REAL FORT & RESORTS (P) LTD., CITY CENTRE, F ORT ROAD, KANNUR. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE, CALICUT.. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN