ACIT, Trichy V. Shri G.Umanath, Trichy

ITSSA 23/CHNY/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8268 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-06-2011
• Assessment Year: misc
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained investment; Block assessment
• Section: 143(3); 133A; 263; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.(SS)A NO. 23/MDS/2010 BLOCK PERIOD FROM 1996-97 TO 2002-03 & 2002-03(PA RT) THE ACIT CENTRAL CIRCLE II TIRUCHIRAPALLI VS SHRI G.UMANATH 20-21 VADAVUR MIDDLE STREET THILLAI NAGAR TRICHY - 18 [PAN - AAEPU3100D] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI S.SRIDHAR O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 2.6.2010, WHICH EMANATES FROM THE ORDER OF THE ACIT, CENTRAL CIRCLE II, TIRUCHIRAPALLI, PASSED U /S 158BC R.W.S 143(3) OF THE ACT, FOR THE BLOCK COMPRISING OF ASSESSMENT YEARS 1996-97 TO 2002-03 AND 2002-03(PARTLY). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A DEALER IN GOLD COVERING(IMITATION) JEWELLERY. A SE ARCH OPERATION U/S 132 WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE O N 5.12.2001 IT(SS)A 23/10 :- 2 -: DURING WHICH CERTAIN INCRIMINATING DOCUMENTS WERE F OUND AND SEIZED AND BLOCK ASSESSMENT WAS COMPLETED ON 30.12.2003. SUBSEQUENTLY, THE ASSESSMENT WAS SET ASIDE BY THE LD. CIT-II, U/S 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO INCLUDE UNEXPLAI NED INVESTMENTS MADE BY THE ASSESSEE IN BHARATHI NAGAR REAL ESTATES . CONSEQUENT UPON THIS DIRECTION, THE ORIGINAL ASSESSMENT WAS SET ASIDE AND FRESH ASSESSMENT WAS MADE. THIS REVISIONAL ORDER WAS NO T CHALLENGED BY THE ASSESSEE. IN THE ASSESSMENT ORDER, WHICH WAS BASED ON TRIAL BALANCE FILED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME, THE ASSESSMENT WAS REFRAMED IN WHICH AN ADDITION OF ` 20,39,320/- WAS MADE TO THE INCOME ALREADY ASSESSED. BUT THE ORD ER GIVING EFFECT TO THE ORDER OF THE LD. CIT U/S 263, WAS CHALLENGED BE FORE THE LD. CIT(A), WHO HAS DELETED THE IMPUGNED ADDITION. NOW, THE R EVENUE IS AGGRIEVED AND HAS FILED THIS APPEAL BY TAKING THE F OLLOWING GROUNDS: 1.A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED 111 DELETING THE ADDITIONS MADE BY THE A.O AMOUNTING TO ` 20,39,320 ON ACCOUNT OF UNDISCLOSED INCOME RELATING TO BHARATHI NAGAR REAL ESTATES. 1.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE MATTER REGARDING INVESTMENT IN BHARATHI NAGAR REAL ESTATES WAS SUBJECT TO VERIFICATION AT THE TIME OF SEARCH AND A S PER THE PROVISIONS OF SECTION 15 8BB(1), COMPUTATION OF UND ISCLOSED INCOME SHALL BE 'ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH DR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORN1ATION AS ARE AVA ILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENC E' AND ACCORDINGLY UNDISCLOSED INCOME U/S 1588B HAS BEEN C ORRECTLY COMPUTED BY REFERRING TO ASSESSEE'S TRIAL BALANCE. IT(SS)A 23/10 :- 3 -: 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. IN EFFECT, T HE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITION OF ` 20,39,320/- MADE BY THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE LD. CI TS DIRECTION, AS UNDISCLOSED INCOME RELATING TO BHARATI NAGAR REAL E STATES. THE FACTS APROPOS THIS ISSUE ARE THAT APART FROM SEARCH CONDU CTED U/S 132 OF THE ACT ON 5.12.2001, A SURVEY U/S 133A WAS ALSO CONDUC TED IN THE BUSINESS PREMISES OF THE ASSESSEE ON THE SAME DAY. IN THE BLOCK RETURN FILED ON 24.12.2003, THE ASSESSEE HAS DECLAR ED UNDISCLOSED INCOME OF ` 10,15,980/- UNDER THE FOLLOWING HEADS : UNEXPLAINED INVESTMENT IN BHARATHI NAGAR REAL ESTATES ` 8,80,680 UNEXPLAINED SILVER ARTICLES ` 1,35,300 ` 10,15,980 WHILE FRAMING THE ASSESSMENT ORDER U/S 263 R.W.S 14 3(3), AFTER EXAMINING THE RECORDS, IT WAS FOUND THAT THERE WAS A SHORT COMPUTATION OF UNEXPLAINED INVESTMENT. WHILE ARRIV ING AT THE UNDISCLOSED INCOME AMOUNT OF ` 8,80,680/- AS INVESTMENT IN BHARATHI NAGAR REAL ESTATES, THE TOTAL INVESTMENT HAS BEEN T AKEN AT ` 37,80,000/-AS AGAINST THE BALANCE REFLECTED IN THE ACCOUNT AT ` 58,20,000/-. THEREFORE, THE ASSESSING OFFICER HAS COMPUTED THE UNEXPLAINED INVESTMENT IN BARATHI NAGAR REAL ESTATE S AS UNDER: IT(SS)A 23/10 :- 4 -: TOTAL INVESTMENT IN BHARATHI NAGAR REAL ESTATES ` 58,20,000 LESS: ADVANCE RECEIVED FROM RELATIVES AND FRIENDS CREDITS GIVEN AT THE TIME OF SEARCH ` 15,00,000 ` 43,20,000 LESS: AMOUNT DRAWN FROM G.UMANATH HUF AMOUNT RECEIVED FROM PREM SAYEE ` 14,00,000 BALANCE TO BE ASSESSED UNDER UNEXPLAINED INVESTMENT ` 29,20,000 UNEXPLAINED INVESTMENT ADMITTED ` 8,80,680 BALANCE TO BE ASSESSED ` 20,39,320 4. THUS, THE ASSESSING OFFICER HAS MADE AN ADDITION O F ` 20,39,320/- WHICH HAS BEEN DELETED BY THE LD. CIT(A ). THE REASON FOR DELETION HAS BEEN GIVEN THAT NO INCRIMINATING MATER IAL/EVIDENCE WAS FOUND OR SEIZED REGARDING THIS ADDITION BUT THE TRI AL BALANCE PRODUCED BY THE ASSESSEE AT THE TIME OF ASSESSMENT, HAS BEEN MADE A BASIS THEREOF . UNDER CHAPTER XIVB, ADDITION COULD BE MADE ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH AND D EHORS ANY SUCH MATERIAL, NO ADDITION COULD BE MADE. THE ORIGINAL ORDER OF THE ASSESSING OFFICER WAS BASED ON THE ADMISSION THAT T HE ASSESSEE MADE DURING THE COURSE OF SURVEY ADMITTING INVESTMENT IN THE REAL ESTATE BUSINESS AT ` 22,80,680/- WHICH WAS CLAIMED TO HAVE BEEN FUNDED BY RAISING LOAN FROM HUF TO THE EXTENT OF ` 8 LAKHS AND FROM HIS SISTER-IN- LAW, S.PREMSAYEE TO THE TUNE OF ` 6 LAKHS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED C ASH BOOK, LEDGER IT(SS)A 23/10 :- 5 -: AND TRIAL BALANCE. THE TOTAL OF THE TRIAL BALANCE WAS ` 58,20,000/-. THE CREDITS SIDE OF THIS TRIAL BALANCE CONTAINS THE FOLLOWING ENTRIES: G. UMANATH (INDL.) 8,80,680 G. UMANATH(HUF) 8,00,000 RAMASAMY 8,00,000 RAMASAMY & ORS 18,64,320 S. VASANTHI 8,75,000 S. PREMSAYEE 6,00,000 TOTAL 58,20,000 5. IT WAS FOUND THAT G. UMANATH(HUF), S.PREMSAYEE AND S. VASANTHI ARE ASSESSED TO INCOME TAX AND THESE ADVAN CES ARE REFLECTED IN THEIR RESPECTIVE ASSESSMENTS. DURING THE COURSE OF SEARCH, THE ASSESSEE HAD STATED THAT HE HAD RECEIVED ADVANCE OF ` 15 LAKHS FROM ONE SHRI RAMASAMY AND THIS ADMISSION HAS BEEN RECOR DED. THUS, TOTAL CREDITS OF ` 37,75,000/- WAS TREATED AS PROVED. THE CASE OF THE REVENUE, AS PUT FORTH BY THE LD.DR, SHRI SHAJI P JA COB, IS THAT INVESTMENT IN BHARATHI NAGAR REAL ESTATES, WAS SUBJ ECT TO VERIFICATION AS PER THE PROVISIONS OF SECTION 158BB(1). WE ARE ALSO IN AGREEMENT WITH THIS PROPOSITION SUBMITTED BY THE LD.DR. HOWE VER, UNDER THIS SECTION UNDISCLOSED INCOME CAN BE COMPUTED ONLY ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFO RMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND ARE RELATA BLE TO SUCH EVIDENCE. THIS PHENOMENON HAS EXAMINED UMPTEEN TIMES BY THE H ON'BLE HIGH IT(SS)A 23/10 :- 6 -: COURTS AND THE APEX COURT. UNDENIABLY AND UNDISPU TEDLY, NO EVIDENCE/INCRIMINATING DOCUMENT WAS FOUND REGARDING INVESTMENT HAVING BEEN MADE IN BHARATHI NAGAR REAL ESTATES. I T WAS ONLY AS PER THE TRIAL BALANCE FILED BY THE ASSESSEE HIMSELF DUR ING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS ARRIVED AT A PARTICULAR FIGURE. SUCH ADDITIONS AS UNDISCLOSED INCOME ARE NOT THE SU BJECT MATTER OF CHAPTER XIVB OF THE ACT . DEHORS ANY MATERIAL HAVING BEEN FOUND IN SEARCH AND RELATABLE EVIDENCE OF OTHER INCOME NO AD DITION CAN BE MADE IN THE BLOCK ASSESSMENT ORDER. IN THIS REGARD , THE DECISIONS OF HON'BLE MADRAS HIGH COURT IN THE CASES OF CIT VS G. K.SENNIAPPAN, 284 ITR 220 AND CIT VS K.BHUVANENDRAN & OTHERS, 303 ITR 235, ARE RELEVANT. IN THE CASE OF CIT VS G.K.SENNIAPPAN(SU PRA), IT HAS BEEN HELD AS UNDER: THE EXPRESSION SUCH OTHER MATERIALS OR INFORMATIO N AS ARE AVAILABLE WITH THE ASSESSING OFFICER' IN SECTIO N 158BB OF THE INCOME-TAX ACT, 1961, CANNOT BE BISECTED OR TAKEN IN ISOLATION FOR THE PURPOSE OF COMPUTATION. SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER SHOULD BE RELATABLE TO 'SUCH EVIDENCE'. THE WORD 'SUCH' USED AS A PREFIX T O THE WORD 'EVIDENCE' ASSUMES MUCH SIGNIFICANCE IN THIS PROVIS ION AS IT INDICATES ONLY THE EVIDENCE FOUND AS A RESULT OF S EARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS, AT THE TIME OF SEARCH. ANY OTHER MATERIAL CANNOT FORM THE BASIS FO R COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CHIT FU ND AND REAL ESTATE. IN A SEARCH CONDUCTED AGAINST A TH IRD PERSON IT WAS FOUND THAT THE ASSESSEE HAD UTILISED UNDISCLOSE D INCOME FOR MAKING CONTRIBUTIONS TO CERTAIN UNREGISTERED CHITS CONDUCTED BY THE SAID PERSON. THEREAFTER, A SURVEY WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE WHICH INDICATED C ERTAIN REAL IT(SS)A 23/10 :- 7 -: ESTATE TRANSACTIONS CARRIED ON BY THE ASSESSEE AND PROFITS DERIVED THEREON HAD NOT BEEN DIS CLOSED TO THE DEPARTMENT. THE ASSESSING OFFICER INCLUDED UNDER SECTION 158BB THE UNDISCLOSED INCOME FOUND DURING THE SURVEY MADE UNDER SECTION 133A. THE COMMISSIONER (APPEALS) EXCLUDED THAT PORTION WHICH HAD BEEN INCLUDED BASED ON THE MATERIAL FOUND DURING THE SUR VEY ON THE PREMISES THAT IN RESPECT OF BLOCK ASSESSMENT UNDER SECTION 158BB MATERIAL COLLECTED DURING THE SURVEY UNDER SECTION 133A COULD NOT BE TAKEN INTO CONSIDERATION. THIS WAS CON FIRMED BY THE TRIBUNAL. ON APPEAL CONTENDING THAT THE MATERIAL GA THERED IN THE COURSE OF SURVEY UNDER SECTION 133A COULD ALSO BE R EGARDED AS A MATERIAL FOR THE PURPOSE OF BLOCK ASSESSMENT UNDER SECTION 158BB : HELD , ACCORDINGLY, DISMISSING THE APPEAL, THAT THE COMMISSIONER(APPEALS) AND THE TRIBUNAL HAVING DECID ED THE ISSUE IN ACCORDANCE WITH THE STATUTORY PROVISIO NS, IT REQUIRED NO INTERFERENCE. 6. IN THE CASE OF CIT VS K.BHUVANENDRAN & OTHERS (SUP RA), IT HAS BEEN HELD AS UNDER: HELD , DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD FOUND THAT THERE WAS NO EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIONS. THE STATEMENT RECORDED FROM THE ASSESSEE WAS SUBSEQUENTLY RETRACTED AND REBUTTED. FURTHERMORE, THE STATEMENT WAS NOT RELATABLE TO ANY SEIZED MATERIAL. THEREFORE, EVEN THE STATEMENT COULD NOT BE THE BASIS FOR MAKING ANY ADDITION. WHEN THE SALE DEED DISCLOSES A SALE CONSIDERATION, IT IS FOR THE REVENUE TO SHOW THAT WHAT WAS DISCLOSED IN THE SALE DEED IS NOT THE CORRECT SALE CONSIDERATION. IN THIS CASE THE REVENUE COULD NOT BRING ON RECORD ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD PAID ON-MONEY OF ` 23,00,000. THE REASONS GIVEN BY THE TRIBUNAL WERE BASED ON VALID MATERIAL. THE DELETION OF ADDITION WAS JUSTIFIED. 7. CONSEQUENTLY, WE ARE LEFT WITH NO OPTION BUT TO ACC EPT THE IMPUGNED DELETION BECAUSE THE ASSESSMENT MADE U/S 158BC HAS TOBE STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF CHAPT ER XIVB WHEREIN IT IS CLEARLY LAID DOWN THAT SUCH ADDITION CAN BE BASED O N SEIZED MATERIAL IT(SS)A 23/10 :- 8 -: ONLY. ADMITTEDLY, THE TRIAL BALANCE WAS NOT PART O F THE SEIZED RECORDS HENCE, THIS ADDITION CANNOT BE SUSTAINED IN ASSESSE ES HANDS. CONSEQUENTLY, WE HAVE TO IGNORE THE OTHER ARGUMENTS OF THE REVENUE LIKE NON-EXPLANATION OF THE ENTIRE AMOUNT MENTIONED IN THE TRIAL BALANCE. THIS EXERCISE CAN BE DONE WHILE MAKING RE GULAR ASSESSMENT AND NOT WHILE MAKING BLOCK ASSESSMENT WHICH IS A P ARTICULAR AND PECULIAR MODE OF ASSESSMENT OF UNDISCLOSED INCOME. HENCE, BY FOLLOWING THE DECISIONS OF THE HON'BLE JURISDICTION AL HIGH COURT AND IN VIEW OF THE PROVISION CLEARLY LAID DOWN IN CHAPTER XIV, WE HAVE TO CONFIRM THE IMPUGNED DELETION AND DISMISS THE APPEA L OF THE REVENUE. 8. IN THE RESULT, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 1.7.2011 SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 11 TH JULY, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR