Sri G Narendra, Eluru V. The ACIT, Central Circle, Rajahmundry

ITSSA 29/VIZ/2005

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9259 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 07-06-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Unexplained investment; Search and seizure; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T(SS).A. NO.29/VIZAG/2005 BLOCK PERIOD 1-4-1995 TO 6-11-2001 GRANDHI NARENDRA, ELURU VS. ACIT, CENTRAL CIRCLE, RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AATPN 3545 J APPELLANT BY : SHRI G.V.N. HARI, CA RESPONDENT BY : SHRI SUBRATA SARKAR, CIT(DR) O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04.04.2005 PASSED BY LD CIT(A), RAJAHMUNDRY AND IT RELATES TO THE BLOCK PERIOD FROM 1.4.1995 TO 06.11.2001. 2. THOUGH THE ASSESSEE HAS RAISED AS MAY AS NIN E GROUNDS OF APPEAL, ALL OF THEM ARE DIRECTED AGAINST A SINGLE ISSUE VIZ., WHET HER THE LD CIT(A) IS RIGHT IN LAW IN UPHOLDING THE ADDITION OF RS.12.00 LAKHS MAD E IN THE BLOCK ASSESSMENT PROCEEDINGS BY RELYING ONLY ON THE OF SWORN STATEM ENT MADE BY THE ASSESSEE. 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 6.11.2001. IN THE SWORN STATEMENT TAKEN DURING THE COURSE OF SEARCH, THE AU THORIZED OFFICER ENQUIRED 2 ABOUT THE POSSIBLE UNDER STATEMENT OF THE VALUE OF FOLLOWING THREE PROPERTIES AND THERE FORE POSSIBILITY OF CONCEALMENT OF INCOME.. (A) VACANT SITE PURCHASED NEAR KESARI TALKIES IN 1998. (B) SHOP PURCHASED AT PAVAN PLAZA, VIZAG. (C) HOUSE BUILT AT KANDAKAM ROAD. IN REPLY, THE ASSESSEE SUBMITTED THAT THERE WOULD B E DIFFERENCE IN THE BOOKS AND RETURNS SHOWN TO THE INCOME TAX DEPARTMENT AND ACCO RDINGLY AGREED TO PAY TAXES ON AN UNEXPLAINED INCOME OF RS.12.00 LAKHS. HOWEVER, HE DID NOT DISCLOSE THIS AMOUNT IN HIS BLOCK RETURN. HENCE, THE AO TRE ATED THE IMPUGNED AMOUNT OF RS.12.00 LAKHS AS REPRESENTING THE DIFFERENCE IN TH E COST OF CONSTRUCTION OF THE PROPERTY BUILT AT KANDAKAM ROAD AND INCLUDED THE SA ME IN THE COMPUTATION OF UNDISCLOSED INCOME OF THE ASSESSEE. THE LD CIT(A) HELD THAT THE ASSESSEE HAS DISCLOSED THE IMPUGNED AMOUNT OF RS.12.00 LAKHS IN RESPECT OF ALL THE THREE PROPERTIES AND ACCORDINGLY CONFIRMED THE ORDER PASS ED BY THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE SUBMISSION OF THE LEARNED AR IS THAT T HE ASSESSEE WAS ASKED ABOUT THE POSSIBLE UNDER STATEMENT IN THE VALUE OF THREE PROPERTIES AND IN REPLY, THE ASSESSEE HAS AGREED FOR A ROUND SUM DISCLOSURE OF R S.12.00 LAKHS IN VIEW OF THE POSSIBLE DIFFERENCE IN THE BOOKS AND RETURNS. THUS THE CONTENTION OF THE LD AR IS THAT THE ASSESSEE NEVER DISCLOSED THE ABOVE SAID SU M OF RS.12.00 LAKHS TOWARDS THE DIFFERENCE IN THE COST OF CONSTRUCTION, AS ASSU MED BY THE TAX AUTHORITIES. LD AR FURTHER SUBMITTED THAT THE REVENUE HAS NOT FOUND ANY MATERIAL AT THE TIME OF SEARCH TO SUGGEST THAT THE ASSESSEE HAD PAID ANY AM OUNT OVER AND ABOVE THE VALUE DISCLOSED BY THE ASSESSEE. HENCE THE ASSESSM ENT OF UNDER STATEMENT OF CONSIDERATION, IF ANY, WOULD BE OUTSIDE THE PURVIEW OF THE BLOCK ASSESSMENT PROCEEDINGS. ACCORDINGLY LD AR CONTENDED THE TAX A UTHORITIES WERE NOT RIGHT IN LAW IN MAKING THE ADDITION OF RS.12.00 LAKHS BY SOL ELY RELYING UPON THE SWORN 3 STATEMENT TAKEN AT THE TIME OF SEARCH, THAT TOO ON THE PRESUMPTION THAT THE SAID DISCLOSURE WAS MADE TOWARDS THE DIFFERENCE IN THE C OST OF CONSTRUCTION. 5. ON THE CONTRARY, LD DR SUBMITTED THAT SINCE THE CONSIDERATION PAID FOR THE ACQUISITION/CONSTRUCTION OF THE IMPUGNED THREE PROP ERTIES WAS APPARENTLY LOWER THAN THE MARKET VALUE, THE ASSESSEE HAS AGREED TO D ISCLOSE THE IMPUGNED AMOUNT OF RS.12.00 LAKHS AND HENCE THE TAX AUTHORIT IES ARE RIGHT IN LAW IN TREATING THE SAID SUM OF RS.12.00 LAKHS AS THE UNDI SCLOSED INCOME OF THE ASSESSEE ON THE BASIS OF THE SWORN STATEMENT. THE LD DR FURTHER SUBMITTED THAT THE CASE MAY BE SET ASIDE TO THE FILE OF AO IN ORDE R TO VERIFY THE PURPOSE OF DISCLOSURE OF RS.12.00 LAKHS, IN CASE THE PURPOSE O F DISCLOSURE IS TREATED AS NOT CLEAR. 6. WE HAVE HEARD RIVAL CONTENTIONS AND ALSO CAREFU LLY PERUSED THE RECORD. WE MAY STATE THAT THE LAW WITH REGARD TO THE BLOCK ASS ESSMENT PROCEEDINGS IS WELL SETTLED NOW IN AS MUCH AS THE PROVISIONS OF SECTION 158BB, WHICH DEALS WITH THE COMPUTATION OF UNDISCLOSED INCOME, HAS TO BE STRICT LY CONSTRUED AND THE UNDISCLOSED INCOME HAS TO BE COMPUTED STRICTLY ON T HE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAIL ABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE DEPARTMENT DID NOT UNEARTH ANY MATERIAL TO SUGGEST ANY UNDER STATEMENT OF CONSIDERATION WITH REFERENCE TO THE THREE PROPERTIES REFERRED ABOVE. THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT AND HAS BEEN PREPARING HIS RETURN OF INCOME ON THE BASIS OF BANK ACCOUNTS MAINTAINED BY HIM. ACCORDING TO THE ASSESSEE, THE PURCHASE OF VACANT S ITE NEAR KESARI THEATRE AND THE SHOP IN PAVAN PLAZA, VIZAG WAS DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2000-01 ON 14. 12.2000, I.E. PRIOR TO THE DATE OF SEARCH. THE CONSTRUCTION OF THE HOUSE PROP ERTY WAS COMPLETED DURING 4 THE FINANCIAL YEAR 2001-02 RELEVANT TO THE ASSESSME NT YEAR 2002-03 BY AVAILING LOAN OF RS.5.00 LAKHS FROM A CO-OPERATIVE BANK AND HENCE THE DETAILS OF CONSTRUCTION WERE ALSO AVAILABLE IN THE BANK ACCOUN T. THE ESSENTIAL INGREDIENT FOR FRAMING A BLOCK ASSESSMENT, AS STATED EARLIER, IS T HE MATERIAL SEIZED DURING THE COURSE OF SEARCH. THE CONTENTION OF THE LD AR IS T HAT THE REVENUE DID NOT SEIZE ANY MATERIAL TO INDICATE THAT THERE IS UNDER STATEM ENT OF THE VALUE OF THE THREE PROPERTIES STATED ABOVE. 7. THE ASSESSING OFFICER HAS PLACED MUCH RELIANCE ON THE SWORN STATEMENT GIVEN BY THE ASSESSEE DURING THE COURSE OF SEARCH. SINCE THE WHOLE ISSUE REVOLVES AROUND THE SAID SWORN STATEMENT, WE FEEL IT APPROPR IATE TO EXTRACT THE RELEVANT QUESTION NO.4 AND THE ANSWER THERE OF FROM THE SWOR N STATEMENT, WHICH IS REPRODUCED IN PAGE NO.6 OF THE ORDER OF LD CIT(A). Q.4 (A) AS PER THE STATEMENT GIVEN BY YOU THIS MOR NING, YOU PURCHASED ABOUT 1000 SQ.YARDS NEAR KESARI TALKIES I N 1998. THE PRICE YOU PAID WOULD BE LESS THAN MARKET PRICE. (B) YOU HAVE PURCHASED ONE SHIP AT PAVAN PLAZA, VIZ AG IN YOU INDIVIDUAL STATUS, ONE SHIP IN YOU HUF STATUS AND O NE SHOP IN THE NAME OF YOUR WIFE SMT. KRISHNA KUMARI. THE VALUE YO U HAVE SHOWN WAS LESS THAN RS.2 LAKHS. IT IS IMPOSSIBLE TO GET A T THAT PRICE IN AN IMPORTANT BUSINESS PLACE IN VISAKHAPATNAM. ( C) ON THE HOUSE BUILT BY YOU AT KANDAKAM ROAD YOU HAVE SHOWN EXPENDITURE OF RS.7 LAKHS. FOR THIS YOU TOOK A LOAN OF RS.5 LAKHS FROM ELURU CO.OP.URBAN BANK AND YOU TOLD THAT THE R EMAINING RS.2 LAKHS WAS FROM THE BALANCE IN THE CAPITAL ACCOUNT. BUT YOU HAVE PURCHASED TEAKWOOD OF MARKET VALUE OF RS.1,16,600/- FROM NARSIPATNAM FOREST DEPARTMENT AUCTIONS AND THAT YOU TOLD THAT YOU HAVE NOT WRITTEN ANY CONSTRUCTION ACCOUNT. IN THE B ACKGROUND, THE VALUE OF THE BUILDING WOULD BE MUCH HIGHER THAN THE VALUE TOLD BY YOU. IN THE ISSUES EXPLAINED ABOVE YOU COULD HAVE CONCEA LED YOUR INCOME. YOU HAVE TO GIVE PROPER EXPLANATION. 5 A. IN THE ISSUES EXPLAINED ABOVE, I FEEL THAT THERE WOULD BE DIFFERENCE IN THE BOOKS AND THE RETURNS SHOWN TO IN COME TAX DEPARTMENT. BECAUSE OF THIS, IN ORDER THAT THE DEPA RTMENT WOULD NOT CREATE ANY PROBLEM IN FUTURE, ON ALL THESE I SH ALL PAY TAXES ON AN UNEXPLAINED INCOME OF RS.12 LAKHS ON A PLAIN READING THE QUESTION AND ANSWER EXTRACTE D ABOVE, IT CAN BE NOTICED THAT THE AUTHORIZED OFFICER IS QUESTIONING THE PROB ABLE UNDERSTATEMENT IN THE PURCHASE/CONSTRUCTION OF THE THREE PROPERTIES. HOW EVER IN REPLY, THE ASSESSEE MAKES A GENERAL DISCLOSURE OF RS.12.00 LAKHS WITHOU T MAKING REFERENCE TO ANY PARTICULAR PROPERTY. HENCE, IN OUR OPINION, HE IS NOT CORRECT IN ASSUMING THAT THE DISCLOSURE OF RS.12.00 LAKHS REPRESENT UNEXPLAINED INVESTMENT IN HOUSE CONSTRUCTION. THE MOOT QUESTION HERE IS WHETHER A BLOCK ASSESSMENT CAN BE FRAMED ONLY ON THE BASIS OF SWORN STATEMENT?. 8. IN THIS REGARD, IT IS RELEVANT HERE TO DISCU SS THE VARIOUS CASE LAW RELIED UPON BY LD AR. (A) RAJESH JAIN VS. DCIT (2006) (100 TTJ (DEL) 929 :- IN THIS CASE IT WAS HELD THAT THE PERSON CARRYING THE SEARCH IS THE PERSON POSSESSING SOME AUTHORITY AND THERE FORE, ASSESSMENT WHOLLY AND EXC LUSIVELY BASED ON CONFESSIONAL STATEMENT IS A RISKY AFFAIR.. THEREFO RE, IT IS INSISTED THAT CONFESSIONAL STATEMENT SHOULD BE CORROBORATED WITH SOME MATERIAL TO SHOW THAT ASSESSMENT MADE IS JUST AND FAIR. FINALLY IT WAS HE LD THAT THE COMPUTATION OF UNDISCLOSED INCOME SOLELY ON THE BASIS OF CONFESSIO NAL STATEMENT OF ASSESSEE WAS NOT JUSTIFIED, INTER ALIA, WHERE THE CONDUCT OF AFF AIRS BY THE REVENUE AUTHORITIES SHOWED THAT GOOD AMOUNT OF PSYCHOLOGICAL PRESSURE W AS BUILT ON THE ASSESSEE TO MAKE THE SAID STATEMENT AND ALL MATERIAL FOUND DURI NG SEARCH WAS DULY EXPLAINED BY ASSESSEE ON WHICH NO ADVERSE COMMENT WAS MADE BY AO. 6 (B) DCIT V M/S PREMSONS (ITA NO.4698/MUM/2006):- IN THIS CASE IT WAS HELD THAT IN ORDER TO MAKE AN ADDITION ON TH E BASIS OF SURRENDER DURING SEARCH OR SURVEY, IT IS SINE QUA NON THAT THERE SH OULD BE SOME OTHER MATERIAL TO CO-RELATE THE UNDISCLOSED INCOME WITH SUCH STATEMEN T. (C) DCIT V PRAMUKH BUILDERS (2008) 5 DTR (AHD) 166 :- IN THIS CASE IT WAS HELD THAT WHEN THERE IS CONFUSED STATE OF AFFAIRS, NO SANCTITY CAN BE ATTACHED TO THE STATEMENT AND THAT CANNOT FORM THE SOLE BASIS TO DETERMINE UNDISCLOSED INCOME. (D) VINOD SOLANKI V UNION OF INDIA (CIVIL APPEAL NO.74 07 OF 2008)(SC):- IN THIS CASE, THE HONBLE SUPREME COURT DEALT IN DETAIL ABOUT THE EFFECT OF A RETRACTED CONFESSION FOR THE PURPOSE OF LEVY OF PENALTY UNDER FOREIGN EXCHANGE REGULATION ACT, 1973. AT PARA 22 OF THE ORDER, IT HAS BEEN OBSERVED AS UNDER: IT IS A TRITE LAW THAT EVIDENCES BROUGHT ON RECO RD BY WAY OF CONFESSION WHICH STOOD RETRACTED MUST BE SUBSTANTIALLY CORROBO RATED BY OTHER INDEPENDENT AND COGENT EVIDENCES, WHICH WOULD LEND ADEQUATE ASS URANCE TO THE COURT THAT IT MAY SEEK TO RELY THERE UPON. WE ARE NOT OBLIVIOUS OF SOME DECISIONS OF THIS COURT WHEREIN RELIANCE HAS BEEN PLACED FOR SUPPORTI NG SUCH CONTENTION BUT WE MUST ALSO NOTICE THAT IN SOME OF THE CASES RETRACTE D CONFESSION HAS BEEN USED AS A PIECE OF CORROBORATIVE EVIDENCE AND NOT AS THE EV IDENCE ON THE BASIS WHEREOF ALONE A JUDGMENT OF CONVICTION AND SENTENCE HAS BEE N RECORDED. (SEE PON ADITHAN VS. DEPUTY DIRECTOR, NARCOTICS CONTROL BURE AU, MADRAS (1999) 6 SCC 1)). AT PARA 35, IT WAS OBSERVED AS UNDER: IT IS ONE THING TO SAY THAT A RETRACTED CONFESSIO N IS USED AS A CORROBORATIVE PIECE OF EVIDENCE TO RECORD A FINDING OF GUILT BUT IT IS ANOTHER THING TO SAY THAT SUCH A FINDING IS ARRIVED AT ONLY ON THE BASIS OF SUCH CONFESSION ALTHOUGH RETRACTED AT A LA TER STAGE. 7 9. NOW WE SHALL ADVERT TO THE FACTS OF THE CASE. THE QUESTION NO.4 WHICH IS EXTRACTED IN PARAGRAPH NO.7, SUPRA, STARTS WITH THE WORDINGS AS PER THE STATEMENT GIVEN BY YOU IN THE MORNING. THESE WORD S SUGGEST THAT THE DEPARTMENT HAD ALREADY RECORDED A STATEMENT IN THE MORNING AND THE PRESENT STATEMENT IS RECORDED IN THE LATER PART OF SEARCH P ROCEEDING. THUS IT IS EVIDENT THAT THE REVENUE DID NOT DETECT ANY MATERIAL DURING THE COURSE OF SEARCH SUGGESTING AVAILABILITY OF ANY UNDISCLOSED INCOME, FOR THE REASON THAT IN QUESTION NO.4, THE AUTHORIZED OFFICER IS QUESTIONING ONLY TH E PROBABLE UNDER STATEMENT OF THE VALUE OF THE THREE PROPERTIES AND POSSIBILITY O F CONCEALMENT. THE REVENUE CANNOT ALSO TAKE A STAND THAT THE ASSESSEE HAD BLOC KED ANY FURTHER PROBE IN THE ABSENCE OF ANY INCRIMINATING MATERIAL. THE VERY FAC T THAT THE ASSESSEE AGREED TO DISCLOSE AN AMOUNT OF RS.12.00 LAKHS, DESPITE THE F ACT THAT THE DEPARTMENT DID NOT UNEARTH ANY MATERIAL AGAINST HIM, WOULD ONLY SU GGEST THAT THERE MIGHT HAVE BEEN SOME MENTAL PRESSURE UPON THE ASSESSEE TO MAKE SUCH A CONFESSION. THE FACT THAT THE TAX AUTHORITIES WERE ALSO NOT SURE OF THE PURPOSE OF THE DISCLOSURE IS EVIDENT FROM THEIR RESPECTIVE ORDERS. WHILE THE AO IS OF THE VIEW THAT THE ASSESSEE HAS MADE THE DISCLOSURE WITH REGARD TO THE DIFFERENCE IN THE COST OF CONSTRUCTION OF ONE OF THE THREE PROPERTIES, THE LD CIT(A) INTERPRETS THAT IT HAS BEEN MADE WITH REGARD TO ALL THE THREE PROPERTIES. WHERE AS, THE ASSESSEE HAS MADE A GENERAL DISCLOSURE, WITHOUT MAKING REFERENCE TO ANY OF THE PROPERTIES. THE ABOVE SAID FACTS INDICATE THAT BOTH THE ASSESSE E AND THE TAX AUTHORITIES WERE NOT SURE OF THE PURPOSE OF DISCLOSURE. IN THAT CASE , IN VIEW OF THE JUDICIAL PRECEDENTS DISCUSSED IN EARLIER PARAGRAPHS, WE ARE OF THE VIEW THAT NO CREDENCE COULD BE GIVEN TO THE STATEMENT IN THE ABSENCE OF A NY CORROBORATIVE MATERIAL TO SUBSTANTIATE THE DISCLOSURE. HENCE, IN THE INSTANT CASE, THE REVENUE IS NOT ENTITLED TO PLACE RELIANCE ONLY ON THE STATEMENT GI VEN BY THE ASSESSEE. ANOTHER PERTINENT POINT THAT SHOULD BE NOTED HERE IS THAT T HE INSTANT PROCEEDING, BEING BLOCK ASSESSMENT PROCEEDING, THE AO HAS TO MAKE THE ASSESSMENT ONLY ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH . IT IS AN UNDISPUTED FACT THAT 8 IN THE INSTANT CASE, THE DEPARTMENT DID NOT DETECT ANY MATERIAL TO SUGGEST THE AVAILABILITY OF UNDISCLOSED INCOME. IN VIEW OF THE ABOVE, WE REVERSE THE ORDER OF LD CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELET E THE IMPUGNED AMOUNT OF RS.12.00 LAKHS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S ALLOWED. PRONOUNCED ACCORDINGLY ON 29 TH APRIL, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 29-4-2010. A COPY OF THIS ORDER IS FORWARDED TO : 01 SHRI GRANDHI NARDNERA, S/O BALAKRISHNA, MAIN BAZ AR, ELURU, WEST GODAVARI 02 THE ACIT, CENTRAL CIRCLE, RAJAHMUNDRY 03 THE CIT (A), RAJAHMUNDRY, 04 THE CIT, RAJAHMUNDRY 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH