SMT. KANTI DEVI, PATNA V. DCIT, CENTRAL CIRCLE-1, PATNA

ITSSA 34/PAT/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4862 (ITAT-PATNA)
• Duration Of Justice: 5 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 22-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Block assessment
• Section: 158BD

Judgement Text

IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘PATNA BENCH’ AT KOLKATA, [Virtual Court Hearing] Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Girish Agrawal, Accountant Member I.T.(SS)A. No. 34/PAT/2016 Assessment Year: Block Period 1991-92 to 2001-02 Smt. Kanti Devi,..........................................................................Appellant W/o. Sri Ram Suphal Prasad, Saguna More, Bailey Road, Patna -Vs.- Deputy Commissioner of Income Tax,.......................................Respondent Central Circle-1, Patna Appearances by: Shri S.C. Sannigrahi, C.A., appeared on behalf of the assessee Shri Sanjay Mukherjee, CIT(D.R), appeared on behalf of the Revenue Date of concluding th e hearing : March 24, 2022 Date of pro nouncing the orde r : April 05, 2022 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-3, Patna dated 06.09.2016 passed for the block period starting from assessment year 1991-92 and ending on 23.11.2000. Originally the assessee has taken the following grounds of appeal:- “1. For that, on the fact & circumstances of the case, the confirmatory order of the learned Commissioner of Income Tax (Appeal)-3 is without jurisdiction and also bad in law & facts. Without prejudice to above. 2. For that, on the fact & circumstances of the case, the confirmation of addition of opening capital of ? 3,32,949/- (which is the closing capital beyond the block period) as disclosed income without any material, evidence and documents IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 2 found in search is totally not legal & proper. Especially when, the learned Commissioner of Income Tax (Appeal) himself allowed total of Rs.95,750/- being the non-taxable income of the block period cannot come under the provision of section 158BB(1)(c). Especially when these are not included u/s. 158BB(1)(c)(B). Therefore, the addition of opening capital which amount is generated from non-taxable income since 1981-82 should not be added as undisclosed income of the block period. Hence, such addition is fit to be deleted. 3. For that, the appellant craved leaved to add, modify and amend any of the grounds of appeal at the time of hearing”. ~ 2. The ld. counsel for the assessee at the very outset submitted that for taking cognizance under section 158BD of the Income Tax Act, the pre-requisite conditions are that during the course of search, some incriminating material should be recovered which belonged to the person other than the searched person. The ld. Assessing Officer of the searched operation should recorded a satisfaction that income assessable in the hands of other person is embedded in the seized material and, therefore, action against such other person than the searched person is required to be taken. After recording the satisfaction, he is required to transmit copy of such satisfaction to the Assessing Officer having jurisdiction on such other person and thereafter the Assessing Officer of the such other person is also required to record his satisfaction for initiating the proceeding against such person. In the present case, search was conducted on the assessee’s husband and according to the Revenue, certain material was found and seized exhibiting the fact that income assessable in the hands of the assessee required to be considered for the block period. Therefore, the action under section 158BD was taken against the assessee. He submitted that no such satisfaction is available on the record. He further contended that an additional ground to this effect was taken before the ld. 1 s t appellate authority, but such ground has been adjudicated by the ld. CIT(Appeals) by observing that it was not pressed. According to him, a jurisdictional issue cannot be waived even with the consent of the assessee. The assessee even if not pressed this ground, the Commissioner should have decided it, whether Assessing IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 3 Officer has a jurisdiction to initiate the proceeding under section 158BD or not. 3. We find that this appeal was filed in 2016. Very small issues are involved otherwise on merit. From the last six years, Revenue has been seeking time for producing the copy of satisfaction. Even on the date of hearing, ld. CIT(DR) sought further time for production of such satisfaction note. After taking into consideration the issues on merit, we deem it appropriate to skip a specific finding on this issue because we are otherwise convinced with the argument of ld. counsel for the assessee about non-sustainability of the additions on merit. 4. On merit, the grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the addition of Rs.3,32,949/-. 5. Brief facts of the case are that a search was carried out on the residential premises of Shri Ram Suphal Prasad (i.e. husband of the assessee) on 23.11.2000. A notice under section 158BD was issued on 14.11.2002, which was served upon the assessee and she filed her return for the block period. The ld. Assessing Officer has passed assessment order on 22.11.2004. He made various additions to the total income of the assessee. However, on appeal, the ld. CIT(Appeals) deleted those additions except the addition of Rs.3,32,949/-. The finding of the ld. Assessing Officer on this addition reads as under:- “4. OPENING CAPITAL AS ON 01.14.1990 4.1. From the perusal of the statement of affairs filed by the assessee during the course of the block assessment proceedings, it has been observed that the assessee has shown opening capital of Rs.3,32,949/- as on 01.04.1990, given as miscellaneous advances. Since, the regular return of income have been filed by the assessee for the first time on 04.11.1996 for the A.Y. 1995- 96, hence it can not be said that the aforesaid opening capital was disclosed by the assessee in her regular returns of income filed prior to search and seizure operations. Even in the regular returns of income filed for the assessment years 1995-96 to 2000-01 before the search, balance sheets or statement of affairs were not filed along with the regular returns, which is evident from the perusal of the copies of regular returns filed by the IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 4 assessee during the course of the block assessment proceedings. The statement of affairs for the A.Y. 1991-92 and for other assessment years have been prepared by the assessee after the search and seizure operations and they are mere self-serving documents to explain the investments made by the assessee during the block period. Hence, it would come within the purview of block assessment as per the detailed discussion made in the above para. 4.2. The assessee failed to furnish any explanation regarding the opening capital despite getting repeated opportunities. The assessee has utilized the aforesaid opening capital in explaining the investment in house property and land made by her during the assessment years 1991-92 to 1993-94. Since, the assessee failed to furnish any source of the aforesaid opening capital, hence it is treated as unexplained and out of the undisclosed income of the assessee for the block period. Since, the assessment years in which the aforesaid undisclosed income were generated is not known, hence it is added to the total income for the A.Y. 1991-92 of the block period”. 6. On appeal, ld. CIT(Appeals) has confirmed this addition by recording the following finding:- “Appellate finding and decision: After considering the AO’s finding and submission of the appellant, I find that the AO has referred to the opening balance of Rs. 3,25,000/- as capital alongwith cash in hand of Rs. 7,949/- totaling to Rs. 3,32,949/- as on 01.04.1990 which was not explained by the appellant. From the submissions at the time of appellate proceeding again, it is noticed that the appellant has filed first return of income only in AY 1995-96 whereas the appellant has given computation of total income starting from AY 1991-92 to 1994- 95 which is only a self serving statement without any basis. Thus, the opening capital balance of Rs. 3,32,949/- shown in statement as on 01.04.1990 has no basis. The appellant has raised contention that the issue of addition is not arising from any seized document and therefore, it cannot be added u/s 158BD of the Act. This contention of the appellant is not acceptable for the following reasons: (i)There was search & seizure action in the case of appellant's husband wherein several assets including bank deposits in the name of the appellant were found leading to initiation of proceeding u/s15BD of the Act in appellant’s cases. (ii)As part of explanation for the assets - movable/ immovable, the appellant filed cash flow statement and opening capital balances starting from 01.04.1990. Thus, these capital balances are linked to explanations for the assets in the name of the appellant. (iii)The appellant had filed her first return of income from AY 1995-96 onwards. Thus, there is no credibility to the opening capital balance as on 01.04.1990. IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 5 Hence, I agree with the AO’s findings that the opening capital balance of Rs. 3,32,949/- as on 01.04.1990 has been shown by the appellant only to explain the assets / investments found in the name of the appellant in the later AYs. falling within block period. Accordingly, the addition of Rs. 3,32,949/- is hereby confirmed as undisclosed income of the block period”. 7. With the assistance of ld. representatives, we have gone through the record carefully. It is pertinent to observe that the undisclosed income has been defined in section 158B of the Income Tax Act. Further it is to be computed under section 158BB(1) of the Income Tax Act, 1961. A perusal of the above clause would indicate that undisclosed income is to be computed on the basis of seized material found during the course of search. Though it is an assessment under section 158BD but the ld. Assessing Officer is required to make a reference to the seized material for treating an item of addition as part of undisclosed income. A perusal of finding of both the authorities would reveal that there is no reference to any seized material. It has been worked out on the basis of statement of income submitted by the assessee, wherein she has worked out capital balance as an opening balance before the block period. The ld. Assessing Officer has even observed that firstly the assessee did not file return for A.Y. 1991-92 and secondly her returns were not taken for scrutiny. To our mind, both the reasonings are not sufficient to treat this item as undisclosed income. The ld. 1 s t appellate authority under the reasoning (No. ii) has observed that these capital balances are linked to explanations for the assets in the name of the appellant. We do not find narration to any such asset in the assessment order or by the ld. CIT(Appeals). We could appreciate this stand of the ld. Assessing Officer if he made reference to a particular asset acquired during the block period by the assessee and its source does not match with the explanation of the assessee. No such thing is discernible from the record and, therefore, this addition is not sustainable. We allow this ground of appeal and delete the addition of Rs.3,32,949/-. We treat the preliminary issue raised by the ld. counsel for the assessee for the time being as redundant IT(SS)A No. 34/PAT/2016 Block Assessment Year 1991-92 to 2001-02 Smt. Kanti Devi, Patna 6 in view of our finding on the merits of the addition, this appeal is treated as allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on April 05, 2022. Sd/- Sd/- (Girish Agrawal) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 05 day of April, 2022 Copies to : (1) Smt. Kanti Devi, W/o. Sri Ram Suphal Prasad, Saguna More, Bailey Road, Patna (2) Deputy Commissioner of Income Tax, Central Circle-1, Patna (3) Commissioner of Income Tax (Appeals)-3, Patna (4) Commissioner of Income Tax- (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.