Sri M.Gnanasekaran, CHENNAI V. ACIT, CHENNAI

ITSSA 45/CHNY/2004

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3571 (ITAT-CHENNAI)
• Duration Of Justice: 18 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 18-04-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Peak credit; Block assessment
• Section: 132; 158BC; 158BD

Judgement Text

आयकर अपीलीय अिधकरण ‘बी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ7वाल ,लेखा सद: के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM IT(SS)A No.150/Chny/1998 & IT(SS)A No.45/Chny/2004 (Block Assessment Period: 01.04.1986 to 31.03.1996 & 01.04.1996 to 13.09.1996) Late Shri M. Gnansekaran Rep. by legal heirs Old No.10/1, New No.22 Puzal Munuswamy Street, Perambur, Chennai-600 011. बनाम/ V s. ACIT, Central Circle-I(5), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAK P G -0 6 2 8 -E (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri D. Anand (Advocate)-Ld. AR थ की ओरसे/Respondent by : Shri Guru Bashyam (CIT) –Ld. DR सुनवाई की तारीख/Date of Hearing : 22-06-2022 घोषणा की तारीख /Date of Pronouncement : 13-07-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee arise out of separate orders of lower authorities. The assessee has expired on 07.09.2018 and accordingly, this appeal has been continued in the name of legal heirs which have been brought on record. The legal heirs have filed revised Form No.36 which is found in order. - 2 - 2. Both these appeals have travelled up-to the level of Hon’ble High Court of Madras and have been restored back to the Tribunal with certain directions. The manner in which these appeals have come up for fresh hearing before us has been captured by Ld. AR in the written submissions as under: - 1. Search under section 132 of the Income Tax Act was conducted at the residential premises of the assessee in connection with searches at the business premises of M.G.Pictures and its Directors. 2. Consequent to search notice under section 158BD r.w.S 158BC dated 16.07.1997 was served on the assessee on 18.07.1997 and in response to the same the assessee filed his return of income on 19.09.1997. Assessment proceedings were thereafter initiated and assessment orders were passed on 29.07.1998 making the following addition (P 1-15 of Typed Set). a. Addition made substantive in the case of M.G. Pictures case was added protectively. b. Unexplained credit in Bank Account. c. Income from sale of Garment Export quota. 3. Against the order of assessment dated 29.07.1998 the assessee preferred an appeal before the Hon'ble ITAT in IT(SS) A.No.150/MDS/1998 (26-29) and the Hon'ble Tribunal vide its order dated 20.05.2002 passed an ex-parte order in which additions which were made on protective basis. As observed both in the assessment order and tribunal order the bank credits contained cash and cheque deposits on account of from exporters and brokers in connection of trading in quotas (internal para 6 in page 27 of the typed set). With respect to sale of export quota, the Hon'ble ITAT remanded the matter to the file of the AO to examine it and include only the peak credit as income of the assessee. However, with respect to the legal issue of limitation raised by the assessee the Hon'ble tribunal held that the assessee failed to produce evidence with respect to search warrant served on him on 30.09.1996 and therefore declined to entertain the plea of the assessee that the assessment is barred by limitation. 4. No grievance was raised either by the assessee with respect to the merits of the case. But however, the Assessee being aggrieved with the tribunals order on legal issue of limitation preferred an appeal before the Hon'ble High Court in TCA No.125 of 2005. The Hon'ble High Court vide its order in TCA No.125 of 2005 dated 13.07.2011 (36- 37) restored the appeal back to ITAT which is presently posted as IT(SS) A.No.150/MDS/1998. 5. While this being so the Ld.AO pursuant to the directions given by the Hon'ble ITAT in lT(SS) A.No.150/MDS/1998 passed an order on 16.03.2004 (38-42). In the said order the Ld.AO, as directed by the tribunal, deleted the addition made on protective basis and assessed the peak credit in the bank account as estimated income in sale of export quota but however proceeded to make further addition under the head unexplained credit on the basis of entries made in the same bank account. 6. Aggrieved with orders of AO dated 16.03.2004 the assessee preferred another appeal before the Hon'ble ITAT in IT(SS) A.No.45/Mds/2004. The Hon'ble ITAT vide its order dated 6.10.2006 (43-49) dismissed the appeal filed by the assessee holding that the AO has passed orders only in consonance of the Tribunals Directives. 7. Against the order of Hon'ble ITAT in IT(SS) A.No.45/Mds/2004 the assessee preferred an appeal before the Hon'ble Madras High Court in TCA No.229 of 2007. The Hon'ble High Court vide its order in TCA No.229 of 2007 dated 28.01.2014 restored the appeal back to the file of the |TAT which is presently posted as IT(SS) A.No.45/Mds/2004. - 3 - DATES AND EVENTS S.NO DATE EVENTS ISSUES 1 13.09.1996 Search in the premises of the Assessee (1.04.1986 to 31.03.96 & 1.4.96 to 14.09.96) & date of Warrant of Authorization. 6.12.1996 Date of Prohibitory Order 2 16.07.1997 Notice under section 158BD r.w.s 158BC served on 18.07.1997 3 19.09.1997 Return of income of filed by the assessee 4 29.07.1998 Order under section 158BC r.w.s. 158BD 1.Addition made substantive in the case of M.G. Pictures case was added protectively. 2. Unexplained credit in Bank 3. Income from sale of Garment Export quota. 5 20.05.2002 Order of ITAT in IT(SS) A No.150/Mds/1998 1. Hon'ble ITAT held that only real Income is to be assessed and not assumed income hence protective addition deleted. This issue has reached finality since no appeal has been filed by the department. 2. Addition on account of dealing in quotas the matter was export remanded to AO to examine and only include the peak credit as income. 6. Memorandum of TCA.125 of 2005 filed before High Court Question of law : Whether the orders Memorandum of passed under 158BC rw.s.158BD is filed before High Court barred by limitation. 7 13.07.2011 Order of High Court in TCA.125 of 2005 Order of Hon’ble ITAT was set aside and restored back to tribunal. 8 16.03.2004 Order under Section 158BC r.w.s 158 BC r.w.s 254 Following addition was by AO pursuant to the orders of ITAT in IT(SS) A No.150/Mds/1998. 1. Unexplained credit in Bank Account. 2. Income from sale of Garment Export quota. 9 06.10.2006 Order of ITAT in IT(SS)A No.45/Mds/2004 Aggrieved with the giving effect to order of the Hon’ble ITAT in IT(SS) A No.150/Mds/1998 the assessee preferred an appeal - 4 - and the same was dismissed by ITAT. 10 .01.2007 Memorandum of TCS file before High Court The question raised was whether the undisclosed income was computed by Assessing Officer in accordance to the directions given by the Hon'ble ITAT. Whether the tribunal was right in upholding the orders of the AO to the effect that the profit of 25% has been earned on sale of quote without any evidence for the same. Whether the tribunal was right in upholding the additions on account of 1) Deposit of amounts in bank account treated as undisclosed income 2) Quota rights 3) cash credit 4) other loans. 11 28.01.2014 Order of High Court in TCS. 229 of 2007 Order of ITAT in IT(SS) A No.45/Mds/2004 also restored back to ITAT. 3. It could be gathered that initially the assessee was assessed on 29.07.1998 u/s 158BD r.w.s. 158BC wherein it was saddled with certain additions / disallowance. One of the additions was related with transactions of export quotas. The assessee did not reflect any such income whereas the seized documents revealed that the assessee carried out such transactions. For the same, the assessee maintained bank account with SBI, Mahabalipuram Branch under the name & style of ‘M.G. International’ and ‘G.M. International’. In these accounts, there were large deposits in cash as well as in cheques. The assessee admitted that the credit represents proceeds received from exporters for sale of quotas. Such quota sales amounted to Rs.212.94 Lacs against which Ld. AO estimated as addition of 25% and made addition - 5 - of Rs.53,24,073/- to the income of the assessee for the block period. However, at the same time, in para-6 of the order, Ld. AO directed the assessee to prove the source of cash deposits made in the same bank accounts. The assessee reiterated that the cash entries represent transactions of trading in quotas. Rejecting the same, Ld. AO made separate addition of cash deposits as well as credit entries as follows: - Financial Year Cash Deposits Credit deposits 1992-93 6,28,500/- 11,11,042/- 1993-94 33,17,000/- 31,96,622/- 1994-95 17,86,000/- 70,29,574/- 1995-96 34,05,000/- 60,12,500/- 1996-97 20,000/- 15,90,000/- 91,56,500/- 1,89,39,738/- In other words, besides making estimated addition of 25% in quota transactions, Ld. AO made separate addition aggregating to Rs.2,80,96,238/-. 4. Upon further appeal, the issue of addition arising out of sale of export quotas was remanded back by the Tribunal vide order dated 20.05.2002 with a direction to the Ld. AO to include only the peak credit as income of the assessee. The issue of limitation was not entertained by the Tribunal. The issue of limitation was agitated by the assessee before Hon’ble High Court of Madras in TCA No.125 of 2005 dated 13.07.2011 wherein the matter was restored back to the Tribunal which is presently posted as IT(SS) No,150/Chny/1998. 5. In the meanwhile, pursuant to the directions of Tribunal, Ld. AO assessed the peak credit in the bank account as estimated income on sale of export quota and deleted the estimated addition of 25%. - 6 - However, Ld. AO did not provide any relief against cash and credit transactions arising out of same bank account. The assessee’s appeal against the same stood dismissed by the Tribunal vide order dated 06.10.2006 which was further agitated by the assessee before Hon’ble High Court of Madras in TCA No.229 of 2007 wherein the matter has been restored back to the Tribunal and this appeal has been posted as IT(SS) No.45/Chny/2004. The entire sequence has already been tabulated as above. 6. The Ld. AR, drawing attention to Tribunal’s order in MP No.95/Mds/2002 dated 08.08.2003 passed in IT(SS) No.150/Mds/1998 submitted that a finding has already been rendered by the Tribunal on the issue of limitation in paragraph-1 & 2 of the order which read as under: - By means of this application the assessee-petitioner has stated that the Tribunal has committed an error while coming to the conclusion that the assessment made on the claim u/s 158BC of the IT Act, 1961 was within time. The assessee has stated that the Tribunal has noted that there is no evidence in regard to the date of search while the order of assessment shows the date of search as 13.09.1996, The Tribunal in its order dated 20.05.2002 has observed in paragraph as under: - “8..... The order of assessment is passed by the AO shows that it is an order made under Sec.158BC and Sec.143(3) of the Act. The order further shows that consequent to the search made at the premises of the assessee came to be searched. The search that was so made on that basis was on 13.09.1996. The assessee stated in the grounds of appeal as reproduced above that the search warrant was served on him on 30.09.1996. However, the assessee has not filed any evidence in this regard along with the appeal that was filed. In the absence of evidence in this regard, we are unable to uphold the claim of the assessee.” 2. The contentions of the parties have been heard. The order of assessment framed shows that the assessment has been made based on the search made on the assessee and the search made on M.G.Pictures Ltd. The AO accordingly had framed the assessment both u/s 158BC and u/s 158BC read with Sec.158BD of the Act. If the assessment had been framed based on the search made on 13.09.1996, the assessment should have been framed by 30.09.1997. However, considering the fact that the assessment was framed with reference to the search made on M.G.Pictures (Chennai) Ltd. where certain note books maintained in the form of ledger, cash book were seized which showed the transaction of the assessee. Therefore, from the point of view the time available is two years from the end of the month in which the last of the authorizations for the search has - 7 - been made, which in the instant case is 13.09.1996. The two year period which run from 01.08.1996 and end with 30.09.1998. The assessment framed on 29.07.1998 in these circumstances would be a valid assessment. Accordingly, the Misc. Petition fails and is dismissed. The Ld. AR fairly submitted that the issue of limitation has already been dealt with by Tribunal as above and this fact remained to be brought to the notice of Hon’ble High Court of Madras. Considering the same, we find that the issue of limitation has already been adjudicated by the Tribunal and we see no reason to differ with the same until any change in facts was shown to us. Accordingly, appeal IT(SS) No.150/Chny/1998 stand dismissed. 7. So far as the merits of the case are concerned, we find that matter was adjudicated by Tribunal in order dated 20.05.2002 as under: - 7. The income that was treated as income of the assessee on a protective basis (para 3 above) we of the opinion could not be allowed to remain because undisclosed income must be real income of the assessee and not assumed income which the A.O. is doubting. The addition to that extent is deleted. In so far as the addition on account of dealing in export quotas the matter is remanded to the A.O. to examine it and include only the peak credit as income of the assessee. It could be seen that Ld. AO was directed to include peak credit of export quota bank transactions as the income of the assessee. Pursuant to these directions, an assessment has been framed by Ld. AO on 16.03.2004 wherein peak credit has been worked out to be Rs.27.46 Lacs and added to the income of the assessee. However, the grievance of the assessee stem from the fact that Ld. AO has not reduced the separate additions arising out of same bank accounts. The assessee has reiterated that the cash deposits represent transactions of quota transactions. This fact remains undisputed before us. Therefore, the addition to the extent of Rs.91,56,500/- representing - 8 - cash deposit could not be sustained since the same would amount to double addition. So far as the credit deposit of Rs.189.39 Lacs is concerned, the same has been computed in Annexure-I to III of order dated 29.07.1998. Upon perusal of these transactions, it could be gathered that the same are mixed transactions i.e. quota advances as well as receipt of loans. The Ld. AO is directed to eliminate quota advances from the additions since the addition of peak credit has already been made in the hands of the assessee and adding the same separately would amount to double addition. In other words, the transactions aggregating to Rs.189.39 Lacs shall be segregated and the quota transactions shall be deleted from the additions. We order so. The appeal stand partly allowed in terms of our above order. Conclusion 8. In the result, IT(SS) No. 150/Chny/1998 stand dismissed whereas IT(SS) No.45/Chny/2004 stand partly allowed. Order pronounced on 13 th July, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद: / ACCOUNTANT MEMBER चे,ई / Chennai; िदनांक / Dated : 13-07-2022 EDN/- आदेश की Tितिलिप अ7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF