THE ACIT, CEN. Circle-2., Baroda V. Smt. Pushpa M.Sharma L/h. of late M.G.Sharma, Baroda

ITSSA 88/AHD/2003

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9350 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-05-2010
• Assessment Year: misc
• Appeal Filed On: 27-03-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CTI
• Keywords: Income from undisclosed sources; Loose papers; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 4.05.10 DRAFTED ON: 4.05.10 IT(SS)A NO.88/AHD/2003 BLOCK PERIOD 1990-1991 TO 28.07.1999 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, 6 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA. VS. SMT. PUSHPA MAHESHCHANDRA SHARMA PRATAPNAGAR, BARODA. PAN/GIR NO. : (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR CTI D.R. RESPONDENT BY: NONE O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-IV, AHM EDABAD, DATED 31.12.2002 BY TAKING FOLLOWING GROUNDS. THE LD. C.I.T.(APPEALS) HAS ERRED IN DELETING THE FOLLOWING ADDITIONS ON THE BASIS OF CASH FLOW STATEMENTS FILE D BEFORE THE LD.C.I.T. (APPEALS) WHICH HAS NOT BEEN PROVIDED TO THE ASSESSING OFFICER UNDER RULE 46A(3) FOR HIS REBUTT AL. 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.30,000/- MADE ON ACCOUNT OF UNDISCLO SED ADVANCE TO SHRI NANDUBHAI MARWADI. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.10,000/- MADE ON ACCOUNT OF UNDISCLO SED ADVANCE TO SHRI MEHMAN. - 2 - 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.35,000/- MADE ON ACCOUNT OF UNDISCLO SED ADVANCE TO SHRI SHANKARBHAI. 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.30,000/- MADE ON ACCOUNT OF UNDISCLO SED ADVANCE TO SHRI PRADI C. MERCHANT. 5. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.10,000/- MADE ON ACCOUNT OF UNDISCLO SED ADVANCE TO SHRI PATHANBHAI. 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.1,02,160/- MADE ON ACCOUNT OF UNDISC LOSED ADVANCE TO SHRI SHEIKH JAN MOHD. 7. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.5,500/- MADE ON ACCOUNT OF UNDISCLOS ED ADVANCE TO SHRI N.R.SURTI AND SHRI K. R. AGARWAL. 2. AT THE OUTSET, THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS)HAS VIOLATED RULE 46A(3) OF THE INCOME TAX RULES, 1962 BY ACCEPTING CASH FLOW STATEMENT OF THE ASSESSEE AND TAKING INTO CONS IDERATION THE SAME HAS DELETED THE VARIOUS ADDITIONS MADE BY THE LEARN ED ASSESSING OFFICER WITHOUT CONFRONTING THE SAME TO THE LEARNED ASSESSING OFFICER. HE FURTHER SUBMITTED THAT OTHERWISE ON MERITS, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS PASSED A WE LL REASONED ORDER CONSIDERING ALL ASPECTS OF THE ISSUES AND THE REVENUE HAS NO CASE. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENT ATIVE AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THAT THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS)HAS ACCEPTED CASH FLOW STATEMENT FILED BY THE ASSESSEE WHICH WAS NOT FILED BEFORE THE LEARNED ASSESSING OF FICER AND WHICH WAS NOT CONFRONTED TO THE LEARNED ASSESSING OFFICER BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BEFORE ACCEPTIN G THE SAME AND TAKING THE SAME INTO CONSIDERATION AND DELETING THE VARIOUS ADDITIONS - 3 - MADE BY THE LEARNED ASSESSING OFFICER. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS HELD AS UND ER:- IT IS OBSERVED THAT THE APPELLANT HAS BEEN FILING HIS REGULAR RETURNS OF INCOME SINCE A.Y. 96-97. HOWEVER, SINCE A.Y.98-99, HE HAS BEEN FILING THE RETURN U/S.49AF OF THE ACT. NO BOOKS OF ACCOUNT HAVE ADMITTEDLY BEEN MAINTAINED. DURING THE SEARCH VARIOUS LOOSE PAPERS AND OTHER INCRIMINATING DOCUME NTS WERE SEIZED, WHICH REVEALED THAT THE ASSESSEE WAS DOING MONEY LENDING BUSINESS AND HAD MADE ADVANCES TO VARIOUS P EOPLE. ONE UNDISCLOSED BANK ACCOUNT WAS ALSO FOUND IN WHICH HE HAD MADE TOTAL DEPOSIT OF RS.1,89,000/- ON VARIOUS DATES. T HE ASSESSING OFFICER PROCESSED THE BLOCK RETURN AND FRAMED THE A SSESSMENT U/S 158BC OF THE ACT, AT AN INCOME OF RS.12,10,100/- FO R THE BLOCK PERIOD, AS AGAINST THE RETURNED INCOME OF RS.10,94, 909/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT COMPLIED AND SUBMITTED A STATEMENT OF VARIOUS ASSETS AND LIABILI TIES, AS ON 28.07.1999, I.E. THE DATE OF SEARCH, FOR THE ENTIRE BOCK PERIOD, CLAIMED TO BE PREPARED ON THE BASIS OF SEIZED MATER IAL AND OTHER RECORDS AVAILABLE WITH HIM. BEFORE THE AO THE ASSES SEE CONTENDED THAT ALL THE ASSETS, WHICH WERE FOUND IN THE SEARCH HAVE BEEN DULY ACCOUNTED FOR IN THE STATEMENT OF ASSETS AND LIABILITIES, THEREFORE, EVERYTHING IS ACCOUNTED FOR. HOWEVER, IT IS SEEN THAT THE A.O. DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE. HE DID NOT GIVEN ANY REASON FOR NOT ACCEPTING THE SAME, AND, P ROCEEDED TO MAKE AN ADDITION OF RS.7,34,740/- ON ACCOUNT OF UND ISCLOSED ADVANCES. ALL THE DEPOSITS IN BANK ACCOUNT NO.5662, WITHOUT GIVING BENEFIT OF PEAK, ESTIMATED INTEREST INCOME O N THE ADVANCES AND ALSO ADDED INSTALLMENT PAID TOWARDS VISI, IN AL L, HE MADE THE ADDITIONS OF RS.11,06,091/- TO HIS RETURNED INCOME. HE ALSO OBSERVED THAT DURING THE BLOCK PERIOD THE ASSESSEE HAD EARNED UNACCOUNTED INCOME OF RS.11,55,000/- FROM THE BUSIN ESS OF SALE OF MILK AND MILK PRODUCTS, AND ALLEGED THAT THE SAM E IS INVESTED IN VARIOUS ASSETS. IN THE ASSESSMENT PROCEEDINGS AN D ALSO IN THE APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT HE HAS NOT EARNED UNACCOUNTED INCOME FROM THE BUSINESS OF SALE OF MILK AND MILK PRODUCTS. HE ADMITTED OF DOING UNDISCLOSED MON EY LENDING BUSINESS AND WHATEVER FOUND DURING THE SEARCH HAS N OW BEEN ACCOUNTED FOR IN THE STATEMENT OF ASSETS AND LIABIL ITIES. HE SUBMITTED THAT HE HAS DECLARED HIS UNACCOUNTED INCO ME IN THE BLOCK RETURN. HOWEVER, WITH THE HELP OF THIS STATEM ENT, IT WAS NOT POSSIBLE TO KNOW THE STATUS OF ALL THE ASSETS FOUND , HE WAS ASKED TO PREPARE A CASH FLOW STATEMENT FOR THE ENTIRE BLO CK PERIOD TO PROVE THE NEXUS BETWEEN THE RECEIPTS AND ITS APPLIC ATION. HE - 4 - PREPARED THE SAME AND SUBMITTED BEFORE ME, CONTENTS OF WHICH ARE BEING DISCUSSED BY ME, THE LATTER PART OF THIS ORDER. 4. RULE 46A READS AS UNDER:- [PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE [DEPU TY COMMISSIONER (APPEALS)][AND COMMISSIONER (APPEALS)] . (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)], ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE PRODUCED BY HI M DURING THE COURSE OF PROCEEDINGS BEFORE THE [ASSESSING OFFICER ], EXCEPT IN THE FOLLOWING CIRCUMSTANCES, NAMELY: (A) WHERE THE [ASSESSING OFFICER] HAS REFUSED TO A DMIT EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE [ASSESSING OFFICER]; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE [ASSESSING OFFICER] ANY EVIDE NCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE [ASSESSING OFFICER] HAS MADE THE ORD ER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO TH E APPELLANT TO ADDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REAS ONS FOR ITS ADMISSION. (3) THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS TH E CASE MAY BE, THE COMMISSIONER (APPEALS)] SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE [A SSESSING OFFICER] HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROS S-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT; OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. - 5 - (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE [DEPUTY COMMISSIONER (APPEALS)] [OR, AS THE CASE MA Y BE, THE COMMISSIONER (APPEALS)] TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENA BLE HIM TO DISPOSE OF THE APPEAL, OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE [ASSESSING OFF ICER]) UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271. 5. FURTHER THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF SMT. PRABHAVATI S. SHAH VS. CIT (1998) 231 ITR 1(BOM) HE LD AS UNDER:- ON A PLAIN READING OF R. 46A, IT IS CLEAR THAT THI S RULE IS INTENDED TO PUT FETTERS ON THE RIGHT OF APPELLANT TO PRODUCE BEFORE THE AAC ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF THE P ROCEEDINGS BEFORE THE ITO, EXCEPT IN THE CIRCUMSTANCES SET OUT THEREIN. IT DOES NOT DEAL WITH THE POWERS OF THE AAC TO MAKE FU RTHER ENQUIRY OR TO DIRECT THE ITO TO MAKE FURTHER ENQUIR Y AND TO REPORT THE RESULT OF THE SAME TO HIM. THIS POSITION HAS BE EN MADE CLEAR BY SUB-R. (4) WHICH SPECIFICALLY PROVIDES THAT THE RESTRICTIONS PLACED ON THE PRODUCTION OF ADDITIONAL EVIDENCE BY THE APPELLANT WOULD NOT AFFECT THE POWERS OF THE AAC TO CALL FOR THE PRODUCTION OF ANY DOCUMENT OR THE EXAMINATION OF ANY WITNESS T O ENABLE HIM TO DISPOSE OF THE APPEAL. UNDER SUB-S. (4) OF S. 25 0, THE AAC IS EMPOWERED TO MAKE SUCH FURTHER INQUIRY AS HE THINKS FIT OR TO DIRECT THE ITO TO MAKE FURTHER INQUIRY AND REPORT T HE RESULT OF THE SAME TO HIM. SUB-S. (5) OF S. 250 EMPOWERS THE AAC TO ALLOW THE APPELLANT, AT THE HEARING OF THE APPEAL, TO GO INTO ANY GROUND OF APPEAL NOT SPECIFIED IN GROUNDS OF APPEAL, ON HIS B EING SATISFIED THAT THE OMISSION OF THE GROUND FROM THE FORM OF AP PEAL WAS NOT WILFUL. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE POWERS OF THE AAC ARE MUCH WIDER THAN THE POWERS OF AN ORDINARY C OURT OF APPEAL. THE SCOPE OF HIS POWERS IS CO-TERMINOUS WIT H THAT OF THE ITO. HE CAN DO WHAT THE ITO CAN DO. HE CAN ALSO DIR ECT THE ITO TO DO WHAT HE FAILED TO DO. THE POWER CONFERRED IN AAC UNDER SUB-S. (4) OF S. 250 BEING QUASI-JUDICIAL POWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME IF THE FACTS AND CIRCUMSTA NCES JUSTIFY. IF THE AAC FAILS TO EXERCISE HIS DISCRETION JUDICIALLY AND ARBITRARILY REFUSES TO MAKE ENQUIRY IN A CASE WHERE THE FACTS A ND - 6 - CIRCUMSTANCES SO DEMAND, HIS ACTION WOULD BE OPEN F OR CORRECTION BY A HIGHER AUTHORITY. ON A CONJOINT REA DING OF S. 250 AND R. 46A, IT IS CLEAR THAT THE RESTRICTIONS PLACE D ON THE APPELLANT TO PRODUCE EVIDENCE DO NOT AFFECT THE POWERS OF THE AAC UNDER SUB-S. (4) OF S. 250. THE PURPOSE OF R. 46A APPEARS TO BE TO ENSURE THAT EVIDENCE IS PRIMARILY LED BEFORE THE ITO. B.L . CHOUDHURY VS. CIT (1976) 105 ITR 371 (ORI) : TC 7R.289 RELIED ON. 6. A READING OF THE ABOVE RULE 46A AND THE DECISION OF THE HON'BLE BOMBAY HIGH COURT SHOWS THAT RULE 46A ONLY PREVENTS THE ASSESSEE FROM FILING ANY ADDITIONAL EVIDENCE BEFORE THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BEFORE ACCEPTING THE SAME SHOULD CONFR ONT IT TO THE LEARNED ASSESSING OFFICER. THERE IS NO RESTRICTION ON THE POWER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO CALL FOR ANY EVIDENCE FROM THE ASSESSEE FOR THE PURPOSE OF DECID ING THE APPEAL OF THE ASSESSEE. WHEN AN EVIDENCE IS FURNISHED BY THE ASSE SSEE IN COMPLIANCE TO THE DIRECTION OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THE ADMISSION OF SUCH EVIDENCE BY THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) CANNOT BE READ AS VIOLATING THE PROVISIONS OF RULE 46A. IN THE INSTANT CASE, THE CASH FLOW STATEMENT WAS FILED BY THE ASSESSEE ON THE REQUIREMENT OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) AND NOT OF ITS OWN. THEREFORE, RULE 46 A(4) WILL COME INTO PLAY AND IT IS NOT NECESSARY FOR THE LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) TO CONFRONT THE LEARNED ASSESSING OFFI CER WITH THE SAME. THEREFORE, WE FIND NO ERROR IN THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) IN DECIDING THE APPEAL OF THE A SSESSEE ON THE BASIS OF CASH FLOW STATEMENT WHICH WAS SUBMITTED BY THE A SSESSEE ON THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). - 7 - 7 MOREOVER, WE FIND THAT THE REVENUE COULD NOT DISP UTE THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THAT THE SOURCES OF THE RECEIPT WHICH WERE TABULATED IN THE CASH FLO W STATEMENT WERE ALSO FURNISHED BY THE ASSESSEE BEFORE SEARCH OFFICIALS A ND LEARNED ASSESSING OFFICER. THUS, IT IS OBSERVED THAT THE INFORMATION CONTAINED IN THE CASH FLOW STATEMENT WAS NOT A FRESH INFORMATION GIVEN TO THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FOR THE VERY FI RST TIME AND THUS, IN TRUE SENSE IT WAS NOT A FRESH EVIDENCE ALSO. ON MERIT, WE FIND THAT THE LEARNED ASSESSING OFFICER HAS NOT GIVEN A FINDING T HAT EVEN AFTER TAKING INTO CONSIDERATION ALL THE SOURCES WHICH WERE AVAIL ABLE TO THE ASSESSEE AS PER SEARCH MATERIAL WAS NOT SUFFICIENT TO EXPLAI N THE INVESTMENTS OF THE ASSESSEE IN RESPECT OF WHICH ADDITIONS WERE MAD E IN THE ORDER OF ASSESSMENT. THUS, THE ORDER MADE ON THIS COUNT IS E VEN OTHERWISE UNSUSTAINABLE. THE LEARNED DEPARTMENTAL REPRESENTA TIVE SQUARELY ADMITTED BEFORE US THAT ON MERITS THE REVENUE HAS N O CASE AS THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HAS PASSED A WE LL REASONED ORDER CONSIDERING ALL THE ASPECTS OF ISSUE WHILE DE LETING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER. THEREFORE, THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 07 TH DAY OF MAY 2010. SD/- SD/- (BHAVNESH SAINI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 07 TH DAY OF MAY, 2010 PARAS - 8 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 04.05.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 04.05.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 04.05.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 04.05.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 05.05.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 07.05.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 07.05.2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------