ACIT, Ernakulam V. S. Sachithananda Pai, Ernakulam

ITSSA 9/COCH/2007

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 8553 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-02-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 12-01-2011
• Assessment Year: misc
• Appeal Filed On: 15-03-2007
• Court: TRIBUNAL
• Department Lawyers: S C SONKAR
• Assessee Lawyers: R RAJASEKHARAN CAAR
• Keywords: Gift; Corroborative evidences; Retraction
• Section: 143(3); 132; 154

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL COCHIN BEN CH, COCHIN BEFORE S/SHRI N.VIJAYAKUMARAN, JM AND SANJAY AR ORA, AM I.T.(SS)A. NOS. 02, 09 & 10/COCH/2007 BLOCK PERIOD : 1.4.1996 TO 18.4.2002 S.SACHITHANANDA PAI, M/S. A.GEERIPAI JEWELLERY, BROADWAY, ERNAKULAM. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-3, ERNAKULAM.. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) (AND VICE VERSA) ASSESSEE BY SHRI R.RAJASEKHARAN, CA-AR REVENUE BY SHRI S.C. SONKAR, CIT-DR O R D E R PER SANJAY ARORA, AM: THESE ARE CROSS-APPEALS, I.E., TWO BY THE REVENUE AND ONE BY THE ASSESSEE, ARISING OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCHI (`CIT(A) FOR SHORT) DATED 3.11.2006, DECIDING THE ASSESSEES APP EAL AGAINST ITS ASSESSMENT U/S. 158BC READ WITH SECTION 158BD AND 143(3) OF THE INCOME-TA X ACT, 1961 ('THE ACT', HEREINAFTER) DATED 22.5.2006 FOR THE BLOCK PERIOD 1.4.1996 TO 18 .4.2002, THE DATE OF SEARCH. THE SECOND APPEAL BY THE REVENUE (IT (S&S) A NO. 9/COCH /2007) CONTESTS THE DELETION OF LEVY OF SURCHARGE ON THE ASSESSED TAX PER ORDER U/S . 154 DATED 14/6/2006. 2. THE BACKGROUND FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PARTNER IN M/S. A. GEERIPAI JEWELLERS, BROADWAY, ERNAKULAM, A FIRM ENG AGED IN JEWELLERY BUSINESS, WHICH WAS SUBJECT TO SEARCH U/S. 132 OF THE ACT, BOTH AT ITS BUSINESS PREMISES AS WELL AS RESIDENCES OF THE PARTNERS, INCLUDING THE ASSESSEE. THE IMPUGNED ASSESSMENT FOLLOWS SEIZURE OF INCRIMINATING DOCUMENTS AND OTHER VALUAB LES THEREAT, WHICH WE SHALL DEAL WITH ISSUE-WISE. IT(SS)A.NOS. 02,09 & 10/COCH/2007 2 3. THE FIRST GROUND OF THE ASSESSEES APPEAL RELATE S TO THE ADDITION ON ACCOUNT OF CASH FOUND AND SEIZED FROM THE RESIDENCE OF THE ASSESSEE , I.E., ` 1,95,120/-. THE ASSESSING OFFICER (AO) ADDED THE ENTIRE AMOUNT, REJECTING THE ASSESSEES CASH RECONCILIATION STATEMENT (FOR PERIOD 01.4.1997 TO 18.4.2002) IN VI EW OF THE ASSESSEES DEPOSITION VIDE SWORN STATEMENT MADE AT THE TIME OF SEARCH, ADMITT ING NON-EXPLANATION OF THE CASH FOUND. IN HIS VIEW, THE RECONCILIATION STATEMENT, WHICH INCLUDED CASH DECLARED BY THE ASSESSEES DAUGHTER UNDER VDIS, 1997; THE CASH WITH DRAWALS BY THE ASSESSEES WIFE, AS WELL AS THE AMOUNTS RECEIVED BY HER BY WAY OF GIFTS AND PER ENCASHMENT OF NSC, ETC., WAS PREPARED ONLY TO EXPLAIN THE CASH FOUND IN SEAR CH. THE LD. CIT(A), IN APPEAL, EXAMINING THE ASSESSEES ADDITIONS, CONSIDERED THE CASH TO THE EXTENT OF ` 1,45,120/- AS EXPLAINED, SO THAT HE SUSTAINED THE ADDITION FOR TH E BALANCE ` 50,000/-. AGGRIEVED, BOTH THE PARTIES ARE IN APPEAL (REVENUES GROUND NO. 2 IN IT S&S)A NO.10/COCH/2007). 4.1 BEFORE US, THE LD. AR WOULD SUBMIT THAT THE ASS ESSEE HAD DISCLOSED A TAXABLE CASH OF ` 40,000/- PER HIS RETURN OF NET WEALTH AS ON 31.3.19 97, PAYING TAX THEREON, AND WHICH IS ONLY AFTER EXCLUDING `50,000/ - WHICH DOES NOT QUALIFY TO BE AN ASSET UNDER THE WEA LTH TAX ACT. AS SUCH, THERE IS NOTHING AMISS IN THE ASS ESSEES STATING THE OPENING CASH BALANCE AT ` 90,000/- , I.E., AS ON 1.4.1997, SO THAT THE LD. CI T(A) HAD ERRED IN RESTRICTING THE SAME AT RS. 60,000/-. FURTHER, THE ASSESSEES DAUGHTER IS RESIDING WITH HIM, BOTH AT THE TIME OF DECLARATION AS WELL AS THE SEARCH, SO T HAT HER DECLARATION OF CASH UNDER VDIS AT ` 1 LAKH ALSO COULD NOT BE IGNORED BY THE REVENUE. 4.2 THE LD. DR, ON THE OTHER HAND, WOULD RELY ON THE ASSESSMENT ORDER, STATING THAT THE ASSESSEE HAD HIMSELF ADMITTED THE CASH IN HAND AT T HE TIME OF SEARCH AS UNEXPLAINED, AND THE RECONCILIATION STATEMENT, FILED SUBSEQUENTLY, I S OF NO SIGNIFICANCE IN THE ABSENCE OF ANY BOOKS OF ACCOUNTS OR ANY SUPPORTING EVIDENCE/S. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 5.1 THE AO DID NOT ACCEPT THE ASSESSEES CASH R ECONCILIATION STATEMENT IN VIEW OF THE ADMITTED FACT OF NON-MAINTENANCE OF ANY BOOKS OF AC COUNTS RELATING TO PERSONAL MATTERS, IT(SS)A.NOS. 02,09 & 10/COCH/2007 3 SO THAT THE SAME WAS CONSIDERED BY HIM AS MERELY AS AN AFTERTHOUGHT. THE LD. CIT(A), ON THE OTHER HAND, ACCEPTED THE SAME, DISTURBING ONLY TWO COMPONENTS THEREOF, I.E., THE OPENING BALANCE, WHICH HE ACCEPTED AT ` 0.60 LAKHS (AS AGAINST THE DISCLOSED FIGURE OF ` 0.90 LAKHS) AND GIFTS RECEIVED DURING THE PERIOD AT `0. 6 0 LAKHS AS AGAINST THE STATED FIGURE OF ` 0.80 LAKHS. 5.2 FIRSTLY, IN OUR VIEW, A NON-DEFINITE REPLY BY T HE ASSESSEE PER THE SWORN STATEMENT AT THE TIME OF SEARCH IN THE MATTER, WOULD NOT PRECLUD E HIM FROM EXPLAINING THE CASH FOUND IN SEARCH, I.E., SUBSEQUENTLY, AS SOUGHT TO BE DONE BY IT ON THE BASIS OF THE RECONCILIATION STATEMENT. THE NON-MAINTAINING OF ANY PERSONAL BOOK S BY THE ASSESSEE AND HIS FAMILY MEMBERS IS ACCEPTED. IN FACT, UNDER THE CIRCUMSTAN CES, IT WOULD, ON THE CONTRARY, BE SURPRISING IF THE ASSESSEE WAS ABLE TO EXPLAIN THE CASH IN HAND WITH IT, UNLESS, OF COURSE, IT IS WITH REFERENCE TO A RECENT TRANSACTION, AS (SAY) A WITHDRAWAL FROM THE BANK OR THE PARTNERSHIP FIRM ONLY SOMETIME EARLIER. IT IS DIFF ICULT TO RECOLLECT AND CORRELATE ALL THE RELEVANT FACTS IMMEDIATELY. AS SUCH, HIS STATING OF BEING UNABLE TO EXPLAIN THE SAME CANNOT BE HELD AGAINST HIM, PARTICULARLY WHEN HE ST ATES THAT THIS WOULD BE ON ACCOUNT OF PERSONAL SAVINGS FROM BUSINESS AS WELL AS AGRICULTU RAL INCOME. THE REVENUE IS OBLIGED TO AND, RATHER, ENTITLED TO VERIFY THE CASH RECONCILIA TION STATEMENT, WHICH IS ONLY THE ASSESSEES EXPLANATION FOR THE ADMITTED CASH AVAILA BLE WITH HIM. THE AO WAS, THUS, NOT CORRECT IN NOT ADMITTING AND EXAMINING THE SAME. 5.3 COMING TO THE SAID STATEMENT, AS AFORENOTED, TH E LD. CIT(A) HAS DISTURBED ONLY TWO COMPONENTS OF THE SAID STATEMENT. WITH REGARD TO T HE OPENING BALANCE, WE FIND THE ASSESSEES CLAIM AS VALID. THE RETURN COULD ONLY B E CONSIDERED AS HAVING BEEN FILED CORRECTLY, I.E., IN CONSISTENCE WITH THE APPLICABLE PROVISIONS, PARTICULARLY WHEN IT HAS BEEN SO THROUGH A REPUTED FIRM OF CHARTERED ACCOUNTANTS, SO THAT THE ASSESSEE HAD EXCLUDED THE EXEMPT AMOUNT OF ` 50,000/- FROM THE TAXABLE CASH-IN-HAND OF ` 40,000/- DISCLOSED PER HIS STATEMENT OF NET WEALTH AS ON 31/3/1997. AS SUCH, CASH-IN-HAND OF ` 90,000/- COULD BE SAID TO HAVE BEEN POSSESSED AND WOULD BE THE AMOUNT OF OPENING CASHIN-HAND, I.E., AS ON 1.4.1997. IT(SS)A.NOS. 02,09 & 10/COCH/2007 4 5.4 AS REGARDS THE CLAIM OF ` 1 LAKH DECLARED PER VDIS, 1997 BY THE ASSESSEES DAUGHTER, RADHIKA S. PAI, IN OUR VIEW, THE SAME CAN NOT BE ACCEPTED. THERE IS FIRSTLY NO EVIDENCE TO SHOW THAT THE CASH ARISING TO HER DURIN G THE SPECIFIED YEARS (FINANCIAL YEARS 1987 TO 1991) STOOD ACTUALLY RETAINED AS SUCH OVER THE YEARS, I.E., UP TO APRIL, 2002. THE DISCLOSURE IS OF DECEMBER, 1997 SO THAT THE INFEREN CE OF IT BEING HELD IN THE STATED/DECLARED FORM CAN, IF AT ALL, APPLY ONLY UP TO THAT DATE. IN FACT, EVEN PER THE STATEMENT, THE CASH BALANCE FALLS BELOW ` 1 LAKH FOR TWO YEARS (2000, 2001), SO THAT THERE HAS BEEN A UTILIZATION OF THE SAME, EVEN IF CONSIDE RED AS HAVING BEEN AVAILABLE RIGHT UP TO THE YEAR 1999. IN OTHER WORDS, THERE CAN BE NO PRES UMPTION AS TO ITS CONTINUED RETENTION AND OF IT REMAINING UNUTILIZED FOR YEARS TOGETHER. FURTHER, THE `FORM SPECIFIED BY THE DECLARANT IS `CASH/BANK, SO THAT IT COVERS BALANCE (S) HELD WITH BANK(S) AS WELL. THE SCHEME OF THE VDIS REQUIRED THE DECLARANT THEREUNDE R TO INCORPORATE THE SAME IN HIS RECORDS, AND PRECISELY FOR THIS PURPOSE, SO THAT TH E SUBSEQUENT UTILIZATION OF THE SAME BY THE ASSESSEE OR ITS SUBSEQUENT DISCOVERY BY THE REV ENUE, MAY NOT LEAD IT TO BRING SUCH DISCLOSED ASSETS (UNDER VDIS) TO TAX AGAIN, I.E., O N THE BASIS OF BEING UNDISCLOSED. NO SUCH RECORD STANDS PLACED BEFORE ANY AUTHORITY. FU RTHER, THE DECLARANT HAS PAID TAX UNDER VDIS AT ` 74,599/-, SO THAT THE SOURCE FROM WHICH THE SAME ST ANDS PAID WOULD ALSO BE REQUIRED TO BE EXPLAINED, I.E., WHERE THE CLAIM QUA CASH AT THE GROSS AMOUNT IS BEING MADE. IN ANY CASE, THE TAX PAID UNDER VDIS OUGHT T O ALSO FORM PART OF CASH STATEMENT, WHERE RELIANCE ON THE DECLARATION THERE-UNDER IS BE ING PLACED. THIS IS PARTICULARLY SO, AS IT IS CLEAR THAT THE DAUGHTER DID NOT HAVE ANY CASH AP ART FROM THAT DISCLOSED UNDER VDIS, FOR THE SAME, IF SO, WOULD STAND TO BE INCLUDED IN THE CASH RECONCILIATION STATEMENT; THE VDIS DECLARATION ONLY REFLECTING THE HEREINBEFORE UNDISC LOSED INCOME/ASSET, SO THAT THE DISCLOSED CASH WOULD NOT FORM PART THEREOF. SECONDLY, IT NEEDS TO BE APPRECIATED THA T THE CASH WAS AVAILABLE IN THE RELEVANT YEARS, AND DID NOT COME INTO BEING IN DECEMBER 1997 , WHICH IS ONLY THE TIME OF IT BEING REPORTED TO THE REVENUE. THE SAME, THUS, IF AT ALL , OUGHT TO HAVE BEEN INCLUDED IN THE OPENING BALANCE AS ON 1997, WHICH IS ADMITTEDLY AT RS. 0.90 LAKHS. IN FACT, THE ASSESSEE HAS ITSELF BEFORE THE LD. CIT(A) CLAIMED THE OPENIN G CASH BALANCE OF 90,000/- AS HELD BY THE FAMILY, I.E., BY HIM AS COLLECTIVELY FOR ALL TH E FAMILY MEMBERS. IT(SS)A.NOS. 02,09 & 10/COCH/2007 5 5.5 EXCLUDING THE CASH ATTRIBUTABLE TO THE DAUGHTER S VDIS DECLARATION, LEAVES CASH WITH THE ASSESSEE (AS ON 31.3.2002), I.E., AS PER T HE CASH RECONCILIATION STATEMENT, AT ` 0.88 LAKHS, RESULTING IN A `TAXABLE CASH (TO WEALTH TAX ) AT `0.38 LAKHS. NO DOUBT, THE TIME FOR FILING THE RETURN UNDER THE WEALTH TAX ACT, 1957 HA D NOT FALLEN DUE ON 18.4.2002. HOWEVER, THE LAW IN SUCH AN EVENT PROVIDES FOR TAKI NG COGNIZANCE OF THE INCOME/ASSETS AS STAND RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DO CUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE ON OR BEFORE THE SEARCH DATE. TO WARD THIS, WE FIND THAT ALL THE CASH INFLOWS IN THE CASH STATEMENT (INCLUDING THE OPENIN G CASH BALANCE), OTHER THAN STATED TO BE RECEIVED AS GIFTS, ARE DOCUMENTED. GIFTS, PARTICULA RLY IN SMALL AMOUNTS, ARE NOT SUBJECT TO DOCUMENTATION, BEING RECEIVED IN THE NORMAL COURSE IN CASH. THE ARGUMENT, THOUGH REASONABLE, I.E., FACTUALLY, IS LEGALLY NOT TENABLE INASMUCH AS THE LAW PRESCRIBES COGNIZANCE OF ASSETS DOCUMENTED, AND NOTHING PREVEN TED THE ASSESSEE FROM MAINTAINING PERSONAL BOOKS. ON EXAMINING THE ISSUE FACTUALLY, THE LD. CIT(A) HAS FOUND THE CLAIM OF CASH GIFTS AS REASONABLE TO THE EXTENT OF ` 0.60 LAKHS (AGAINST A TOTAL OF ` 80,000/-). AT THE SAME TIME, HOWEVER, IT CANNOT BE IGNORED THAT, FIRS TLY, APART FROM BEING NOT RECORDED, THERE IS NO MENTION OF THE OCCASION/S OR THE DONOR/ S, I.E., THE CLAIM IS SANS ANY BASIC INFORMATION, SO AS TO BE ABLE TO MAKE ANY FAIR AND INFORMED ASSESSMENT IN ITS RESPECT. ALSO, IT IS TO BORNE IN MIND THAT GIFTS ARE NOT A O NE-WAY TRACK, AS THE SAME ARE, LIKEWISE, GIVEN AS WELL. THIS WOULD BE PARTICULARLY SO IN TH E CASE OF AN ASSESSEE WHO IS A PATRIARCH OF AN EXTENDED FAMILY WITH A GOOD SOCIAL STANDING. THERE WOULD BE SEVERAL OCCASIONS DURING THE RELEVANT YEARS, I.E., OF FAMILY AND RELI GIOUS FESTIVALS, AT WHICH GIFTS ARE CUSTOMARILY GIVEN, WHILE THE CASH STATEMENT REFLECT S NONE. IN FACT, IN THIS CONTEXT IT MAY BE NOTED THAT THE MARRIAGE OF THE ASSESSEES SON, R AMESH PAI, ITSELF TOOK PLACE ABOUT FOUR MONTHS PRIOR TO THE DATE OF SEARCH. TAKING THE TOTA LITY OF THE CIRCUMSTANCES IN VIEW, AS WELL AS THE LEGAL MANDATE, WE CONSIDER THE CASH BAL ANCE OF ` 4 0,000/- AS EXPLAINED, AND THE BALANCE AS UNEXPLAINED. WE DECIDE ACCORDINGLY. 6.1 THE FACTS IN RELATION TO THE SECOND ADDITION, W HICH IS IN RESPECT OF GOLD JEWELLERY FOUND AND SEIZED FROM THE ASSESSEES RESIDENCE, ARE AS FOLLOWS:- FOUND: 17163.10 GM. (NET WEIGHT 16031.74 GMS.) SEIZED: 10256.450 GMS. (NET WEIGHT 9942.910 GMS) IT(SS)A.NOS. 02,09 & 10/COCH/2007 6 (*) THE DIFFERENCE BETWEEN THE GROSS AND NET WEIGHT IS ON ACCOUNT OF (WEIGHT OF) STONES. THE ASSESSEE VIDE HIS SWORN STATEMENT AT THE TIME O F SEARCH SUBMITTED THAT A TOTAL OF 59 KG. OF GOLD JEWELLERY WAS DECLARED UNDER VDIS 1997, APART FROM THAT BEING SHOWN VIDE WEALTH TAX RETURNS. FURTHER, HIS SISTER, SMT. SEET HA SHENOY, HAD GIVEN A GOLD LOAN OF 1057 GMS. TO M/S. A.GEERIPAI JEWELLERS SOME 15 YEARS AGO , WHEREFROM IT WAS WITHDRAWN SUBSEQUENTLY FOR SAFE-KEEPING AT HIS RESIDENCE. HI S SON, RAMESH PAI, GOT MARRIED FOUR MONTHS AGO, AND HIS WIFE HAD ALSO BROUGHT SOME JEWE LLERY WITH HER AT THE TIME OF MARRIAGE. TAKING ALL THESE INTO ACCOUNT, NEARLY 6 KGS. OF GOLD ORNAMENTS FOUND FROM HIS RESIDENTIAL PREMISES WAS STATED AS EXPLAINED/DISCLO SED, EXPRESSING INABILITY TO EXPLAIN THE BALANCE, AND FOR WHICH HE WAS PREPARED TO PAY TAX T HEREON. HOWEVER, THE ASSESSEE DID NOT DECLARE THE SAME VIDE HIS RETURN OF UNDISCLOSED INCOME. DURING THE ASSESSMENT PROCEEDINGS, HE EXPLAINED THAT THE ENTIRE JEWELLERY FOUND IN SEARCH FROM THE RESIDENCE AS UNDER (ALONG WITH THE FIGURES QUA THAT ALLOWED BY THE LD. CIT(A): (WEIGHT IN G MS.) HELD BY / QTY.(GMS.) DECLARED ALLOWED BY CIT(A) ASSESSEE AND HIS WIFE 3779.010 3779.010 SEETHA SHENOY 1057.250 NIL RADHIKA S. PAI 1145.580 700.000 (DAUGHTER) SHRI VISHNU NARAYAN 457.270 457.270 (SON MAJOR UNMARRIED) SHRI RAMESH S.PAI 433.000 250.000 (MAJOR SON) DHANYA S.PAI 3119.000 1000.000 (DAUGHTER-INLAW)/ NALINI S.PAI 504.410 250.000 (NEICE, UNMARRIED) DEPOSITED BY BROTHER 5536.000 5536.000 (SHRI SANATHANA S.PAI) TOTAL 16031.52 0 13029.530 GMS. IT(SS)A.NOS. 02,09 & 10/COCH/2007 7 FOUND IN SEARCH : 16031.740 GMS. BALANCE : 0.220 GMS. 6.2 THE AO HAS EXPLICITLY ACCEPTED THE ASSESSEES C LAIM WITH REGARD TO THE GOLD JEWELLERY HELD BY THE ASSESSEE & HIS WIFE, BEING SU BSTANTIATED THROUGH THE WEALTH TAX RETURNS, VDIS DECLARATIONS, ETC., AS ALSO THAT ASCR IBED TO HIS SISTER, SMT. SEETHA SHENOY, BEING STATED PER THE SWORN STATEMENT IN SEARCH. FO R THE BALANCE CLAIM, I.E., IN RESPECT OF OTHER FAMILY MEMBERS, WHICH AGGREGATED TO 5659.260 GMS., IN HIS VIEW THE ASSESSEE HAD DECLARED THE EXPLAINED GOLD AT 6 KGS. ONLY AFTER CO NSULTING HIS FAMILY MEMBERS AND TAKING INTO ACCOUNT THE GOLD (JEWELLERY) HELD BY THEM, AGR EEING TO BE TAXED ON THE BALANCE UNEXPLAINED QUANTITY. HE, THEREFORE, BROUGHT THE E NTIRE AMOUNT OF GOLD SEIZED TO TAX, ALLOWING, IN EFFECT, THE BALANCE JEWELLERY, I.E., 6 906.74 GMS . (NET WEIGHT 6088.830 GMS.) AS EXPLAINED. 6.3 IN APPEAL, THE CIT(A) WAS OF THE VIEW THAT ONCE AN EXPLANATION STANDS TENDERED, THE SAME HAS TO BE EXAMINED BY THE AO AND HE COULD NOT DISMISS IT OUTRIGHT. THE FAMILY MEMBERS QUA WHOM THE GOLD JEWELLERY HAS BEEN STATED BY THE ASS ESSEE, ARE ALL MAJORS AND, ADMITTEDLY, RESIDING WITH THE ASSESSEE. HOWEV ER, AS NO PROOF OR EVIDENCE AS TO THE QUANTITY ASCRIBED TO THEM STOOD ADDUCED BY THE ASSE SSEE, HE ALLOWED RELIEF TO THE ASSESSEE LARGELY FOLLOWING THE CBDT INSTRUCTION (NO. 1916 DA TED 11.5.1994); THE HIGHER CLAIM IN RESPECT OF THE ASSESSEES SON (VISHNU NARAYAN) AND DAUGHTER (RADHIKA PAI) BEING ALLOWED WITH REFERENCE TO THEIR DECLARATIONS UNDER VDIS, 19 97. 6.4 AS REGARDS THE EXPLANATION FOR THE GOLD STATED TO BE BROUGHT BY THE ASSESSEES BROTHER, SHRI SANATHANA PAI, FROM MUMBAI (ISSUED BY A FIRM NAMED SURU GENERAL TRADING COMPANY, MUMBAI), WHICH THE AO CONSIDERED AS A COOK ED-UP STORY, THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAD DISCHARGED HIS PR IMARY ONUS BY FURNISHING THE EVIDENCE/S IN THE FORM OF `ISSUE-VOUCHER BY THE SA ID MUMBAI-BASED FIRM AS ALSO THE RECEIPT ISSUED BY THE PARTNERSHIP FIRM. THE SAME I S SUPPORTED BY THE CONFIRMATION BY THE ASSESSEES BROTHER. THE SAID EVIDENCE HAS NOT BEEN PUT TO TEST BY THE AO, AS BY MAKING IT(SS)A.NOS. 02,09 & 10/COCH/2007 8 ENQUIRIES, SUMMONING THE CONCERNED PERSONS, BEFORE ARRIVING AT A DECISION, SO THAT HIS REJECTION OF THE ASSESSEES EXPLANATION WAS NOT ADM ISSIBLE IN LAW. HE, THEREFORE, TREATED THE SAME AS EXPLAINED. 7. BEFORE US, LIKE CONTENTIONS STOOD RAISED BY EITH ER SIDE, BOTH THE PARTIES BEING IN APPEAL. BEFORE US, IT WAS SUBMITTED BY THE LD. AR THAT WHEN THE EVIDENCE STOOD FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM(S), THERE WAS NO REASON FOR THE LD. CIT(A) TO HAVE GONE BY THE CBDT INSTRUCTION (NO. 1916 DATED 11.5.1 994). THE PRACTICE OF GIVING (OR RECEIVING) GIFTS IS CUSTOMARY IN THE INDIAN SOCIETY AND HAS TO BE TAKEN JUDICIAL NOTICE OF. AS REGARDS THE SAFE-KEEPING OF THE GOLD JEWELLERY R ECEIVED FROM THE MUMBAI-BASED FIRM, THE ASSESSEES CLAIM HAS BEEN DENIED BY THE REVENUE INSPITE OF IT BEING SUPPORTED BY AN AFFIDAVIT AS WELL AS DOCUMENTARY EVIDENCE. THE LD. DR, ON THE OTHER HAND, WOULD SUBMIT THAT ONCE ADMISSION IS THERE, THE ONUS ON RETRACTIO N IS ON THE ASSESSEE, I.E., TO SHOW EXISTENCE OF ERROR OR MISTAKE THEREIN. THE ASSESSEE , WHO IS EVEN OTHERWISE OBLIGED TO EXPLAIN THE VALUABLES FOUND WITH HIM IN SEARCH, HAD , IN THE FACTS OF THE CASE, CLEARLY DEPOSED OF ABOUT 6000 GMS. OF POSSESSED GOLD JEWELL ERY (NET WEIGHT) AS ACCOUNTED, AND THE BALANCE AS UNEXPLAINED. NO DOUBT, A RETRACTION IS PERMISSIBLE, BUT THE SAME IS ONLY TO RECTIFY OR AMEND ANY MISTAKE/S OR OMISSION/S, REQUI RING CORROBORATIVE EVIDENCE/S IN SUPPORT. THE AO HAS REJECTED THE ASSESSEES CASE IN RESPECT OF THE GOLD JEWELLERY STATED TO HAVE BEEN DELIVERED BY THE ASSESSEES BROTHER FOR W ANT OF THE SAME AND, THUS, ON VALID AND COGENT REASONS, AND WHICH HAVE NOT BEEN MET BY THE ASSESSEE. 8. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 8.1 WE SHALL DIVIDE THE ISSUE, FOR THE SAKE OF BETTER ORGANISATION, INTO TWO COMPONENTS, I.E., THE GOLD ASCRIBED TO DIFFERENT FAMILY MEMBERS AND THAT TO THE MUMBAI FIRM. TAKING UP THE FORMER FIRST, WE FIND THAT WHILE THE AO REST RICTED THE ASSESSEES CLAIM TO THAT DECLARED IN SEARCH, FINDING NO REASON FOR ANY CHANG E THEREIN, PARTICULARLY WHEN THE ASSESSEES DEPOSITION IN THE MATTER WAS MADE AFTER CONSULTING HIS FAMILY MEMBERS, THE LD. CIT(A), AS NOTED EARLIER, HOWEVER, EXAMINED EACH IN DIVIDUAL CLAIM SEPARATELY, ALLOWING IT(SS)A.NOS. 02,09 & 10/COCH/2007 9 RELIEF WHERE THE ASSESSEES CLAIM WAS BACKED UP BY SOME DOCUMENTARY EVIDENCE. WE ARE INCLINED TO ENDORSE THE STAND OF THE LD. CIT(A). TH E ASSESSEE HAD MADE A ROUGH, THOUGH GOOD, ASSESSMENT OF THE TOTAL HOLDING BY HIM AND HI S FAMILY MEMBERS AT THE TIME OF SEARCH, WHILE MAKING SPECIFIC CLAIMS LATER. SOME AD JUSTMENTS THEREIN ARE ALWAYS POSSIBLE, E.G. THE GOLD DECLARED UNDER (SAY) VDIS WAS ASSUMED AT A WRONG FIGURE, BEING ONLY OUT OF MEMORY, AND AS FOUND OUT LATER ON VERIFICATION FROM THE RECORDS. TO THE EXTENT, THEREFORE, THESE WERE BACKED BY DOCUMENTARY OR EVEN CIRCUMSTAN TIAL EVIDENCES, THE SAME WERE ADMITTED AND ALLOWED ON MERITS. TRUE, THE CBDT INS TRUCTION FOLLOWED BY THE LD. CIT(A) IS NOT A GUIDELINE QUA ASSESSMENTS, BUT ONLY WITH REGARD TO THE SEIZURE M ADE AT THE TIME OF SEARCH. HOWEVER, EVEN AS ARGUED BY THE LD. DR, THE SAME HAS TO BE TAKEN AS INDICATIVE OF WHAT CAN BE CONSIDERED AS NORMAL AND ACCEPTABLE, GI VEN THE CUSTOMARY PRACTICE IN THE INDIAN SOCIETY. IN OTHER WORDS, IT TAKES INTO ACCOU NT SUCH CUSTOMARY PRACTICES AS RECEIPT OF GIFTS IN GOLD IN THE INDIAN SOCIETY, AND IT IS NOT OPEN TO THE PLEAD ACCEPTANCE OF A HIGHER HOLDING EXCEPT BASED ON SOME MATERIALS. WE, THEREF ORE, UPHOLD THE FINDINGS OF THE LD. CIT(A) IN RELATION TO THE GOLD HELD BY THE ASSESSEE AND HIS FAMILY MEMBERS, I.E., 7493.530 GMS. (13029.53 - 5536). 8.2 COMING TO THE GOLD STATED AS ISSUED BY SURU GEN ERAL TRADING COMPANY, MUMBAI, THE ASSESSEE CLAIMS THAT THE DELIVERY FOR THE SAME WAS TAKEN BY HIS BROTHER, SHRI SANATHANA PAI, BEING ALSO A PARTNER IN THE FAMILY F IRM, A.GEERIPAI JEWELLERS, ON APPROVAL BASIS. THE SAME WAS FIRSTLY TAKEN BY HIM TO HIS RES IDENCE. HOWEVER, AS HE HAD TO LEAVE STATION FOR DELHI ENROUTE TO HARIDWAR, HE DEPOSITED THE SAME AT HIS BROTHERS (ASSESSEES) RESIDENCE FOR SAFE-KEEPING. HOWEVER, AS THE ASSESS EE WAS NOT AVAILABLE AT HIS RESIDENCE AT THE RELEVANT TIME, THE SAME WAS ENTRUSTED TO HIS SO N, SHRI RAMESH S. PAI, ALSO RESIDING ALONG WITH. THE ASSESSEE WAS, THEREFORE, BOTH AT T HE TIME OF SEARCH AS WELL AS DEPOSITION, NOT AWARE OF THE SAID FACT. AS SUCH, HIS STATEMENT , BEING MADE IN IGNORANCE OF THE SAME, COULD NOT BE TAKEN AS CONCLUSIVE OF THE MATTER. 8.3 THE LD. CIT(A) HAS ALLOWED THE CLAIM ON THE BASIS OF NON-VERIFICATION OF THE ASSESSEES CLAIM. WE SHALL EXAMINE THE ISSUE BOTH FACTUALLY AND LEGALLY. IN OUR VIEW, THE LD. DR HAS VERY SUCCINCTLY STATED THE LAW IN THE MA TTER. HOWEVER, THAT COULD ONLY IMPLY, IT(SS)A.NOS. 02,09 & 10/COCH/2007 10 GIVEN THE ASSESSEES STAND, THAT THE RETRACTION BE ADMITTED, BEING BASED ON SOME MATERIAL EVIDENCE, RATHER THAN BEING NOT ADMITTED. HOWEVER, THE FIRST QUESTION THAT ARISES WHILE EXAMINING THE VALIDITY OF THE SAID RETRACTION IS: WHEN WAS IT MADE? IF INDEED THE STORY WAS TRUE, EVEN ASSUMING THAT SHRI RAMESH S. PAI, A PARTNER IN THE FIRM AND FULLY ENGAGED IN THE FAMILY BUSINESS, FOR SOME REASON CHOSE NOT T O INFORM HIS FATHER EITHER ON HIS ARRIVAL AT HOME ON THE DAY WHEN THE JEWELLERY WAS DELIVERED TO HIM (FOR SAFE-KEEPING AT HIS RESIDENCE) OR LATER OR EVEN AT THE TIME OF SEARCH, WOULD DO SO THE FIRST THING AFTER THE SEARCH, WHILE HE HAS INEXPLICABLY NOT. IT CANNOT BU T BE OTHERWISE, I.E., GIVEN A NORMAL HUMAN BEHAVIOUR, UNLESS, OF COURSE, HE HAD SOME ULT ERIOR MOTIVE OR OTHER REASON/S FOR NOT DOING SO, AND WHICH AGAIN ONLY THE ASSESSEE COULD T ELL, THOUGH THAT IS NOT HIS CASE. AND, CONSEQUENTLY, THE ASSESSEE LODGE A CLAIM WITH THE R EVENUE FOR THE SAID OMISSION, HAVING OCCURRED ON ACCOUNT OF IGNORANCE OF A PERTINENT FAC T. HOWEVER, EVEN AS POINTED OUT BY THE LD. DR, NO RETRACTION FOLLOWS THE DEPOSITION OR EVE N A REASONABLE TIME THEREAFTER. THE RECONCILIATION STATEMENT SUBMITTED BY THE ASSESSEE WAS ONLY IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IN REPLY TO THE OFFICE LETT ER DATED 27.9.2005 (I.E., 3 YEARS AFTER SEARCH). EVEN IF, AS STATED BY THE LD. AR, THAT TH E SAME WAS ALSO TENDERED IN THE ASSESSMENT OF THE FIRM, M/S. A.GEERIPAI JEWELLERS, THE FACT REMAINS THAT IT WAS MUCH LATER, BEING IN REPLY TO A SIMILAR NOTICE IN THE CASE OF T HE FIRM IN FEBRUARY, 2004, I.E., ABOUT 2 YEARS AFTER THE SEARCH. THE RETRACTION IS, THUS, NOT ADMISSIBLE AT THE THRE SHOLD . EVEN SO, THERE ARE OTHER FACTUAL .INCONSISTENCIES AND INFIRM ITIES IN THE ASSESSEES CLAIM, BESIDES BEING UNSUBSTANTIATED. HOW AND WHEN WAS THE GOLD TRANSFERRED FROM MUMBAI T O COCHIN ? THERE IS NO NOTHING ON RECORD ON THIS. THE LD. AR S TATED THAT THE SAME WAS BROUGHT BY SHRI SANATHANA PAI BY AIR. WAS THE SAME DECLARED ? THE LD. AR WAS UNABLE TO ANSWER, STATING HE WOULD HAVE TO CONFIRM. THE SAME, APART F ROM THE AVIATION GUIDELINES IN THE MATTER, IS ADVISABLE FOR REASONS OF SECURITY AND RI SK (WHICH THOUGH IS INSURABLE IN THE FORM OF TRANSIT INSURANCE) REASONS, WHICH ARE TOO OBVIOU S FOR US TO DWELL ON THEM. IN FACT, THE SAME WOULD GET DETECTED ON THE LUGGAGE BEING SUBJEC T TO SCANNING, A NORMAL SECURITY PROCEDURE FOLLOWED AT THE AIRPORTS. IN FACT, THERE IS EVEN NO PROOF OF ANY AIR JOURNEY (FROM MUMBAI TO COCHIN) UNDERTAKEN BY THE ASSESSEES BROT HER AT THE RELEVANT TIME . IT IS THE ASSESSEES CLAIM AND, THEREFORE, OUGHT TO HAVE BEEN MADE BY GIVING FULL FACTS, ALONG WITH IT(SS)A.NOS. 02,09 & 10/COCH/2007 11 THE RELEVANT MATERIALS, AT THE FIRST STAGE ITSELF, WHILE THE SAME, APART FROM BEING LODGED YEARS LATER, IS INCOMPLETE EVEN AT THE SECOND APPEL LATE STAGE, I.E., YEARS AFTER ITS LODGE. 8.4 CONTINUING FURTHER, WHY WAS THE SAME NOT KEPT AT THE BUSINESS PREMISES, BEING ONLY A BUSINESS ASSET OF THE FIRM, AS IS THE REST OF ITS GOLD, WEIGHING SEVERAL HUNDRED KILOGRAMS, KEPT THEREAT ? IF THAT JEWELLERY COULD BE SAFE-KEPT THERE, WE ARE AT A LOSS TO UNDERSTAND, WHY NOT THIS ? IN FACT, TAKING IT TO THE RESIDENCE SERVES NO BUS INESS PURPOSE, FOR WHICH IT IS PURPORTEDLY BROUGHT. AGAIN, NO ANSWERS ARE FORTHCOM ING. IT IS RATHER SURPRISING THAT THE ASSESSEES BROTHER DID NOT INFORM HIM EITHER OF THE FACT OF THE JEWELLERY BEING BROUGHT FROM MUMBAI OR OF IT BEING OR HAVING BEEN TAKEN TO HIS RESIDENCE, WHATEVER MAY HAVE BEEN THE REASON FOR THE SAME. IT IS RATHER DIFFICUL T TO ACCEPT THAT THE DECISION TO TRANSFER THE FIRMS VALUABLES, WORTH LAKHS, TO HIS RESIDENCE COU LD BE TAKEN BY ONE PARTNER UNILATERALLY, UNLESS IT IS SHOWN TO BE A REGULAR PRACTICE, AND TH EN TO THE RESIDENCE OF ANOTHER, WITHOUT THE KNOWLEDGE OF OR IN ANY WAY COMMUNICATING WITH T HE TRANSFEREE-PARTNER. THE DECISION MUST NECESSARILY, TO BE GIVEN EFFECT, I.E., IN THE NORMAL COURSE, BE PRECEDED BY A DISCUSSION BETWEEN THEM. THIS IS AS HE, THEREBY, AC CEPTS CONSTRUCTIVE RECEIPT OF AND RESPONSIBILITY FOR THE SAME, I.E., ON BEHALF OF THE FIRM. EVEN SO, IT IS INCOMPREHENSIBLE THAT THE DECISION IS CARRIED OUT WITHOUT INFORMING THE T RANSFEREE PARTNER, THE ASSESSEE, EVEN LATER. EVEN IF NOT AVAILABLE AT THE TIME, HE WOULD BE INFORMED OVER PHONE. 8.5 FURTHER ON, TAKING THE JEWELLERY TO THE RE SIDENCE, APART FROM BEING INEXPLICABLE, IS ALSO NOT TENABLE ON THE BASIS OF THE ASSOCIATED RIS K AND SECURITY FACTORS. HE COULD NOT POSSIBLY GUARD THE JEWELLERY ALL THE TIME AND, THER EFORE, HIS BEING OUT OF STATION IS NOT A VALID REASON FOR THE TRANSFER OF THE JEWELLERY TO T HE ASSESSEE-BROTHERS RESIDENCE. IN FACT, THE JEWELLERY WOULD BE DEPOSITED ALONG WITH THE `IS SUE VOUCHER ONLY. NO SUCH `ISSUE VOUCHER WAS ALSO FOUND FROM THE BROTHERS RESIDENC E WHICH WAS SEARCHED ALONG WITH. AS ALSO STATED BY THE AO, THE THEORY OF SAFE-KEEPING O F THE JEWELLERY CANNOT BE ACCEPTED AS THE JEWELLERY WEIGHING 3.5 KGS. WAS FOUND FROM THE BROTHERS RESIDENCE. IF THAT COULD SAFE-KEPT, WHY NOT THIS JEWELLERY ? SHRI RAMESH PAI, THE ASSESSEES SON, ALSO DID NO T INFORM HIS FATHER OF THE SAME ON HIS RETURNING HOME OR EVEN LATER, AND WHICH IS, AGAIN, INEXPLICABLE. NOT ONLY THAT, HE DID NOT INFORM ANY OTHER FAMILY MEMBER AS WELL, INCLUDING IT(SS)A.NOS. 02,09 & 10/COCH/2007 12 THE ASSESSEES WIFE, WHICH IS NOT COMPREHENSIBLE. T HIS IS AS IF HE HAD, THEY WOULD HAVE ONLY CONVEYED THIS FACT TO THE ASSESSEE ON HIS RETU RN HOME. SH. RAMESH ALSO COULD NOT BE AT THE RESIDENCE ALL THE TIME AND, THEREFORE, WOULD ONLY HAVE GIVEN POSSESSION THEREOF FOR SAFE-KEEPING TO THE LADIES OF THE HOUSE. IN FACT, THE KEEPING OF THE JEWELLERY AT THE RESIDENCE, BE IT THE ASSESSEES OR HIS BROTHERS, I S ITSELF NOT UNDERSTANDABLE AND, IN ANY CASE, WOULD BE ACCOMPANIED BY ISSUE VOUCHER. AS TH E ISSUE-VOUCHER WAS NOT FOUND ALONG WITH THE JEWELLERY, IT IS ONLY REASONABLE TO EXPECT OF IT HAVING BEEN DEPOSITED WITH THE FIRM, WHERE IN FACT IT OUGHT TO HAVE BEEN, I.E., FO R THE PURPOSES OF ITS RECORDS, BEING THE FIRMS PROPERTY (WHILE EVEN ITS COPY WOULD SUFFICE FOR BEING PLACED ALONG WITH THE JEWELLERY). THIS WOULD AT ONCE BRING THE KNOWLEDGE OF THE SAME TO ALL CONCERNED, WHILE AT THE SAME TIME ALSO ENABLE THE ISSUE OF THE `RECEIPT BY THE FIRM IN ACKNOWLEDGMENT, AS ALSO FOR ITS RECORDS. NEEDLESS TO ADD, NO SUCH `IS SUE VOUCHER WAS ALSO FOUND FROM THE FIRMS PREMISES DURING THE SEARCH. 8.6 THERE ARE OTHER QUESTIONS AS WELL THAT ARIS E OUT OF THE ASSESSEES EXPLANATION, WHICH, AS WOULD BE APPARENT, RAISES MORE QUESTIONS THAN IT ANSWERS, WHILE NONE ARE FORTHCOMING. WHAT IS THE CONFIGURATION/PROFILE OF THE JEWELLERY ISSUED BY THE MUMBAI- BASED JEWELLERS ? DOES IT AGREE WITH THAT FOUND DURING SEARCH ? FURTHER, DOES IT CARRY ANY IDENTIFICATION MARK OF THE JEWELLER CONCERNED ? THE SAID JEWELLERY WOULD ONLY BE KEPT IN A SEPARATE CONTAINER OR BOX AND, IN ALL LIKELIHOOD, THE SAME IN WHICH IT WAS BROUGHT. THIS IS CRUCIAL, AS THE JEWELLERY WOULD UNDER NORMAL CIR CUMSTANCES ONLY BE KEPT/PRESERVED AS SUCH, BEING NOT THE FAMILYS OWN BUT OF WHICH IT IS ONLY A CUSTODIAN. IN ANY CASE, THE SAME WOULD ONLY BE KEPT SEPARATELY, SO THAT IT IS NOT MI XED-UP WITH THE OTHER (THE FAMILYS OWN) JEWELLERY. AS SUCH, THE FACTUAL ISSUE THAT WOULD AR ISE IS WHETHER JEWELLERY IN THAT QUANTITY AND, FURTHER, MATCHING WITH THAT STATED IN THE ISSU E-VOUCHER, WAS FOUND KEPT SEPARATELY FROM THE ASSESSEES RESIDENCE DURING SEARCH. THE AN SWER IS CLEARLY IN THE NEGATIVE; THERE BEING NOTHING ON RECORD TO SUGGEST SO. IN FACT, HAD ANY SUCH SEPARATE BOX BEEN FOUND, IT WOULD HAVE IMMEDIATELY ELICITED A RESPONSE FROM EIT HER THE PARTNER OR HIS FAMILY MEMBERS, I.E., EVEN IF THERE HAD OCCURRED AN OMISSI ON EARLIER ON. IT(SS)A.NOS. 02,09 & 10/COCH/2007 13 8.7 IN VIEW OF THE FOREGOING, WE FIND NO MERIT IN THE ASSESSES CLAIMS, I.E., QUA THE JEWELLERY ASCRIBED TO THE MUMBAI-BASED FIRM, BROUGH T BY THE ASSESSEES BROTHER TO COCHIN FROM MUMBAI AND DEPOSITED AT THE ASSESSEES RESIDEN CE WITHOUT HIS KNOWLEDGE. THE EXPLANATION IS FANTASTIC ON SEVERAL COUNTS AND UNSU BSTANTIATED IN MATERIAL RESPECTS, BESIDES BEING ADVANCED YEARS LATER AND WITHOUT ANY CONTEMPORANEOUS MATERIAL. THE RATIO OF THE DECISIONS BY THE APEX COURT, INTER ALIA , IN THE CASE OF CIT V. DURGA PRASAD MORE (1971) 82 ITR 540 (SC) AND SUMATI DAYAL V. CIT (1995) 214 ITR 801 (SC), WOULD, IN OUR VIEW, SQUARELY APPLY IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, APART FROM THE FACT THAT THE RETRACTION ITSELF IS, AS OBSERVED, INADMIS SIBLE. THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE NOT ON THE BASIS OF ANY POSITIVE FINDI NG, BUT ONLY ON THE GROUND OF ABSENCE OF PROPER VERIFICATION BY THE AO. THE QUESTION OF THE AO EXERCISING HIS POWERS OF VERIFICATION, WHICH HE IS OBLIGED TO, ARISES ONLY W HERE THE RETRACTION IS ADMISSIBLE AND THE ASSESSEE HAS DISCHARGED THE ONUS BY PLACING ON RECO RD CREDIBLE, RELEVANT MATERIALS IN SUBSTANTIATION OF ITS CASE. SECONDLY, THE POWERS OF THE FIRST APPELLATE AUTHORITY BEING CO- TERMINUS WITH THAT OF THE ASSESSING AUTHORITY, HE, FINDING A NON OR IMPROPER DISCHARGE OF HIS JUDICIAL FUNCTION BY THE LATTER, COULD EITHER R EQUIRE HIM TO DO SO, OR EXERCISE THE SAME HIMSELF, RATHER THAN DECIDE THE MATTER ON THE BASIS OF A NEGATIVE FINDING. IN FACT, HE IS UNDER SUCH CIRCUMSTANCES LEGALLY OBLIGED TO DO SO. WE THEREFORE FIND NO BASIS OR REASON TO ACCEPT THE ASSESSEES EXPLANATION QUA 5536 GMS. OF GOLD JEWELLERY STATED TO BE DEPOSITED BY THE ASSESSEES BROTHER AT HIS RESIDENCE. 9. NEXT, WE TAKE UP THE REVENUES APPEAL AGIT ATING THE DELETION OF THE SURCHARGE LEVIED U/S. 113 OF THE ACT FOLLOWING THE DECISION B Y THE TRIBUNAL IN THE CASE OF ACIT V. PARAMESWARAN & CO . (DATED 26/11/2003). THE BASIS OF THE TRIBUNALS D ECISION IS THAT THE AMENDMENT TO SECTION 113 OF THE ACT, WHEREBY THE LE VY OF SURCHARGE STOOD EXTENDED TO ASSESSMENTS U/C CHAPTER XIV-B OF THE ACT, PER FINAN CE ACT, 2002 WITH EFFECT FROM 1.6.2002, IS ONLY PROSPECTIVE IN NATURE, AND WOULD THUS NOT BE APPLICABLE TO CASES AS THE PRESENT ONE, WHERE THE BLOCK PERIOD ENDS PRIOR THER ETO. THE MATTER HAS SINCE BEEN CLARIFIED BY THE HONBLE APEX COURT VIDE ITS DECISI ONS IN THE CASE OF CIT V . SURESH N. GUPTA , 297 ITR 322 (SC) AND CIT VS. RAJIV BHATARA , 310 ITR 105 (SC); HOLDING THE PROVISO TO SECTION 113 TO BE CLARIFICATORY AND CURATIVE IN NATURE, SO THAT IT IS APPLICABLE TO IT(SS)A.NOS. 02,09 & 10/COCH/2007 14 ALL ASSESSMENTS MADE UNDER CHAPTER XIV-B AS PER THE RATES SPECIFIED IN THE RELEVANT FINANCE ACT, I.E., THAT APPLICABLE TO THE DATE OF S EARCH. THERE IS WE OBSERVE NO DISPUTE WITH REGARD TO THE RATE OF THE SURCHARGE, WHICH IN ANY CASE IS ONLY A MATTER OF RECORD, BUT ONLY WITH REGARD TO ITS APPLICABILITY. THE ISSUE TH US STANDS RESOLVED IN FAVOUR OF THE REVENUE. 10. IN THE RESULT, BOTH THE ASSESSEES AND THE REVENUES APPEALS ON MERITS ARE PARTLY ALLOWED, WHILE THE REVENUES APPEAL (IT (S&S)A NO.9 /COCH/2007) IS ALLOWED. SD/- SD/- (N.VIJAYAKUMARAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 01 FEBRUARY, 2011 GJ COPY TO: 1. S. SACHITHANANDA PAI C/O. M/S. A.GEERIPAI JEWELL ERS, BROADWAY, ERNAKULAM. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRA L CIRCLE-3, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) IT(SS)A.NOS. 02,09 & 10/COCH/2007 15