K.V. Padmanabhan, Thrissur V. ACIT, Thrissur

ITSSA 95/COCH/2005

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7542 (ITAT-COCHIN)
• Duration Of Justice: 6 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-04-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-02-2012
• Assessment Year: misc
• Appeal Filed On: 05-05-2005
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: V M KRISHNAKUMAR
• Keywords: Depreciation; Corroborative evidences; Block assessment
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A. NO. 95/COCH/2005 BLOCK PERIOD :01-04-1989 TO 15-03-2000 SHRI K.V.PADMANABHAN, KARANAYIL MADOM, ETTUMANA P.O., KARUVANNUR, TRICHUR. [PAN: ACIPP 7981H] THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TRICHUR. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) I.T.(SS)A. NO. 121/COCH/2005 BLOCK PERIOD :01-04-1989 TO 15-03-2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, TRICHUR. SHRI K.V.PADMANABHAN, KARANAYIL MADOM, ETTUMANA P.O., KARUVANNUR, TRICHUR. [PAN: ACIPP 7981H] (REVENUE -APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY SHRI V.M. KRISHNAKUMAR, CA REVENUE BY SMT. VIJAYAPRABHA, JR. DR DATE OF HEARING 16/02/2012 DATE OF PRONOUNCEMENT 3/04/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 07-02-2005 PASSED BY THE LD. CIT(A)-I, KOCHI AND THEY RELATE TO THE BLOCK PE RIOD 01-04-1989 TO 16-03-2000. BOTH THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON OR DER, FOR THE SAKE OF CONVENIENCE. IT(SS)A NO. 95 & 121/COCH/ 2005 2 2. IN THE APPEAL FILED BY THE ASSESSEE, FOLLOWING I SSUES ARE AGITATED:- A) WHETHER THE ASSESSMENT ORDER PASSED U/S. 1 58BC OF THE ACT IS BARRED BY LIMITATION. B) WHETHER DEPRECIATION CAN BE ALLOWED WHILE COMPUT ING THE UNDISCLOSED INCOME. C) WHETHER INCOME REPRESENTED BY TDS WILL FORM PAR T OF THE UNDISCLOSED INCOME. D) WHETHER THE INCOME REPRESENTED BY ADVANCE TAX PAYMENT WILL FORM PART OF THE UNDISCLOSED INCOME. 3. IN THE APPEAL FILED BY THE REVENUE, THE FOLLOWIN G TWO ISSUES ARE AGITATED:- A) WHETHER THE LD. CIT(A) IS RIGHT IN DIRECTI NG THAT INTEREST U/S. 158BFA(1) IS TO BE COMPUTED AFTER GIVING CREDIT FOR THE AMOUNT S EIZED AT THE TIME OF SEARCH. B) WHETHER THE LD. CIT(A) IS RIGHT IN HOLDING THAT THAT AMENDMENT BROUGHT IN TO SEC. 113 IS PROSPECTIVE IN NATURE AND HENCE SURC HARGE CANNOT BE LEVIED IN THE INSTANT CASE. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE OWNS A PRIVATE TEMPLE KNOWN AS KARANAYIL MADOM. THE INCOME GENE RATED FROM THIS TEMPLE IS FULLY ENJOYED BY HIM. THE DEPARTMENT CARRIED OUT A SEARC H AND SEIZURE OPERATION U/S. 132 OF THE ACT IN THE HANDS OF THE ASSESSEE ON 16-03-2000 AND ALSO 04-04-2000. CONSEQUENT THERETO, THE ASSESSEE FILED HIS BLOCK RETURN ON 27- 03-2001 DECLARING UNDISCLOSED INCOME AT RS. 9,03,220/-. THE ASSESSING OFFICER COMPLETED TH E BLOCK ASSESSMENT U/S. 158 BC OF THE ACT ON 24-04-2002 DETERMINING THE UNDISCLOSED INCOM E AT RS. 25,43,470/- BY MAKING VARIOUS ADDITIONS. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND GOT PARTIAL RELIEF. STILL AGGRIEVED, TH E ASSESSEE IS IN APPEAL BEFORE US. THE DEPARTMENT IS ALSO IN APPEAL BEFORE US ASSAILING TH E DECISION OF THE LD. CIT(A) IN RESPECT OF THE TWO ISSUES REFERRED SUPRA. IT(SS)A NO. 95 & 121/COCH/ 2005 3 5. WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FIRS T. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS WHETHER THE BLOCK ASSESSMENT IS BAR RED BY LIMITATION IN TERMS OF SEC. 158BE(1)(B) OF THE ACT. AS PER THE PROVISIONS OF S. 158BC OF THE ACT, THE BLOCK ASSESSMENT SHALL BE COMPLETED WITHIN TWO YEARS FROM THE END OF THE MONTH IN WHICH THE LAST OF THE AUTHORISATION FOR SEARCH U/S. 132 WAS E XECUTED. ACCORDING TO EXPLANATION TO S. 158BE, THE AUTHORISATION SHALL BE DEEMED TO HAVE BE EN EXECUTED ON THE CONCLUSION OF THE SEARCH AS RECORDED BY LAST PANCHANAMA DRAWN IN RELA TION TO ANY PERSON IN WHOSE CASE THE WARRANT OF AUTHORISATION HAS BEEN ISSUED. NOW WE S HALL TURN TO THE FACTS PREVAILING IN THE INSTANT CASE. THE DEPARTMENT COMMENCED SEARCH IN T HE HANDS OF THE ASSESSEE ON 16-03- 2000 AT 10.00 A.M. AND AS PER THE PANCHANAMA PREPAR ED ON THAT DATE, THE PROCEEDINGS WERE CLOSED TEMPORARILY ON THAT DAY ITSELF AT 5.30 P.M. SUBSEQUENTLY, THE SEARCH WAS RESUMED ON 04-04-2000 AT 3.30 P.M BY PREPARING ANOT HER PANCHANAMA AND THE SEARCH WAS FINALLY CONCLUDED ON 04-04-2000 AT 4.30 P.M. 6. ACCORDING TO THE ASSESSEE, SEVERAL DOCUMENTS AS PER ANNEXURE I TO PANCHANAMA DATED 16-03-2000 WERE SEIZED BY THE OFFICIALS ON TH E DATE OF SEARCH ON 16-3-2000. ON THAT DATE, ONLY 7 DOCUMENTS INCLUSIVE OF PHOTOSTAT COPIES OF ORIGINAL DOCUMENTS WERE SCRUTINISED BY THE SEARCH PARTY AND THEY WERE THEN KEPT IN ALMIRAH, WHICH WAS LOCKED AND SEALED. THEREAFTER, AFTER A PERIOD OF 19 DAYS, THE Y RESUMED SEARCH ON 04-04-2000 AND TOOK AWAY ONLY THOSE DOCUMENTS WHICH WERE KEPT IN T HE ALMIRAH CITED ABOVE. THE SUBMISSION OF THE ASSESSEE IS THAT THERE IS NO IMPE DIMENT FOR THE SEARCH PARTY TO SEIZE THOSE 7 DOCUMENTS ALSO, WHICH WERE KEPT IN THE SEAL ED ALMIRAH, ON THE FIRST DATE, I.E., ON 16-03-2000 ITSELF, WHEN THEY CARRIED ABOUT 3700 SHE ETS OF OTHER SEIZED MATERIAL. IT WAS FURTHER SUBMITTED THAT THE DEPARTMENT DID NOT SEIZE ANY OTHER MATERIAL ON 4.4.2000 EXCEPT TAKING AWAY THE MATERIALS KEPT IN THE ALMIRAH. THE LD A.R ALSO SUBMITTED THAT THE SEARCHES ON 16.3.2000 AND 4.4.2000 WERE CONDUCTED B Y TWO DIFFERENT AUTHORISED OFFICIALS. ACCORDINGLY, IT WAS CONTENDED THAT THE SEARCH PARTY HAS CARRIED OUT THE SEARCH ON 4.4.2000 ONLY FOR THE COLLATERAL PURPOSE OF OVERCOMING THE R ESTRICTION IMPOSED BY EXPLANATION 2 TO SEC. 158BE OF THE ACT. ACCORDINGLY, IT WAS CONTEND ED THAT THE SEARCH OPERATION SHOULD BE TREATED AS COMPLETED ON 16.3.2000 ITSELF, IN WHICH CASE, THE ASSESSMENT SHOULD HAVE BEEN IT(SS)A NO. 95 & 121/COCH/ 2005 4 COMPLETED BY 31-03-2002 IN TERMS OF PROVISIONS OF S EC. 158BE, WHERE AS IT WAS COMPLETED ON 24.4.2002 AND HENCE IT IS TIME BARRED ONE. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE CH ENNAI BENCH OF ITAT IN THE CASE OF DCIT VS. M/S. STERLITE INDUSTRIES (INDIA) LTD. REPO RTED IN (2011) 5 TAXCORP (A.T.) 26151 (CHENNAI) TO SUPPORT HIS CONTENTION THAT THE SEARCH SHOULD BE TREATED AS CONCLUDED ON 16- 03-2000. 7. ON THE CONTRARY, THE LD DR SUBMITTED THAT TH ERE IS NO REASON TO ATTACH MALA FIDE ON THE ACTIONS OF SEARCH PARTY, WHO CONCLUDED SEARCH I N THE HANDS OF THE ASSESSEE ON 04-04- 2000. THE COMMENCEMENT OF SEARCH, ITS CONTINUATION AND CONCLUSION ARE PURE ADMINISTRATIVE ACTION, WHICH SHOULD NOT BE QUESTION ED WITH OUT ANY SUPPORTING EVIDENCES. THE LD D.R RELIED UPON THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF VLS FINANCE LTD VS. CIT AND ANOTHER REPORTED IN 289 ITR 286 TO SUBMIT THAT THE LAST PANCHANAMA PREPARED ON 4.4.2000 IS ONLY RELEVANT FO R DETERMINING THE LIMITATION U/S 158BE OF THE ACT. SHE ALSO RELIED UPON THE SPECIAL BENCH DECISION OF ITAT, DELHI IN THE CASE OF SMT. KRISHNA VERMA VS. ACIT REPORTED IN 113 ITD 655 TO SUBMIT THAT NO ULTERIOR MOTIVES CAN BE ATTACHED TO THE ADMINISTRATIVE ACTIO N OF THE SEARCH OFFICIALS. ACCORDINGLY, THE LD D.R SUBMITTED THAT THE SEARCH IN THE HANDS O F THE ASSESSEE WAS CONCLUDED ON 4.4.2000 AND HENCE THE ASSESSMENT COMPLETED ON 24-0 4-2002, I.E, WITHIN TWO YEARS FROM THE END OF APRIL, 2000, IS WITHIN TIME LIMIT PROVID ED UNDER SECTION 158BE OF THE ACT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. IN THE INSTANT CASE, THE ASSESSEE IS RAISING VARIOUS CONTENTIONS O N THE BASIS OF RECORD AVAILABLE WITH HIM, I.E. ON THE BASIS OF HIS OWN INFERENCES AND NOT ON THE BASIS OF ANY OTHER MATERIAL. IT IS WELL SETTLED PRINCIPLE OF LAW THAT IT IS THE RESPON SIBILITY OF THE PERSON WHO MAKES ALLEGATION TO PROVE IT WITH COGENT EVIDENCES. HOWE VER, IN THE INSTANT CASE, THE ASSESSEE HAS NOT TAKEN ANY STEP TO ASCERTAIN THE FACTUAL POS ITION FROM THE RECORD OF DEPARTMENT, WHICH NECESSITATED THE SEARCH OFFICIALS TO TEMPORAR ILY CONCLUDE THE SEARCH ON 16.3.2000 AND RESUME IT ON 4.4.2000, IN ORDER TO SUPPORT HIS ALLEGATIONS. THE CONTENTION OF THE ASSESSEE THAT THE SEARCH ACTION WAS CONDUCTED ON 4. 4.2000 ONLY TO BORROW TIME IS BEYOND IT(SS)A NO. 95 & 121/COCH/ 2005 5 OUR COMPREHENSION, I.E., WE ARE UNABLE TO UNDERSTA ND AS TO HOW THE SEARCH OFFICIALS COULD VISUALISE ON 16.3.2000 ITSELF THAT THE ASSESSING OF FICER WOULD PASS THE BLOCK ASSESSMENT ORDER ONLY IN THE MONTH OF APRIL, 2002 AND HENCE TH ERE OCCURS A NECESSITY TO CONTINUE THE SEARCH IN THE MONTH OF APRIL, 2000, WHICH WOULD ENA BLE THE AO TO PASS THE BLOCK ASSESSMENT ORDER IN THE MONTH OF APRIL, 2002. 9. WE HAVE ALSO GONE THROUGH THE DECISION OF THE CH ENNAI BENCH OF ITAT IN THE CASE OF DCIT VS. M/S STERLITE INDUSTRIES (INDIA) LTD. SU PRA. THERE SHOULD NOT BE ANY DISPUTE THAT THE QUESTION OF DETERMINATION OF THE DATE OF C ONCLUSION OF SEARCH HAS TO BE DECIDED ON THE BASIS OF FACTS AND CIRCUMSTANCES SURROUNDING EA CH CASE. IN THE CASE OF M/S STERILITE INDUSTRIES LTD, SUPRA, THE TRIBUNAL WAS ALSO HAVING THE BENEFIT OF CONSIDERING THE EXPLANATIONS OBTAINED FROM THE AUTHORISED OFFICER O N THE SEQUENCE OF SEARCH OPERATION, WHICH IS VERY MUCH ABSENT IN THE PRESENT CASE. THU S THE TRIBUNAL WAS IN A POSITION TO CONSIDER THE SUBMISSIONS OF BOTH THE ASSESSEE AS WE LL AS THE AUTHORISED OFFICER. FURTHER, IT WAS NOTED THAT THERE WERE TWO DIFFERENT AUTHORISATI ONS AND SERIES OF EXECUTION OF THOSE AUTHORISATIONS. FROM THE EXPLANATIONS FURNISHED BY THE AUTHORISED OFFICER, IT WAS NOTICED THAT THERE WERE CERTAIN GAPS, WHICH COULD NOT BE SA TISFACTORILY EXPLAINED. HENCE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL H ELD THAT THE BLOCK ASSESSMENT IS BARRED BY LIMITATION. HENCE, IN OUR VIEW, THIS DECISION DO ES NOT ASSIST THE ASSESSEE IN THE INSTANT CASE. 10. IN THE CASE OF SMT. KRISHNA VERMA, THE SPEC IAL BENCH HAS OBSERVED AS UNDER AFTER CONSIDERING THE OBSERVATIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF VLS FINANCE LTD, SUPRA, WHERE IN IDENTICAL CONTENTIONS WERE RAI SED.- WE HAVE ALREADY SEEN THAT IN VLS FINANCE LTD.S CA SE (SUPRA), THE DELHI HIGH COURT HAS OBSERVED THAT NO ULTERIOR MOTIVES COULD B E ATTRIBUTED TO THE AUTHORITIES IN NOT SEIZING BOOKS AND INSTEAD PASSING THE PROHIBITO RY ORDER UNDER SECTION 132(3) WHERE THE LAST PANCHNAMA WAS DRAWN WELL BEFORE THE PERIOD OF SIXTY DAYS GIVEN BY SECTION 132(8A). ACTS OF THE AUTHORISED OFFICERS DONE IN THE REGULAR COURSE AND BONA FIDE CANNOT BE QUESTIONED. THESE ARE, IN OUR HUMBLE OPINION, THE PARAMETERS TO BE KEPT IN VIEW WHILE EXAMINING THE QUESTION WHE THER THE BLOCK ASSESSMENT WAS WITHIN THE TIME-LIMIT OR NOT. IT(SS)A NO. 95 & 121/COCH/ 2005 6 THE SPECIAL BENCH ALSO CONSIDERED THE DECISIONS OF HONBLE JURISDICTIONAL KERALA HIGH COURT AND WE FEEL IT CONVENIENT TO EXTRACT ITS OBSE RVATIONS BELOW:- 56. IT WAS THEN SAID THAT THERE WAS AN UNREASONABL E DELAY OF 34 DAYS BETWEEN 12- 3-1999 ON WHICH DATE THE RESTRAIN ORDER WAS PASSED AND 16.4.1999 ON WHICH DATE THE ORDER WAS REVOKED. THE JUDGEMENT OF THE KERALA HIGH COURT IN DR. C. BALAKRISHNAN NAIR VS.CIT (1999) 237 ITR 70 HAS BEEN CITED. THIS JUDGEMENT OF THE SINGLE JUDGE OF THE HIGH COURT HAS BEEN REVERSE D BY A DIVISION BENCH AND THE JUDGMENT IS REPORTED AS CIT V. DR. C.BALAKRISHNAN N AIR (2006)(282 ITR 158). THE DIVISION BENCH HELD THAT THE SINGLE JUDGE WAS NOT R IGHT IN SAYING THAT THERE WAS NO SATISFACTORY EXPLANATION AS TO WHY THE BOOKS OF ACCOUNT, DOCUMENTS ETC. WERE NOT PRACTICABLE TO BE SEIZED ON THE DATE OF SEARCH AND, THERE FORE, THERE WAS A CONTRAVENTION OF SECTION 132(3). THE DIVISION BENC H POINTED OUT AT PAGES 171 AND 172 THAT WHERE IT WAS NOT PRACTICABLE TO SEIZE ALL THE BOOKS OF ACCOUNT AND RECORDS WHICH ARE RELEVANT OR IRRELEVANT, THE AUTHORISED OF FICER MAY SERVE A RESTRAINT ORDER ON THE PERSON WHO IS IN IMMEDIATE POSSESSION OR CON TROL THERE OF AND IF SUCH A PROCEDURE HAS BEEN FOLLOWED, NO FAULT CAN BE FOUND WITH THE INCOME TAX AUTHORITIES. AT PAGE 172, IT HAS BEEN HELD THAT A SEARCH FOLLOWED BY A PROHIBITORY ORDER WOULD NOT AMOUNT TO SEIZURE. IN THE CASE BEF ORE THE KERALA HIGH COURT, THE SEARCH TOOK PLACE ON 27.10.1995. THE PROHIBITORY ORDER WAS PASSED ON THAT DAY AND THEREAFTER THE SEARCH RESUMED ON 10.11.1995. T HE DIVISION BENCH OF THE HIGH COURT HELD THAT THE SEIZURE TOOK PLACE ONLY ON 10.1 1.1995. AT PAGE 173, THE DIVISION BENCH ALSO DEALT WITH THE CONTENTION THAT THE SEARCH WAS PROLONGED UNREASONABLE. IT WAS HELD THAT IN THE ABSENCE OF A NY TIME LIMIT PRESCRIBED IN THE CODE OF CRIMINAL PROCEDURE OR THE INCOME TAX ACT, I T CANNOT BE SAID THAT THE DELAY IN CONCLUDING THE SEARCH HAS VITIATED THE SEARCH AN D SEIZURE. THE DIVISION BENCH ULTIMATELY HELD THAT THERE WAS NO PROCEDURAL VIOLAT ION OF THE SEARCH PROCEEDINGS AND THAT THE SEARCH WAS VALID. THE JUDGMENT OF THE SINGLE JUDGE WAS REVERSED. IT IS ALSO PERTINENT TO EXTRACT THE FOLLOWING OBSER VATIONS OF THE SPECIAL BENCH, SINCE THE FACTS PREVAILING IN THE INSTANT CASE WAS IDENTICAL WITH THE CASE DEALT BY THE SPECIAL BENCH:- 55. IT WAS SAID ON BEHALF OF THE ASSESSEES THAT TH E SEARCH WAS COMPLETE ON 12-3- 1999 ITSELF AS ON THAT DATE THE AUTHORISED OFFICERS HAD ACTUALLY FOUND THE PAPERS IN THE FIRST FLOOR OF THE PREMISES, SEIZED THEM AND TH EN PUT THEM IN THE DRAWER IN THE GROUND FLOOR AND HAVING DONE SO, THEY CANNOT CONTEN D THAT THE SEARCH WAS NOT COMPLETE ON THAT DAY. IT HAS ALREADY BEEN NOTICED THAT ON 12.3.1999, A PANCHNAMA WAS DRAWN UP IN WHICH THERE WAS A CLEAR A VERMENT THAT SEARCH WAS ONLY TEMPORARILY CONCLUDED AND WOULD BE RE-COMMENCE D LATER. THE PURPOSE WHY THE SEARCH WAS ONLY TEMPORARILY CONCLUDED HAS ALSO BEEN STATED IN PARAGRAPH 8 OF THE PANCHNAMA. THE ASSESSEE AND THE PANCHAS HAVE S IGNED THE SAME. THE ASSESSEE DID NOT PROTEST AT THAT TIME AGAINST THE AVERMENT. THE ENTIRE SEQUENCE OF EVENTS, IT(SS)A NO. 95 & 121/COCH/ 2005 7 NAMELY, THE COMMENCEMENT OF THE SEARCH, THE TEMPORA RY CONCLUSION THERE OF, THE PASSING OF THE RESTRAINT ORDER UNDER SECTIN 132(3) ON THE SAME DAY ON WHICH THE SEARCH WAS TEMPORARILY CONCLUDED, THE SECOND VISIT OF THE AUTHORISED OFFICERS ON 16.4.1999, THE REVOKING OF THE RESTRAINT ORDER ON T HAT DATE FOR THE PURPOSE OF SEIZING THE DOCUMENTS FOUND IN THE DRAWER, THE DRAW ING OF A PANCHNAMA ON THAT DAY WHICH RECORDED THAT THE SEARCH CONCLUDED ON THA T DAY, ALL OF THEM SHOW THAT ALL THESE OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED W ITHOUT ANY ULTERIOR MOTIVE. 11. THE VARIOUS OBSERVATIONS MADE BY THE SPECIA L BENCH IN THE CASE OF SMT. KRISHNA VERMA ARE EQUALLY APPLICABLE TO THE INSTANT CASE AL SO. HENCE, WE DO NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE ON THIS ISSUE. ACCORDINGL Y, WE ARE OF THE VIEW THAT THE SEARCH WAS CONCLUDED IN THE INSTANT CASE ONLY ON 4.4.2000 AND ACCORDINGLY, THE ASSESSMENT ORDER PASSED U/S. 158BC DOES NOT BECOME TIME BARRED. 12. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSE E RELATES TO THE ISSUE OF ALLOWING DEPRECIATION WHILE COMPUTING THE UNDISCLOSED INCOME . THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. THE ASSESSEE DID NOT MAINTAIN REG ULAR BOOKS OF ACCOUNTS FOR THE PERIOD FROM 1.4.89 TO 31.3.1996. THE BOOKS OF ACCOUNT MAI NTAINED FOR THE PERIOD FROM 1.4.1996 TO 16.3.2000 WERE ALSO CONSIDERED AS NOT CORRECT AN D COMPLETE BY THE AO. THE ASSESSEE HAD DETERMINED THE UNDISCLOSED INCOME ON THE BASIS OF RECEIPTS AND PAYMENTS ACCOUNT PREPARED BY HIM. THE AO, HOWEVER, CHOSE TO DETERMI NE THE UNDISCLOSED INCOME ON THE BASIS OF ACCRETION TO NET INVESTMENTS EVERY YEAR AS ADJUSTED BY CASH OUT GOINGS AND CAPITAL INFLOW. WHILE DOING SO, THE AO DID NOT ALLOW DEPREC IATION FROM THE INCOME SO COMPUTED BY HIM. THE LD CIT(A) ALSO REJECTED THE CLAIM OF D EPRECIATION ON THE GROUND THAT THERE IS NO NECESSITY TO ALLOW DEPRECIATION UNDER THE METHOD ADOPTED BY THE AO TO DETERMINE THE UNDISCLOSED INCOME. 13. THE LD A.R PLACED RELIANCE ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. SMT. C. SABIRA REPORTED IN 338 ITR 226 TO SUBMIT THAT THE DEPRECIATION CAN BE CLAIMED IN THE BLOCK ASSESSMENT. THE LD D.R , HOWEVER, SUBMITTED THAT THE DEPRECIATION CLAIM REQUIRES VERIFICATION AT THE END OF THE AO. IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT CITED ABOVE, THE ASSESSEE CAN CLAIM DEPRECIATION IN THE IT(SS)A NO. 95 & 121/COCH/ 2005 8 BLOCK ASSESSMENT PROCEEDINGS. HOWEVER, AS SUBMITTE D BY LD D.R, THE AMOUNT OF DEPRECIATION COMPUTED BY THE ASSESSEE NEEDS VERIFIC ATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE QUAN TUM OF DEPRECIATION CLAIMED BY THE ASSESSEE AND DETERMINE THE UNDISCLOSED INCOME AFTER ALLOWING THE ELIGIBLE AMOUNT OF DEPRECIATION. 14. THE NEXT TWO ISSUES ARE WHETHER THE AMOUNT REPRESENTED BY THE TDS AMOUNT AND ADVANCE TAX PAYMENTS CAN BE CONSIDERED AS UNDISCLOS ED INCOME. IT HAS BEEN HELD IN THE FOLLOWING CASES THAT THE AMOUNT RELATING TO THE TDS AND ADVANCE TAX CANNOT BE CONSIDERED AS UNDISCLOSED INCOME. (A) CIT VS. SHAMLAL BALRAM GURBANI (2001)(249 ITR 501 (BOM) (B) CIT VS. KUMKUM KOHLI (2005) (276 ITR 589) (DEL HI) (C) ALAKA GOSWAMI (DR. MRS.) VS. CIT (2004) (268 ITR 178) (GAU) HOWEVER, THE LD D.R SUBMITS THAT THE AMOUNT RELATIN G TO TDS DEDUCTION AND ADVANCE TAX PAYMENTS HAS ALREADY BEEN EXCLUDED BY THE AO. HENC E, IN OUR VIEW, THE CLAIM OF THE ASSESSEE REQUIRES VERIFICATION. ACCORDINGLY, WE SE T ASIDE THE ORDER OF LD CIT(A) ON THESE TWO ISSUES AND RESTORE THEM TO THE FILE OF AO WITH A DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND EXCLUDE THE INCOME RELATING TO THE TDS AND ADVANCE TAX PAYMENTS, IF IT HAS NOT ALREADY BEEN EXCLUDED. 15. WE SHALL NOW TAKE UP THE APPEAL OF THE REVE NUE. THE FIRST ISSUE RELATES TO THE CLAIM OF ADJUSTMENT OF SEIZED CASH AGAINST THE TAX DETERM INED AS PAYABLE FOR THE PURPOSE OF CALCULATION OF INTEREST U/S 158BFA OF THE ACT. DUR ING THE COURSE OF SEARCH CONDUCTED ON 16-03-2000, CASH AMOUNTING TO RS.2,00,000/- WAS SEI ZED. THERE AFTER, VARIOUS BANK ACCOUNTS HAVING CUMULATIVE BALANCE OF RS.4,12,679/- WERE ATTACHED AS PER THE RESTRAINT ORDER PASSED ON 12.5.2000. THE ASSESSEE FILED A LE TTER DATED 15.3.2001 WITH THE ASSESSING OFFICER, WHERE IN HE REQUESTED HIM TO ADJUST THE AB OVE SAID AGGREGATE AMOUNT OF RS.6,12,679/- AGAINST THE TAX DUE FOR THE BLOCK PER IOD. THERE AFTER, HE FILED HIS BLOCK RETURN ON 27.3.2001. THE ASSESSEE, BY PLACING REL IANCE ON THE DECISION OF THE MUMBAI IT(SS)A NO. 95 & 121/COCH/ 2005 9 TRIBUNAL IN THE CASE OF SATPAUL D AGARWAL (HUF) VS. A.C.I.T, CONTENDED BEFORE LD CIT(A) THAT THE CASH BALANCE OF RS.2,00,000/- SEIZE D BY THE DEPARTMENT AND THE BANK BALANCES OF RS.4,12,679/- KEPT UNDER RESTRAIN SHOUL D BE TREATED AS TAX PAYMENTS AND ACCORDINGLY, THE INTEREST U/S 158BFA SHOULD BE COMP UTED BY REDUCING BOTH THE AMOUNTS. THE LD CIT(A) WAS CONVINCED WITH THE CLAIM OF THE A SSESSEE AND ACCORDINGLY DIRECTED THE AO TO COMPUTE THE INTEREST U/S 158 BFA OF THE A CT AFTER REDUCING THE ABOVE CITED AMOUNT OF RS,6,12,679/-. 16. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUS ED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAW RELIED UPON BY THE ASSESSEE. IN THE CASE OF SATPAUL D AGARWAL (HUF), SUPRA, THE TRIBUNAL CONSIDERED THE QUESTION OF TREATMENT OF CASH SEIZED BY THE DEPARTMENT AS ADVANCE TAX. IT WAS HELD THEREIN THA T THE CASH SEIZED BY THE DEPARTMENT SHOULD BE TREATED AS ADVANCE TAX PAYMENT FOR THE RE ASON THAT THE SAID CASH WAS RETAINED BY THE DEPARTMENT AND FURTHER THERE WAS A REQUEST FROM THE ASSESSEE TO APPROPRIATE THE SAME AGAINST THE TAX LIABILITY. THE QUESTION OF BALANCE S KEPT WITH BANKS UNDER ATTACHMENT WAS NOT AN ISSUE BEFORE THE TRIBUNAL IN THE ABOVE CITED CASE. IN THE INSTANT CASE THE DEPARTMENT HAS SEIZED A CASH OF RS.2.00 LAKHS ON 16 .3.2000 AND THE ASSESSEE HAS GIVEN A LETTER DATED 15.3.2001 REQUESTING THE AO TO ADJUST THE SAME AGAINST THE TAX LIABILITY. HENCE, BY FOLLOWING THE RATIO OF THE ABOVE SAID DEC ISION, IT HAS TO BE HELD THAT THE ABOVE SAID SUM OF RS.2.00 LAKHS SHOULD BE TREATED AS PAID TOWARDS TAX LIABILITY ON THE DATE WHEN THE LETTER WAS FILED WITH THE ASSESSING OFFICER. 17. HOWEVER, IN OUR VIEW, THE SAME RATIO CANNOT BE APPLIED IN RESPECT OF BANK BALANCES KEPT UNDER RESTRAIN, AS THEY STAND IN A DIFFERENT F OOTING, WHICH WE PROCEED TO EXPLAIN. WHILE THE CASH SEIZED BY THE DEPARTMENT ARE KEPT WI TH THE DEPARTMENT, THE SAME IS NOT THE CASE WITH THE BANK BALANCES. THE AMOUNT REPRESENTI NG BANK BALANCES ARE KEPT BY THE CONCERNED BANK ONLY AND THE RESTRAINT ORDER PROHIBI TS APPROPRIATION OF THE SAME BY THE ASSESSEE. HENCE, IT CANNOT BE SAID THAT THE ABOVE SAID BANK BALANCES ARE KEPT WITH THE DEPARTMENT AS IN THE CASE OF CASH SEIZED BY THE DEP ARTMENT. HENCE, IN OUR VIEW, THE DATE OF PAYMENT OF THE BANK BALANCES IS THE DATE WHEN TH E SAID BALANCES ARE ACTUALLY IT(SS)A NO. 95 & 121/COCH/ 2005 10 APPROPRIATED TOWARDS TAX LIABILITY AND NOT THE DATE ON WHICH LETTER WAS FILED WITH THE AO. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO GIVE CREDIT OF THE RS.2.00 LAKHS, BEING THE CASH SEIZED, ON THE DATE ON WHICH THE LETTER WAS FILED BY THE AO AND GIVE CREDIT OF BANK BALANCES ON THE DATE OF APPROPRIATION OF THE SAME TOWARDS TAX LIABILITY. 18. THE NEXT ISSUE IN THE CASE OF REVENUE RELAT ES TO THE LIABILITY TO SURCHARGE. THE LD CIT(A) HAS HELD THAT THE ASSESSEE IS NOT LIABLE TO PAY SURCHARGE. HOWEVER, THIS ISSUE HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF SURESH N GUPTA REPORTED IN 297 ITR 322, WHERE IN IT HAS BEEN HELD THAT THE SUR CHARGE IS LEVIABLE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE. 18. IN THE RESULT, BOTH THE APPEAL OF THE ASSES SEE AND THE APPEAL OF THE REVENUE ARE TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 3 -04-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 3RD APRIL, 2012 GJ COPY TO: 1. SHRI K.V.PADMANABHAN, KARANAYIL MADOM, ETTUMANA P.O., KARUVANNUR, TRICHUR. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTR AL CIRCLE, TRICHUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN