The Commissioner of Income Tax -1 V. R.S. Sudheesh

ITTA/172/2013

AI Insights

This case involves an appeal by the Commissioner of Income-tax against the decision of the Income Tax Appellate Tribunal, which had found in favor of the respondent, R.S. Sudeesh, in a block assessment covering the period from 1990-91 to 2000-01. The core issue was whether the income from share transactions, recorded in the books of three companies and declared in their tax returns, could be considered undisclosed income of the assessee following a search and seizure operation. The Tribunal had noted that no unaccounted cash or valuables were found during the search, and the only evidence was some notings in a seized document. The Tribunal concluded that there was no nexus established between the assessee and the companies' share transactions, thus dismissing the Revenue's appeal.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 771736 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 03-07-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Benami Transactions; Block assessment; Evidence; Post search proceedings; Search and seizure; Undisclosed income
• Section: 158BB(1)

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI INCOME TAX APPELLATE TRIBUNAL APPEAL NO.172 OF 2013 DATED:3.7.2013 Between: The Commissioner of Income-tax –I Hyderabad … Appellant And R.S. Sudeesh … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE Ms. JUSTICE G. ROHINI I.T.T.A. NO.172 OF 2013 JUDGMENT: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be admitted on the following suggested questions of law. 1. “Whether, on the facts and in the circumstances of the case and in law, the order of the Tribunal is not perverse? 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal is correct in holding that the assessing officer failed to bring any supporting evidence or material on record that the assessee was the real beneficiary of sale of shares in the name of M/s. Akhil Ceramics, M/s. Sri Chakra Cements Ltd., Krishna Rama Industrial Investments Ltd.? 3. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in rejecting the appeal of Revenue on the ground that the share transactions were recorded in books of account of three companies, without appreciating the stand of the Revenue that the assessee is the real beneficiary of the share transaction? 4. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that assessment for block period can only be done on the evidence found as a result of search, without appreciating section 158BB (1) which clearly states that the undisclosed income shall be computed based on evidence as a result of search as well as such other materials as are available with the Assessing Officer and further information and evidences gathered during post search proceedings? 5. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in ignoring that further information and evidences were gathered during post search proceedings by way of self-cheques, bank statements and statement of MD of benami company and without appreciating and retraction of such statements were made after considerable period of time?” This appeal is filed against the judgment and order of the learned Tribunal, dt.10.5.2012, in relation to block assessment covering the period of 1990-91 to 2000-01 upto 8.3.2001. There has been search and seizure in the establishment of the respondent/assessee. Thereupon, it has been noted by the learned Tribunal on fact that excepting seizure of certain documents, no other assets like unaccounted cash, valuables were found from the premises of the assessee. In one of the documents seized, certain notings could be found. While making post search enquiry, the Assessing Officer found that the shares of M/s.AF were sold by three companies. The learned Tribunal, thereafter, on fact, found that when the income arising out of sales of shares has been recorded in the books and the final accounts of the respective companies and declared to the department in the returns filed by them prior to the date of search, by no stretch of imagination, they can be treated as undisclosed income of the assessee. It has been further found by the Tribunal that neither the seized material nor any other material brought on record by the Assessing Officer could establish any nexus between the assessee and the sale of shares by the companies. It is settled position of law that in order to fasten the liability for payment of tax, undisclosed income has to be ascertained and this undisclosed income must result from the assets and properties, and material unearthed during search and seizure. Unless these are done, post search seizure enquiry or investigation legally does not form the basis of making block assessment. Block assessment basically relates to undisclosed income and if no income is unearthed as a result of search and seizure, no extraneous material can help the assessee to make an assessment, since it is a special procedure. The learned Tribunal has followed the correct legal position relying on the established principles of law laid down by the various High Courts, including Delhi and Calcutta High Courts. Under the circumstances, we dismiss the appeal as no substantial question of law is involved in this matter. No order as to costs. ________________________ K.J. SENGUPTA, CJ ______________________ G. ROHINI, J 3.7.2013 bnr "