Income Tax Appellate Tribunal - Chennai
V.Dhivaharan, Mannargudi vs Dwct, Chennai on 28 April, 2017
आयकर अपील य अ धकरण, 'डी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी ड.एस. सु दर #संह, लेखा सद य केसम(
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
धन कर अपील सं. / WTA Nos.60 & 61/Mds/2005
Assessment Years : 1996-97 & 1997-98
Shri V. Dhivaharan, The Deputy Commissioner of
No.32/1, Mannai Nagar, v. Wealth Tax,
Mannargudi - 614 001. Central Circle II(4),
Chennai - 600 034.
PAN : AADPD 1568 P
(अपीलाथ+/Appellant) (-.यथ+/Respondent)
I.T.(SS) A. No.61/Mds/2002
Block Period : 1987-88 to 1997-98 (upto 24.09.1996)
Shri V. Dhivaharan, The Assistant Commissioner of
No.32/1, Mannai Nagar, v. Income Tax,
Mannargudi - 614 001. Central Circle II(4),
Chennai - 600 034.
PAN : AADPD 1568 P
(अपीलाथ+/Appellant) (-.यथ+/Respondent)
I.T.(SS) A. No.38/Mds/2007
Block Period : 1987-88 to 1997-98 (upto 24.09.1996)
Smt. B. Sumathi,
C/o Sh.K.S. Lakshmi Narayanan, The Deputy Commissioner of
FCA, v. Income Tax,
17, Stonedge Towers, I Avenue, Central Circle II(4),
Ashoknagar, Chennai - 600 083. Chennai - 600 034.
PAN : ACQPB 9407 Q
(अपीलाथ+/Appellant) (-.यथ+/Respondent)
2 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02
I.T.(SS) A. No.38/Mds/07
अपीलाथ+ क/ ओर से/Appellants by : Shri T. Vasudevan, Advocate
-.यथ+ क/ ओर से/Respondent by : Shri T.R. Senthil Kumar,
Sr. Standing Counsel
सन
ु वाई क/ तार ख/Date of Hearing : 07.04.2017
घोषणा क/ तार ख/Date of Pronouncement : 28.04.2017
आदे श /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
Two income-tax appeals of two different assessees and two wealth tax appeals of one of the above two assessees are directed against the respective orders of the Assessing Officer and Commissioner of Wealth Tax-1, Chennai. Since common issues arise for consideration in these appeals, we heard all these appeals together and disposing of the same by this common order.
2. Let's first take income-tax appeals for the block period 1987- 88 to 1997-98 (upto 24.09.1996).
4. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that there was a search under Section 132 of the Income- tax Act, 1961 (in short 'the Act') on 24.09.1996 in the premises of the assessee in I.T.(SS) A. No. 61/Mds/2002. According to the Ld. counsel, the Revenue claims that incriminating materials were found 3 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 during the course of search operation. However, no incrimination materials were found with regard to income earned by the assessee. The entire assessment was made on assumption. Referring to grounds of appeal raised before this Tribunal, the Ld.counsel submitted that ground Nos.3 to 10 are general in nature, therefore, the same were not pressed. The Ld.counsel has also made endorsement to that effect in the appeal folder. In view of the above, ground Nos.3 to 10 are dismissed as not pressed.
5. Now, the first ground arises for adjudication is addition of `4,57,021/- towards value of the gold jewellery found at the residence of the assessee. According to the Ld. counsel, for the assessment year 1995-96, the assessee filed return of income and also filed return under Wealth Tax Act. Gold jewellery to the extent of 1290 grams was disclosed to the Revenue. During the course of search operation, one of the assessee's relatives Ms. Padmavathi Ammal visited the assessee's house. The jewellery to the extent of 150 grams belonged to Ms. Padmavathi Ammal. The assessee's mother is also living along with the assessee after the death of the assessee's father. Around 400-450 grams of gold jewellery belong to the assessee's mother, which was also kept in the assessee's 4 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 residence. The balance jewellery belong to the assessee's wife. According to the Ld. counsel, during the course of marriage, the assessee's wife received Sreedhan property in the form of gold jewellery which was kept at the residence. The Ld.counsel further submitted that as per customary practice prevailing in this part of country, especially in Hindu marriages, substantial chunk of jewellery used to be given by respective parents as gift at the time of marriage. The Assessing Officer without examining the explanation filed by the assessee, has simply made an addition of `4,57,021/-.
6. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that admittedly there was search operation at the residence of the assessee at Mannargudi. The Revenue authorities found 2332 grams of gold jewellery. The assessee made various claims regarding ownership of gold jewellery found at his residence. According to the Ld. Sr. Standing Counsel, the assessee claimed that 1290 grams of jewellery was purchased by him and which was disclosed in the income-tax and wealth-tax returns filed in the regular course. The assessee has also claimed that 150 grams of jewellery belonging to 5 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 one of his relatives Ms. Padmavathi Ammal. As per the assessment order, Ms. Padmavathi Ammal was very much available at the time of search. The Assessing Officer called for evidence to support the claim of the assessee that 150 grams of jewellery was belonging to Ms. Padmavathi Ammal and 400-450 grams of jewellery claimed to be belonging to assessee's mother. The assessee has not produced any evidence to support the claim made by the Assessing Officer. Therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer by referring to Section 132(4A) of the Act, found that there was legal presumption that the gold jewellery found during the course of search operation belonged to the assessee. Accordingly, he made an addition for the block period.
7. We have considered the rival submissions on either side and perused the relevant material available on record. Even though 2332 grams of jewellery was found at the residence of the assessee, the dispute is only with regard to the jewellery valued at `4,57,021/- In other words, the dispute is with regard to 1042 grams of gold jewellery found. The assessee claims that 400-450 grams of jewellery belonging to his mother and 150 grams of jewellery belonging to Ms. Padmavathi Ammal, the relative of the 6 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 assessee. The balance belongs to the assessee's wife. It is a customary practice prevailing in this part of the country to receive or gift gold jewellery to the girls at the time of marriage by their respective parents. The assessee claims that his mother possessed 400-450 grams of jewellery. Even if the Assessing Officer disbelieved the claim of the assessee with regard to the jewels of Ms. Padmavathi Ammal, the so-called relative of the assessee, it cannot be denied that the assessee's wife received Sreedhan property from her parents at the time of marriage with the assessee. The Assessing Officer disallowed the claim of the assessee on the ground that no evidence was produced.
8. This Tribunal is of the considered opinion that these gifts were made during the course of marriage by their respective parents. When the parents gifted gold jewellery at the time of marriage, no one could expect any documentary evidence. Therefore, producing documentary evidence for possession of 400- 500 grams of jewellery by the assessee's mother and the balance by the assessee's wife is something impossible. The assessee's mother also might have received Sreedhan property from her parents. Having considered the customary practice prevailing in 7 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 this part of country, family background and the status of the assessee, this Tribunal is of the considered opinion that the addition of 1042 grams of gold jewellery is not called for. Therefore, the addition of `4,57,021/- being the value of gold jewellery of 1042 grams is not justified. Accordingly, the order of the Assessing Officer is set aside the and the addition of `4,57,021/- is deleted.
9. The next ground of appeal is with regard to addition of `43,47,182/- being the value of the jewellery found in Locker No.133.
10. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that admittedly the locker stands in the name of the assessee's mother-in-law Smt. B. Sumathi. According to the Ld. counsel, in the course of search operation, the Revenue authorities examined the bank locker No.133 at City Union Bank, Mannargudi Branch and found gold jewellery to the extent of 4370 grams and diamond to the extent of 48.61 carats. The assessee explained before the Assessing Officer that the locker stands in the name of his mother-in-law Smt. Sumathi and thus the gold jewellery and diamond are belonging to her. The assessee further claimed that 8 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 the locker rent receipt was not found at the house of the assessee but it was found at the residence of one Shri Natarajan. Smt. Sumathi, the mother-in-law of the assessee, also explained before the Revenue authorities that the jewellery and diamond belong to her and the same were acquired from the agricultural income. Therefore, no addition is called for in the hands of the assessee.
11. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of search operation, locker rent receipt and locker deposit receipt were found in the premises of the assessee. It is for the assessee to explain how the same were found at his house. According to the Ld. Sr. Standing Counsel, a substantive addition was made in the hands of the assessee and protective assessment was made in the hands of Smt. B. Sumathi, who is the assessee in I.T.(SS) A. No.38/Mds/2007. Even though Smt. Sumathi claims that she was cultivating 20 acres of land, there was no evidence to prove the quantum of agricultural income. Therefore, the Assessing Officer presumed that the jewellery found in locker No.133 of City Union Bank, Mannargudi Branch, belong to the assessee. The value of the gold jewellery found was added as undisclosed income in the 9 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 hands of the assessee. A protective assessment was also made in the hands of Smt. Sumathi.
12. We have considered the rival submissions on either side and perused the relevant material available on record. During the course of search operation, the Revenue authorities admittedly examined the bank locker No.133 of City Union Bank, Mannargudi Branch and found 4370 grams of gold jewellery and 48.61 carats of diamond. It is not in dispute that the bank locker stands in the name of Smt. B. Sumathi. An addition of the value of jewellery and diamond was made in the hands of the assessee to the extent of `43,47,182/- on the ground that the locker rent receipt and locker deposit receipt were found in the residence of the assessee. Moreover, Smt. Sumathi could not explain the quantum of agricultural income for making the investment. The question arises for consideration is when the bank locker prima facie stands in the name of Smt. Sumathi, can addition be made in the hands of the assessee? This Tribunal is of the considered opinion that when the bank locker stands in the name of Smt. Sumathi, the jewellery and diamond found inside the locker belong to Smt. Sumathi unless it is otherwise proved that it belongs to the assessee. The Revenue 10 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 authorities had no material to indicate that the jewellery and diamond found in the locker belong to the assessee. The presumption was raised by the Assessing Officer on the ground that the locker rent receipt and locker deposit receipt were found in the premises of the assessee. It is not in dispute that Smt. Sumathi is the mother-in-law of the assessee. The assessee was married to Smt. D. Hemalatha, who is none other than the daughter of Smt. Sumathi. Thus, the assessee and Smt. Sumathi are closely related and therefore, there is nothing wrong in finding the locker rent receipt and deposit receipt in the premises of the assessee, i.e. in the house of Smt. Hemalatha, who is none other than the daughter of Smt. Sumathi. This Tribunal is of the considered opinion that when Smt. Sumathi left locker rent receipt and locker deposit receipt in the house of Smt. Hemalatha, this Tribunal is of the considered opinion that there cannot be any presumption that the jewellery and diamond found in the locker belong to the assessee. At the best, if Smt. Sumathi could not explain the source for acquiring the jewellery and diamond, the value of the jewellery and diamond can be added in the hands of Smt. Sumathi and not definitely in the hands of the assessee. The Assessing Officer found that Smt. 11 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Sumathi has no evidence to prove the quantum of agricultural income for acquiring the jewellery and diamond. Since Smt. Sumathi has filed separate appeal, the source for acquiring the jewellery and diamond need to be examined only in the hands of Smt. Sumathi and not in the hands of the assessee. Suffice to say, since the locker belongs to Smt. Sumathi, the jewellery and diamond available in the said locker belong to Smt. Sumathi only and not to the assessee. Therefore, the Assessing Officer is not justified in making addition on presumption basis. Accordingly, the orders of the lower authorities are set aside and the addition of ` 43,47,182/- is deleted.
13. The next ground of appeal is with regard to addition towards value of silver articles found during the course of search operation.
14. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the silver articles were gifted to the assessee's wife Smt. Hemalatha during her marriage with the assessee. According to the Ld. counsel, the assessee was living in a joint family alongwith parents, brother and sister till 1991 or 1992. It is a customary practice to gift silver articles and gold jewellery during the 12 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 course of marriage to the daughters by their parents. There is a belief among the villagers that possession of silver brings prosperity. Even during small occasions like birthday, wedding day, etc. gifts mostly of silverware and gold jewellery, used to be given. These silver articles, in fact, belong to the assessee's mother and his wife. Therefore, the addition made by the Assessing Officer to the extent of `89,966/- is not justified.
15. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that at the time of search, the Revenue authorities found 12,247 grams of silver articles at the residential premises of the assessee. The assessee explained before the Assessing Officer that the silver articles belong to his mother and wife. The assessee also claims that he lived in a joint family till 1991 or 1992 and lot of gifts were received by the family members. During the marriage of the assessee also, the assessee claims that his wife received gifts. However, the assessee could not produce any evidence to substantiate the claim. Other than the oral argument, the assessee could not produce any evidence before the Revenue authorities. Therefore, the Assessing 13 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Officer found that the value of silver articles at the rate of `7346/- per Kg has to be assessed as undisclosed income.
16. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, 12,484 grams of silver articles were found during the course of search operation. The assessee claims that the silver articles belong to his mother and his wife. The Assessing Officer found that the assessee could not produce any material to substantiate the claim that the silver articles found belong to his wife and mother. It is an admitted fact that during the course of marriage, parents use to gift gold jewellery and silver articles. The value of the gift may depend upon the family status and financial position of respective families. Now the assessee claims before this Tribunal that his mother and wife received silver articles as gift during the course of their respective marriages. It is a customary practice in this part of country to gift gold and silver articles to the girls by the respective parents. The quantum of gifts may differ from one family to another depending upon the financial and social status. However, proving the gifts made by the respective parents is something impossible by the assessee. No girl would ask for evidence from the respective 14 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 parents for the gifts made to her by way of gold and silver. Therefore, to some extent the judicial authorities have to take into consideration the customary practice prevailing in that locality. By taking into consideration the customary practice, financial and social background of the assessee's family, this Tribunal is of the considered opinion that the assessee's mother and his wife would have possessed 12,247 grams of silver articles. Therefore, the addition made by the Assessing Officer to the extent of `89,966/- is not justified. Accordingly, the order of the Assessing Officer is set aside and the addition made by the Assessing Officer to the extent of `89,966/- is deleted.
17. The next ground of appeal is with regard to valuable articles found at the residential premises of the assessee.
18. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the assessee was living in a joint family. A fridge and an air-conditioner were in his house for about 10 or 15 years. The assessee claims that he was allowed to use the fridge and air- conditioner but it do not belong to him. The Assessing Officer found that the assessee could not give any evidence to show that the air- 15 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 conditioner and fridge were purchased beyond the block period. According to the Ld. counsel, in the joint family system, the coparceners are using the valuables available at the residence and do not belong to any particular coparcener. At the best, it has to be assessed only in the hands of the HUF and not in the hands of the individual assessee. Referring to TV, generator, VCR and typewriter, the Ld.counsel submitted that these items were disclosed in the wealth-tax return. Moreover, a Maruti Esteem car was belonging to M/s TCV Engineering Pvt. Ltd., a separate company. Therefore, the addition made by the Assessing Officer is not justified.
19. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of search operation, the Revenue authorities found a Maruti Esteem car and other valuables such as TV, fridge, air-conditioner, generator, video cassette recorder and typewriter, etc. The assessee claims that other than air-conditioner, fridge and Maruti car, all other items were disclosed in the wealth-tax return. However, no evidence was filed by the assessee. In respect of air- conditioner and fridge, the assessee claims that it belongs to joint 16 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 family and the assessee was allowed to use the same. For this also, no evidence is available on record. Therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer has rightly estimated the value of the assets at `4,00,000/-.
20. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the Maruti Esteem car was registered in the name of M/s TCV Engineering Pvt. Ltd. M/s TCV Engineering Pvt. Ltd. being a company, it is a separate assessable unit. It is also not in dispute that the Maruti Esteem car was registered in the name of M/s TCV Engineering Pvt. Ltd. Therefore, in the absence of any other material to indicate that the car belongs to the assessee, there could not be any addition for the block period. Section 158BB(1) of the Act clearly says that for the purpose of making addition for the block period, the material shall found during the course of search operation. In this case, no material is available on record to suggest that the Maruti car belongs to the assessee. However, the Registration Certificate stands only in the name of M/s TCV Engineering Pvt. Ltd. Therefore, at the best, the value of Maruti car 17 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 can be assessed only in the hands of M/s TCV Engineering Pvt. Ltd. being a company and definitely not in the hands of the assessee.
21. Now coming to the air-conditioner and fridge, the assessee claims that he is living in a joint family and he was allowed to use the same but it does not belong to him. This contention of the assessee is not disputed by the Revenue. When the assessee admittedly is living in a joint family system, the articles belong to joint family. However, the members / coparceners of the joint family may use the same. Since the joint family or Hindu Undivided Family is a separate assessable unit under the provisions of Income-tax Act, the value of air-conditioner and fridge has to be necessarily assessed only in the hands of the HUF and there cannot be any addition in the hands of the individual coparcener merely because they are allowed to use the same.
22. Now coming to TV, generator, VCR and typewriter, the assessee claims that these are disclosed in the wealth-tax return. The TV was valued at `18,000/-, the generator was valued at `21,000/-, video cassette recorder was valued at `15,000/- and the typewriter was valued at `7,000/-. This Tribunal is of the considered 18 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 opinion that even though the assessee claims that the acquisition of these assets was disclosed in the wealth-tax return, the source of income declared by the assessee for the block period is more than sufficient for purchasing the properties. Apart from that, the assessee also had agricultural income and contract receipts. Therefore, the assessee would have purchased the same from these incomes. Hence the addition of `4,00,000/- made by the Assessing Officer is not justified. Accordingly, the order of the Assessing Officer is set aside and the addition of `4,00,000/- made by the Assessing Officer is deleted.
23. The next ground of appeal is with regard to addition of `34,672/- towards cash found during the course of search operation.
24. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that during the course of search operation, the Revenue authorities found a Hundi. It is a common practice in villages to maintain a Hundi for small savings. The money saved in due course was deposited in the Hundi. According to the Ld. counsel, 19 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 even this amount was added by the Assessing Officer to the extent of `34,672/-.
25. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the assessee claimed before the Assessing Officer that his mother and wife were maintaining Hundi for saving. According to the Ld. Sr. Standing Counsel, the explanation offered by the assessee was found not satisfied by the Assessing Officer. Since the cash was found in the residence of the assessee, it is for the assessee to explain the source for the cash found during the course of search operation. The assessee's mother's Will was also found in the course of search in the residential premises of Shri T. Vivekanandam at Trichy. This Will refers a bank account at State Bank of India, Mannargudi. This Will does not refer to any cash left by the assessee's mother, therefore, the Assessing Officer made an addition of `34,672/- under Section 69A of the Act.
26. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that a sum of `34,632/- was found during the course of 20 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 search operation. The assessee explained before the Assessing Officer that these are small savings by his mother and wife. It is a customary practice in the villages that when the money was given for household expenses, the ladies use to keep a part of amount for meeting unforeseen expenditure. The Assessing Officer disbelieved the claim of the assessee on the ground that the assessee's mother's Will does not refer anything about the money left at the assessee's house. This Tribunal is of the considered opinion that these are small savings by the respective ladies in villages. Merely because there was omission in the Will about the money left at the residence of the assessee, which was saved in the course of life time by the assessee's mother and his wife, this Tribunal is of the considered opinion that the claim of the assessee cannot be totally disregarded. The customary practice prevailing in villages has to be taken into consideration by the judicial authorities while making addition. When the assessee's mother and wife received money in the course of their day-to-day activities from the household expenses, expecting a documentary evidence or material for supporting such savings is something which cannot be produced by the assessee. The judicial authorities cannot ignore the customary 21 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 practice which prevails in the society, more particularly, in the villages regarding small savings by the ladies. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer and accordingly the same is set aside. The addition of `34,672/- made by the Assessing Officer is deleted.
27. The next ground of appeal is with regard to addition of `10,00,000/- being the deposit in the name of Smt. Subashree Baskaran.
28. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that this amount was already included in the hands of Shri Baskaran, the husband of Smt. Subashree, therefore, there cannot be any separate addition in the hands of the assessee. According to the Ld. counsel, the addition was made on protective basis. This is block assessment under Section 158BC of the Act. Therefore, in view of language employed by Parliament in Section 158BB(1) of the Act, the Assessing Officer has to confine only to the material found during the course of search operation and the information which is relatable to such material found during the course of search operation. In this case, no material is available on 22 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 record to suggest that the money belongs to the assessee. In fact, the addition was made in the hands of one Shri Bhaskaran, who is none other than the husband of Smt. Subashree, therefore, there cannot be any addition in the hands of the assessee on protective basis.
29. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that substantive addition was made in the hands of Shri Bhaskaran, the husband of Smt. Subashree. However, protective assessment was made in the hands of the assessee. The protective assessment was made on the basis of statement recorded from Smt. Subashree, therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer has rightly made a protective assessment in the hands of the assessee.
30. We have considered the rival submissions on either side and perused the relevant material available on record. The block assessment was made on the basis of the statement said to be recorded from Smt. Subashree. It is not known whether the statement was recorded from the said Smt. Subashree during the 23 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 course of search operation or during the course of enquiry under Section 131 of the Act. The fact remains that a substantive assessment was made in the hands of Shri Bhaskaran, husband of Smt. Subashree. As rightly submitted by the Ld.counsel for the assessee, protective assessment is unknown to block assessment. Addition in the block assessment can be made only on the basis of material found during the course of search operation. In case there is no material, there cannot be any addition for the block period. Therefore, there is no question of making assessment in the hands of the assessee. Moreover, it is not in dispute that the very same amount was already taxed in the case of Shri Bhaskaran. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer. Accordingly, the order of the Assessing Officer is set aside and the addition of `10,00,000/- made on protective basis is deleted.
31. The next ground of appeal is with regard to addition of `6.00 lakhs towards funeral expenses.
32. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that Revenue authorities claim certain unauthenticated 24 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 loose sheets found during the course of search operation. The loose sheets found by the Revenue authorities do not make any meaning. Referring to the decision of Pune Bench of this Tribunal in Chander Mohan Mehta v. ACIT (1999) 65 TTJ 327, the Ld.counsel submitted that the addition made on the basis of loose sheets have no relevance in the block period.
33. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the seized material showed that the assessee spent a sum of `4,09,438/- towards funeral expenses of his mother Smt. Krishnaveni. Moreover, book No.32 found during the course of search operation also discloses an expenditure of `2,90,354/-. According to the Ld. Sr. Standing Counsel, the assessee explained before the Assessing Officer that most of the expenditure incurred in funeral of his mother was met by his neighbours, friends and relatives. His brothers and sisters also shared the expenditure. In the absence of any material showing that the expenditure was shared by brothers, sisters and other relatives, the Assessing Officer made addition of `6,99,792/-. In the absence of any further material explaining the source for meeting the expenditure, according to the Ld. Sr. Standing Counsel, 25 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 the Assessing Officer made addition of `6,99,792/- for the block period.
34. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, there are certain materials which indicate the expenditure incurred by the assessee in the funeral expenses of his mother Smt. Krishnaveni. A seized material discloses the expenditure of `4,09,438/- and another book shows the expenditure of `2,90,354/-. Even though the assessee initially claimed that the above said material was not found in the premises of the assessee, subsequently he explained that the expenditure was met by his neighbours, friends and relatives and also brothers and sisters. It is customary practice in villages to share the funeral expenses of mother by all the children and the close relatives. Expecting evidence for sharing such kind of expenditure is something impossible for the assessee to produce. When the assessee claims that sisters, brothers and his relatives shared the expenditure of funeral of his mother, this Tribunal is of the considered opinion that when such a customary practice to share such an expenditure exists in south Indian villages, rejecting the claim of the assessee in toto is not called for. 26 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
35. The Assessing Officer found that the seized material discloses not only the debits but also the credits. This Tribunal is of the considered opinion that the expenditure would be normally incurred by the elder members of the family at the first instance and subsequently it would be shared by other family members and close relatives. Therefore, merely because there was a credit entry in the name of the assessee, it does not mean that the expenditure was incurred by the assessee alone. The assessee being one of the children of Smt. Krishnaveni, definitely he has to share a part of the expenditure in the funeral expenditure. Therefore, out of `6,99,792/-, this Tribunal is of the considered opinion that the assessee would have shared an expenditure of `2,00,000/-. The balance amount of `4,99,792/- might have been shared by brothers, sisters and close relatives in the family. This being the customary practice in villages in this part of country, this Tribunal is of the considered opinion that providing documentary evidence may not be possible one. Therefore, by keeping the customary practice prevailing in this part of country and the status of the assessee's family, this Tribunal is of the considered opinion that a sum of `2,00,000/- would have been incurred by the assessee towards 27 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 funeral expenses of his mother Smt. Krishnaveni. Accordingly, the order of the Assessing Officer is modified and the addition of `2,00,000/- is sustained. However, a sum of `4,99,792/- is deleted.
36. The next ground of appeal is with regard to addition of `42.37 lakhs on protective basis.
37. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that on the basis of so-called loose sheets found in the premises of the assessee, the Assessing Officer found that an investment of `50,43,875/- was made by the assessee. The assessee explained before the Assessing Officer that he had no connection or transaction with the persons whose names appeared in the loose sheets. According to the Ld. counsel, the payments were made to Shri K.C. Sivanandam and Smt. Yagavalli for the purpose of purchasing land by M/s TCV Engineering Pvt. Ltd. According to the Ld. counsel, TCV Engineering Pvt. Ltd. was separately assessed. The Assessing Officer found that a sum of `8,06,552/- was accounted in the books of M/s TCV Engineering Pvt. Ltd. and the balance of `42,37,323/- was already assessed in the hands of M/s TCV Engineering Pvt. Ltd. The Assessing Officer 28 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 made addition in the hands of the assessee on protective basis. According to the Ld. counsel, assessment on protective basis is unknown to the block period. In view of Section 158BB(1) of the Act, the Assessing Officer has to confine himself only to the evidence found during the course of search operation and such information which is relatable to the evidence found during the course of search operation. In this case, the material found during the course of search operation shows that the payments were made to Shri K.C. Sivanandam and Smt. Yagavalli for purchase of land by M/s TCV Engineering Pvt. Ltd. In fact, a part of payment was accounted in the books of that company. Therefore, the protective assessment made in the hands of the assessee cannot stand in the eye of law.
38. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the seized material shows a payment of `50,43,875/-. The assessee explained before the Assessing Officer that he has no connection with those persons whose names appearing in the loose sheets found during the course of search operation. Referring to Section 132(4A) of the Act, the Ld. Sr. Standing Counsel submitted that the amounts 29 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 referred in the seized material would be presumed to be an investment made by the assessee. Since the assessee has not offered any explanation satisfactorily to the Assessing Officer, he found that the investment might have been made by the assessee. After referring to the books found in TCV Engineering Pvt. Ltd., the Assessing Officer found that a sum of `8,06,552/- was accounted in the books of M/s TCV Engineering Pvt. Ltd. Therefore, the balance amount of `42,37,323/- might have been made outside the books by the assessee. On examination, M/s TCV Engineering Pvt. Ltd. denied payment of any cash to Shri K.C. Sivanandam and Smt. Yagavalli. Since the papers were seized from the premises of the assessee and the assessee being a substantial shareholder of M/s TCV Engineering Pvt. Ltd., the Assessing Officer assessed the balance of `42,37,323/- substantively in the hands of M/s TCV Engineering Pvt. Ltd. However, the same amount was assessed protectively in the hands of the assessee.
39. We have considered the rival submissions on either side and perused the relevant material available on record. The undisclosed income for the block assessment has to be assessed on the basis of evidence found during the course of search operation or the 30 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 information which is relatable to the evidence found during the course of search operation. The Assessing Officer cannot travel beyond the evidence found during the course of search operation. In the case before us, advance was made to Shri K.C. Sivanandam and Smt. Yagavalli for purchase of land by M/s TCV Engineering Pvt. Ltd. A part of payment to the extent of `8,06,552/- was recorded in the books of M/s TCV Engineering Pvt. Ltd. The Assessing Officer presumed that since the material found during the course of search operation in the premises of the assessee, the assessee might have paid the amount. Therefore, he protectively assessed the balance amount of `42,37,323/- in the hands of the assessee. This Tribunal is of the considered opinion that when M/s TCV Engineering Pvt. Ltd. accounted a part of payment to the extent of `8,06,552/- for purchasing of land, the balance amount also ought to have been assessed only in the hands of the company. Merely because the company denied the payment that cannot be a reason to make assessment in the hands of the assessee.
40. The assessee appears to be the Managing Director of M/s TCV Engineering Pvt. Ltd. The papers relating to the company 31 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 might have been found in the premises of the assessee. The company being a separate and distinct assessable unit under the scheme of Income-tax Act, this Tribunal is of the considered opinion that the income of the company cannot be assessed in the hands of assessee merely because he appears to be the Managing Director. Moreover, protective assessment is unknown to the scheme of block assessment. In view of the specific language employed by Parliament in Section 158BB(1) of the Act, this Tribunal is of the considered opinion that the Assessing Officer has to confine himself to the material found during the course of search operation. Therefore, he cannot make any protective assessment in the hands of the assessee. Since the land belongs to the company and a part of payment was admittedly recorded in the books of the company, this Tribunal is of the considered opinion that there cannot be any protective assessment in the hands of the assessee. Accordingly, the order of the Assessing Officer is set aside and the addition of `42,37,323/- is deleted.
41. The next ground of appeal is with regard to deposits made in the bank account of the assessee.
32 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
42. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer, in the course of assessment, called for details regarding the source for making deposits in the S.B. accounts with Bank of Madura, City Union Bank and Indian Overseas Bank at Mannargudi. The assessee explained before the Assessing Officer that he was engaged in contract work doing on sub-contract basis apart from cultivation of land on lease basis. The contract receipts were routed through City Union Bank. However, the agricultural income and income from other sources were routed through Bank of Madura. According to the Ld. counsel, the assessee has filed regular return of income for all the years and all the credits and debits were duly considered while preparing return of income. The Assessing Officer without considering the income disclosed in the return filed in the regular course, has computed the undisclosed income. According to the Ld. counsel, the books found during the course of search operation, do not indicate any income from undisclosed sources. The assessee has explained all the sources before the Assessing Officer. Therefore, according to the Ld. counsel, the addition made by the Assessing Officer is not 33 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 justified. Alternatively, the Ld.counsel submitted that income from contract may be estimated at 8% under Section 44AD of the Act.
43. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of assessment, the Assessing Officer called for details and sources for making deposits in Bank of Madura, City Union Bank and Indian Overseas Bank. The assessee claimed that he was maintaining only two accounts, one at Bank of Madura and another at City Union Bank. However, the material available with the Assessing Officer discloses the maintenance of one more account in Indian Overseas Bank also. The assessee could not offer any explanation for the query raised by the Assessing Officer. By way of generalized comments, the assessee explained that receipt on sub- contract was routed through City Union Bank account and agricultural income and other income are routed through Bank of Madura account.
44. The Ld. Sr. Standing Counsel further submitted that the Assessing Officer found that the credit found in City Union Bank account was more than the actual contract receipts as credited in 34 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Form 26AS. The Assessing Officer found that for the assessment year 1992-93, the assessee filed return of income disclosing the contract receipts at `1,77,220/-. However, in the bank account the deposit shown was only `45,000/-. There was no TDS certificate attached with return of income. Moreover, for assessment year 1993-94, the assessee has disclosed contract receipt of `4,76,139/- However, the TDS certificate discloses the contract receipt at `1,09,000/-. Since tax was not deducted at the time of payment, it is for the assessee to explain the source for making deposits. Similarly for the assessment year 1994-95, the contract receipt was `9,22,984/-, the TDS certificate shows the contract amount as `5,06,614/-. A sum of `3,23,874/- was paid to the assessee for the assessment year 1995-96. When the assessee has shown contract receipt of `20,73,945/-, the TDS certificate shows the gross contract receipt of `16,532/-. The assessee received net amount of `11,991/-. Since the assessee has not produced any material relating to contract business, except filing copies of TDS certificates, the Assessing Officer found that the money deposited over and above the TDS was admittedly belongs to the assessee from 35 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 undisclosed sources. Accordingly, the Assessing Officer made addition of `48,15,553/-.
44. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, there were bank accounts found by the Assessing Officer during the course of search operation. The assessee claims that he was maintaining only two accounts, one in City Union Bank and another in Bank of Madura. The Revenue claims that the assessee was also maintaining account in Indian Overseas Bank at Mannargudi. The fact remains that the assessee was engaged in sub-contract work as substantiated by the TDS certificate. There was a difference in respect of contract receipts as it was disclosed by the assessee in the return filed in regular course and the TDS certificate. Merely because the original contractor failed to deduct tax at the time of payment, it does not mean that the assessee has not received any contract money over and above that was disclosed in the TDS certificate. The Assessing Officer ought to have verified the payments with the books maintained by the contractors from whom the assessee received contract work. The assessee is also 36 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 doing agricultural activities and received income from other sources also.
45. The main dispute is with regard to contract receipts. In Indian Overseas Bank, there was a deposit of `32,877/-. Section 44AD of the Act provides for estimation of profit from contract at 8% if the assessee was not maintaining proper books of account. In the case before us, the assessee claims that there were contract receipts. This fact was substantiated by TDS certificate filed by the assessee. However, the income was disclosed in the regular course of return. The assessee's premises was searched on 24.09.1996. Therefore, the income disclosed in the return of income filed on or before 24.09.1996 cannot form part of undisclosed income for the block period. In other words, the income disclosed in the return of income filed before the date of search cannot be said that the same was unearthed during the course of search operation. Therefore, in respect of contract receipts and agricultural income, which were disclosed on or before 24.09.1996, this Tribunal is of the considered opinion that the same cannot be taken as undisclosed income. However, in respect of return filed on or after 24.09.1996, the contract receipts have to be assessed 37 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 under Section 44AD of the Act at the rate of 8%. Therefore, the alternative contention of the assessee that the income has to be assessed at the rate of 8% of the total contract receipts has to be accepted. Accordingly, order of the Assessing Officer is modified and the Assessing Officer is directed to delete the entire addition towards the income disclosed in the regular return on or before 24.09.1996. In respect of contract receipts, which were not disclosed in the regular return on or after 24.09.1996, the profit may be estimated at 8% of the contract receipts under Section 44AD of the Act. Accordingly, the order of the Assessing Officer is modified.
46. The next ground of appeal is with regard to deposits in the bank account of Smt. D. Hemalatha.
47. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that on verification of bank passbook filed by the assessee's wife Smt. Hemalatha, the Assessing Officer found that there are deposits. The assessee explained before the Assessing Officer that money received from Shriram Chits & Investments Ltd. for mobilizing deposits was deposited in the account of Smt. Hemalatha. The assessee has also explained that after 38 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 withdrawing the deposit made earlier, the same was re-deposited in the bank account. The Assessing Officer found that the explanation offered by the assessee with regard to first deposit was correct and the assessee's wife also filed return of income disclosing the receipt of `1,10,000/- from M/s Shriram Chits & Investments Ltd. The dispute is with regard to subsequent two deposits to the extent of `84,000/-. According to the Ld. counsel, the withdrawal made from initial deposits were re-deposited, therefore, it cannot be considered as undisclosed income.
48. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the Assessing Officer found that there are three deposits in the bank account of Smt. Hemalatha, the wife of the assessee. Out of the three deposits, `1,10,000/- was disclosed in the return filed by Smt. Hemalatha as received from M/s Shriram Chits & Investments Ltd. In respect of other two deposits, the assessee has not disclosed any source. A mere claim that the withdrawal made earlier was re- deposited cannot be a reason. Therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer made the addition of `84,000/-.
39 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
49. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the bank passbook of Smt. Hemalatha discloses deposit on three dates. On 11.11.1994, there was a deposit of `1,09,773/-, on 07.10.1995, there was a cash deposit of `5,00,000/- and on 23.08.1996, there was another deposit of `34,000/-. The assessee explained that the money received from M/s Shriram Chits & Investments Ltd. was deposited to the extent of `1,10,000/- and this was accepted by the Assessing Officer. The Assessing Officer also accepted that the same was disclosed in the return of Smt. Hemalatha. Therefore, the assessee's wife Smt. Hemalatha, being an independent assessee, the deposit, if any, has to be considered only in the hands of Smt. Hemalatha and not in the hands of the assessee.
50. Even though Smt. Hemalatha appears to be the wife of the assessee, under the scheme of Income-tax Act, Smt. Hemalatha is an independent and separate entity and hence, the addition has to be made only in the hands of Smt. Hemalatha and not in the hands of the assessee. It is not the case of the Revenue that the assessee deposited in his wife's account. In the absence of any 40 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 searched material showing that the assessee has deposited money in the account of his wife, there cannot be any addition. Moreover, the assessee claims that the money deposited in the very same account earlier was withdrawn cannot be brushed aside by the Assessing Officer. In view of the above, this Tribunal is unable to uphold the addition of `84,000/- with regard to deposit made in the bank account of Smt. Hemalatha. Accordingly, the order of the Assessing Officer is set aside and the addition of `84,000/- is deleted.
51. The next ground of appeal is with regard to addition of `3.99 lakhs towards cost of property at Ashesham village, Mannargudi.
52. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer referred the valuation of the property at Ashesham village to the valuation officer to estimate the cost of construction. The valuation officer estimated the cost of construction at `49,849/-. The valuation officer found that there was difference in the area of land and the area of construction of building mentioned in sale deed and the actual area. The assessee has not disclosed the purchase of the land and building, therefore, the entire 41 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 investment was treated as undisclosed income. According to the Ld. counsel, no search material relating to investment in the property was found during the course of search operation. The Departmental Valuation Officer's report cannot be construed as material found during the course of search operation, therefore, there cannot be any addition for the block period. The Ld. counsel placed his reliance on the judgment of Madras High Court in CIT v. G.K. Senniappan (2006) 284 ITR 220 and on the judgment of Delhi High Court in CIT v. Ravi Kant Jain (2001) 250 ITR 141.
53. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the valuation officer found that the vacant land measuring 2520 sq.ft. was purchased by the assessee on 25.05.1989. The valuation officer has reported that plot Nos. 9 and 11 were not disclosed in the document. The valuation officer further found that there was dwelling unit on plot No.10 in existence. An employee of the assessee was very much present at plot No.9. However, the person available did not know who was the owner of the property. Therefore, the Assessing Officer estimated the investment in the land and dwelling unit constructed at plot No.9 was estimated as per 42 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 the report given by the valuation officer. Therefore, according to the Ld. Sr. Standing Counsel, no interference is called for.
54. We have considered the rival submissions on either side and perused the relevant material available on record. With regard to investment made in the land and construction in the land at Ashesham village was not reflected in the search material. In other words, no material was found during the course of search operation in respect of the so-called investment made by the assessee in the land at Ashesham village. The Assessing Officer solely relied upon the valuation officer's report for making addition. The Assessing Officer also found that the purchase of plots No.9 and 11 were not disclosed by the assessee. It is also equally true that only the valuation officer brought to the notice of the assessee that there were plots No.9 and 11. It is not known on what basis the valuation officer claims that the occupant of the land is employee of the assessee. One end the valuation officer says that the occupant is an employee of the assessee and on the other hand, the valuation officer says that the occupant could not disclose the actual owner of the land. Therefore, there was a doubt whether the assessee is the owner of the plot Nos. 9 and 11. The fact remains that no material 43 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 was found during the course of search operation. Therefore, in view of provisions of Section 158BB(1) of the Act, the Assessing Officer cannot travel beyond the material available on record. In the absence of any material during the course of search operation, addition cannot be made on the basis of valuation officer's report alone for the block period. In view of the above, we are unable to uphold the order of the Assessing Officer. Accordingly, the order of the Assessing Officer is set aside and the addition of `3.99 lakhs is deleted.
55. The next ground of appeal is with regard to unexplained credit in the books of Sengamala Thayar Trust.
56. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that as per the books found during the course of search operation, there was a cash credit of `20,000/- in the name of the assessee. In fact, the Trust itself was created by the assessee in the year 1993 and they have also established a college. The day book of the Trust shows that for the accounting year 1995-96, there was a receipt of `10,000/- from the assessee 01.04.1995. The amount credited in the day book was not reflected in the ledger. 44 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Similarly, according to the Ld. counsel, there was a credit of `10,000/- in the name of the assessee on 06.07.1994 for the accounting year 1994-95. The assessee explained before the Assessing Officer that there was no authenticity for the credit entry found in Trust account, therefore, there cannot be any addition in the hands of the assessee. The Assessing Officer without considering the explanation of the assessee made the addition. According to the Ld. counsel, credit entry found in the books of the Trust has to be answered only by the Trust. Referring to Section 68 of the Act, the Ld.counsel submitted that the addition can be made only in the hands of the Trust in whose books the entry was made. The failure of the Trust to substantiate the entry made in their books cannot be a reason to make addition.
57. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that seized material clearly shows that the assessee has established the Trust by the name Sengamala Thayar Educational Trust. The day book shows a credit of `20,000/- in the name of the assessee for the accounting year 1995-96. A similar credit was found in the day book as on 01.04.1995 relating to accounting year 1995-96. However, the entry 45 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 of `10,000/- found in the day book does not reflect in the ledger of the Trust. The ledger of the Trust reflects another credit of `10,000/- on 06.07.1994 for the accounting year 1994-95. Since the assessee could not offer proper explanation, according to the Ld. Sr. Standing Counsel, the addition was made in the hands of the assessee.
58. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the Revenue authorities found certain incriminating material with regard to credits found in the books of Sengamala Thayar Educational Trust for the accounting years 1994-95 and 1995-96. The assessee now claims that for the purpose of making addition under Section 68 of the Act, it has to be made in the hands of the Trust in whose book the credit entry was made.
59. We have carefully gone through the provisions of Section 68 of the Act. Section 68 of the Act clearly says that if any credit was found in the books of account maintained for any previous year and no explanation was offered about the nature and source of such credit, the sum so credited may be charged to income-tax as 46 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 income of the assessee for the previous year. In the case before us, admittedly, a credit entry was found in the books of Sengamala Thayar Educational Trust. Therefore, it is for the Trust to explain the source of credit. Merely because the ledger and day book were found in the premises of the assessee and entry was made in the name of the assessee, there cannot be any presumption that the assessee advanced the funds to the so-called Trust. There may be every possibility that the said Trust named Sengamala Thayar Educational Trust, might have credited their own funds in the name of the assessee. These facts can be clarified only on examination of the trustees or officer-in-charge of the Trust. The Assessing Officer simply presumed that the assessee has advanced funds to the above said Trust. When the assessee specifically claims that there was no authenticity for the transaction in respect of credits found in the books of Sengamala Thayar Educational Trust, the Assessing Officer ought to have examined the person who is in- charge of accounts of Sengamala Thayar Educational Trust. Since such an exercise was not done by the Assessing Officer, this Tribunal is of the considered opinion that making addition of 47 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 `40,000/- is not justified. Accordingly, the order of the Assessing Officer is set aside and the addition of `40,000/- is deleted.
60. The next ground of appeal is with regard to unexplained credit.
61. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer found that there are some credits for the period from 28.02.1993 to 25.02.1994 to the extent of `2,01,000/-. The assessee claimed before the Assessing Officer that the seized material does not contain any name of the parties, therefore, there cannot be any addition in the hands of the assessee. The assessee has claimed that these materials were not seized from the premises of the assessee, therefore, according to the Ld. counsel, the addition made by the Assessing Officer is not justified. The Ld.counsel further submitted that there was no reference in the books as to any nexus of those entries with the assessee. The Assessing Officer made addition only on presumption. Therefore, according to the Ld. counsel, the addition made on surmises and conjectures cannot stand in the eye of law. 48 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
62. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the seized material discloses credit of `2,01,000/- on various dates from 28.02.1993 to 25.02.1994. The assessee could not explain the source for making the credit. The so-called seized material said to be recovered from the assessee itself was not within the knowledge of the assessee.
63. We have considered the rival submissions on either side and perused the relevant material available on record. The seized material discloses credit of `2,01,000/- for the period 28.02.1993 to 25.02.1994. The Assessing Officer made the addition on the ground that there was no explanation from the assessee. As rightly submitted by the Ld.counsel for the assessee, there was no reference in the seized material about the entries, from whom the assessee said to have received the money. It is not known whether the assessee actually received the money or not. This Tribunal is of the considered opinion that when there was a credit found in the material found during the course of search operation, it is for the assessee to explain the source of such credit. In the absence of any explanation, the presumption is that it is the assessee's income 49 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 which was credited in the said material found during the course of search operation. The nexus of any entry or other thing, has to be furnished only by the assessee. In the absence of any other explanation with regard to credit entry, the same cannot be taken advantage by the assessee. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has rightly made addition of `2,01,000/-. Therefore, this Tribunal finds no reason to interfere with the order of the Assessing Officer and accordingly, the same is confirmed.
64. The next ground of appeal is with regard to unexplained expenditure.
65. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer made addition of `1,50,000/- towards unexplained expenditure under Section 69C of the Income- tax Act, 1961 (in short 'the Act'). There was a receipt dated 31.03.1994 for `1,50,000/- from Shri Shakthi Timber Depot in the case of the assessee, found during the course of search operation. This receipt establishes that the assessee had incurred expenditure of `1,50,000/- for purchase of some material from M/s Shri Shakthi 50 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Timber Depot. The assessee could not furnish any explanation, therefore, the Assessing Officer found it is an unexplained expenditure. According to the Ld. counsel, the assessee has no knowledge about the receipt issued by M/s Shri Shakthi Timber Depot. No enquiry was made by the Assessing Officer with regard to the above receipt. In the absence of any corroborative material, the addition made by the Assessing Officer cannot stand in the eye of law.
66. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the receipt issued by M/s Shri Shakthi Timber Depot in the name of the assessee for purchase of material to the extent of `1,50,000/- was found during the course of search operation. The assessee could not offer any explanation except saying that he has no knowledge about the transaction. It is not the case of the assessee that he has not purchased any material from M/s Shri Shakthi Timber Depot. Just to avoid the matter, the assessee says that he has no knowledge. Therefore, the Assessing Officer has rightly made the addition.
51 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
67. We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer made addition of `1,50,000/- on the basis of the receipt said to be issued by M/s Shri Shakthi Timber Depot which was found during the course of search operation. The assessee is apparently doing contract work on sub-contract basis. The assessee also has income from agricultural activities and other source. Therefore, this Tribunal is of the considered opinion that the assessee might have invested these funds from his own income from contract and agricultural activities. Therefore, this Tribunal is of the considered opinion that the addition of `1,50,000/- is not justified, accordingly the same is deleted.
68. The next ground of appeal is with regard to unexplained credit in the books of M/s Jai Hind Brick Works.
69. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that during the course of search operation, the Revenue claims that the day book of M/s Jai Hind Brick Works was found. The assessee explained before the Assessing Officer that the day book found during the course of search operation cannot be relied 52 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 upon in the absence of ledger. Moreover, the credits are found in the books of M/s Jai Hind Brick Works. Therefore, according to the Ld. counsel, the said M/s Jai Hind Brick Works being a separate and independent assessable unit, they have to explain the source for credit in their accounts. Referring to Section 68 of the Act, the Ld.counsel submitted that the credit was found in the books of M/s Jai Hind Brick Works, therefore, there cannot be any addition in the hands of the assessee.
70. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the Assessing Officer made an addition of `52,400/- on the basis of seized material found during the course of search operation. According to the Ld. counsel, page 1 of the day book of M/s Jai Hind Brick Works found during the course of search operation discloses a credit of `50,000/- on 02.04.1994. Similarly, at page 8, another credit of `2,400/- was reflected on 22.04.1994. The assessee explained before the Assessing Officer that the book was incomplete. Since the explanation of the assessee could not be accepted, the Assessing Officer made addition of `52,400/-. 53 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
71. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, a credit was found in the books of M/s Jai Hind Brick Works. We have carefully gone through the provisions of Section 68 of the Act. Section 68 provides for addition towards credit found in the books in case the assessee could not explain properly the source of such material. In the case before us, the credit was admittedly found in the books of M/s Jai Hind Brick Works and not in the accounts of the assessee. Therefore, if M/s Jai Hind Brick Works could not explain the source of credit, presumption is that it is their income, therefore, at the best, the addition can be made in the hands of M/s Jai Hind Brick Works and not in the hands of the assessee. In view of the above, we are unable to uphold the order of the Assessing Officer and accordingly the order of the Assessing Officer is set aside and the addition of `52,400/- is deleted.
72. The next ground of appeal is with regard to addition of `5,45,453/- under Section 68 of the Act.
73. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer found that there are some 54 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 credits in the material found during the course of search operation in the name of the assessee to the extent of `2,48,798/-. The assessee explained before the Assessing Officer that the books do not contain any name and the assessee has no knowledge about the contents of the entry found therein. The Assessing Officer made addition without any further enquiry with regard to nature of so-called entry found. According to the Ld. counsel, merely because certain books were found in the course of search operation in the premises of the assessee that cannot be a reason to make addition in a mechanical manner, therefore, the addition of `5,45,453/- under Section 68 of the Act is not justified.
74. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the seized material discloses a credit of `5,45,453/-. There are credit entries found in three books. The assessee could not offer any explanation with regard to source of credits. Since the material was found in the premises of the assessee, the presumption was that the credits found in the books belong to the assessee. In the absence of any explanation from the assessee, the credits found in the books were treated as income of the assessee under Section 68 of the Act. 55 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
75. We have considered the rival submissions on either side and perused the relevant material available on record. From the material available on record it appears that three books were found during the course of search operation. The first book discloses a credit of `2,48,798/-, the second book indicates a credit of `1,96,655/- and the third book discloses a credit of `1,00,000/-. The assessee claims that there was no nexus with regard to entries from where the credits were made. It is not known from the order of the Assessing Officer whether the books found by the Revenue are the books maintained in the regular course of business of the assessee. The Assessing Officer simply made the addition on the basis of seized material found in the premises of the assessee. No enquiry was made how such credits were made and in what connection. When the Assessing Officer himself claims that the assessee has no source for incurring the expenditure in his mother's funeral and the credit found in the books of Sengamala Thayar Educational Trust and Jai Hind Brick Works, it is not known on what basis the Assessing Officer came to a conclusion that the credit found in the books belong to the assessee.
56 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
76. The material available on record clearly shows that the assessee is engaged in sub-contract work and also engaged in agricultural activities. Even though this Tribunal directed the Assessing Officer to examine the matter afresh with regard to source of each credit, no such examination was carried out. Therefore, this Tribunal is of the considered opinion that in the absence of any reference with regard to entries found on the deposits made, it cannot be said that `5,45,453/- belongs to the assessee. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer. Accordingly, the order of the Assessing Officer is set aside and the addition of `5,45,453/- is deleted.
77. The next ground of appeal is with regard to unexplained expenditure in the purchase of property to the extent of `2.46 lakhs.
78. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer made an addition of `2,46,036/- as unexplained income. According to the Ld. counsel, the so-called loose sheets found during the course of search operation, do not disclose the nature of investment. According to the Ld. counsel, even though the Assessing Officer observed in the 57 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 impugned order that the expenditure was incurred in registration of some property, the identity of the property was not available before the Assessing Officer or no material in relation to that property was available before the Assessing Officer. In the absence of any material to identify the property before the Assessing Officer, according to the Ld. counsel, the registration charges cannot be added as unexplained income of the assessee. The seized material does not disclose whether the assessee incurred the expenditure or not. In the absence of any search material to indicate that the assessee in fact incurred expenditure for registration on purchase of property, according to the Ld. counsel, there cannot be any addition in the hands of the assessee.
79. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of search operation, the Revenue authorities found certain seized material which discloses expenditure incurred by the assessee in registration of some property. The loose sheets found during the course of search operation contain signature of the assessee. Since the seized material was found in the premises of the assessee, according to the Ld. Sr. Standing Counsel, the Assessing 58 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Officer found that the expenditure incurred by the assessee to that extent is unexplained income of the assessee.
80. We have considered the rival submissions on either side and perused the relevant material available on record. The Revenue authorities admittedly found certain loose sheets in the premises of the assessee during the course of search operation. The loose sheets said to be found during the course of search operation disclose expenditure of `2,46,036/- in registration of some documents. As rightly submitted by the Ld.counsel for the assessee, it is not known the registration was for which document or which property the expenditure was incurred. It is not known whether any document was registered in the name of the assessee or somebody else. It is also not known whether the expenditure was incurred by the assessee on behalf of somebody else or on behalf of the assessee himself. The loose sheets found during the course of search operation do not disclose the identity of the property or identity of the document for which the expenditure was incurred. In the absence of identification of any such property or identification of the document for which expenditure was said to be incurred, this Tribunal is of the considered opinion that making 59 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 addition of `2,46,036/- on the ground that loose sheets bear the signature of the assessee, cannot be justified.
81. It is for the Revenue authorities to find out the purpose for which the expenditure was incurred. It is the duty of the Assessing Officer to examine and find out the document and the property for which the expenditure was incurred. Since such a nexus was not established by the Revenue authorities, this Tribunal is unable to uphold the addition made by the Assessing Officer. Accordingly, the order of the Assessing Officer is set aside and the addition of `2,46,036/- is deleted.
82. The next ground arises for consideration is unexplained investment of `3 lakhs in purchasing of vehicle bearing Registration No.TN 01 J 8992.
83. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Revenue authorities claim that they have found certain cash bills in replacement of spare parts and oil services for vehicle No.TN 01 J 8992. The vehicle was in fact registered in the name of one R. Pakkirisamy. According to the Ld. counsel, on examination, it appears Shri Pakkirisamy denied that the vehicle 60 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 belongs to him. Therefore, the Assessing Officer rejected the explanation of the assessee and found that the expenditure incurred for replacement of spare parts and oil services for the vehicle No.TN 01 J 8992 was in fact incurred by the assessee. Accordingly, the same was added to the income of the assessee. According to the Ld. counsel, the vehicle registration stands in the name of Shri Pakkirisamy, therefore, mere denial of Shri Pakkirisamy that the vehicle does not belong to him does not hold good. When the registration document stands in the name of Shri Pakkirisamy, the expenditure incurred by the assessee has to be presumed that the said Shri Pakkirisamy has incurred the expenditure. According to the Ld. counsel, it is not the case of the Revenue that the assessee purchased the vehicle from Shri Pakkirisamy or somebody else or the assessee has incurred the expenditure for using the vehicle. Therefore, according to the Ld. counsel, the addition made by the Assessing Officer to the extent of `3 lakhs is not justified.
84. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of search operation, cash bills for replacement of spare parts and oil 61 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 services for vehicle No.TN 01 J 8992 were found in the premises of the assessee. Admittedly, the vehicle was registered in the name of one Shri Pakkirisamy of Thousand Lights, Chennai. On examination, according to the Ld. Sr. Standing Counsel, said Shri Pakkirisamy disowned the ownership of the vehicle. He also made a categorical statement that he has not purchased any vehicle by investing his money or somebody's money. In view of the above statement of Shri Pakkirisamy and the cash bills found in the premises of the assessee, according to the Ld. Sr. Standing Counsel, the addition was made in the hands of the assessee towards the cost of replacement of spares and oil service.
85. We have considered the rival submissions on either side and perused the relevant material available on record. From the material available on record it appears during the course of search operation, certain cash bills were found for replacement of spare parts and oil services for vehicle No.TN 01 J 8992. Admittedly, the registration certificate stands in the name of Shri Pakkirisamy. On examination, Shri Pakkirisamy appears to have claimed that he has not purchased the vehicle either by his own money or somebody's money. If it is so, how the registration was done in the name of Shri 62 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Pakkirisamy needs to be examined. Unless Shri Pakkirisamy purchased the vehicle, under the normal circumstances, it would not be registered in the name of Shri Pakkirisamy. In the absence of any material to suggest that the assessee has invested the funds in purchasing the vehicle, and when the registration stands in the name of Shri R. Pakkirisamy, it cannot be said that the assessee has invested the funds in the vehicle. It is not the case of Shri Pakkirisamy that the vehicle was purchased by the assessee in his name. In those circumstances, the presumption may be that Shri Pakkirisamy is the owner of the vehicle since the registration certificate stands in his name. It is for Shri Pakkirisamy to explain how the registration was made in his name without anybody making investment for purchase of the vehicle. Merely because some bills for replacement of spare parts and oil services were found in the premises of the assessee, there cannot be any presumption that the assessee has purchased the vehicle. Prima facie the vehicle stands registered in the name of Shri Pakkirisamy, therefore, addition if any has to be made only in the hands of Shri Pakkirisamy and not in the hands of the assessee. Therefore, this Tribunal is 63 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 unable to uphold the order of the Assessing Officer. The addition of `3 lakhs is deleted.
86. The next ground of appeal is with regard to addition of `9 lakhs towards the cost of acquisition of three lorries and `5,60,573/- towards income from operation of three lorries.
87. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer made addition only on estimation basis. When the Assessing Officer found that the lorries stand in the name of the assessee, he ought to have allowed depreciation at the rate of 40% on the cost of lorries. The very fact that depreciation was not allowed indicates that the assessee has not invested on the lorries, Therefore, according to the Ld. counsel, the addition made by the Assessing Officer is not justified.
88. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that during the course of search operation, a stamped receipt from M/s Samy Battery Works, Mannargudi, was found in the name of the assessee for replacement of battery for the lorry bearing registration No.TN 09 1594. The seized material further indicates that lorries bearing 64 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 No.TN 09 1594, TCO 7475 and TN 51 0646 were being run under the name of M/s Venkateswara Lorry Service. The income and expenditure details of the lorries were found during the course of search operation in respect of M/s Venkateswara Lorry Service. As per the records maintained by Transport Department, lorry No. TN 09 1594 is registered in the name of one Shri G. Venkataramanujam, vehicle No.TCO 7475 was registered in the name of one Shri V. Durairaj and vehicle No.TN 51 0646 was also registered in the name of above said Shri Durairaj. However, the registration of said lorry was changed on 02.09.1996 in the name of one Shri T. Sathyamurthy. According to the Ld. Sr. Standing Counsel, on further examination, the Assessing Officer found that there was no person in the name of Shri G. Venkataramanujam at the given address.
89. The Ld. Sr. Standing Counsel further submitted that in view of the above, coupled with the fact that the bill for replacement of battery was found during the course of search operation, the Assessing Officer came to a conclusion that the said lorries belong to the assessee. Since all the three lorries run under the name and style of Venkateswara Lorry Service and the income and 65 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 expenditure details were found during the course of search operation, according to the Ld. Sr. Standing Counsel, it is obvious that all the three lorries belong to the assessee, therefore, the Assessing Officer found that the assessee acquired the lorries. Hence, according to the Ld. Sr. Standing Counsel, the cost of all the three lorries on estimation basis was added in the hands of the assessee. As per the material found during the course of search operation, the income from all the three lorries were added to the total income of the assessee.
90. We have considered the rival submissions on either side and perused the relevant material available on record. Lorry No.TN 09 1594 stands registered in the name of one Shri G. Venkataramanujam, Egmore, Chennai. On examination, the Assessing Officer found that no such person in the name of G. Venkataramanujam was there in the given address. It is not the case of the assessee that there was a person in the name of Shri Venkataramanujam and from whom the lorry was hired or taken by the assessee. The bill replacement of battery for lorry No. TN 09 1594 stands in the name of the assessee. Since the replacement of battery for lorry with Registration No.TN 09 1594 was found during 66 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 the course of search operation and it was also found that no such person in the name of Shri Venkataramanujam in the given address, it is for the assessee to explain how the bill was obtained for replacement of battery in his name. The assessee only claims that if the lorry was found in the name of the assessee, depreciation has to be allowed. The very fact that the assessee was claiming depreciation shows that the lorry belongs to the assessee. In the absence of any material to indicate that other than the assessee, any one was claiming the ownership and no one was found in the name of Shri Venkataramanujam at the given address and the bill for replacement of battery found in the name of the assessee, this Tribunal is of the considered opinion that the Assessing Officer has rightly found that the lorry bearing registration No.TN 09 1594 belongs to the assessee.
91. Now coming to lorries No.TCO 7475 and TN 51 0646, both the lorries were registered in the name of one Shri Durairaj. The lorry No.TN 51 0646 was subsequently registered in the name of Shri T. Sathyamurthy. The existence of Shri Durairaj and Shri Sathyamurthy is not in dispute. Merely because all the three lorries were run under the name Venkateswara Lorry Service, it cannot be 67 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 said that these two lorries belong to the assessee. Since the registration certificate stands in the name of Shri Durairaj and one of such lorry was transferred in the name of Shri Sathyamurthy, prima facie this Tribunal is of the considered opinion that Shri Durairaj and Shri Sathyamurthy are the owners of the above said lorries. In the absence of any other material to indicate that the assessee is the owner of these vehicles, this Tribunal is of the considered opinion that there cannot be any addition on presumption basis with regard to lorry No. TCO 7475 and TN 51 0646.
92. From the material available on record, it is not known who is the owner of Venkateswara Lorry Service? It is not the case of the Revenue that the assessee is running the business of plying the vehicles in the name of Venkateswara Lorry Service. In the absence of any material to indicate that the assessee was running Venkateswara Lorry Service, this Tribunal is of the considered opinion that there cannot be any addition in respect of the two vehicles bearing registration No. TCO 7475 and TN 51 0646 in the hands of the assessee. Accordingly, while confirming the addition made by the Assessing Officer in respect of the cost of acquisition of Lorry No.TN 09 1594 and income therefrom, there is no 68 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 justification in the addition in respect of lorry bearing registration Nos.TCO 7475 and TN 51 0646. Accordingly, the addition is sustained to the extent of `3 lakhs towards cost of acquisition of the lorry bearing registration No.TN 09 1594 and also income from the said lorry to the extent of `2,24,134/-. The balance amount is deleted.
93. The next ground of appeal is with regard to addition of `1,12,500/- towards investment in Jai Hind Brick Works.
94. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer made addition of `1,12,500/- based on incomplete books of account of M/s Jai Hind Brick Works. According to the Ld. counsel, the addition was made on the presumption that the assessee would have introduced `1,12,500/- towards capital contribution. According to the Ld. counsel, in the absence of any material found during the course of search operation, there cannot be any addition.
95. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the books of account of the assessee were incomplete. Therefore, the Assessing Officer presumed that there was partnership in existence 69 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 and the assessee would have introduced capital. Therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer has rightly made the addition.
96. We have considered the rival submissions on either side and perused the relevant material available on record. Merely because the books were incomplete, there cannot be any presumption that partnership was in existence and the assessee contributed towards capital. In the absence of any material found during the course of search operation towards contribution of `1,12,500/- towards capital in Jai Hind Brick Works, this Tribunal is of the considered opinion that there cannot be any addition in the hands of the assessee. Accordingly, this Tribunal is unable to uphold the addition made by the Assessing Officer. This addition of `1,12,500/- stands deleted.
97. The next ground of appeal is with regard to addition of `10 lakhs towards commission said to be received from M/s TCV Engineering Pvt. Ltd.
98. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the assessee was Director in M/s TCV Engineering Pvt. Ltd. and resigned from directorship in the year 1996. The 70 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 assessee was entitled for managerial commission. However, the company treated the managerial commission as expenditure on accrual basis as provided in Section 209 of Companies Act, 1956. The company, namely, M/s TCV Engineering Pvt. Ltd. accounted for a total remuneration of `15,03,750/- for the block period. Out of this, only `5,03,750/- was paid and treated as income of the assessee. The balance of `10 lakhs represented only provision made in the books of account and this was not actually received by the assessee. Therefore, according to the Ld. counsel, the same cannot be construed as income of the assessee.
99. Referring to Section 158BB of the Act, the Ld.counsel for the assessee submitted that the undisclosed income has to be computed only on the basis of material found during the course of search operation. The assessee is also following cash system of accounting. Since the assessee was following cash system of accounting, according to the Ld. counsel, there cannot be any addition in respect of remuneration which was not actually received by the assessee. Therefore, the Assessing Officer is not justified in making addition of `10 lakhs.
71 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
100. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that from the assessment record of M/s TCV Engineering Pvt. Ltd. it was found that the assessee has received commission of `15,03,750/-. The assessee, however, accounted `5,03,750/- only. Therefore, the balance was treated as income of the assessee. Therefore, according to the Ld. Sr. Standing Counsel, the Assessing Officer has rightly made the addition.
101. We have considered the rival submissions on either side and perused the relevant material available on record. It is not in dispute that the assessee was Director in M/s TCV Engineering Pvt. Ltd. and received managerial commission. The commission was admittedly received to the extent of `5,03,750/-. The assessee claimed that the balance amount of `10 lakhs was due for payment and it was not actually received by the assessee. It is not in dispute that the assessee was following cash system of accounting. Therefore, unless the assessee actually received the balance of `10 lakhs, it cannot be treated as income of the assessee. It is not the case of the Revenue that the assessee, in fact, received entire amount of `15,03,750/-. Since the balance of `10 lakhs was not 72 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 received, this Tribunal is of the considered opinion that there is no justification in making addition of `10 lakhs towards commission. Accordingly, the order of the Assessing Officer is set aside and the addition of `10 lakhs is deleted.
102. The next ground of appeal is with regard to addition made towards inadequate drawings.
103. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that the Assessing Officer without any material estimated drawings and made addition of `20 lakhs. According to the Ld. counsel, this being block assessment, the assessment can be made only on the basis of material found during the course of search operation. Therefore, according to the Ld. counsel, the estimation made by the Assessing Officer cannot be justified.
104. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that the drawings disclosed by the assessee are grossly inadequate to justify the claim. Therefore, according to the Ld. Sr. Standing Counsel, based upon the material, the Assessing Officer estimated the drawings at `20 lakhs.
73 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
105. We have considered the rival submissions on either side and perused the relevant material available on record. This being the block assessment, the Assessing Officer has to confine himself only to the material found during the course of search operation. In this case, no material is available on record with regard to drawings. Section 158BB of the Act is very clear that the Assessing Officer cannot travel beyond the material found during the course of search operation and such information available on record which is relatable to the material found during the course of search operation. Therefore, without any search material, the Assessing Officer cannot estimate the drawings. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer and accordingly, the addition of `20 lakhs is deleted.
106. Now coming to Wealth Tax Appeals in WTA.Nos.60 and 61/Mds/2005 for the assessment year 1996-97 and 1997-98.
107. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that for the assessment year 1996-97, the assessee filed the wealth-tax return on 26.03.2001 admitting net wealth of `12,05,852/-. The Assessing Officer by referring to the assessment 74 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 made for the income-tax for the block period, found that there was lot of discrepancies, therefore, by following the order of income-tax assessment, he computed the net wealth at `67,18,700/-. According to the Ld. counsel, the Assessing Officer ought to have accepted the wealth-tax return filed by the assessee on 26.03.2001.
108. The Ld.counsel for the assessee further submitted that for the assessment year 2007-08, the assessee could not file the return of income. The Assessing Officer on the basis of income-tax assessment for the block period, completed the wealth-tax assessment also. The assessee has filed copies of the agreement in which the property at Door No.10, Venkateswara Nagar, 4th Street was given to Smt. Anuradha, the daughter of the assessee. Therefore, the said property cannot be assessed in the hands of the assessee. According to the Ld. counsel, income-tax assessment is different and wealth-tax assessment is different. Therefore, completing the wealth-tax assessment on the basis of income-tax assessment is not justified.
109. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that consequent to 75 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 the search conducted under Section 132 of the Act, notice under Section 17 of the Wealth Tax Act was issued to the assessee on 16.03.1999, calling upon the assessee to file return for the assessment year 1996-97 and 1997-98. The assessee filed the return on 26.03.2001 for the assessment year 1996-97. However, no return was filed for assessment year 1997-98. Since the assessee has not co-operated with the Assessing Officer, the Assessing Officer completed the assessment on the basis of material found during the course of search operation. The CWT(Appeals) also confirmed the order of the Assessing Officer.
110. The Ld. Sr. Standing Counsel further submitted that while referring to the so-called agreement whereby the property in Venkateswara Nagar was given to Smt. Anuradha, the CWT(Appeals) found that the agreement was unregistered and the contents of the said unregistered document was highly doubtful. Therefore, according to the Ld. Sr. Standing Counsel, the CWT(Appeals) confirmed the order of the Assessing Officer for both the assessment years.
76 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
111. We have considered the rival submissions on either side and perused the relevant material available on record. Many of the additions were made only on the basis of the income-tax assessment for the block period. While considering the block assessment in I.T.(SS) A. No.61/Mds/2002, this Tribunal in the earlier part of this order deleted many of the additions made by the Assessing Officer. Since the wealth-tax assessment was made mainly on the basis of the assessment made for the block period under the Income-tax Act, this Tribunal is of the considered opinion that in the light of the order of this Tribunal for the block assessment, the wealth-tax assessment has to be reconsidered by the Assessing Officer. Accordingly, the orders of both the authorities below under Wealth Tax Act are set aside and all the issues are remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider afresh in the light of this order of the Tribunal for the block period under the Income-tax Act, and thereafter decide in accordance with law, after giving a reasonable opportunity to the assessee.
112. In the result, both the Wealth Tax appeals are allowed for statistical purposes.
77 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
113. Now let's come to I.T.(SS) A. No.38/Mds/2007 in the case of the assessee Smt. B. Sumathi.
114. Shri T. Vasudevan, the Ld.counsel for the assessee, submitted that consequent to the search made in the case of Shri V. Divaharan, proceeding under Section 158BD of the Act was initiated against the present assessee, Smt. B. Sumathi. The assessee filed return of income for the block period disclosing "nil" income. In fact, according to the Ld. counsel, protective assessment was made in the hands of the present assessee Smt. B. Sumathi and substantive assessment was made in the hands of Shri V. Divaharan. This being a proceeding under Section 158BD of the Act in respect of the person other than the searched person, according to the Ld. counsel, the Assessing Officer has to record satisfaction as required under Section 158BD of the Act before proceeding further. Placing reliance on the judgment of Supreme Court in Manish Maheshwari v. ACIT (2007) 289 ITR 341, the Ld.counsel submitted that in the absence of any satisfaction recorded by the Assessing Officer, the proceeding initiated under Section 158BD of the Act cannot stand in the eye of law.
78 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
115. The Ld.counsel for the assessee further submitted that the Assessing Officer has made addition in the hands of Shri V. Divaharan on substantive basis. Therefore, he cannot satisfy that the very same asset / income belonging to the present assessee Smt. B. Sumathi. In the absence of any satisfaction as held by Apex Court in Manish Maheshwari (supra), the proceeding initiated under Section 158BD of the Act cannot be sustained. The Ld.counsel further submitted that the contention of the assessee right from the Assessing Officer is that the jewellery belongs to Shri Balakrishnan (HUF) and not to the assessee. Shri Balakrishnan (HUF) was in possession of huge agricultural land and they are cultivating the same. To substantiate this claim, a certificate issued by the Village Administrative Officer was produced before the Assessing Officer. Since the assessee has produced sufficient evidence before the Assessing Officer that the jewellery belongs to Shri Balakrishnan (HUF), even on merit, according to the Ld. counsel, the assessment made in the hands of the assessee is not justified.
79 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07
116. On the contrary, Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, submitted that there was search operation in the case of the son-in-law of the assessee Smt. B. Sumathi on 24.09.1996. During the course of search operation, a rent receipt in respect of locker No.133 of the City Union Bank was found. The locker was, in fact, operated on 01.10.1996. The Assessing Officer, who assessed the block assessment under Section 158BD of the Act in the case of Shri V. Divaharan, the son- in-law of the assessee, issued notice under Section 158BC of the Act on 14.12.1998 to the assessee. In fact, according to the Ld. Sr. Standing Counsel, substantive assessment for the block period was made in the hands of Shri V. Divaharan and only protective assessment was made in the hands of Smt. B. Sumathi. In the original round of litigation, this Tribunal set aside the assessment in the case of Shri V. Divaharan and Smt. B. Sumathi and remanded back the entire issue to the file of the Assessing Officer. In the set aside assessment, according to the Ld. Sr. Standing Counsel, the assessee could not prove the ownership of the jewellery found in the bank locker, therefore, once again a protective assessment was made in the hands of Smt. B. Sumathi. However, according to the 80 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Ld. Sr. Standing Counsel, a substantive assessment was made in the hands of Shri V. Divaharan.
117. Shri T.R. Senthil Kumar, the Ld. Sr. Standing Counsel for the Revenue, further submitted that the question of recording of satisfaction under Section 158BD of the Act does not arise in this case since the Assessing Officer who passed the assessment order in the case of Shri V. Divaharan under Section 158BC of the Act, is the same officer issued notice to the present assessee under Section 158BC of the Act. Therefore, according to the Ld. Sr. Standing Counsel, the judgment of Apex Court in Manish Maheswari (supra) may not be applicable to the present case.
118. Referring to the merit of the appeal, the Ld. Sr. Standing Counsel submitted that the assessee said to have acquired 300 sovereigns of jewellery from the year 1969. However, neither the assessee nor the family members of the assessee were assessed under Income-tax Act and Wealth-tax Act. According to the Ld. Sr. Standing Counsel, the assessee claims that her family is engaged in cultivation activity. However, no material was filed to substantiate the claim of the assessee. Therefore, according to Ld. Sr. Standing 81 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 Counsel, the Assessing Officer made the protective assessment once again.
119. We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee is a person other than the searched person. The proceeding was also initiated against the assessee under Section 158BD of the Act. We have carefully gone through the provisions of Section 158BD of the Act which reads as follows:-
"UNDISCLOSED INCOME OF ANY OTHER PERSON.
158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly."
120. A bare reading of Section 158BD of the Act clearly shows that where the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom the search was made under Section 132 of the Act or whose 82 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 books of account or other documents shall be handed over to the Assessing Officer having jurisdiction over such person and that officer shall proceed against the person who is other than the searched person. Therefore, the satisfaction of officer who is assessing the person, who is searched under Section 132 of the Act, is mandatory as held by Apex Court in Manish Maheshwari (supra).
121. Now the Revenue claims that the officer who assessed the searched person and other person other than the searched person, is one and same, therefore, the judgment of Apex Court in Manish Maheshvari (supra) is not applicable to the facts of the case. This Tribunal is of the considered opinion that when the Assessing Officer who assessed Shri V. Divaharan, who was the person searched, is satisfied that the jewellery belongs to Mr. Divaharan, he cannot issue notice to the assessee under Section 158 BD of the Act. In other words, when the Assessing Officer is satisfied that the jewellery belongs to Shri V. Divaharan, he had no jurisdiction to invoke provisions of Section 158BD of the Act for initiating block assessment proceeding against the assessee Smt. B. Sumathi. As held by the Apex Court, this Tribunal is of the considered opinion 83 W.T.A. Nos.60 & 61/Mds/05 I.T.(SS) A. No.61/Mds/02 I.T.(SS) A. No.38/Mds/07 that satisfaction of Assessing Officer is mandatory for initiating proceeding under Section 158 BD of the Act. When such satisfaction was admittedly not recorded, the very initiation of assessment proceeding cannot stand in the eye of law. Moreover, in this case, the satisfaction cannot be recorded by the Assessing Officer against the assessee since the Assessing Officer himself is satisfied that the jewellery belongs to Shri V. Divaharan and substantive assessment was also made in the hands of Shri V. Divaharan. Therefore, this Tribunal is unable to uphold the order of the Assessing Officer. Accordingly, the order of the Assessing Officer is set aside and the entire assessment proceeding is quashed.
122. In the result, I.T.(SS) A. No.61/Mds/2002 is partly allowed, WTA Nos.60 & 61/Mds/2005 are allowed for statistical purposes and I.T.(SS) A. No.38Mds/2007 is allowed.
Order pronounced on 28th April, 2017 at Chennai.
sd/- sd/-
ु दर #संह)
( ड.एस. स (एन.आर.एस. गणेशन)
(D.S. Sunder Singh) (N.R.S. Ganesan)
लेखा सद य/Accountant Member या यक सद य/Judicial Member
84 W.T.A. Nos.60 & 61/Mds/05
I.T.(SS) A. No.61/Mds/02
I.T.(SS) A. No.38/Mds/07
चे नई/Chennai,
th
6दनांक/Dated, the 24 April, 2017.
Kri.
आदे श क/ - त#ल7प अ8े7षत/Copy to:
1. अपीलाथ+/Appellant
2. -.यथ+/Respondent
3. CWT(A)-1, Chennai
4. आयकर आयु9त/CWT, Central-II, Chennai
5. 7वभागीय - त न ध/DR
6. गाड; फाईल/GF.