Income Tax Appellate Tribunal - Amritsar
Maj. Gen. (Retd.) Kanwarjit Singh Gill ... vs Assistant Commissioner Of Income Tax on 14 September, 2005
Equivalent citations: (2006)101TTJ(ASR)538
ORDER
Bhavnesh Saini, J.M.
1. This appeal by the assessee is directed against the order of the CIT(A), Bhatinda, dt. 16th Dec., 2003 on the following grounds :
1. That order of learned AO is illegal, arbitrary and contrary to facts and worthy CIT(A) has erred in confirming the same.
2. That the learned AO has erred on facts and in law in not excluding FDRs worth Rs. 1,05,000, which were purchased prior to commencement of block period (and which were erroneously included by the assessee in undisclosed income) and worthy CIT(A) has erred in confirming this illegality on the part of the learned, AO.
3. That the learned AO has erred in not excluding interest amounting to Rs. 24,246 on the above FDRs, which accrued before the commencement of block period (and which was erroneously included by the assessee) and worthy CIT(A) has erred in confirming this illegality.
4. That the learned AO has erred on facts and in law in declining to give us credit for cash, in hand through withdrawals from Bank of Baroda, Defence Colony, New Delhi, to the value of Rs. 73,000 which was utilised for depositing in same bank: viz., Bank of Baroda, Defence Colony, New Delhi, Punjab & Sind Bank, Hall Bazar, Amritsar and FDR of Rs. 50,000 in the name of Col. Narinder Singh Gill on 14th May, 1992 subsequently and that the order of learned AO is contradictory to the assessment order of wealth-tax passed by the same AO in case of same assessee wherein the availability of this cash in hand and its utilisation was accepted and worthy CIT(A) has erred in confirming the same.
5. That the learned AO has erred on facts and in law in declining to give credit of Rs. 20,000 for deposit in Bank of Baroda, Defence Colony, New Delhi, on 20th May, 1995 against available cash of Rs. 2,39,102 prior to that date.
2. The assessee also filed additional ground of appeal. However, the same was not pressed by the learned Counsel for the assessee. The same is accordingly dismissed.
3. Briefly, the facts are that this case belongs to Snowhite group of cases of New Delhi where search under Section 132 commenced on 23rd April, 1998. At the time of search at residence at D-28, NDSE-I, New Delhi, the assessee (late) Smt Narinder Kaur Gill was also present and was also covered by the search. In pursuance of the notice under Section 158BC r/w Section 158B(a) of the IT Act, 1961, the return for the block period was filed by the Maj. Gen. (Retd.) Shri K.S. Gill, legal heir of the assessee. An income of Rs. 2,73,414 was returned as 'income disclosed' for the block period. The block assessment order was passed by the then AO (Jt. CIT, Special Range, Amritsar) on 26th May, 2000 making an addition of Rs. 10,08,827 over and above Rs. 2,73,414 disclosed by the assessee in the return filed. Thus, the assessment was made at Rs. 12,82,241 as total concealed income. The assessee went in appeal before the CIT(A), Jammu (headquarters at Amritsar). In the appeal order dt. 5th March, 2001, the CIT(A) allowed the relief of Rs. 6,20,600. In para 5.5 of the order, the CIT(A) directed that :
As regards the other additions in respect of deposits in the bank account, FDR and bank interest are concerned, the issue is restored to the file of the AO for reconsideration in view of information dt. 14th June, 2000 supplied by the bank. He should also examine the plea whether any credit could be given for withdrawal of Rs. 73,000 made by Smt. N.K. Gill during the impugned period.
Thus, the issue was restored back to the file of the AO for reconsideration in view of the information received from the Bank of Baroda, Defence Colony, New Delhi, dt. 14th June, 2000. '.
4. The AO (has) taken up the matter as per directions of the CIT(A). The AO considering the additions impugned in this appeal as under :
4.1 FDRs with Bank of Baroda, Defence Colony, New Delhi : In the block return filed by the assessee, the assessee had declared three FDRs of Rs. 35,000 each amounting to Rs. 1,05,000 along with interest accrued at Rs. 24,246. The counsel for the assessee contended that the abovementioned FDRs have been acquired in the year 1985 on 11th Sept., 1985 for a period of 36 months. The same point was raised before the CIT(A) upon which the CIT(A) restored the matter to the file of the AO to reconsider this issue in the light of the information received from Bank of Baroda, Defence Colony, New Delhi, dt. 14th June, 2000. The AO reproduced the aforesaid letter dt. 14th June, 2000 in the assessment order in which it was explained that the assessee along with another person obtained the FDR of Rs. 35,000 each (three in number) for the period of 36 months starting from 11th Sept., 1985. The date of renewal is 11th Sept., 1988. The AO was of the view that since the assessee has declared Rs. 1,05,000 as concealed income for the asst. yr. 1990-91 in the return filed/declared for block period and the assessee is not entitled to file a revised return, therefore, no relief could be granted to the assessee.
4.2 Addition of Rs. 50,000 of FDR purchased on 14th May, 1992 : The assessee filed details before the AO showing availability of the amount and withdrawals available to the assessee. The AO was of the view that the cash left with the assessee was less than Rs. 50,000 and accordingly made the addition. Since the assessee has failed to explain the amount invested in the FDR, therefore, the addition was accordingly made. The AO did not give credit for withdrawals of Rs. 73,000 as the amount was withdrawn separately three years prior to it.
4.3 Cash deposit of Rs. 20,000 with Bank of Baroda on 20th May, 1995 :
The addition was made treating the aforesaid amount as unexplained. It was stated before the AO that during the financial year 1995-96, the assessee has received a sum of Rs. 26,300 as cash interest @ Rs. 13,150 per month from M/s Snowhite Dry Cleaners, Freedom Fighter Pension Rs. 2,000, Army Pension Rs. 1,500, therefore, it would explain the deposits. It was also pointed out that there were cash withdrawals of Rs. 12,000 on 14th Jan., 1995, Rs. 32,500 on 20th Jan., 1995 and Rs. 12,000 oh 20th Feb., 1995. Therefore, it was explained that the amount is enough to explain the deposit. The AO, however, did not find the explanation of the assessee to be satisfactory and made the addition.
4.4 The additions were challenged before the CIT(A). It was briefly submitted that it is to be seen from the separate scheme of taxation of undisclosed income as incorporated in Chapter XIV-B that the income of the block period can only be taxed and for that purpose, the period has been described as ten preceding assessment years plus truncated period. Since the amount of FDRs falls beyond the commencement of block period which commences on 1st April, 1988, the FDRs were purchased on 11th Sept., 1985, as such there is no legal warrant or authority to treat them as undisclosed income. It was also submitted that the CIT(A) has given a specific direction to verify the claim of the assessee but the AO did not do so. The decision of the Tribunal, Nagpur Bench, in the case of Dy. CIT v. Sanmukhdas Wadhwani (2003) 80 TTJ (Nag) 648 : (2003) 85 ITD 734 (Nag) was relied upon. It was also submitted that the CIT(A) earlier also directed the AO to verify the availability of the cash in the hands of the assessee of Rs. 73,000. It was further submitted that the AO has accepted the availability of the cash in hand of Rs. 1,24,246 and Rs. 1,41,246 on 31st March, 1991 and 31st March, 1992. Therefore, there was no need of making the addition. It was also explained that the AO accepted the availability of the cash in the wealth-tax assessment, therefore, other additions stand explained. The letter dt. 14th June, 2000 was also brought to the notice of the CIT(A) to prove that FDR was earlier purchased prior to the block period and was only renewed subsequently. It was further submitted that the AO has misinterpreted the directions of the CIT(A) and made the addition without any basis. As regards acquisition of FDR of Rs. 50,000, the availability of the amount was explained from the material on record as well as the addition of Rs. 20,000 was explained by availability of the funds as was explained before the AO. The learned Counsel for the assessee produced sufficient material before the CIT(A) to show that the additions were unjustified and unwarranted. The CIT(A) considering the submissions of the assessee dismissed the appeal of the assessee. The CIT(A) considered that the addition of Rs. 1,29,246 (Rs. 1,05,000 + Rs. 24,246) on account of FDR amount and interest is justified. The CIT(A) observed that there is no provision in law to alter any entry in respect of the figures of returned income shown by the assessee. The CIT(A) observed that he can provide relief to the assessee only if she shows the provisions of law cover her case. The CIT(A) also observed that if she cannot show this, no relief can be given even if the case is fully justified. As regards the decision of the Tribunal, Nagpur Bench in the case Sanmukhdas Wadhwani (supra), the CIT(A) did not follow the order and observed that he respectfully differ with this decision because it goes against the very framework of the Act and goes against the letter and spirit of the provisions of the Act governing the matter of figure of the returned income. The CIT(A), therefore, held that he is not inclined to interfere in the order of the AO and accordingly confirmed the addition of Rs. 1,29,246.
4.5 As regards the other additions, the CIT(A) observed that the assessee has attempted to take advantage of the availability of the cash in her hands. However, the CIT(A) observed that it is not upon the mere availability but also the assessee has to show that the said funds were actually utilised for the purposes of investment-in the assets found undisclosed by the Department. The CIT(A), therefore, did not accept the contention of the assessee and accordingly dismissed the appeal of the assessee.
5. The assessee is in appeal. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that the AO has not followed the order of the CIT(A) dt. 5th March, 2001 whereby the CIT(A) (AO) was directed to reconsider the issue on ground Nos. 2 and 3 in view of the information dt. 14th June, 2000 supplied by the bank. He has further submitted that three FDRs of Rs. 35,000 each were acquired in the year 1985 on 11th Sept., 1985 which is prior to the block assessment period. Therefore, even if the amount was wrongly shown in the returns filed for the block periods no addition could be made of the aforesaid amount. He has further submitted that only undisclosed income of the block period could have been subjected to assessment in the block assessment under Chapter XIV-B of the IT Act. He has relied upon the order of the Tribunal, Nagpur Bench, in the case of Sanmukhdas Wadhwani (supra). He has further submitted that the AO has not verified any fact despite the certificate of the bank, which is reproduced in the assessment order. Therefore, the CIT(A) should have corrected the mistake of the AO but instead of the same the CIT(A) himself did not follow the order of the Tribunal, Nagpur Bench. The learned Counsel for the assessee strongly submitted that the assessee would be entitled for cost of unnecessary litigation in the above statements.
6. On the other hand, the learned Departmental Representative relied upon the findings of the authorities below and submitted that since the assessee has declared Rs. 1,05,000 as concealed income for the asst. yr. 1990-91 and the assessee is not entitled to file revised return, therefore, the authorities below were justified in making the addition against the assessee.
7. We have considered the rival submissions on this issue on ground Nos. 2 and 3. It is admitted fact that earlier appeal of the assessee was decided by the CIT(A) vide order dt. 5th March, 2001 and on this issue restored the matter to the file of the AO for reconsideration in view of the information dt. 14th June, 2000 supplied by the bank. Therefore, the AO was bound to reconsider the issue in the light of the direction of the CIT(A). It is settled law that when matter is remanded to the AO on limited issue, jurisdiction is confined to such issue alone. We are fortified in our view by the following decisions :
(1) Sri Vindhya Vasini Prasad Gupta v. CIT ;
(2) Kartar Singh v. CIT (1978) 111 ITR 184 (P&H);
(3) Katihar Jute Mills (P) Ltd. v. CIT ;
(4) Pulipati Subbarao & Co. v. AAC ;
(5) CIT v. Hope Textiles Ltd. ; and (6) S.P. Kochhar v. ITO .
Therefore, the duty of the AO was confined to reconsider the issue as per direction of the CIT(A) in view of the information dt. 14th June, 2000 supplied by the bank. Bankers of the assessee issued a certificate dt. 14th June, 2000 which is reproduced in the assessment order by which it is established that the assessee has acquired FDRs in question, in the year 1985 on 11th Sept., 1985. The block assessment year/block period is from 1st April, 1988 to 23rd April, ' 1998. Therefore, the acquisition of the FDRs in question, would clearly fall prior to the block period. The definition of the block period as appearing in Section 158B(a), as was applicable to this case and it means the previous years relevant to ten assessment years preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A and includes in the previous year in which such search was conducted or requisition made, the period upto the date of the commencement of such search or, as the case may be, the date of such requisition. The definition of "undisclosed income" is also provided in Clause (b) to Section 158B. The scheme of Chapter XTV-B provides for assessment of undisclosed income as a result of search as well as computation of undisclosed income of the block period. If any material is recovered during the course of search during the block period then computation of undisclosed income for the block period could be made by way of assessment for the block period under Chapter XIV-B of the IT Act. The FDRs, in question, were acquired by the assessee in the year 1985 on 11th Sept., 1985 prior to the block period, therefore, the same cannot be subject-matter of the assessment for the block period under Chapter XIV-B of the IT Act. The AO rejected the claim of the assessee merely on the ground that the assessee has declared this amount of Rs. 1,05,000 of the three FDRs in the return of income filed for the block period. Therefore, the AO refused to grant relief to the assessee. The CIT(A) confirmed the order of the AO on the same reasons as well as did not follow the order of the Tribunal, Nagpur Bench in the case of Sanmukhdas Wadhwani (supra) and differed with the aforesaid decision on the ground that it goes against the very framework of the Act and goes against the letter and spirit of the provisions of the Act. The Tribunal, Nagpur Bench in the case of Sanmukhdas Wadhwani (supra) considered identical facts in which return of .income for the block period was filed by the assessee on 18th Aug., 1997 declaring an undisclosed income of Rs. 7 lakhs. During the course of assessment proceedings, the assessee submitted that his total undisclosed income for the block period works out to Rs. 6,60,633 comprising of Rs. 3,64,309 on account of balancing figure being excess of assets over liabilities worked out on the basis of entries appearing in the various diaries and a further sum of Rs. 2,89,324 on account of difference in opening capital appearing in the said diaries, which was more than the capital appearing in the regular books as on 1st April, 1990. The working of the undisclosed income at Rs. 6,60,633 furnished by the assessee was verified and found to be correct by the AO. However, he made further addition on the reasons that the income was surrendered by the assessee on this amount in his statement recorded under Section 132(4) as well as on the basis of the admission of the assessee. The additions were challenged which were deleted by the CIT(A). The Revenue challenged the action of the CIT(A) in directing the AO to adopt the undisclosed income of the assessee at Rs. 6,60,633 on the basis of the submissions made during the course of assessment proceedings as against the undisclosed income of Rs. 7 lakhs declared originally in the return for the block period. It was also the contention of the learned Departmental Representative that- since the assessee is not entitled to file revised return, therefore, the addition should not have been deleted. The Tribunal, Nagpur Bench, observed that the stand of the Revenue was that the undisclosed income assessed for the block assessment cannot be lower than that returned by the assessee. The Tribunal on the identical issue, therefore, observed that a combined reading of these provisions makes it clear that the amount which is taxable as undisclosed income in the block assessment should fall within the scope and ambit of definition expressly given in Chapter XIV-B and amount which is not covered by the definition cannot be subjected to tax in block assessment even though declared as such by the assessee in his return for block period. It was further observed that the procedure laid down in Chapter XIV-B also reveals that the AO has to determine the undisclosed income of the block period in the manner specified in Section 158BB and this exercise is independent of the return filed by the assessee for the block period. The Tribunal relied upon the decision of the Tribunal, Pune Bench in the case of Control Touch Electronics (Pune) (P) Ltd. v. Asstt. CIT (2001) 72 TTJ Jpune) 65 : (2001) 77 ITD 522 (Pune) in which it was observed that if any income is not taxable by virtue of any provision of the Act, then it cannot be taxed merely because it was offered by the assessee in his return of income and there cannot be any such estoppel against statute. The Tribunal also relied upon the decision of the Hon'ble Supreme Court in the case of Narayanan v. Gopal AIR 1960 SC 235 in which it was held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. The Tribunal in these circumstances held that any amount which is not assessable as undisclosed income for the block period as undisclosed income cannot be assessed as such merely for the reasons that the same was declared by the assessee in the. return for block period and there cannot be such estoppel against the statute. The appeal of the Revenue was accordingly dismissed by holding that the CIT(A) was justified in directing the AO to adopt the undisclosed income finally determined at Rs. 6,60,633 as against the income originally returned by the assessee at Rs. 7 lakhs. The aforesaid decision of the Tribunal, Nagpur Bench is squarely applicable to the case of the assessee and as such the addition of Rs. 1,29,246 (Rs. 1,05,000 + Rs. 24,246) was clearly unjustified even if the assessee has shown it to be undisclosed income in the return filed for the block period.
8. In the aforesaid facts and the circumstances, it is clear that the AO has not followed the order of the CIT(A). If the AO did not agree with the order of the CIT(A) dt. 5th March, 2001, then he has a remedy to agitate his point in appeal before the Tribunal as per law. The AO is subordinate to CIT(A) and once the AO has not challenged the order of the CIT(A) before the Tribunal, the order of the CIT(A) has become final and is binding upon the AO. The AO, therefore, acted against judicial norms. But the matter would not rest here as not only the AO disobeyed the order of the CIT(A) but the CIT(A) also disobeyed the order of the Tribunal, Nagpur Bench, in the case of Sanmukhdas Wadhwani (supra) relied upon before him by the learned Counsel for the assessee. The CIT(A) without any reason did not follow the order of the Tribunal, Nagpur Bench (supra) dealing with the identical matter in issue. The CIT(A) is subordinate to Tribunal in judicial hierarchy. Therefore, he is bound to follow the order of Tribunal. The above facts clearly show that the AO as well as CIT(A) acted against the law by not following the orders of their higher judicial authorities. The CIT(A) lost sight of the matter that the precedents have great authority and must be followed where applicable. The practice of treating precedents as absolutely binding is necessary to secure the certainty of the law. The decisions must be followed, whether they are approved of or not being the source of law. The orders of the AO and the CIT(A) show their disregard to rule of precedents and respect to judicial hierarchy. Therefore, their action amounts to judicial indiscipline and impropriety. In case the AO/CIT(A) would have followed the orders of the CIT(A) and Tribunal in correct perspective, unnecessary and unwanted litigation before us could have been avoided. The assessee suffered time and money in unnecessary litigation, therefore, in our considered view, would be entitled to costs of appeal.
9. On considering the above discussion, we are of the view that the authorities below were unjustified in confirming the addition of Rs. 1,29,246 on ground Nos. 2 and 3. The additions are, therefore, deleted. The appeal of the assessee on these ground Nos. 2 and 3 are allowed.
10. Now we take ground No. 4 by which the addition of Rs. 50,000 on account of FDR of Rs. 50,000 acquired on 14th May, 1992 is challenged. The learned Counsel for the assessee submitted that the assessee purchased FDR of Rs. 50,000 on 14th May, 1992 out of availability of Rs. 73,000. The learned Counsel for the assessee referred to p. 6 of the assessment order in which the AO has specifically mentioned availability of the above amount along with the availability of the amount of Rs. 1,24,246 and Rs. 1,41,246 as taken before the CIT(A). He has further submitted that if the addition of Rs. 61,000 is taken undisclosed, therefore, it would be available for investment in the FDR of Rs. 50,000 on the principle of telescoping. The learned Counsel for the assessee referred to p. 52 of the paper book and submitted that the same is the assessment order of wealth under Section 17(1) of the WT Act, dt. 21st March, 2003 by which the amount of Rs. 2,45,450 was available with the assessee on 31st March, 1992. The same computation is given in the computation of net wealth.
11. On the other hand, the learned Departmental Representative relied upon the orders of the authorities below.
12. On consideration of the above facts, we are of the view that the assessee has explained the source of Rs. 50,000 through which the FDR was purchased. In the wealth-tax order for the asst. yr. 1991-92 net wealth of Rs. 2,45,456 was available to the assessee. Even as per assessment order, the AO has accepted the contention of the assessee about the availability of the amount as per working given on p. 6 of the assessment order. We may remind here that on the principle of telescoping even the funds on which additions have been made are available for the purpose of explaining the aforesaid addition. The assessee from the above facts has been able to prove that sufficient source was available with the assessee with regard to the purchase of the FDR of Rs. 50,000. We accordingly set aside the orders of the authorities below and delete the addition. This ground of appeal of the assessee is accordingly allowed.
13. On ground No. 5, the assessee challenged the addition of Rs. 20,000 being deposit in Bank of Baroda on 20th May, 1995. The learned Counsel for the assessee submitted that sufficient amount was available with the assessee as per submission made before the AO as well as CIT(A) which was not considered in proper perspective by the authorities below. The learned Counsel for the assessee reiterated the submissions made before the authorities below and took us to p. 64 of the paper book to explain that interest received from M/s Snowhite Dry Cleaners and M/s Snowhite Clothiers was available to the assessee in a sum of Rs. 1,31,202. Therefore, the amount was sufficient for making the deposit of Rs. 20,000 in the bank.
13.1 On the other hand, the learned Departmental .Representative relied upon the order of the CIT(A).
13.2 On consideration of the above facts and explanation given before the authorities below, we are of the view that the assessee has been able to prove the explanation with regard to the deposit made in the bank of Rs. 20,000. The sources explained by the assessee are sufficient to hold that the assessee had an explanation for making the deposit in the bank of the amount of Rs. 20,000. We accordingly set aside the orders of the authorities below and delete the addition. This ground of appeal of the assessee is accordingly allowed.
14. No other ground is argued or pressed.
15. As a result, the appeal of the assessee is allowed subject to cost of the appeal in the sum of Rs. 5,000 under Section 254(2B) of the IT Act. The cost shall be paid by the Revenue Department to the assessee within one month from the receipt of this order.
16. As a result, the appeal of the assessee is allowed.