Income Tax Appellate Tribunal - Bangalore
Gauthamchand Bhandari vs Deputy Commissioner Of Income Tax on 8 February, 2005
Equivalent citations: (2005)95TTJ(BANG)288
ORDER
Deepak R. Shah, A.M.
1. This appeal by assessee is directed against the order of learned CIT(A)-IV, Bangalore, dt. 11th Dec., 2001 in an appeal against assessment made under Section 158BC for the block period comprising asst. yr. 1989-90 till asst. yr. 1999-2000 and financial year upto the date of search i.e. 19th July, 1999.
2. The only issue urged in this appeal relates to addition of a sum of Rs. 50,00,000 being amount advanced to one Mr. P. Balakrishna as unexplained investment.
3. The assessee is an individual carrying on the business of money lending, pawn broking and jewellery business. A survey was conducted at the premises of assessee on 13th July, 1999 and the assessee agreed to have advanced the sum of Rs. 50 lacs out of his income and was ready to pay the income-tax due thereon. The assessee also filed a letter on 13th July, 1999 before the DDI (Inv) confirming that he would offer the income in his hands. A search was conducted in the premises of the assessee on 19th July, 1999. In pursuance of the above search, a notice under Section 158BC dt. 20th Sept., 1999 was served on the assessee. The assessee filed a return of income for the block period on 5th Nov., 1999 returning an undisclosed income of Rs. 1,26,100. During the course of search on 13th July, 1999 in the case of one Shri T. Balakrishna, it came to the knowledge of the Department that Shri T. Balakrishna had taken advances to the tune of Rs. 50 lacs from the assessee. The advances were made during the previous year relevant to the asst. yr. 1999-2000 for which the due date for filing the return had not expired. The assessee also filed a regular return of income for the asst. yr. 1999-2000 on 4th Nov., 1999 declaring an income of Rs. 53,57,470 including the said amount of Rs. 50 lacs which was earned during the relevant previous year. The AO, vide his order under Section 158BC of the Act, dt. 27th Sept., 2000, assessed a sum of Rs. 50 lacs as undisclosed income of the block period and determined the total undisclosed income at Rs. 53,83,200. A regular assessment under Section 143(3) was also made for the asst. yr. 1999-2000 on the same date assessing the sum of Rs. 50 lacs protectively. Learned CIT(A) confirming the addition held that but for the search the unaccounted advances would not have been brought on record and accordingly chargeable as undisclosed income for the block period as per Section 158BC.
4. Learned counsel for assessee, Shri Ravi submitted that the statement from appellant herein has been recorded on 13th July, 1999, at the premises of M/s H. Ashok Kumar & Co. In this context the letter of the assessee dt. 10th July, 2000, is crucial and in particular second paragraph of that letter. Further there is a statement recorded from Mr. Bishu Dutt Dave where he affirms that the advances to Mr. Balakrishna were available on the date of survey, which clearly shows that the books of account were available. The learned CIT(A) in para 6 states that the examination of the book shows that a sum of Rs. 50 lakhs advanced by Gauthamchand Bhandari are not recorded therein. Apparently, therefore, the CIT(A) is of the view that books were there. This seems to be contrary to the finding in p. 3 of the assessment order that books were not available. For the asst. yr. 1999-2000 assessment under Section 143(3) has been made by adding this sum of Rs. 50 lacs protectively. In that order in para 2 of p. 2, the AO records "such book has not been seized by the Department purportedly because it does not exist." The very fact is that the assessee has made the disclosure of sum of Rs. 50 lacs advanced to one Mr. T. Balakrishna prior to search was never objected by the Department. It is only the question of whether the information made available or given at the time of survey tantamounts to undisclosed income within the meaning of Section 158B(b). In simple terms whether such disclosure would be construed as disclosed income for the purposes of the IT Act.
4.1 Learned counsel for assessee relied upon the decision of Tribunal, Chennai Bench, Smt. Sivabala Devi v. Asstt. CIT (2004) 88 TTJ (Mad) 955 : (2004) 88 ITD 333 (Mad) wherein it is held that disclosure of information during the course of survey under Section 131 would tantamount to disclosure for the purpose of the Act. The Tribunal further held that no additions can be made under the block assessment based on the information, which has already been disclosed during the course of survey proceedings under Section 131 of the Act. In fact the Hon'ble Tribunal has held that meaning of disclosure of the purpose of the income-tax as contemplated under Section 158B(b), does not mean that the disclosure has to be made by way of filing return of income. The decision would squarely apply to this case and therefore the addition of Rs. 50,00,000 being sum advanced to Mr. T. Balakrishna is to be deleted in view of the above decision.
5. Learned Departmental Representative, Shri Manjunatha Swamy strongly supported the orders of authorities below. He submitted that under Section 158BC what will constitute the undisclosed income which is not recorded in the books of accounts. At the time of survey, the books of account revealed that the transaction was not recorded pertaining to loan given to Shri T. Balakrishna. This was admitted by assessee not only in statement under s, 131 but even while filing a separate letter addressed to the AO. Thus, there is undisputed fact that advance is out of unaccounted income. He invited our attention to the question and answer during statement recorded under Section 131 on 13th July, 1999 extracted herein :
"(7) Whether you have shown in your books of account, the amount has been given to Balakrishna ?
I have not shown above amount in my books of account.
(8) What is the reason ?
This is because out of my concealed income loan has been given. That is why, I have not shown in my books of account.
(9) Please clear once again what is the source of loan ?
I am clearing again the above loan is out of concealed income."
The entries were not made even at the time search conducted on 19th July, 1999. The sworn statement of assessee was recorded on 19th July, 1999, relevant paragraphs are extracted herein :
"Question 2.3 : Please confirm what are the loans you have extended as on today ?
Answer : Apart from Rs. 50 lacs, I have given to Shri T. Balakrishna, no other loans I have advanced nor taken from any person. This loan has been given outside the books from my unaccounted income. I have to receive 21 per cent per annum interest from T. Bala Krishna. But as on date, I have not received any interest.
Question 4. Please produce the books of account for the year ending 31st March, 1999 of yours and your family members and your business concerns.
Answer : We have not yet prepared the books of account for the year ended 31st March, 1999. These books are under preparation and the same will be produced in two or three days.
Question 5. Please confirm once again that Rs. 50 lacs loan given by you to Shri T. Balakrishna is not reflected in your books.
Answer : I have given the amount of Rs. 50 lacs in instalments during last year and this has not come in any of the books of mine or my family members or any of the concern.
Question 6. Have you taken this amount of Rs. 50 lacs from any other loan person as a loan or otherwise and given to Shri Balakrishna ?
Answer : I have not taken this amount from any person and it is the income earned during the past few years."
The assessee also confirmed having unaccounted investment of the said sum of Rs. 50 lacs advance during the period May, 1998 to Dec., 1998, in the statement under Section 131 dt. 1st Sept., 1999. The admission dt. 13th July, 1999, has further confirmed by a separate letter addressed to DDI (Inv.) on 13th July, 1999, extracted herein :
"Sub : Declaration of income further to my statement given on 13th July, 1999.
Further to my statement on 13th July, 1999 at M/s H. Ashok & Company at No. 10, T.N. Shetty Lane, Avenue Road, Bangalore, given before you. I have given loan of Rs. 50,00,000 (Rupees fifty lacs) to Shri T. Balakrishna, Principal of St. Anne's High School, 6th Block, Rajajinagar, Bangalore, by way of cash around one year back. I am to receive interest of 21 per cent per annum from Shri T. Balakrishna for the first one year. However, I have not received any interest till date from him.
I have deposited this money Rs. 50,00,000 (Rupees fifty lacs) in M/s Mahaveer Jewellery and M/s Mahaveer Pawn Broker at Rajajinagar, Bangalore. I have not shown the amount in my books of account and I am offering this amount as undisclosed income as per law. I will make arrangements to pay the tax on the above income of Rs. 50,00,000 and interest income which I am going to earn, as per law.
Yours faithfully, Sd/- 13th July, 1999"
He relied upon the decision in L.R. Gupta and Ors. v. Union of India and Ors. (1992) 194 ITR 32 (Del). He also submitted that the decision of Tribunal, Chennai Bench (supra) are on different set of facts wherein the due date for filing return of income was not over. He accordingly submitted that order of learned CIT(A) is to be upheld.
6.1 We have carefully considered the relevant facts, argument advanced and the decisions cited. The word "Undisclosed income" is defined in Section 158B(b) which reads as follows :
"158B(b) 'undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act."
Section 158B(B)(1) provides how the undisclosed income is to be computed. The section read as under:
158BB(1) : The undisclosed income of the block period shall be the aggregate...... computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the AO, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,--
(a).....
(b) .....
(c) ....
(d) where the previous year has not ended or the date of filing the return of income under Sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years;
6.2 In the present case, it is seen that the amount was advanced during the financial year relevant to asst. yr. 1999-2000. The search was conducted on 19th July, 1999. Thus the due date for filing return of income for asst. yr. 1999-2000 has not expired. Prior to search, during the course of survey under Section 133A itself the assessee has declared certain income as undisclosed income and already offered to pay tax thereof. It is not the case that the assessee has retracted his statement. On the contrary the assessee has included the said undisclosed income declared during the survey in his return for asst. yr. 1999-2000. Thus in the present case it is to be seen whether the income declared during the survey operation under Section 133A can be considered as undisclosed income in the search conducted subsequent to survey. Once the assessee admits any income as undisclosed income during survey it does not retain the character of undisclosed income in the search under Section 132. To compute the undisclosed income under Section 158BC, the same is to be based on material found during search conducted under Section 132 only and not survey conducted under Section 133A. The material should be found during search. The confirmation of undisclosed income declared during survey loses its character as 'undisclosed income' during search, as it is no longer undisclosed thereafter. Hon'ble Supreme Court in the case of CIT v. Tarsem Kumar (1986) 161 ITR 505 (SC) was concerned with somewhat similar situation. In the said case the facts as noted are as under:
"An amount of Rs. 93,500 which was, inter alia, seized from the respondent by the Customs authorities and lay in their custody, had to be returned to him pursuant to an order of the High Court in a writ petition. Before the amount was returned, the ITO served a warrant of authorization dt. 10th May, 1972, issued under Section 132 of the IT Act, 1961, on the respondent as well as on the Customs authorities and the IT authorities took possession of the amount. On a writ petition filed by the respondent, the High Court held that the IT authorities could not seize the amount from the Customs authorities under Section 132 and that the search and seizure warrants were liable to be quashed and the money returned to the Customs Department."
Hon'ble Supreme Court affirming the decision of Hon'ble Punjab and Haryana High Court held thus :
"That where the exact location of the property was known and certain, there was nothing to search or look for. There was no need to seize the money: the IT Department could direct handing over of the money to the IT authorities or take steps for such direction through appropriate authorities."
Applying the same principle it can be held that once the assessee has unequivocally disclosed certain income during survey under Section 133A and so long as it is not retracted, it cannot be said that the same income is found during search conducted under Section 132. What remains after the declaration during survey under Section 133A is appropriately taxing the same only. This was done by the AO in regular assessment for asst. yr. 1999-2000. Since there is no material to hold that the amount declared during survey would not have been disclosed in the return of income, the same cannot be considered as undisclosed income under Section 158BB and accordingly taxed under Section 158BC. The decision of Hon'ble Supreme Court in N.R. Gupta's case (supra) relating to validity of search under s, 132 is not applicable to the facts of the case, as the assessee does not challenge the action under Section 132. The decision of Tribunal, Chennai (supra) will also apply in the present appeal. Hon'ble Tribunal in the said case in paras 36 and 37 held thus :
"36. We heard both sides in detail and considered the issue very carefully. A block assessment under Chapter XIV-B of the IT Act is contemplated to assess the undisclosed income of an assessee as a result of search under Section 132 or a requisition under Section 132A, or on account of implication of another person by virtue of the operation of Section 158BD. What can be assessed in a block assessment is only the undisclosed income. And now, what is undisclosed income ? As Chapter XIV-B provides for special procedure for assessment of search cases, the amplitude of the expression 'undisclosed income' need to be understood as per the definition of the term given in the said Chapter. A reading of the definition of 'undisclosed income' in Section 158B(b), which is reproduced in para 30 above, makes the point clear, inasmuch as that income or property, which has not been disclosed for the purposes of this Act, or income or property which would not have been disclosed for the purposes of this Act.
37. Disclosed for the purposes of this Act definitely means, disclosed for the purposes required by the various provisions contained in the IT Act, 1961. Disclosed for the purposes of the IT Act, 1961 does not mean, disclosed for the purposes of making an assessment alone. There is no such a restriction given in the definition of 'undisclosed income', so as to presume that particulars furnished by an assessee through filing a return of income alone constitute disclosing the particulars for the purposes of this Act. The assessee might be furnishing details and particulars regarding his property and income in compliance of the requirements made by appropriate authorities invoking different provisions of the IT Act, 1961. In the present case, the assessee has furnished the details regarding her business, investments in such businesses, sources of income, etc. Through her letter dt. 15th May, 1995, in compliance of the notice issued by the ADI, Madurai, under Section 131 of the IT Act. Disclosing certain details and particulars in compliance of a requisition made by an appropriate authority under Section 131 of the IT Act amounts to disclosure of such particulars and details for the purposes of the IT Act, 1961."
In view of our finding above and relying on the decision of Hon'ble Supreme . Court in the Tarsem Kumar case (supra) and decision of Tribunal, Chennai (supra), addition of Rs. 50 lacs is required to be deleted.
7. The grounds relating to validity of notice, charging of interest under Section 158BFA(1) and initiating proceedings under Section 158BFA(2) were not pressed before us. The same are therefore dismissed for want of prosecution.
In the result, the appeal is partly allowed.