Income Tax Appellate Tribunal - West Bengal
Amritlal Agarwal vs Assistant Commissioner Of Income-Tax on 31 December, 1996
ORDER
R. Acharya, A.M.
1. These appeals have been instituted by the assessee against the orders of the CIT(A) for the asst. yr. 1981-82 on different grounds.
2. The appeals in ITA Nos. 551 & 552 (Cal) of 1990 were decided earlier by the Tribunal, B-Bench, Calcutta, vide order dt. 15th March, 1994 but when the assessee filed Misc. Appln. Nos. 60 & 61 (Cal) of 1994 in ITA Nos. 551 & 552 (Cal) of 1990, the orders of the Tribunal were recalled vide order in Misc. Appln. Nos. 60 & 61 (Cal) of 1994 in ITA Nos. 551 & 552 (Cal) of 1990 for the asst. yr. 1981-82 dt. 28th December, 1994. They are thus recalled appeals pending before us and the appeal in ITA No. 3912 (Cal) of 1992 is fresh one.
3. This is a very peculiar case and the chronological history of the case with facts in brief is that in this case a search and seizure operation took place in the residential premises of the assessee on 25th May, 1981 and amongst others a bunch of loose papers marked as BM-5 was seized vide Annexure-"BM" Panchnama placed on the record. The deposition of the assessee was also recorded under s. 132(4) of the Act and a copy is placed at p. 27 of the paper-book. An order under s. 132(5) placed at p. 11 of the paper-book was passed on 21st August, 1981, holding cash seized from the residence amounting to Rs. 80,000 and cash paid to Sri I. M. Dhawan amounting to Rs. 2,00,000 as concealed income. The original return showing total income at Rs. 61,750 was filed on 17th June, 1982 and the assessment under s. 143(3) was completed on 28th March, 1984 on total income of Rs. 1,31,750 including Rs. 70,000 as unexplained gift received by the minor sons of the assessee. The assessee filed an appeal against that assessment order on 11th April, 1984. During the pendency of this appeal a notice under s. 148 was issued and served on the assessee as on 27th March, 1985 and the assessment was reopened on the basis of certain vital information found in the seized documents about the assessee's business activities in sanitary goods which was admitted by him under s. 132(4) and on the basis of large amount of credits in a few bank pass books in the name of the assessee and his minor sons seized by the Department. In the meantime, the assessee filed an application before the Settlement Commission on 12th September, 1985. On the other hand in response to notice under s. 148 the assessee filed return on 4th February, 1987 declaring therein the total income of Rs. 61,540 and the reassessment under s. 143(3)/147 was finalised on 30th March, 1987 on total income of Rs. 3,56,750, which included in addition to originally assessed income, a sum of Rs. 25,000 as income from undisclosed business in sanitary goods and Rs. 2,00,000 as unexplained cash paid to Sri I. M. Dhawan. The assessee filed an appeal against the reassessment on 20th May, 1987 and the CIT(A) confirmed the action and jurisdiction of the AO under s. 147 and disposed of the appeal on 24th October, 1989, on merit by setting aside the order under s. 143(3)/147, for comprehensive investigation and for fresh assessment. Fresh assessment was completed under s. 144 on total income of Rs. 3,56,750 which was also appealed against by the assessee. The Settlement Commission passed its order on 1st December, 1988. In the first appeal against the original assessment order the CIT(A) vide his order dt. 24th October, 1989, dismissed the appeal as infructuous on the ground that since the original assessment is reopened under s. 147 it does not exist. In appeal against the assessment order under s. 143(3)/147 the CIT(A) has set aside the assessment vide his order dt. 24th October, 1989, and in third appeal against fresh assessment under s. 144, the CIT(A) has confirmed the assessment vide his order dt. 14th August, 1992. The assessee has preferred appeals to the Tribunal against all these three orders of CIT(A). What emerges from the above facts is the peculiarity of this case where three appeals for the same assessment year i.e., for asst. yr. 1981-82 are preferred to and are pending before the Tribunal. We take up these appeals now one by one as follows :
4. In ITA No. 551 (Cal) of 1990 the assessee has raised two grounds as under :
(1) That on the facts and circumstances of the case, the learned CIT(A) erred in holding that the appeal preferred by the appellant against order under s. 143(3) dt. 28th March, 1984, became infructuous and on the basis of such erroneous finding, he further erred in summarily dismissing the appeal.
(2) That the learned CIT(A) should have decided the appeal preferred by the assessee against the aforesaid assessment order, on its merit inasmuch he should have held the original assessment order passed under s. 143(3) was very much in force even when the present appeal was taken up for hearing.
5. In this case the return was filed on 17th June, 1982, and the assessment was made on total income of Rs. 1,31,750 under s. 143(3) on 28th March, 1984. While making the assessment the ITO found that a sum of Rs. 1,10,000 was credited in the savings bank account No. 4166 in Dena Bank which is a joint account of Mst. Nikhil Agarwal (son of the assessee) with the assessee. He found that these deposits constituted gifts received from several persons. As the assessee could not explain the credit of Rs. 70,000 out of Rs. 1,10,000 the AO added the same as income of the assessee.
6. The assessee being aggrieved by the addition of Rs. 70,000, filed an appeal before the CIT(A) and contended that as the gifted money belongs to the assessee's minor son the addition should be deleted. The CIT(A) decided the appeal by passing the order as under :
"During the pendency of appeal the assessment made under s. 143(3) was reopened by the ITO under S. 147 of the Act. The assessment reopened has in the meanwhile has been completed and the appellant as preferred appeal against the said re-assessment order vide Appeal No. 86/II(2) /CIT(A)-X/87-88. Since the assessment which gave rise to the appeal was no more existence, the appeal is dismissed CIT vs. Keshaba Reddiar (1989) 178 ITR 457 (Ker)."
7. Being aggrieved further, the assessee has filed the appeal to the Tribunal challenging the order of the CIT(A) on the above grounds. The learned counsel for the assessee pleaded that the original assessment is in tact in so far as the disputed point in appeal is not covered by the proceedings under S. 147. He also contended that this appeal is, therefore, not infructuous as wrongly held by the CIT(A). The learned counsel for the assessee relied on the following decisions and submitted that the reassessment does not render the original assessment void :
(1) CIT vs. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC); wherein it was held as under :
".. in reassessment proceedings, it was not open to the assessee to seek a review of concluded items unconnected with the escapement of income for the purpose of computation of the income escaping assessment; and, therefore, the Tribunal was right in holding that the respondent was not entitled to reagitate the question of the set off of losses in the reassessment proceedings."
(2) Nawab Mir Barkat Ali Khan Bahadur vs. ITO (1988) 172 ITR 13 (AP); wherein it was held that mere issuance of a notice under S. 148 does not affect the validity or efficacy of the original assessment order or the appeals or other proceedings arising therefrom, or other proceedings if any taken in pursuance of such original assessment order.
8. The learned Departmental Representative on the other hand argued that the appeal has correctly been dismissed as infructuous in the light of the proceedings under S. 147. He supported the order of the CIT(A) on the basis of the Kerala High Court decision in the case of CIT vs. K. Kesava Reddiar (1989) 178 ITR 457 (Ker) wherein it was held that the original assessment no longer survived or was in existence when the Tribunal took up for hearing the appeal filed by the Revenue. The Tribunal was justified in not considering the appeal on merits. The learned Departmental Representative tried to distinguish the Supreme Court decision in the case of Sun Engg. Works. (P) Ltd. (supra) on the ground that the assessment has not reached finality as the appeal was pending and, therefore, the original order does not survive under the circumstances.
9. We have carefully considered the rival contentions, relevant facts and material placed on the record and have also gone through the decisions and judicial pronouncements on which reliance is placed by both the parties. According to the ratio of Supreme Court decision in the case of CIT vs. Sun Engg. Works. (P) Ltd. (supra) on reassessment, original assessment is at large and the original assessment is reopened only as regards income escaping assessment. According to the decision claims which have been disallowed in the original assessment cannot be permitted to be reagitated on the assessment being reopened for bringing to tax certain income which has escaped assessment, because the controversy on re-assessment is confined to the matters which are relevant only in respect of income which had not been brought to tax during the course of the original assessment. In the reassessment proceedings it is not open to the assessee to seek a review of concluded items unconnected with the escapement of income for the purpose of computation of the income escaping assessment. In view of this, in our opinion, the Kerala High Court decision in the case of CIT vs. K. Kesava Reddiar (supra) is no longer a good law in view of the Hon'ble Supreme Court decision in the case of CIT vs. Sun Engg. Works. P. Ltd. (supra). No doubt, the matter of gift of Rs. 70,000 added as income from other sources and agitated in appeal has not reached finality as the appeal is pending but it is unconnected with the escapement of income for the purpose of computation of the income escaping assessment. According to the decision of the Andhra Pradesh High Court in the case of Nawab Mir Barkat Ali Khan vs. ITO (supra) the reassessment proceeding does not affect the validity or afficacy of the original order on the appeals, if any, taken in pursuance of such original assessment order. Hence, the contention of the Department does not hold good. Respectfully following the above decisions we hold that the CIT(A) was not justified in dismissing the appeal as infructuous on the ground that the assessment which gave rise to the appeal was no more in existence. Accordingly, the order of the CIT(A) which is not in accordance with the provisions of law is set aside and the appeal is restored to his file with direction to decide the appeal afresh according to the provisions of law.
10. In appeal No. 552 (Cal) of 1990 grounds 1 to 3 relate to reopening of the original assessment. The assessee's grievance is that as there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the CIT(A) should have held that the reopening of original assessment was invalid and void.
11. It is noticed from para 3 of the assessment order dt. 30th March, 1987, that the assessment was reopened by the AO on the ground and for the reasons that there was certain vital information in seized documents marked BM-5 about undisclosed business of the assessee in sanitary goods, which was admitted by the assessee in his statement recorded under S. 132(4) and also for the reason that the credits of large amounts were found in few bank pass books in the names of the assessee and his minor sons and that due details were required to be furnished. The assessee's explanation about these two points, was that they are covered by and are subject-matter of the application before the Settlement Commission filed by Amritlal Agarwal (HUF). The ITO rejected the explanation of the assessee for the reasons and on the ground that the said HUF filed application before the Settlement Commission about amounts found in seized books marked as BM-1 to BM-4 and that entries in the seized books marked as BM-5 were not subject-matter of the petition. He, therefore, brought following amounts to tax on account of reopening of assessment :
Rs.
(i) Income from undisclosed business in sanitary goods 25,000
(ii) Income from undisclosed sources representing cash
paid to Sri I. M. Dhawan 2,00,000
12. Before the CIT(A) the assessee submitted that all the information brought out by the search and seizure operation were before the ITO and, therefore, reopening of assessment and bringing to tax a sum of Rs. 2,00,000 amounted to change of opinion. The CIT(A) considered the submission of the assessee and confirmed the action of the ITO under S. 147 for the reasons given in his order as follows :
"As a fact, in the ground of appeal No. 3 of the first appeal filed against the asst. yr. 1981-82 [appeal No. 37/II(2)/(A)-X/84-85] it was urged that the appellant could not produce proof/evidence before the ITO due to shortage of time. In the face of such admitted facts by the appellant on the record, it has to be accepted that the plea of the ITO having changed his opinion on the same set of documents is completely out of place."
xxx xxx xxx xxx "2(c) Law cannot be reduced to mere interpretation of narrow technicalities for shutting up evidence that deserve to be examined within the framework of time and opportunity as granted by the law itself. If the contention of the appellant against the action of the reopening the assessment under S. 147 is accepted, in the facts of the case it will amount to giving approval to the use of law as an instrument to kill virgin evidence. It cannot be the case of the appellant that the original assessment under S. 143(3) was based on an adequate interaction between him and the ITO. It also cannot be the case of the appellant that the evidence seized during the course of search was not examined by the ITO in spite of full compliance by the appellant. In such circumstances, upholding the argument of the authorised representative would tantamount to using law rather than applying it fairly and squarely between the tax-payer and the tax-gatherer as would become discernible from what is stated below at para 3. On such consideration the objection raised by the authorised representative for the appellant against the reopening the assessment under S. 147 is not accepted. The finding is that the ITO was very much within his legal competence to reopen the assessment under S. 147."
13. Being aggrieved by this order the assessee has preferred this appeal to the Tribunal. The learned counsel for the assessee first of all argued before us that the Departmental action under S. 147(b) is barred by limitation and if it is claimed to be an action under S. 147(a), the provisions of S. 147(a) are not applicable as the re-opening of the assessment is based on two items i.e., transaction with minor son and income from undisclosed business of sanitary goods which are already considered by the ITO in the original assessment and by Settlement Commission respectively. On the basis of the paper-book already filed, he further clarified that the sum of Rs. 25,000 on account of sanitary goods is considered by the Settlement Commission as it is evident from para 5, p. 18 of the order under S. 245D(4) of the Act passed by the Settlement Commission, a copy of which is placed at p. 15 of the paper-book. The representative of the assessee also argued that sanitary goods are purchased by HUF and are accepted by the Settlement Commission for asst. yrs. 1980-81 and 1982-83. It was also asserted on behalf of the assessee that no business in sanitary goods was carried on by the assessee and the assessee has never admitted the same.
14. As regards cash of Rs. 2,00,000 paid to Sri I. M. Dhawan, it was submitted that the amount was paid by the wife of the assessee and has already been assessed in her case as it is evident from the assessment order dt. 10th June, 1985 of Smt. Rajni Agarwal for asst. yr. 1982-83, placed at p. 44 of the paper-book. The learned representative of the assessee further argued that since this point was not disputed and challenged before the Tribunal, the order of the Dy. CIT(A) becomes final. He also contended that the statement of Sri I. M. Dhawan is vague and that the assessee was not confronted with that. He also pointed out that this matter was considered in the proceeding and in the order under S. 132(5) dt. 21st August, 1981 also and it was already in the knowledge of the AO as it is evident from the order under S. 132(5) placed at p. 11 of the paper-book. In order to support his arguments and contentions the learned representative of the assessee relied on the following decisions :
(i) CIT vs. Mangilal Dhanraj (1985) 155 ITR 71 (Bom); wherein it was held that the assessee had conveyed to the ITO the primary fact of the seizure of gold bars and currency and that there was no omission to make a full and true disclosure of the material facts. Therefore, reassessment was not valid.
(ii) Gemini Leather Stores vs. ITO (1975) 100 ITR 1 (SC); wherein it was held reversing the decision of the High Court as under :
".. that after discovery of the primary facts relating to the transactions (sic) evidenced by the drafts it was for the officer to make the necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the appellant. This the officer did not do. It was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the appellant to disclose fully and truly all material facts. He could not, therefore, take recourse to S. 147(a) to remedy the error resulting from his own oversight".
15. The learned Departmental Representative on the other hand submitted that basic issue in this case is reopening of assessment and that since the AO has taken action under S. 147(a) it is validly taken and it is not barred by limitation. According to him, although the assessment was set aside twice nowhere primary facts are disclosed and there was no response from the side of the assessee even at third time of hearing. He also pointed out that in the course of search and seizure operation certain incriminating materials were found and seized and on the basis of them it was found that cash payment of Rs. 2,00,000 was paid by the assessee to Sri I. M. Dhawan. According to the learned Departmental Representative the assessee denied to have paid i Rs. 2,00,000 but subsequently came forward to say that the sum was paid by his wife. He further contended that the assessee did not cooperate with the Department and did not comply with the notices issued by the AO. According to him, since the returns of the assessee's wife were filed on 12th June, 1984 and her assessments were made on 10th June, 1985, while the assessee's assessment completed on 28th March, 1984, the notice under S. 148 was validly issued on 27th March, 1985. He also clarified this point further that the return of the assessee's wife was not filed till the assessment of the assessee was finalised and, therefore, the assessee has been shifting his stand. He also took us through the order of the CIT(A) and relied on p. 3 of his order. In order to prove the case of the Department and to support his contention he placed reliance on the following decisions :
(i) ITO vs. Laxmi Narayan & Co. (1995) 54 ITD 671 (Cal); and
(ii) ITO vs. Selected Dalurband Coal Co. (P) Ltd. (1996) 217 ITR 597 (SC).
16. In reply, the learned counsel for the assessee submitted that no fresh facts have come to light and there is nothing new in this case and, therefore, the ratio of the Supreme Court decision in the case of Selected Dalurband Coal Co. (P) Ltd. (supra) on which reliance is placed by the learned Departmental Representative is not applicable to the instant case.
17. We have carefully considered the rival contentions, the relevant facts and material placed on the record and we have also gone through the case law on which reliance is placed by both the parties. We find that the AO has correctly rejected the contention of the assessee that the item of income on the basis of which assessment proceedings are reopened are covered by the petition by the assessee and the order of the Settlement Commission. While rejecting this contention the AO has given two reasons firstly that the HUF has come up for the settlement about the amounts and points found in seized books marked BM-1 to BM-4 and certain deposits in the minor's seized bank account, and secondly, the entries in the seized books marked BM-5 were not subject-matter of the petition filed before the Settlement Commission. It is also noticed that the order of the Settlement Commission covers the income for the asst. yrs. 1980-81 and 1982-83 and not the items of the income for the asst. yr. 1981-82 under consideration. Since the assessee has completely failed to rebut the contention of the AO by producing evidence with regard to entries in the seized books of account marked BM-5 and with regard to the items covered by the order of the Settlement Commission, in our opinion, the re-opening of the assessment under S. 147 cannot be disturbed on this account.
18. The next contention of the assessee that the transaction of Rs. 2,00,000 with Sri I. M. Dhawan related to his wife Smt. Rajni Agarwal has also rightly been rejected by the Department on the ground that Sri Dhawan in his statement under S. 132(4) had stated that he received the money from Sri Amritlal Agarwal after 10 days from 20th February, 1981, and on the basis of the contradiction based on the inconsistency of Sri Rajni Agarwal's books with the statement of Sri Dhawan and the assessee has not been able to controvert the same by producing any evidence. It is also seen that the AO of Smt. Rajni Agarwal has made the assessment on a protective measure subject to final decision in the hands of her husband. In view of this as well as in the absence of documentary evidence in the possession of the wife of the assessee to support her statement that the money had been given by her to Sri Dhawan through her husband, the contention of the assessee against the reopening of the assessment under S. 147 on this ground is not tenable and in our opinion has rightly been rejected by the authorities below.
19. However, the assessee's contention that the matter of cash payment of Rs. 2,00,000 was already before the AO and was considered in the proceedings and in the order under S. 132(5) dt. 21st August, 1981, appears to be correct as it is evident from the order under S. 132(5) placed at p. 11 of the paper-book that the cash amounting to Rs. 2,00,000 paid to Sri I. M. Dhawan is considered as concealed income of the assessee. This simply means that this item of concealed income was already in the knowledge of the AO while passing the order under S. 132(5) which is an order passed in a summary manner, but while passing the regular assessment on 28th March, 1984, he has not brought this concealed income to tax. This is, therefore, inferred that after considering the explanation of the assessee and after due deliberation at the time of regular assessment the AO has dropped the addition of Rs. 2,00,000 which was considered as concealed income in the order under S. 132(5). Undoubtedly, this amounts to change of opinion and in our opinion, therefore, the assessment could not have been reopened on this ground as all the seized materials and the facts connected with the cash payment of Rs. 2,00,000 to Sri Dhawan were before the AO and, therefore, there was no omission on the part of the assessee insofar as this item is concerned. Our opinion gets support from the Bombay High Court decision in the case of CIT vs. Mangilal Dhanraj (supra) where the Customs authorities carried out a search and seized gold bars and some currency notes and the information about the search and seizure was conveyed to the ITO but the ITO completed the assessment without making any enquiry and without making any addition to the income on account of the seized goods, it was held that the assessee had conveyed to the ITO the primary fact of the seizure of gold bars and currency notes and that there was no omission to make a full and true disclosure of material facts and, therefore, the reassessment was not valid. We also derive support from the Supreme Court decision in the case of Gemini Leather Stores vs. ITO (supra) where the AO after discovery of the primary facts relating to the transaction evidenced by the drafts did not make necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the assessee, it was held that it was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and, therefore, the ITO could not take recourse to S. 147(a) to remedy the error resulting from his own oversight. Thus, even if the treatment of cash amounting to Rs. 2,00,000 paid to Sri Dhawan as concealed income was dropped by the AO an account of oversight he could not have taken recourse to S. 147(a) to assess the concealed income resulting from his own oversight. Accordingly, we hold that to that extent the reopening of the assessment and re-assessment is not valid.
20. It is evident from the reassessment order that the main reason for re-opening the assessment under S. 147(a) is the escapement of income from undisclosed business of the assessee in sanitary goods. As we have already discussed that the contention of the assessee that the income from the business in sanitary goods is covered by the Settlement Commission is not borne out by the evidence and has rightly been rejected by the AO on the ground that the HUF has come up for the settlement for the asst. yrs. 1980-81 and 1982-83 and that the amounts found in the seized books marked BM-1 to BM-4 are covered by the Settlement Commission and that the entries in the seized books of account marked BM-5 were not subject matter of the petition. In the absence of evidence adduced by the assessee to prove his contention in our opinion, the AO was well within his jurisdiction and was competent to issue notice under S. 148 r/w S. 147(a) on the basis of material available on the record. In our opinion, the seized books of account marked as BM-5 and contents thereof could constitute the basis for the formation of the requisite belief under S. 147(a) and, therefore, we hold that the reassessment notice under S. 148 was valid on this ground and for this reason. Since the assessment is reopened under S. 147(a) the contention of the assessee that the proceedings are barred by limitation, is not correct.
21. In view of this, as well as for the reasons mentioned in the earlier paragraphs we hold that the reopening of the assessment under S. 147(a) was valid on the ground that the income from undisclosed business in sanitary goods as found in the seized books marked BM-5 has escaped assessment by reason of the failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment of the year. Our view gets support from the Supreme Court decision in the case of ITO vs. Selected Dalurband Coal Co. (P) Ltd. (supra) where a report made by a Govt. department after conducting a joint inspection, gave a reasonably specific estimate of the excessive coal mining over and above the figure disclosed in the return, it was held that the letter could constitute the basis for the formation of the requisite belief under S. 147(a) and the reassessment notices were valid. The decision of the Tribunal, 'B' Bench, Calcutta in the case of ITO vs. Laxmi Narayan & Co. (supra) also supports our view and helps the cause of the Department. In the case of ITO vs. Laxmi Narayan & Co. (supra) the original assessment was completed after verification of loans and after accepting confirmation letters but the AO subsequently found evidence of loans being bogus and such evidence was not rebutted by the assessee. He, therefore, made reassessment under S. 147(a) and added loan amounts as assessee's income from undisclosed sources. On the facts and in the circumstances of the case our view also gets support from the Hon'ble Supreme Court decision in the case of Phool Chand Bajrang Lal vs. CIT (1993) 203 ITR 456 (SC) wherein it was held as under :
"He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts, in such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but one of acting on fresh information."
xxx xxx xxx xxx xxx xxx "It would be immaterial whether the ITO, at the time of making the original assessment, could or could not have found by further enquiry or investigation whether the transaction was genuine or not if, on the basis of subsequent information the ITO arrives at a conclusion, after satisfying the twin conditions prescribed in S. 147(a) that the assessee had not made full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment."
When we consider the position of documents marked as BM-5, savings bank account No. 237 with Oriental Bank of Commerce and statement of the assessee recorded under S. 132(4) of the Act and the role they played in reopening of the assessment, we find that the ratio of the Supreme Court decision in the case of Phool Chand Bajrang Lal (supra) is squarely applicable to the instant case and, therefore, in our opinion, the action of the AO is fully justified.
22. In this view of the matter as well as for the reasons mentioned above, we hold that the reopening of assessment under S. 147(a) was valid on this ground and to that extent the order of the CIT(A) is upheld.
23. Ground No. 4(a) relates to the addition of Rs. 2,00,000 as unexplained cash payment to Sri I. M. Dhawan. In the foregoing paragraphs we have also held that once the AO treats the sum of Rs. 2,00,000 as concealed income under S. 132(5) and deliberately drops the same in regular assessment, he cannot reopen the assessment and reassess this income again as it amounts to change of opinion. On this ground and for this reason, therefore, this addition cannot be sustained. On merit also it is noticed that this unexplained cash of Rs. 2,00,000 has been assessed in the hands of the wife of the assessee Smt. Rajni Agarwal. Although the assessment in the case of the wife of the assessee is made on protective basis, that has been confirmed by the Dy. CIT(A). The assessee's contention is that the assessment has become final in the case of the wife of the assessee as no second appeal is filed against the order of the Dy. CIT(A). It is noticed that this fact has not been controverted by the Department by adducing evidence. In view of this and for these reasons we vacate the orders of the authorities below and delete the addition of Rs. 2,00,000.
24. Ground No. 4(b) relates to the addition of Rs. 25,000 as income from undisclosed business in sanitarywares. Since this matter has been set aside by the CIT(A) and since this issue is also raised in ITA No. 3912 (Cal) of 1992 under ground No. 3 they are dealt with and decided together in that appeal for the sake of convenience. In so far as this ground in this appeal is concerned after considering all the facts and circumstances of the case we agree to the decision of the CIT(A) and upheld his order setting aside the assessment on this point.
25. Ground No. 4(c) relates to the addition of Rs. 70,000 on account of unexplained gifts. It is noticed that this matter is not disputed before the CIT(A) separately in a separate ground. Secondly, this issue is already pending in original appeal and while deciding the assessee's appeal in ITA No. 551 (Cal)/90 we have directed to decide the appeal afresh and, therefore, till then no cause of action arises and no appeal lies before the Tribunal. This ground is, therefore, rejected.
26. Ground No. 4(d) relates to charging of interest under S. 139(8) and 217 of the Act. It is consequential in nature insofar as interest under S. 139(8) is concerned. As the assessee relied on the Calcutta High Court decision in the case of CIT vs. Radha Devi Poddar (1990) 185 ITR 544 (Cal) in our opinion, no interest is chargeable under S. 217 as the assessment is not a regular assessment. The AO is directed accordingly.
27. Ground No. 5 is general and needs no comments and no decision.
28. In ITA No. 3912 (Cal) of 1992 ground No. 1 is that the AO was not justified in completing the assessment on an ex-parte basis.
29. After hearing both the parties and after going through the assessment order and appellate order we find that the authorities below have given sufficient reasons for passing the ex-parte order for confirming the same respectively and, therefore, in the absence of any evidence to controvert their findings we decline to interfere with their orders. This ground is, therefore, rejected.
30. Ground No. 2 relating to addition of Rs. 2,00,000 as payment of cash to Sri I. M. Dhawan has already been decided in favour of the assessee in ITA No. 552/Cal/90 and, therefore, this ground is rejected as being infructuous.
31. Ground No. 3 runs as under :
"That on the facts and in the circumstances of the case, the learned AO Inv. Circle has erred in alleging that the assessee had undisclosed income from dealing in sanitarywares and on the basis of such erroneous allegation, erred in holding that the assessee had undisclosed income of Rs. 25,000 from the said source."
32. Briefly stated, the facts are that the AO found from the seized books of account and documents marked as BM-5 that there was certain vital information about the assessee's undisclosed business activity in sanitary goods. He informed the assessee accordingly and brought to his notice that the same has been admitted by the assessee in his statement recorded under S. 132(4) on 25th May, 1981. When the assessee was asked to offer explanation, it was submitted that this is subject-matter of petition pending before the Settlement Commission. The AO rejected the explanation of the assessee on the ground that the concealed business activities are reflected in BM-5, entries of which are not subject-matter of petition before the Settlement Commission. As the assessee failed to establish that the assessee had no income from business in sanitary goods, the ITO estimated reasonable income from such business on the basis of material available on record at Rs. 25,000 and assessed the same to tax.
33. Before the CIT(A) the assessee submitted that he had purchased certain sanitary goods for fitting them in his flat. The CIT(A) set aside the order of the AO and restored the matter to his file on the following grounds :
(i) that it is not feasible to give decision as the very contents of the documents on the basis of which such addition was based were not discussed in the assessment order.
(ii) that the HUF of the assessee had preferred a petition before the Settlement Commission for which the required examination was deferred but not taken up so far.
34. Thereafter, the AO issued statutory notices to the assessee but in spite of reasonable opportunities the assessee did not appear and comply with the notices. He, therefore, passed ex-parte order under S. 144 to the best of his judgment and made the addition of Rs. 25,000 on account of concealed income from sanitary business. The CIT(A) confirmed the assessment including the addition of Rs. 25,000 as income from undisclosed business in sanitary goods.
35. Before us the learned counsel for the assessee submitted that this income of Rs. 25,000 has already been considered by the Settlement Commission. He invited our attention to the order of the Settlement Commission a copy of which is placed at p. 15 of the paper-book and drew our attention to p. 18 of the paper-book and para 5 of the order under S. 245D(4) of the Act and submitted that the income from purchase of sanitarywares is taken at Rs. 25,000. According to the learned counsel for the assessee, the sanitary goods are purchased by the HUF and is accepted by the Settlement Commission. He further contended that no such business in sanitary goods is carried on by the assessee and that the assessee has never admitted the same. In order to prove his contention he invited our attention to the question and answer No. 27 in the statement of the assessee recorded under S. 132(1) on 25th May, 1981 a copy of which is placed at p. 27 of the paper-book.
36. The learned Departmental Representative, on the other hand contended that since the assessee could not explain the sources of the purchase of sanitary goods and since the assessee admitted in his statement to have carried on the business, the ITO was justified in estimating the income from the undisclosed business at Rs. 25,000 in the absence of details and proof. He further contended that the assessee was given several opportunities and the assessment was set aside but in spite of that there was no response from the assessee's side to explain the concealed income and concealed business.
37. We have carefully considered the rival contentions, the relevant facts and material placed on the record. We find that although several opportunities were offered to the assessee by the authorities below but the assessee failed to explain the entries in the books of account seized and failed to establish that the assessee had not earned any income from business in sanitary goods. On the other hand, it is seen that while answering question No. 27 in his statement he has stated that pp. 5 & 6 represent payment to Hindustan Distributors for some sanitary fittings and in response to question No. 28 he has admitted that some times he supplied goods to different parties and charged some amount say Rs. 40/50 per ton for the same and that the profit from the business run in his individual capacity has not been disclosed to the Department. He has further admitted that he has not maintained any books of account. In view of this as well as considering all these facts and circumstances of the case we hold that the AO was fully justified in estimating the income from sanitary business not disclosed to the Department at Rs. 25,000 in the absence of details and books of account and the CIT(A) has rightly confirmed the same. As the above facts have not been controverted by the assessee by adducing requisite material and evidence we decline to interfere with the orders of the authorities below. Accordingly, the addition of Rs. 25,000 as income from undisclosed source is upheld.
38. Ground No. 4 relating to the addition of Rs. 70,000 has become infructuous as the CIT(A) has already been directed to decide the issue in the original appeal in ITA No. 551/Cal/90.
39. Ground No. 5 relating to charging of interest under S. 139(8) of the Act is consequential in nature insofar as interest under S. 139(8) is concerned. As the assessee relied on the Calcutta High Court decision in the case of CIT vs. Radha Devi Poddar (supra) in our opinion, no interest is chargeable under S. 217 as the assessment is not a regular assessment. The AO is directed accordingly.
40. Ground No. 6 is general in nature.
41. In the result, ITA No. 551/Cal/90 is treated to be allowed for statistical purpose, ITA No. 552/Cal/90 and ITA No. 3912/Cal/92 are partly allowed.