Income Tax Appellate Tribunal - Chandigarh
Smt. Mohinder Kaur,, Chandigarh vs Department Of Income Tax on 14 December, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND Ms. ANNAPURNA MEHRO TRA, ACCOUN TAN T MEMBER
ITSS No. 14/CHD/2006
Block Period 01.04.1996 to 23.05.2002
The ACIT, Vs Smt. Mohinder Kaur,
Central Circle, House No. 694,
Chandigarh. Sector - 8,
Chandigarh.
PAN: AGTPK4925D
&
C.O.No. 30/CHD/2006
In ITSS No. 14/CHD/2006
Block Period 01.04.1996 to 23.05.2002
Smt. Mohinder Kaur, Vs The ACIT,
House No. 694, Central Circle,
Sector - 8, Chandigarh.
Chandigarh.
PAN: AGTPK4925D
(Appellant) (Respondent)
Revenue by : Shri Manoj Mishra,CIT-DR
Assessee by : Shri Ashish Goyal
Date of Hearing : 08.12.2015
Date of Pronouncement : 14.12.2015
O R D E R
PER BHAVNESH SAINI,JM The departmental appeal as well as Cross Objection by assessee are directed against the order of ld. CIT(Appeals)-XVIII, New Delhi dated 28.03.2006 for the above block period.
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2. Briefly the facts of the case are that search & seizure operation under section 132 of the Income Tax Act was conducted on the residential and business premises of Smt. Mohinder Kaur of M/s Lada Liquor Group on 23.05.2002. It may be pointed out that late Shri Taranjeet Singh, husband of the assessee was doing liquor business at Chandigarh and Panchkula District of Haryana for last several years. After his demise on 19.04.2000, this business was taken over and carried on by his wife Smt. Mohinder Kaur, assessee till the date of search. Shri Taranjeet Singh had been carrying on this business in his name and in the name and style of M/s Lada Liquor, M/s Taranjeet Singh & Co. and at times in the names of his trusted employees. No books of account were found during the course of search. The Assessing Officer issued notice under section 158BC but return of income was not filed within the time prescribed but ultimately assessee filed the return for the block period declaring 'nil' income. The Assessing Officer after giving opportunity of being heard to the assessee, completed the block assessment under section 158BC of the Income Tax Act vide order dated 22.08.2005 determining total undisclosed income of the assessee at Rs. 9.10 Cr. The Assessing Officer, while making the above addition, made several additions which were challenged before ld. CIT(Appeals).
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3. The ld. CIT(Appeals) deleted the substantial additions and maintained part of the additions, therefore, revenue as well as the assessee are in their appeals as well as Cross Objection, as mentioned above.
4. We have heard ld. Representatives of both the parties and perused the material available on record. The ld. DR relied upon order of the Assessing Officer, on the other hand, ld. counsel for the assessee submitted that most of the additions have been deleted by ld. CIT(Appeals) because no incriminating material was found or recovered during the course of search against the assessee, therefore, additions were rightly deleted by the ld. CIT(Appeals). Since, it is a block assessment case, therefore, before proceeding to decide the additions on merit in both the cross matters, it would be relevant to consider the relevant provisions of block assessments. 4.1 Chapter XIV-B starts with sec. 158B and provides the definition of "block period" and "undisclosed income".
"Undisclosed income" is relevant in this case, which is reproduced below as amended by Finance Act, 2002 w.e.f.
1.7.1995:
S.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 4 have been disclosed for the purpose of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false.
This section shows that the following conditions must be satisfied to treat the income as undisclosed income i.e. :
(i) It must be in the form of money, bullion, jewellery, other valuable article or thing or should constitute income or property based on any entry in the books of accounts or other document or transaction;
(ii) It should be averred that the assets or entry in the books represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act.
(iii) or any expenses, deduction or allowance claimed under this head, which is found to be false.
Section 158BB(1) provides for computation of undisclosed income of the block period and is reproduced as under:
"(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence 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) where assessments u/s 143 or sec. 144 or sec. 147
have been concluded [prior to the date of
commencement of the search or the date of requisition], on the basis of such assessments;5
(b) where returns of income have been filed u/s 139 [or in response to a notice issued under sub-section (1) of sec. 142 or section 148] but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns;
[(c) where the due date for filing a return of income has expired, but no return of income has been filed,- (A) on the basis of entries 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 where such entries result in computation of loss for any previous year falling in the block period; or (B) On the basis of entries 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 where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period;
(ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);]
(d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of sec. 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;
(e) where any order of settlement has been made under sub-
section(4) of sec. 245D, on the basis of such order;
(f) where an assessment of undisclosed income had been made earlier under clause (c) of sec. 158BC, on the basis of such assessment.
Explanation.-For the purpose of determination of undisclosed income, -
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(a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of [this Act] without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32;
[provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of sec. 32;]
(b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called [to any partner not being a working partner];
Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;]
(c) assessment under section 143 includes determination of income under sub-section (1) or sub-section (1B) of sec. 143.
(2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition.
(3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the 7 commencement of search or the requisition, as the case may be, shall be on the assessee.
(4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments."
4.2 We, after considering the above provisions, are of the opinion that even if there is an amendment in the above sections, the scheme or purpose of enacting Chapter XIV-B has not undergone a major change in the sense that the block assessment pertaining to a number of years remains distinct from assessment u/s 143(3) pertaining to a single AY. The block assessment could be made in respect of undisclosed income if during the block period undisclosed income is recovered as a result of evidence found during the course of search and not as a result of other documents or material which came to the possession of the AO subsequent to the conclusion of search operation unless and until such material or document is relatable to such evidence recovered during the course of the search. The amended definition of sec. 158BB as mentioned above clearly suggests that some evidence is to be found as a result of search operation and it is only thereafter that the remaining part of the provisions come into play and that too the remaining 8 evidence must be relatable to the evidence recovered during the course of the search. The other amendment in sec. 158B(b) which is reproduced above has enlarged the meaning of the term "undisclosed income"
by including therein "any expense, deduction or allowance claimed under this Act which is found to be false." What has to be seen is that the valuable articles, documents or transactions which represent wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act. Therefore, before coming to analyze what is undisclosed income, it is necessary to be seen that such income has not been or would not have been disclosed for the purpose of this Act. If any such article or thing or income has already been disclosed to the department prior to the search, it cannot be termed that the same has not been or would not have been disclosed for the purpose of this Act. Therefore, whatever items or articles have been shown to the department prior to the search cannot be treated as undisclosed income.
5. The Hon'ble Bombay High Court in the case of CIT vs. Vinod Danchand Ghodawat, 247 ITR 448 (Bom.) observed:
" where the value of the gold and silver articles and jewellery had been disclosed in the assessee's wealth-tax return which was accepted by the department.9
Held, that Chapter XIV-B of the IT Act, 1961 had not application to the facts of the case and the addition made by the department on the ground of undisclosed income was erroneous."
6. The Hon'ble Calcutta High Court in the case of Bhagwati Pd. Kedia vs. CIT, 248 ITR 562 (Cal.) observed -
"The explanation to sec. 158BA of the IT Act, 1961 makes it clear that the Legislature thought it fit to make a distinction between the block assessment and the regular assessment. In the case of regular assessment, the AO is free to examine the veracity of the return as well as the claims made by the assessee, whereas the undisclosed income is taxed by way of block assessment as a result of search and seizure. The logic behind the two different modes of assessment is that concealment of income and claiming deduction or exemption in respect of a disclosed income cannot be treated at par. The former is an offence which goes to the root of the matter and the other is on the basis of the causes shown by the assessee where the AO is free to accept the justification shown or reject the same.
There was a search and seizure resulting in block assessment of the assessee. During the block assessment, the assessee was called upon to explain the advance taken from a company. The assessee had filed the confirmation letter of loan from the company including income tax file numbers of the creditor. The income-tax authority held that the said loan was a fictitious one and was to be considered as undisclosed income of the assessee during the period under consideration. On the question whether the AO was entitled to question the loan amount which was the subject matter of regular assessment, while making block assessment.10
Held, that the AO was not entitled to question in block assessment the loan which was a subject matter of the regular assessment. The AO was wrong in holding that the said sum could be taxed in block assessment although the same featured in the regular books of account. When the loan creditor was an assessee and in whose assessment the loan advanced had been accepted by the Revenue, the AO was wrong in holding that the assessee was liable to pay tax on that loan money taken from the assessee."
7. In case of CIT vs. Ravi Kant Jain, 250 ITR 141 (Del.), the Hon'ble Delhi High Court observed:
"Block assessment under Chapter XIV-B of the IT Act, 1961, is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done 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. Evidence found as a result of search is relatable to sections 132 and 132A.
Held, that, admittedly the undisclosed income was not determined on the basis of any search material and the AO was proceeding within the scope of the assessment and not within the scope of exercising jurisdiction under Chapter XIV- B and sec. 158BA. Therefore, sec. 158BA of the Act had no application to the facts of the case."
8. In the case of Sunder Agencies vs. DCIT, 63 ITD 245, ITAT, Mumbai Bench 'B' held as under:
"Sec. 158BA of the IT Act, 1961 - Search and seizure - Block period 1.4.1985 to 16.11.1995 - whether within pale of 11 Chapter XIVB assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search - Held, yes - Whether sec. 158BA does not provide a license to revenue for making roving enquiries connected with completed assessment and is beyond power of AO to review assessments completed unless some direct evidence comes to knowledge of department as a result of search which indicates clearly factum of undisclosed income
- Held, yes - Whether scheme of Chapter XIVB gives power to revenue to draw presumption in regard to undisclosed income - Held, no - Assessee claimed 1 to 1.5 per cent out of total sales as "sales promotion expenses" - During search proceedings a book called "gift register" was seized from assessee's business premises - Gift register related to sale promotion expenses - In earlier assessment proceedings covering block period in question, such expenses were disclosed and disallowances were made - Neither any incriminating material revealing undisclosed income came to light nor enquiry regarding sales promotion expenses in proceeding u/s 132(1) was made. Whether addition on account of sales promotion expenses on estimate basis could be justified - Held no."
9. In the case of Digvijay Chemical Ltd. vs. ACIT, 68 TTJ 280, ITAT, Delhi Bench "E" held that "addition based on suspicion and surmises are not covered u/s 1 5 8 B ( b ) . I t wa s f u r t h e r h e l d t h a t " t h e a d d i t i o n u / s 1 5 8 B ( b ) mu s t b e m a d e o n c o n c r e t e m a t e r i a l . "
10. In the case of P.K. Ganeshwar vs. DCIT, 80 ITD 429 (Chennai), ITAT, Chennai Bench "C" Held -
"Sec. 158BA of the IT Act, 1961 - Block assessment search cases - Assessment of undisclosed income as a result of 12 search - Whether, where undisclosed income is found not on basis of evidence found as a result of search but on investigation and inquiries made following search, such income could be included as undisclosed income of block period computed under Chapter IV - Held, no - Whether Chapter XIV-B is a special provision for assessment of undisclosed income found as a result of search only and there is no scope for considering items that could be considered under regular assessment - Held, yes."
11. Hon'ble Calcutta High Court in the case of CIT vs. Ashim Krishna Mondal, 270 ITR 160 at pages 163 and 164 observed:
"The principle that has been laid down for the purpose of making assessment are settled proposition as was referred to by the ld. Tribunal in the case of Sunder Agencies vs. DCIT [1997] 63 ITD 245 (Mumbai); T.S. Kumarasamy vs. ACIT [1998] 65 ITD 188 (Mad), at page 206 and Indore Construction (P) Ltd. vs. ACIT [1999] 71 ITD 128 (Indore) wherein the Mumbai Bench of the ITAT, the Madras Bench of the ITAT and the Indore Bench of the ITAT, respectively, had held that the income for block assessment under search and seizure procedure is to be computed strictly on the basis of the documents seized; and it cannot proceed on conjectures and/or surmises and arrive at an estimation instead of computation. The word "computation" connotes a different meaning than estimation or appraisal. Computation presupposes a calculation on the basis of the materials, which is something different from estimation or appraisal and it must be based on methodical calculation with some amount of approximity to mathematical process on the materials available on search and seizure."
12. ITAT, Delhi Bench (TM) in the case of Dang & Co. Pvt. Ltd. vs. DCIT, 277 ITR (AT) 190 held: 13
"The assessee explained that it was an estate agent and the amount received by the assessee was an advance received towards purchase of certain properties. Assuming it was a loan received by the assessee, it was not in dispute that the assessee had filed its regular return of income for the AY 1994-95 disclosing the amount in the balance-sheet. If it was a loan, the amount thereof could have been added to the total income u/s 68 only if it was held to be a non-genuine loan. The genuineness could have been gone into only in the course of regular assessment when the assessee had duly disclosed the amount in its balance-sheet. The assessee had discharged its part of the obligation by disclosing the amount in the balance-sheet and by filing the return. It was not the assessee's fault that no assessment was made. It was of no consequence under which head the amount was disclosed in the balance-sheet. If it was an advance from a customer for purchase of property, it could not be treated as income because it was merely an advance towards purchase of property and in no way the income of the assessee. When the amount stood duly disclosed in the regular return of income, the AO could not resort to block assessment proceedings to go into its genuineness and subject it to a higher rate of tax. The addition of Rs.55 lakhs was not justified."
13. Hon'ble Madras High Court in the case of CIT vs. G.K. Senniappan, 284 ITR 220 held:
"The assessee was engaged in the business of chit fund and real estate. In a search conducted against a third person it was found that the assessee had utilized undisclosed income for making contributions to certain unregistered chits conducted by the said person. Thereafter, a survey was conducted in the business premises of the assessee which indicated certain real estate transactions carried on by the assessee and profits derived thereon had not been disclosed 14 to the Department. The AO included u/s 158BB the undisclosed income found during the survey made u/s 133A. The Commissioner(Appeals) excluded that portion which had been included based on the material found during the survey on the premises that in respect of block assessment u/s 133A could not be taken into consideration. This was confirmed by the Tribunal. On appeal contending that the material gathered in the course of survey u/s 133A could also be regarded as a material for the purpose of block assessment u/s 158BB:
Held, accordingly, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal having decided the issue in accordance with the statutory provisions, it required no interference."
14 Hon'ble Delhi High Court in the case of CIT vs. Girish Chaudhary, 163 Taxman 608 in the head-note held "Under chapter XIVB, bef ore an addition of an undisclosed i n c o me c a n b e m a d e , t h e A O h a s t o b r i n g o n r e c o r d t h e material to show that on evidence f ound as a result of s e a r c h , t h e r e i s a n u n d i s c l o s e d i n c o me r e p r e s e n t e d b y credits appearing in the books of account. In the instant c a s e , t h e r e wa s n o m a t e r i a l o n r e c o r d t o s h o w a s t o wh a t on basis the AO reached the conclusion that the f igure "48" wa s to be read as Rs.48 lakhs. The d o c u me n t recovered during the course of search in the instant case w a s a d u mb d o c u me n t . T h u s , t h e T r i b u n a l r i g h t l y d e l e t e d t h e a d d i t i o n m a d e b y A O o n a c c o u n t o f u n d i s c l o s e d i n c o me on the basis of seized material."
15. In view of the above legal position, now we decide both the matters as under.
15(DEPARTMENTAL APPEAL)
16. On ground No. 1, revenue challenged the deletion of addition of Rs. 87,70,400/- on account of undisclosed income from running of Ahata.
16(i) Brief facts are that assessee had obtained liquor vend in open auction alongwith facility of Ahata. The return of income for assessment year 2001-02 declaring total taxable income at Rs. 4,83,547/- was filed which included Ahata income at Rs. 16,29,000/-. The return was supported by audited accounts and accepted under section 143(1)(a) of the Act. For assessment year 2002- 03, the income from liquor trading, including that of Ahata, income was declared at Rs. 4 lacs on estimate basis in the absence of regularly maintained books of account. The return was accepted under section 143(3) of the Act and income from liquor vend was accepted at declared income. For assessment year 2003-04 since previous year had not been ended before the date of search, no income tax return was filed. The Assessing Officer noted that in the course of search, it was found that assessee was enjoying income from Ahata given on daily rent to various persons. He has further noted that statements 'on oath' were recorded of the persons running/managing the Ahatas during the course of search. Further, on the basis of the statement recorded on the date of search, Assessing Officer noted that 16 assessee was having daily Ahata receipts from various persons in a sum of Rs. 14,450/-. The Assessing Officer further noted that out of several persons, Shri Sardara Singh and Shri Gobind Kumar were running Ahatas since financial year 1998-99 till the date of search. Shri Sarmukh Singh was running Ahata since April,2000 whereas others have denied to have running Ahata in earlier years. Also daily rent paid by Shri Sardara Singh and Shri Govind Kumar in earlier years totaling to Rs. 2300/- to Rs. 2800/-. The Assessing Officer, on the basis of the same noted that assessee was receiving daily rent for use of Ahata which have been increased. Therefore, for block period, Assessing Officer has computed the Ahata income in a sum of Rs. 87,70,400/-.
17. The assessee submitted before ld. CIT(Appeals) that out of 13 persons available in the list, three persons accepted running of Ahata in earlier years but others have denied. It has been stated that Assessing Officer obtained information from Excise Department for framing assessment in respect of Ahata income. The Assessing Officer did not confront the statements and particularly of these Ahata Managers before estimating the undisclosed income. It was submitted that whatever Ahata income was received, have been taxed in earlier years. The estimate of income for block period is wholly unjustified. The ld. CIT(Appeals) noted that addition is based on statement of 13 persons running/managing the 17 Ahata, recorded during the course of search and not on the basis of any incriminating material detected in search. The statement recorded during the course of search could not be treated as evidence to unearth undisclosed income and relied upon order of ITAT Jabalpur Bench in the case of Chitra Devi 77 TTJ 640 and other decisions and deleted the addition.
18. On consideration of the rival submissions in the light of the legal proposition discussed above, we do not find any justification to interfere with the order of ld. CIT(Appeals) in deleting the addition. It is admitted fact that no evidence was discovered during the course of search for estimating Ahata income. The statements of 13 persons were recorded during the course of search out of which, only 3 have accepted running of Ahata but they were not subjected to cross-examination on behalf of the assessee. Further information was received by the Assessing Officer from Excise Department, therefore, such could not be treated as undisclosed income recovered as a result of evidence found during the course of search. Therefore, ld. CIT(Appeals), on proper appreciation of the facts and law, correctly deleted the addition. Ground No. 1 of appeal of revenue is dismissed.
19. On ground No. 2, revenue challenged the deletion of addition of Rs. 1,92,17,657/- on account of unexplained 18 investment in purchase of SCO 16-17, Sector 8, Chandigarh.
19(i) In the assessment order, Assessing Officer has stated that in the course of search, it was found that assessee alongwith her husband had purchased a property in open auction at SCO 16-17, Sector 8, Chandigarh of Rs. 2,71,50,000/-. It has been further stated that total payments upto the date of search in respect of aforesaid property aggregated to Rs. 3,78,71,872/-. He, therefore, held that payments made prior to the date of demise of husband of the assessee, aggregating to Rs. 1,86,54,214/- represented unexplained investment of husband and was, therefore, liable to be assessed in assessment of the assessee as legal heir of her husband. Addition was accordingly made. It was submitted before ld. CIT(Appeals) that husband of the assessee had purchased in open auction a show room site for Rs. 2,71,50,000/- and made the payment through account payee cheques by debit to regularly maintained books of account upto 31.03.2001. Further payments have been made by debit to the bank account for the period from 01.4.2001 to 31.03.2002. It has been stated that bank accounts through which these payments have been made are part of the disclosed record and balance sheet submitted alongwith the return of income. The ld. CIT(Appeals) found that since no incriminating material has been detected as a result of 19 search, which either alleges or establishes that assessee had made unexplained investment in the property, therefore, no addition in the block assessment could be made. It was also noted that entire payments have been made through bank accounts which have been disclosed, therefore, no addition could be made and accordingly addition was deleted.
20. On consideration of the rival submissions, we do not find any merit in this ground of appeal. It is admitted fact that purchase of the property was made in open auction subject to banking channel. These details were noted in the books of account and shown to the Revenue Department earlier to the search. PB-141 is the letter of ADIT (Investigation) dated 29.12.1997 calling for the details of the properties in question. Therefore, this fact was within knowledge of Revenue Department prior to the date of search. Further, since no incriminating material was found as a result of search on this issue, therefore, ld. CIT(Appeals) was justified in deleting the addition. This ground of appeal of the revenue is accordingly dismissed.
21. On ground No. 3, revenue challenged the deletion of addition of Rs. 10,31,520/- made on account of unexplained investment on construction of SCF No. 21, Sector 24, Chandigarh. The Assessing Officer noted that assessee alongwith her husband purchased this property 20 in the year 1996. As per Sale Deed, half share in this property was purchased on 19.09.1996 for a sum of Rs. 2,50,000/- from Smt. Joginder Kaur in the name of the assessee. The other half share was purchased on 20.09.1996 from Shri Pritam Singh for a sum of Rs. 2,50,000/- in the name of Shri Taranjit Singh, husband of the assessee. It has been further stated that Stamp Duty on this purchase was paid at Rs. 3,20,880/-. The Assessing Officer further held that Stamp Duty charged @ 12.5% of the market value of the property by the Government. Therefore, applying the aforesaid basis, Assessing Officer held that market value of this property comes to Rs. 25,63,040/- as against declared registered value of Rs. 5 lacs. The Assessing Officer, accordingly, held that there was an undisclosed investment in purchase of this property at Rs. 20,63,040/- which was assessable equally in the hands of assessee and her husband and accordingly made the above addition. It was submitted before ld. CIT(Appeals) that since no incriminating material was found during the course of search on this issue, therefore, addition is unjustified. The ld. CIT(Appeals) found that no material was found as a result of search for making this addition which is not sustainable in law. The Assessing Officer made addition merely on the basis of Stamp Duty charged by the Government. The ld. CIT(Appeals) accordingly deleted the addition.
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22. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. No material was found during the course of search to prove any undisclosed income on this issue. Therefore, such addition could not be made in the bloc assessment. The Assessing Officer merely made addition on the basis of stamp valuation which is not permissible under the block assessments. This ground has, therefore, no merit and same is accordingly dismissed.
23. On ground No. 4, revenue challenged the order of ld. CIT(Appeals) in deleting the addition of Rs. 1 lac on account of interest income and Rs. 54,00,000/- on account of unexplained investment in FDR. 23(i) Briefly the facts of the case are that the JCIT has noted in the order that during the course of search, statement of Smt. Mohinder Kaur was recorded 'on oath'. In her deposition, assessee stated that she owned two FDRs, one of Rs. 6 lacs with Punjab National Bank, Sector 23, Chandigarh and another FDR of Rs. 54 lacs with State Bank of India, Sector 22, Chandigarh. The Assessing Officer has held that assessee could not satisfactorily state the source of purchase of these FDRs and both these FDRs are not reflected in the statement of affairs as on 23.05.2002 delivered during the post-search enquiry. The same was, therefore, held to be unexplained investment. However, no addition has been 22 made in respect of other FDR since it was found that FDR of Rs. 6,25,000/- had been made as a result of renewal of earlier FDR made of Rs. 6 lacs purchased prior to the block period. The Assessing Officer, therefore, directed that Rs. 1 lac be assessed as income in the hands of the assessee and Rs. 2 lacs in the hands of assessment of husband of the assessee. It was submitted before ld. CIT(Appeals) since FDR was found prior to the block period, therefore, interest could not be added. As regards FDR of Rs. 54 lacs, it was submitted that a theft broke in the business premises during assessment year 2001-02 and a sum of Rs. 64 lacs was stolen. This matter was investigated by ADIT Cell by invoking provisions of Section 133A of the Act and ADIT was satisfied with the explanation of the assessee with regard to source of funds. It was submitted that FDRs have been properly debited to the regularly maintained books of account and shown in the audited accounts alongwith the return of income. It has been submitted that thieves were caught and the assessee received a sum of Rs. 54 lacs out of stolen money of Rs. 64 lacs through the Court of law against bank guarantee. Thus, assessee was put to loss of Rs. 10 lacs (+) burden of guarantee fees. The ld. CIT(Appeals) accepted the contention of the assessee that investment of FDR of Rs. 54 lacs stood duly disclosed in the return of income whose source of income is nothing but receipt of money recovered as a result of theft. Therefore, this amount cannot be treated as undisclosed 23 while completing the block assessment. The ld. CIT(Appeals), accordingly, deleted the addition of Rs. 54 lacs.
23(ii) Similarly as far as estimate of interest income of Rs. 1 lac is concerned, it was found that it is estimated addition and no material was found as a result of search to make addition of this amount, therefore, addition of Rs. 1 lac was also deleted.
24. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The FDR of Rs. 54 lacs was made out of the recovered amount after theft of Rs. 64 lacs committed in the business premises of the assessee. The assessee received amount in question through Court of law on giving guarantee. These details have been shown in the books of account and declared in the return of assessment year 2002-03 (PB-136). The interest in FDR of Rs. 54 lacs have been offered for taxation. Therefore, in the absence of any incriminating material found during the course of search, no addition of FDR of Rs. 54 lacs and estimated addition of interest could be made in the block assessment because the same were already disclosed to the Revenue Department. This ground of appeal of the revenue is accordingly dismissed.
25. On ground No. 5, revenue challenged deletion of disallowance of interest paid on Rs. 14,48,100/- and 24 claimed as deduction while computing income from house property. The Assessing Officer disallowed the above interest on the ground that no evidence was filed to explain that this interest was actually paid and nor the manner in which it was paid. The assessee claimed deduction of this amount while computing the income from house property. The ld. CIT(Appeals) found that assessee had duly disclosed the payment of interest in the regular return of income filed for assessment year 2002-03 and no material was found in the course of search to suggest that no interest was paid. The ld. CIT(Appeals), accordingly, deleted the addition.
26. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The assessee has claimed deduction of interest while computing the income from house property which was also disclosed in the regular return of income. In the absence of any material recovered on this issue during the course of search, ld. CIT(Appeals) was justified in deleting the addition. This ground of revenue is accordingly dismissed.
27. On ground No. 6, revenue challenged the deletion of addition of Rs. 7,80,000/-on account of household expenses. The Assessing Officer noted that statement of the assessee was recorded during the course of search in which assessee has explained her household expenses 25 and size of the family. The Assessing Officer did not accept explanation of the assessee and estimated the household expenses and made above addition. The ld. CIT(Appeals) deleted the addition because no material was found during the search to prove any undisclosed income in the hands of the assessee.
28. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The addition is not supported by any evidence found during the course of search. Therefore, estimated addition could not be made in the block assessment without recovery of any incriminating material during the course of search. The ld. CIT(Appeals) was, therefore, justified in deleting the addition. This ground of appeal of revenue is therefore, dismissed.
29. On ground No. 7, revenue challenged the deletion of addition of Rs. 2,31,547/- on account of interest income. The Assessing Officer, on verification of return of income found that assessee and her husband had received interest income which have not been disclosed correctly. It was submitted that no evidence was detected as a result of search to establish that assessee had not disclosed interest income correctly. The ld. CIT(Appeals), accordingly, deleted the addition.
30. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. 26 The Assessing Officer on verification of the return of income made this addition, would clearly prove no incriminating material was found on this issue during the course of search to sustain the addition. Therefore, since interest income was already disclosed to the Revenue Department, therefore, same could not be treated as undisclosed income of the assessee. This ground is accordingly dismissed.
31. On ground No. 8, revenue challenged the deletion of addition of Rs. 34,92,930/- on account of unexplained deposit from M/s Shubh International Ltd. The Assessing Officer, on scrutiny of the bank account found that there is a deposit of Rs. 34,92,930/-. This amount has been received from the Bank of Baroda from the account of M/s Shubh International Ltd. in April,2001. This was held not to be genuine in earlier year also in the case of Late Shri Taranjit Singh, therefore, same was treated as unexplained deposit. It was submitted before ld. CIT(Appeals) that M/s Shubh International Ltd. in April,2001 has given this amount through Bank of Baroda which is credited in thebank account. This party is assessed to tax. The ld. CIT(Appeals), on consideration of the same found that since this amount is already disclosed and no material is found during the course of search to prove it to be undisclosed income, therefore, ld. CIT(Appeals) deleted the addition in the block period.
27
32. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. No incriminating material was found during the course of search to prove that it was undisclosed income of the assessee. The Assessing Officer noted in para 9 of the assessment order that this deposit was received in the name of Shri Taranjit Singh & Co., therefore, same could not be considered in the hands of the assessee. Further, this amount was already disclosed to the Revenue Department. PB-232 is the Schedule of Partner's capital account as on 31.03.2000 which shows that amount in question have been received from M/s Shubh International Ltd. and entered into the books of account of the assessee. Therefore, genuineness of the same could not be considered in the block assessment. In the absence of any recovery of incriminating material during the course of search, ld. CIT(Appeals) was justified in deleting the addition. This ground is accordingly dismissed.
33. On ground No. 9 revenue challenged the deletion of addition of Rs. 5,53,74,275/- in respect of unexplained investment in business. The JCIT, on the basis of information from ETO, Chandigarh noted that assessee had made a payment of Rs. 3,53,74,175/- as Licence Fees/Bid Money for financial year 2002-03 upto the date of search. He also noted that assessee in the statement of affairs filed as on 23.05.2002 had shown the 28 investment in business at Rs. 1.75 Cr. Since no books of account have been produced, therefore, Assessing Officer held that Rs. 2 Cr be adopted as investment in stock and accordingly made aggregated addition of Rs. 5,53,74,175/- on account of unexplained investment of assessee.
33(i) It was submitted before ld. CIT(Appeals) that estimation of business investment is erroneous in block assessment. There was no justification to hold that duty paid of Rs. 3.53 Cr represents unexplained. The assessee further submitted that estimation of closing stock at Rs. 2 Cr was erroneous more particularly when the Department is in possession of the actual stock found during the course of search operation. It was further submitted that Assessing Officer should have confronted with the details of stock found during the course of search operation and should not have made addition merely on estimate basis.
34. The ld. CIT(Appeals), considering the material on record noted that since assessment is made under Chapter XIV-B which provide special procedure for assessment in search cases, which is different from regular assessments, therefore, the addition made by the Assessing Officer is wholly unjustified. The ld. CIT(Appeals) noted that no incriminating material was found during the course of search to make this addition. 29 The ld. CIT(Appeals) noted that in the present case, no material relevant to the investment referred to above have been found during the course of search, what to say of incriminating material. Therefore, such addition in block assessment could not be made and accordingly deleted.
35. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The Assessing Officer on the basis of information received from the ETO, Chandigarh made addition against the assessee which could not be treated as any evidence found during the course of search. The ld. counsel for the assessee submitted that payment was made in financial year 2002-03 upto the search, so it could not be added in the block period because the same pertain to assessment year 2003-04. This fact is also mentioned in the appellate order that such payment have been made in financial year 2002-03. Since no incriminating material have been found during the course of search against the assessee, therefore, on subsequent information received from ETO, Chandigarh could not be basis for making addition against the assessee in block assessment. This ground has no merit and same is accordingly dismissed.
36. In the result, departmental appeal is dismissed. 30 CROSS OBJECTION
37. The assessee has filed revised grounds of Cross Objection.
37(i) Ground Nos. 1 to 3 are general in nature and have not been pressed by ld. counsel for the assessee. The same are, accordingly, dismissed as not pressed.
38. On ground No. 4 of the Cross Objection, assessee challenged the addition of Rs. 1,40,000/- on account of household articles. This addition was made towards unexplained expenditure in computer and refrigerator found on the date of search. No explanation was filed during the course of assessment proceedings or before ld. CIT(Appeals), therefore, addition of the same amount was made.
39. After hearing rival submissions, we do not find any merit in this ground of Cross Objection of the assessee. Specific moveable property i.e. computer and refrigerator were found during the course of search. The assessee failed to explain source of the expenditure made for purchase of these articles. Therefore, authorities below were justified in making addition. This ground is accordingly dismissed.
40. On ground No. 5, assessee challenged the addition of Rs. 3,34,810/- made on account of cash found during 31 the course of search operation. The Assessing Officer noted the details of cash found at the various vends of the assessee on the date of search totaling to Rs. 3,34,820/-. The assessee failed to explain the availability of cash during the course of search. Even before ld. CIT(Appeals), no explanation has been given. No material is produced before us to explain the cash found during the course of search. Therefore, this ground of Cross Objection of the assessee is dismissed.
41. The assessee filed application for admission of additional ground of Cross Objection challenging the addition of Rs. 24,78,522/- in respect of explained investment in jewellery. It is stated that ld. CI T(Appeals) has erred in giving partial relief on this issue.
42. Briefly the facts of the case are that during the course of search, at two lockers of the assessee, jewellery valuing Rs. 22,27,962/- was found. Further gold jewellery weighing 288.20 gms. and silver jewellery weighing 18.33 gms. was found at the residence of the assessee. The Assessing Officer after giving benefit of gold jewellery declared in the Wealth Tax Return for assessment year 1992-93 of 127 gms. Held that gold jewellery weighing 121 gms. and silver jewellery weighing 18.33 gms. was not disclosed apart from jewellery seized from the locker of the assessee. He has, therefore, added Rs. 24,78,522/-. It was submitted before ld. CIT(Appeals) 32 that family of the assessee comprised of her late husband, mother-in-law and two daughters. Therefore, as per Board's Circular, the possession of jewellery is permissible at 1500 gms. whereas Assessing Officer has allowed 267 gms. only. It was submitted that Assessing Officer failed to appreciate that acquisition of jewellery from 1992-93 to the date of search and availability of the family's jewellery. The ld. CIT(Appeals), however, found that no satisfactory explanation has been given regarding source of investment in jewellery. The ld. CIT(Appeals), following Board's circular and decision of the Karnataka High Court in the case of Smt. Pati Devi Vs ITO 240 ITR 727 allowed the benefit of jewellery of 1100 gms. to the assessee. The Assessing Officer was accordingly directed to re-compute the investment in jewellery as is directed.
43. The ld. counsel for the assessee submitted that due to omission, assessee forgot to take this ground in the Cross Objection. However, ld. counsel for the assessee was not able to explain as to when the Cross Objection was filed in September,2006, why the assessee was waiting for about 9 years for taking additional ground of Cross Objection in the matter. The ld. counsel for the assessee has not been able to explain why assessee did not raise this additional ground for last about 9 years. Further, no material is produced before us to make out a prima-facie case for deletion of the addition. The ld. CIT(Appeals), specifically noted that no satisfactory 33 explanation has been given by assessee to prove source of the investment on jewellery. The ld. counsel for the assessee merely stated that family's jewellery should also be considered by the Assessing Officer. The ld. CIT(Appeals) has already granted substantial relief to the assessee on the basis of Board's Circular and decision in the case of Smt. Pati Devi (supra) even though no satisfactory explanation has been given by the assessee to explain source of jewellery found during the course of search. In the absence of any explanation from the side of assessee why assessee remained silent for 9 years in raising this ground and further in the absence of any material on record to prima-facie make out a good case for assessee, we are not inclined to admit additional ground of Cross Objection. The same is accordingly rejected.
44. In the result, Cross Objection of the assessee is dismissed.
45. In the result, departmental appeal as well as Cross Objection of the assessee are dismissed.
Order pronounced in the Open Court.
Sd/- Sd/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 14th December,2015. 'Poonam' Copy to:
The Appellant, The Respondent, The CIT(A), The CIT,DR Assistant Registrar, ITAT Chandigarh