Rajasthan High Court - Jaipur
Commissioner Of Income-Tax vs Elegant Homes Pvt. Ltd. on 6 August, 2002
Equivalent citations: [2003]259ITR232(RAJ)
JUDGMENT
1. The present appeal had been admitted in terms of the following questions : "1. Whether the judgment passed by the learned Income-tax Appellate Tribunal suffers from perversity or not ?
2. Whether the learned Income-tax Appellate Tribunal was right in its wisdom to apply the Rajasthan PWD rates for working out the cost of construction of the said property for income-tax purpose, instead of CPWD rates ?
3. Whether the learned Income-tax Appellate Tribunal was right in deleting the addition of Rs. 41,400 by holding that when entries find place in the regular cash book, then no addition can be made in the block assessment until there is evidence to the contrary ?
4. Whether the addition on the basis of examination of the regular books of account seized during the course of search is out of the purview of the block assessments ?"
5. A search and seizure operation was carried out at the residential and business premises of the director of the assessee-company on November 9, 1995, and some incriminating documents/papers pertaining to the assessee-company were found during the search and seizure operation and the same were seized.
6. A notice under Section 158BC(b) of the Income-tax Act, 1961, was issued to the assessee-company on January 16, 1998, whereby the assessee was called upon to file the return of income for the block period, i.e., 1985-86 to 1995-96. In response to the said notice, the assessee-company had filed the return showing "nil" income for all these years. Another notice under Section 158BC(b) was also issued to the assessee-company along with the questionnaire asking the assessee-company to explain the incriminating documents/ papers, etc., seized pertaining to the assessee-company. In response to the aforesaid notice, one Mr. Ravi Mathur attended the proceedings before the Assessing Officer and the case was discussed at length. After considering the material on record and the explanation furnished by Mr. Mathur, an addition of Rs. 41,400 has been assessed for the assessment year 1993-94 and an addition of Rs. 2,76,302 has also been made in the assessment year 1996-97.
7. Before us, the issue relates to the investment made for the construction of the building where the issue was whether the valuation of the building should be at the rate of Public Works Department (PWD) or at the rate of Central Public Works Department (CPWD). The other issue before us is whether Rs. 41,400 deposited by the assessee-company be treated as undisclosed income of the assessee or not ?
8. Mr. Mathur, learned counsel for the Revenue, submits that when the amount of Rs. 41,400 was found to be credited in the name of various parties, they were not produced, the Assessing Officer, has rightly assessed the tax treating it as undisclosed income. He further submits that the valuation of the constructed building could be assessed as per the CPWD rates and it also depends upon various factors, no straightjacket formula shall apply to assess the valuation of the constructed building on the basis of the PWD or the CPWD rates. He supported the view taken by the Assessing Officer.
9. Mr. Kasliwal, learned counsel for the assessee, submits that the deposits made by Shri Ram Kumar Dhanuka should not be taxed as he is one of the collaborators and the returns were not filed by the assessee-firm in these years as the assessee was engaged only in one project. Unless that project is complete they are not bound to show any income in that assessment year from 1986-87 onwards. Mr. Kasliwal further submits that as the Tribunal has found just and reasonable cause to apply the PWD rate for assessing the investment, it is a question of fact and unless it is found perverse, the finding of the Tribunal should not be disturbed.
10. The admitted facts of the case are that a search and seizure operation was carried out at the residential and business premises of the director of the assessee-company on November 9, 1995, and some incriminating documents/ papers were found during the search and the same were seized. However, no returns were filed prior to that. The block period was 1986-87 to 1996-97. In response to the notice issued for the assessment of the income of the block year, the assessee had filed a return showing his income as "nil". During the course of assessment, the Assessing Officer found that there were deposits of Rs. 41,400 in the name of various parties. As the genuineness of the cash credits was not proved, the Assessing Officer had assessed this income of the assessee as undisclosed income for the assessment year 1993-94.
11. There is no dispute that the entries of the said deposits were found in the regular cash books of account of the assessee which were seized during the course of search and when they were not proved nor the creditors produced by the assessee, it can be treated as undisclosed income of the assessee for the assessment year 1993-94.
12. Section 158B(b) relates to undisclosed income which reads as under :
"'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 or any expense, deduction or allowance claimed under this Act which is found to be false."
13. The Tribunal has deleted the addition on the ground that as the entries are shown in the regular cash books, therefore, it cannot be said that the income is undisclosed income. In fact, in the case in hand, the assessee had not filed the return till the date of search and even after search the assessee had shown the income as "nil" for the assessment year 1993-94. When the assessee was asked to prove the genuineness of the cash credit, it had failed to discharge its burden. When the assessee had filed the return in response to the notice after search, the income which had not been taxed or shown can be assessed as "undisclosed income" of the assessee.
14. Admittedly, Rs. 41,400 had never been offered for tax and it was never shown as income of the assessee, the entries of these deposits were found in the regular cash books maintained by the assessee. When the entries were found in the books of the assessee, the assessee could not explain the genuineness of the deposits, this amount was never disclosed, it is an undisclosed income of the assessee. The Tribunal has committed an error in holding that as the entries were found in the regular books of account, therefore, it cannot be treated as undisclosed income.
15. The view is contrary to the provisions of Chapter XIV-B of the Income-tax-Act, 1961. In Chapter XIV-B of the Act, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, if some "undisclosed" income is found on the basis of material seized, that should be treated as undisclosed income as per the scheme of special assessment under the aforesaid Chapter.
16. The other issue relates to the valuation of the constructed building--whether for the purpose of investment the rates of the PWD should be adopted or the rates of the CPWD should be adopted ? This court has already taken a view that there is no straightjacket formula to apply for the valuation of the constructed building by adopting the rates of the PWD or the CPWD that depends upon the location of the building, material used and the utility of the building. Therefore, blindly we cannot go by the rates of the PWD or the CPWD. However, Mr. Kasliwal, learned counsel for the assessee, submits that even if the PWD rate is adopted, even otherwise the tax effect is negligible.
17. Considering the facts and circumstances of this case, and the fact that it is basically a question of fact based on finding of facts. Therefore, we are not inclined to interfere with the view taken by the Income-tax Appellate Tribunal on the issue of investment in the construction.
18. In the result, the appeal is partly allowed and stands disposed of accordingly.