Income Tax Appellate Tribunal - Delhi
Anand Swaroop Khandelwal, Delhi vs Assessee on 21 December, 2006
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : A : NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI A.D. JAIN, JUDICIAL MEMBER
ITA No.02/Del/2010
Block Assessment Period : 01.04.1988 to 15.10.1998
Anand Swaroop Khandelwal, Vs. DCIT,
1163-A, Kucha Mahajani, Circle 29(1),
Chandni Chowk, New Delhi.
Delhi.
PAN : AAJPK4495Q
(Appellant) (Respondent)
Assessee by : Shri Ved Jain & Shri A.K. Jain, CAs
Revenue by : Mrs. Anuradha Misra, CIT, DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER
This is an appeal filed by the assessee for the block assessment period 1.04.1998 to 15.10.1998. The assessee has raised the following effective grounds of appeal:-
"1. That on the facts and circumstances of the cases and in law, the learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 22,14,767/- as made by the Assessing Officer in respect of alleged investment of the assessee in business. In this regard all of her observations are wrong and against the facts and law.
2. That on the facts and circumstances of the cases and in law, the learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs.19,14,067/- as made by the Assessing Officer towards alleged speculative income earned by the assessee from forward transactions entered by the assessee Shri Shree Ram of Indore. In this regard all of her observations are wrong and against the facts and law.2 IT (SS) A No.02/Del/2010
3. That on the facts and circumstances of the cases and in law, the learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 15,500/- as made by the Assessing Officer towards alleged unexplained investment of the assessee in Ekta Co-op. Group Housing Society Ltd.. In this regard all of her observations are wrong and against the facts and law.
4. That on the facts and circumstances of the cases and in law, the learned Commissioner of Income Tax (Appeal) has erred in confirming the addition of Rs. 24,253/- towards alleged speculative income earned by the assessee from forward transactions. In this regard all of her observations are wrong and against the facts and law.
5. That the learned Commissioner of Income Tax (Appeal) has erred in not accepting the findings of Hon'ble ITAT that the assessee is carrying on the business as broker only and carried out various transactions as bailee of goods and at no point of time property in goods passed to him. The action of Assessing Officer and Commissioner of Income Tax (Appeal) are against the law and not tenable. Therefore, the assessment order in question shall be quashed.
6. That the learned Commissioner of Income Tax (Appeal) has erred in confirming the assessment of undisclosed income of Rs.23,22,550/- as against undisclosed income of Rs.3,47,000/- declared by the Assessee.
7. That the impugned Assessment order dated 21/12/2006 u/s 158BC/254 is bad in law and against the facts of the case. Therefore, the impugned order be quashed.
8. That on the facts and circumstances of the cases and in law, the Commissioner of Income Tax (Appeal) has erred in confirming levy of interest of Rs.1,88,100/- u/s 158BFA(1) of IT Act, 1961."
2. As per ground No.1, the Ld. CIT (A) has erred in confirming the addition of ` 22,14,767/- representing alleged investment of the assessee in business. In the present round of litigation, the Assessing Officer made an addition of ` 91,60,754 on the basis of documents A- 7/29, treating the assessee to be the owner and trader on his own account for bullion. The Ld. CIT (A) gave partial relief to the assessee. The assessee filed appeal before the ITAT. The ITAT vide order dated 30.09.2005 held that the assessee a stock broker and that he acted in carrying out various transactions as bailee of the goods and that at no 3 IT (SS) A No.02/Del/2010 point of time had the property in goods passed through him; after rummage of the premises of the assessee and after making inquiries on the basis of material found as a result of the search, the Assessing Officer could not bring on record any material to prove that the transactions recorded in the documents seized represented purchase and sale of goods in which the assessee could be said to have proprietary rights. In para 25 of the order, the Tribunal observed as follows:-
"25. We have heard the parties with reference to material on record. The assessee has made reference to statement dated 2.11.1998 recorded on oath under section 131 of the Act where the nature of the transaction recorded in such balance sheet have been explained with reference to its paper book page 124 and 137 where summary of commission and transaction as broker with various parties have also been explained. The assessee also claimed that the transactions mentioned in the balance sheet indicated the amount recoverable from persons to whom goods were sold and amount payable to persons on whose behalf goods were sold. The assessee noted it as a balance sheet as he considered it moral duty but the payment was for remittance to actual person to whom goods belonged. The AO, however, did not examine explanation of the assessee in the right perspective even though accepted income from various transactions as brokerage income. It appears to us that without making proper enquiries the AO accepted the documents in part which was favourable to the revenue and decline to accept the other part of the same document which explained the case favourable to the assessee. It was not permissible in law to have accepted document partly and rejected the other part. It will meet the ends of justice if this matter is set aside and restored back to the AO with a direction to find out from the assessee the correct amount of investment that the assessee can be said to have been made through the transactions recorded in the said seized papers inventorised as annexure A-7/79. Accordingly we direct the assessing officer to adjudicate the issue afresh after taking explanation of the assessee and bring to tax that amount alone which remains unÂexplained. He shall take decision in accordance with law after affording reasonable opportunity of being heard to the assessee. "
3. In this manner, the matter was remitted by the Tribunal to the Assessing Officer with a direction to find out from the assessee the correct amount of investment that the assessee could be said to have 4 IT (SS) A No.02/Del/2010 made through the transactions recorded in the seized papers, i.e., Annexure A-7/79.
4. The Assessing Officer, pursuant to the aforesaid Tribunal order, observed that the department had challenged the findings of the Tribunal before the Hon'ble High Court. Accordingly, the Assessing Officer made addition of ` 22,14,767/-, treating each asset and liability to be that of the assessee. The Ld. CIT (A) confirmed the assessment order in this regard by observing as follows:-
"4.1 Annexure A-7/29 was admitted balance sheet as on 06.08.1998. While passing the order u/s 158BC for the first time, the Assessing Officer had considered the entire sum of Rs.91,60,754/- appearing on the asset side of the said balance sheet, as undisclosed income. While giving effect to the order of the Hon'ble ITAT, the Assessing Officer restricted the addition to Rs.22,14,767/-, which was the difference between the asset and the liability side of the balance sheet.
4.2 It is relevant to note that while passing the appellate order, the Hon'ble ITAT had noted that it appeared to them that the assessee was carrying out various transactions as a 'bailee' of the goods, which observation was applied while deleting the addition made by the Assessing Officer u/s 40A(3). However, while adjudicating on the addition arising out of annexure A- 7/29, the Hon'ble Bench did not refer to its earlier findings and instead set aside the order of the Assessing Officer with a direction to 'adjudicate the issue afresh after taking explanation of the assessee and bring to tax that amount alone which remains unexplained.' During the proceedings initiated by the Assessing Officer to give effect to the order of the Hon'ble ITAT, the assessee reiterated the arguments advanced earlier in the 158BC proceedings and also referred to the finding of the Hon'ble Tribunal that he was carrying on various transactions as bailee of the goods. In addition, the assessee took the alternative plea that the maximum addition towards alleged unexplained investment as per the seized document A-7/29 could be only Rs.22,14,767/-, the difference between the asset and the liability side of the balance sheet. Since the assessee identified the maximum addition that could be made and did not render any further explanation about the identity of the debtors and the creditors reflected in the balance sheet and also because of the observation of the Hon'ble ITAT that the said document (A-7/29) could not be accepted in parts, the Assessing Officer restricted the addition to Rs.22,14,767. That the 5 IT (SS) A No.02/Del/2010 observation of the Hon'ble Tribunal, relating to the assessee acting as a 'bailee' of goods, is not applicable on the point under consideration is obvious from the order of the Hon'ble Tribunal itself - only some issues were adjudicated by reference to that observation whereas others were set aside to be done afresh by the Assessing Officer. Moreover, the argument of the appellant that he was a 'bailee' was not enough while considering the balance sheet as on 06.08.1998 that reflected substantial debtors and creditors. Bailment is a legal relationship where physical possession of property is transferred from one person (the 'bailor') to another (the 'bailee') who subsequently holds possession of the property, but the ownership is retained with the first person (the 'bailor'). The 'bailee' receives the property through a contract from the 'bailor' and is committed to certain duties of care towards the property while it remains in his possession. In the case at hand, while the assessee claimed to be a 'bailee', he failed to discharge his burden to identify the 'bailors', the terms and conditions of the bailment, etc. such that in respect of the debtors and creditors appearing in the admitted balance sheet as on 06.08.1998, the amounts remained unexplained. Under the circumstances, the Assessing Officer was justified in presuming that the contents of the balance sheet reflected in annexure A-7/29 of the seized documents were true and making the addition of the net worth as undisclosed income. In view of this discussion, ground 1 of the appeal is dismissed."
5. Before us, the ld. counsel for the assessee has contended that the Tribunal order dated 30.09.2005 (supra) has since been confirmed by the Hon'ble High Court vide their judgement dated 08.09.2008 (copy at APB-II, pages 23-26); that the only reason stated by the Assessing Officer for making the addition was that the findings of the Tribunal had not been accepted by the department and the department was in appeal before the Hon'ble High Court; that now, even the High Court has confirmed the findings recorded by the Tribunal and so, no case remains for the addition to be sustained; that further , the assessee's explanation was a plausible explanation and the authorities below did not find any fault therewith; that the Assessing Officer added the amount of ` 22,14,767/-, which was the difference between the asset side and the liability side of the assessee's balance sheet; that the addition was made considering the assessee as a trader and not as a broker, whereas the Tribunal found 6 IT (SS) A No.02/Del/2010 the assessee to be a broker rather than a trader and this finding of fact has been confirmed by the Hon'ble High Court.
6. The Ld. DR, on the other hand, has strongly relied on the impugned order in this regard. It has been contended that as noted by the Ld. CIT (A), the Tribunal had opined that it appeared that the assessee had been carrying out various transactions as a bailee of the goods; that this observation was made while deleting the addition made by the Assessing Officer u/s 40A (3) of the Act; that however, while considering the addition at hand, the matter was set aside; that in the set aside proceedings before the Assessing Officer, the assessee reiterated his earlier arguments in the proceedings u/s 158BC of the Act and placed reliance on the Tribunal decision; that as an alternative plea, it was contended that the maximum addition could only be ` 22,14,767/-, representing the difference between the assets side and the liabilities side of the balance sheet; no further explanation was offered about the identity of the debtors and the creditors reflected in the balance sheet; that the Assessing Officer, accordingly, correctly restricted the addition to ` 22,14,767/-; that the observations of the Tribunal regarding the assessee being a bailee of the goods is not applicable to the addition at hand; that more over, whereas the assessee claimed to be a bailee, he failed to identify the bailors; that all these facts were duly taken into consideration by the Ld. CIT (A) and the addition correctly made by the Assessing Officer was rightly confirmed by the Ld. CIT (A) by passing a detailed speaking order in this regard; and that as such, there is no merit in ground No.1 taken by the assessee and the same be rejected.
7. We have heard the parties and have perused the material available on the record with regard to ground No.1. The Assessing Officer, it is seen, made the addition for the sole reason that the findings recorded by the Tribunal while remitting the matter to the 7 IT (SS) A No.02/Del/2010 Assessing Officer, had not been accepted by the department and were under challenge before the Hon'ble High Court at the hands of the department. In confirming the addition, the Ld. CIT (A) made elaborate reference to the findings recorded by the ITAT. However, as correctly contended on behalf of the assessee, the Hon'ble High Court has confirmed the findings recorded by the Tribunal. It would be appropriate to reproduce hereunder the observations made by their lordships:-
"3.5 The Tribunal while dealing with Ground No.2 noted that even while the Assessing Officer made observations on the basis of the seized documents that the Assessee was carrying on trading activity which could not be associated with his activity as a broker, it had accepted the commission income with reference to transactions declared as undisclosed income of the block period of the Assessee. The Tribunal also noted that the stock of bullion to which reference has been made by the Assessing Officer based on the seized documents was not physically found with the Assessee. The Tribunal also observed that the Assessing Officer had not brought on record any positive material to show that the transactions on which he had accepted the Assessee as having earned commission were bilateral transactions where both buyers and sellers could be termed as two different persons. It observed that the Assessing Officer was not able to show that the Assessee had entered into the said transactions as an agent or that the commission received by the Assessee represented profits from activity of sale or purchase of goods undertaken by the Assessee himself. The Tribunal, thus concluded, that it appeared to it that, the Assessee acted as a bailee of goods and, at no point of time, the property in the bullion passed to the Assessee. This conclusion, the Tribunal arrived at based on the fact that the Assessing Officer had not been able to bring any material on record to establish that the Assessee had received possession of the bullion as an actual buyer or that the property in the bullion had passed to the Assessee. The Tribunal noted that after the Assessing Officer had accepted the agency commission it was not permissible for the Assessing Officer to presume that such transactions were from purchase or sale made by the Assessee in his own right. In view of the above, the Tribunal concluded that the appellant herein could not bring on record any material to prove that the transactions referred to in the documents seized represented the purchase and sale of goods in which the Assessee had proprietary rights.8 IT (SS) A No.02/Del/2010
3.6 In these circumstances, the Tribunal allowed Ground No.2 raised in the appeal filed by the Assessee before it.
3.7 With reference to Ground No.8 the Tribunal noted the contention of the Revenue that the transactions reflected in the seized documents (Annexures A-2 to A-8) were trading transactions made in cash by the Assessee and hence, in terms of Section 40A(3) a disallowance @ 20% of the amount of total transactions amounting to Rs.108,08,36,839/- had been made, which were, as stated above, quantified as Rs.21,61,67,368. Briefly, the Tribunal also recorded amongst others, the following submissions of the Assessee:- (i) the provisions of Section 40A(3) could not be taken resort to in a block assessment proceedings conducted under Chapter XIV-B of the Act; (ii) no claim in respect of cash purchases amounting to Rs.108,08,36,839/- had either been made or allowed in the block assessment and, therefore, the question of disallowance did not arise; (iii) the resort to the provisions of Section 40A(3) could only be taken in the course of regular assessment; (iv) there were no purchases made as alleged or at all. Being a broker the assessee only received a commission, therefore, the provisions of Section 40A(3) did not apply. 3.8 The Tribunal, after noting the submissions of both the Revenue and the Appellant, held that in view of the findings returned in respect of Ground No.2 of the appeal that the seized documents, being Annexures A-2 to A-8, did not reflect purchases in which Assessee had proprietary rights and it being undisputed that, in respect of, such transactions Assessee had declared commission from agency business, which had been accepted as undisclosed income of the block period without any adverse comments thereon, there was no factual or legal justification in making disallowance under Section 40A(3) of the Act. The Tribunal categorically stated that it was unable to accept that the seized documents Annexures A-2 to A-8 represented purchases made by the Assessee in cash.
4. Having heard the learned counsel for the Revenue as well as the Assessee and perused the record of the case below, we are of the view that the addition made by the Assessing Officer by taking resort to Section 40A(3) of the Act on the ground that the Assessee had made cash purchases to the tune of Rs. 108,08,36,839/- is untenable. It is quite evident that the said section is set into motion only if an Assessee incurs an expenditure in cash of a sum exceeding Rs.20,000/-. In other words, the section prohibits making payments towards expenditure in cash for a sum exceeding Rs.20,000/-. In the event of an Assessee undertaking a payment of an expenditure for a sum exceeding Rs.20,000/- in cash, 20% of such expenditure can be disallowed. In view of the finding returned by the Tribunal that the Assessing Officer could not place any material on record to show that the documents so seized 9 IT (SS) A No.02/Del/2010 represented purchases made by the Assessee in cash, the provisions of Section 40A(3) will not come into play. If that be so, then there was no question of the Assessing Officer making an addition of 20% of the alleged expenditure involved i.e., a sum of Rs.21,61,67,368/-.
5. In view of the findings returned by the authorities below which involved appreciation of the evidence placed before them, we do not find that the appeal involves any substantial question of law which would require our consideration. 6. In view of the discussion above, the appeal is dismissed."
8. From the above, it is evident that the assessee was a bailee of the goods and was not holding them on his own account as owner thereof. Further, our attention was drawn by the ld. counsel for the assessee to the detailed reply dated 06.07.2006 filed by the assessee before the Assessing Officer. A copy thereof is at APB-III pages 5-21. The reply dated 14.09.2006 is at APB-III, pages 22-31. Reply dated 09.11.2006 is at APB pages 32-63. All the concerned details have been submitted along with these replies. It remained undisputed that as per these details and documents, the transactions entered into by the assessee were on account of brokerage, the income whereof had also been assessed. Also, as available from these documents, there was no investment made in these transactions. This being so, obviously, the Assessing Officer was not justified in including the goods, i.e., gold and silver, as part of the assessee's own stock. The grievance of the assessee in this regard is justified and is accepted as such. Accordingly, ground No.1 is accepted.
9. Turning to Ground No.2, it states that the Ld. CIT (A) has erred in confirming the addition of ` 19,14,067/- representing alleged speculative income earned by the assessee from forward transactions entered into by the assessee with one Shri Shree Ram of Indore.
10. In the original assessment order, an addition of ` 19,14,067/- was made towards alleged amount receivable by the assessee from one 10 IT (SS) A No.02/Del/2010 Shri Shree Ram of Indore towards alleged speculative income earned by the assessee from him, based on the seized Annexure A-`, pages 1-
3. The addition was confirmed by the CIT (A). The ITAT set aside the matter to the file of the Assessing Officer, directing the Assessing Officer to allow reasonable opportunity to the assessee to explain his case. In the re-assessment proceedings before the Assessing Officer, the assessee contended that as per the findings of the ITAT, the assessee was only a broker and profit/loss earned on speculative business was the income of the principal of the assessee; that as per pages 1-3 of the seized Annexure A-1, the assessee had earned brokerage income of ` 829.50 per week on 553 silver bars for the weeks ended 09.05.1998 and 16.05.1998; that the total amount receivable by the assessee from Shri Shree Ram was on account of principal of the assessee; that the brokerage income had already been included in the undisclosed income and assessed as such by the department; that the amount received from Shri Shree Ram could not be recovered from the assessee; and that even otherwise, this income if all, should have been included in the subsequent balance sheet dated 06.08.1998. The Assessing Officer, however, did not accept the aforesaid contentions of the assessee, holding, as in the case of the issue in ground No.1, that the department had not accepted the findings of the ITAT and that the same were under challenge before the Hon'ble High Court. The Assessing Officer, thus, made addition of ` 19,14,067/-. The benefit of telescoping was, however, given and this addition was merged with the addition made in ground No.1.
11. The Ld. CIT (A) confirmed the addition by holding as follows:-
"5.2 It is relevant to note that the assessee made different and contradictory claims before the Hon'ble ITAT and the Assessing Officer. Before the Hon'ble Tribunal, he argued that the forward transaction did not mature and was cancelled. However, during the subsequent proceedings initiated by the Assessing Officer to give effect to the order of the Hon'ble ITAT, it was contended 11 IT (SS) A No.02/Del/2010 that since Shri Ram had refused to honour his commitment, the amount may be allowed as bad debt. In the absence of any evidence from the assessee to back these claims, the Assessing Officer held that the sum of Rs.19,14,067, admitted earlier as forward transaction, was liable for addition as undisclosed income. However, as per the direction of the Hon'ble ITAT, the Assessing Officer considered the claim of the assessee for telescoping and did not make any separate addition on this account as he had already made the addition of Rs.22,14,767/- on account of the balance sheet dated 06.08.1998, appearing as annexure A-7/29. The argument of the appellant, relating to the finding of the Hon'ble Tribunal holding him to be a 'bailee' of goods, is not applicable on the point under consideration for the reason that the same is obvious from the order of the Hon'ble Tribunal itself only some issues were adjudicated by reference to that observation whereas others were set aside to be done afresh by the Assessing Officer. Moreover, the argument of the appellant that he was a 'bailee' was not enough as in the absence of any supporting evidence led by the assessee, the Assessing Officer was justified in presuming that the contents of the annexure A-1/1 to 3 of the seized documents were true. In view of the above discussion, the action of the Assessing Officer is in order."
12. The ld. counsel for the assessee has contended that as in the case of the issue concerning ground No.1, the absence of the Tribunal with regard to the matter at hand also stand confirmed by the Hon'ble High Court and the assessee, therefore, is to be treated as a broker and not the owner of the goods; that the amount of brokerage has also been clearly stated in pages 1-3 of the seized annexure A-1 (copy at APB-I, pages 37-39); that the detailed reply filed by the assessee before the Assessing Officer was wrongly ignored by the Assessing Officer; that as such, the authorities below were wrong in treating the transaction as that of the assessee and the income as belonging to the assessee.
13. The Ld. DR, on the other hand, has, again, placed reliance on the order passed by the Ld. CIT (A), contending that it remains undisputed that the assessee had taken mutually contradictory stand before the Assessing Officer and the ITAT.
12 IT (SS) A No.02/Del/201014. With regard to this issue, it is seen that while the addition of ` 19,14,067/- was made, the benefit of telescoping was given and this addition was merged with the addition made in respect of alleged investment of the assessee in business. The explanation offered by the assessee was not accepted by the Assessing Officer. Before the Tribunal, he had contended that the forward transaction did not mature and was cancelled. Before the Assessing Officer, however, in the subsequent proceedings, he contended that Shri Shree Ram had refused to honour his commitment and so, the amount may be allowed as a bad debt. This contention, however, was not supported by any evidence and it was therefore, that the Assessing Officer made the addition. The same was telescoped as above and as per the directions of the Tribunal, no separate addition on this account was made. These facts have rightly been taken into consideration by the Ld. CIT (A) while confirming the addition.
15. We do not find any reason to differ with the findings of fact recorded by the Ld. CIT (A). Hence, ground No.2 raised by the assessee is rejected.
16. Apropos to Ground No.3, it states that the Ld. CIT (A) has erred in confirming the addition of ` 15,500/- representing the alleged unexplained investment by the assessee in Ekta Co-operative Group Housing Society Ltd.
17. The Assessing Officer made addition of ` 60,500/- on account of alleged investment by the assessee in Ekta Co-operative Group Housing Society Ltd. The ld. CIT (A) confirmed the same. The Tribunal set aside this addition by observing as follows:-
"39. We have heard the parties with reference to material on record. The assessee's explanation that the bank account from which the payment to the society were made is a disclosed account. That being so, the additions could not have been 13 IT (SS) A No.02/Del/2010 sustained as undisclosed income of the assessee unless the assessing authority was of the opinion that the income received in the bank account were not likely to be disclosed by the assessee. Since the explanation of the assessee was capable of verification, the assessing authority ought to have examined the same. The A.O. has thus committed a procedural lapse in not making verification of this fact. We, therefore, set aside the addition and restore the matter back to him for adjudication of dispute in this ground afresh. He shall however afford a reasonable opportunity of being heard to the assessee before taking a decision in accordance with law."
18. The Assessing Officer was, thus, directed by the ITAT to re- adjudicate the matter by verifying the explanation offered by the assessee, which was to the effect that the bank account from which the payment to the society was made, was a disclosed account and so, the addition could not be sustained as undisclosed income of the assessee.
19. In the set aside proceedings, the Assessing Officer confirmed the addition of ` 15,500/-. This comprised of two payments, that of ` 500/- made by the assessee on 15.07.1997 and of ` 15,000/- made by the assessee on 09.08.1998. The assessee had submitted before the Assessing Officer that these amounts had been paid out of cash balance available with him. The Assessing Officer, however, refused to accept such explanation. The Ld. CIT (A) confirmed the addition.
20. Before us, the ld. counsel for the assessee has contended in this regard that both the taxing authorities failed to appreciate the fact that the assessee had made a withdrawal of ` 25,000/- on 16.03.1998. Our attention has been drawn to APB-I, page 43, which is a copy of the bank account, showing the said withdrawal. It has been contended that the amount of ` 500/- was a small amount paid out of the money available with the assessee.
14 IT (SS) A No.02/Del/201021. The Ld. DR, on the other hand, has relied on the impugned order in this regard. It has been contended that undisputedly, the assessee has remained unable to demonstrate the availability of cash in hand, which fact has been duly noted by the Ld. CIT (A) while rightly confirming the addition made.
22. Having considered the rival contentions in the light of the material on record, we find that as per the bank statement (supra), the assessee had made a withdrawal of ` 25,000/- on 16.03.1998. The payment came about in July, 1998.
23. In view of the above, the grievance of the assessee by way of ground No.3 is justified and is accepted as such.
24. Ground No.4 raised by the assessee states that the Ld. CIT (A) has erred in confirming the addition of ` 24,253/- representing alleged speculative income earned by the assessee from forward transactions. Initially, the Assessing Officer had made addition of ` 4,08,485/- on the basis of seized documents Annexures A-2 to A-8, by treating the transactions noted therein to be those of the assessee himself. The Tribunal set aside this issue to the file of the Assessing Officer, on the basis of its finding that the assessee was a broker and not a trader. The Tribunal observed, in this regard, as follows:-
"46. We have heard the parties with reference to material on record. The issue as regards investment made by the assessee on the basis of balance sheet as on 6.8.1998 found and inventorised as Annexure A-7/29 has already been set aside and restored back to the A.O. in ground No.3 hereinbefore. In that view of the matter this issue is also restored back to the A.O. for taking a decision afresh and the A.O. shall have regard to the addition that he may like to make on the basis of that document found as a result of search while taking decision for the said paper also found from him. This is so because if the A.O. is sustaining addition on the basis of investment, a separate 15 IT (SS) A No.02/Del/2010 addition for estimated income falling within that investment cannot be allowed to be sustained due to doctrine of telescoping."
25. In the set aside proceedings, the Assessing Officer again treated these transactions as those of the assessee, holding that the department was in appeal against the Tribunal order. However, benefit of telescoping to the extent of ` 3,84,232/- was given and it was the balance amount of ` 24,253/-, which was considered as the additional income of the assessee. The Ld. CIT (A) confirmed the Assessing Officer's order.
26. This matter, it is seen, is a direct offshoot of the issue concerning ground No.1. Since the Tribunal order has been confirmed by the Hon'ble High Court, the assessee is a broker and brokerage income has already been included. Therefore, no further income was required to be considered in the hands of the assessee with regard to these transactions. Accordingly, ground No.4 is accepted.
27. Ground Nos.5-7 are general.
28. As per ground No.8, the Ld. CIT (A) has erred in confirming the levy of interest of ` 1,88,100/-, u/s 158BFA (1) of the IT Act.
29. It is seen that interest u/s 158BFA (1) was charged, starting from 22.11.1999, i.e., the day when the notice u/s 158BC of the Act was issued. Now, as pointed out, the seized material was made available to the assessee only on 16.05.2000. In this regard, the assessment order dated 29.12.2000 (copy at APB-I, page 57), states as follows:-
"In response to notice u/s 158BC of the IT Act, 1961 dated 11.11.99, which was served upon the assessee on 22.11.99 requiring the assessee to furnish his return of income for the 16 IT (SS) A No.02/Del/2010 block period 1.4.88 to 15.10.98 within 16 days of the receipt of notice, no return was filed within the stipulated period. On 24.1.2000, a letter was received from the assessee asking for photocopies of the seized material in order to prepare the return of income for the block period. Vide this letter, the assessee also requested for extension of time for filing return of block period. On 6.4.2000, the assessee was provided with the photocopies of the part seized material and photocopies of the balance of the seized material were provided on 16.5.2000."
30. Now, once the seized material itself was made available, undisputedly, to the assessee only on 16.05.2000, there is no justification in charging of interest u/s 158BFA (1) of the Act from the assessee, starting from November, 1999, upto May, 2000. In Bachubhai S. Antrolia 288 ITR (AT) 57 (Raj.), as rightly pointed out on behalf of the assessee, it has been held that interest u/s 158BFA (1) of the Act cannot be charged till date when the xerox copies of the seized material are provided to the assessee.
31. Accordingly, ground No.8 is also accepted.
32. In the result, the appeal filed by the assessee is partly allowed, as indicated.
The order pronounced in the open court on 19.10.2012.
Sd/- Sd/-
[G.D. AGRAWAL] [A.D. JAIN]
VICE PRESIDENT JUDICIAL MEMBER
Dated, 19.10.2012.
dk
17 IT (SS) A No.02/Del/2010
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches