Income Tax Appellate Tribunal - Amritsar
The Income Tax Office, Srinagar vs Sh Akash Amin, Srinagar on 2 January, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR.
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER
AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER
I. T. (SS) A. No. 03/(Asr)/2014
Block Period: 01.04.1997 to 11.05.2003
Akash Amin s/o Abdul Rehman vs. Asst. CIT, Circle-3, Srinagar
Bhat Media Enclave, Lambert
Lane The Bund, Srinagar
[PAN: ALDPB 5320N]
(Appellant) (Respondent)
I. T. (SS) A. No. 04/(Asr)/2014
Block Period: 01.04.1997 to 11.05.2003
Asst. CIT, Circle-3, Srinagar vs. Akash Amin S/o Abdul Rehman
Bhat Media Enclave, Lambert
Lane The Bund, Srinagar
[PAN: ALDPB 5320N]
(Appellant) (Respondent)
Appellant by : Sh. Malik Mukhtar Ahmad (Adv.)
Respondent by: Sh. Devender Singh, CIT-DR
Date of Hearing: 04.12.2018
Date of Pronouncement: 02.01.2019
ORDER
Per Sanjay Arora, AM:
These are cross appeals by the Assessee and the Revenue, agitating the part allowance of the assessee's appeal contesting his assessment u/s. 158BC read with section 158BD and sec. 144/145 of the Income Tax Act, 1961, dated 31/12/2007 (for the block period 01/4/1997 to 11/5/2003), by the Commissioner of Income Tax (Appeals), Jammu ('CIT(A)' for short) vide his order dated 27/3/2014.
2 IT (SS)A Nos. 03&04/Asr/2014(BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT
2. The assessee's appeal is delayed by a period of three days, which was, upon hearing the parties, condoned by the Bench on 09.04.2018, and the hearing in the matter proceeded with. The delay, we may mention, stands explained as on account of postal delay.
3. The assessment is framed u/s. 144, i.e., as a best judgment assessment, pursuant to a search u/s. 132 of the Act on 11.05.2003 at the residence and business premises of one, Sh. Ghulam Mohi-udin Bhat, the assessee's brother, block assessment u/s. 158 BC in whose case was framed on 31.05.2005. It was on the basis of the evidences found during the said search and consequent proceedings that proceedings u/s. 158 BC r/w sec. 158BD were initiated in the case of the assessee. The various grounds raised in appeal, are as under:
'1. That the CIT (Appeals) erred in law and on facts, while rejecting Ground no 2 in our 1st Appeal. He has misquoted our prayers, were in he, disallowed our ground, with observations that we have not questioned the time limit of assessment, but only the service of notices.
2. That the CIT Appeals J&K has erred on facts, while rejecting our 5th ground. We had argued that Government advertisements could be published, only after formal approval by the Information Department of J&K Govt, the dated of approval being 26/03/2003. The income earned from these advertisements, as per the documents seized is from 28/03/2003. The CIT appeals erred while allowing the assessment of A.O, in this regard.
3. That the CIT appeals erred again on facts, while conforming the profit and loss formulated by the A.O, as no newspaper, local or national, has ever shown net profit margin of more than two hundred percent. The meagre expenses shown by the A.O cannot be compared, in whole of the country. Even the DCIT Kashmir in his remand report has pointed to the fact that the expenses allowed are not sufficient.
4. That the CIT appeals J&K erred in Law while allowing the assessment based on the assumptions and surmises. The documents seized were all in shape of loose sheets and no complete books were found during the search. The documents found during the search and seizure, were not assessed upon, as the sales figures have been calculated on the basis of assumptions, the Apex court and different High courts have time and again held, that the assessments in case of search and seizure, must be on the basis of the materials seized and not on presumptions. The courts have held in various cases that assessment based on the loose sheets seized is bad in law.3 IT (SS)A Nos. 03&04/Asr/2014
(BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT
5. That the CIT Appeals J&K erred on facts, while upholding the assessment of KPS by the A.O. The fact is that even today KPS is a non profit earning news service and the purchasers of the news from KPS are in fact the newspaper vendors, to who Tameli irshad newspaper sells newspapers, we urged this forum to kindly analyze the Annexure on which the assessment is based.
6. That the CIT appeals erred on Facts while, rejecting our ground, where in we had argued that the assessment by the A.O. is based on wrong facts and figures. The CIT Appeals while allowing our Grounds has contradicted himself. The assessment is not at all based on facts or figures, the A.O. has not relied on the documents seized by him, but has only tried to create an excessive demand based on assumptions.' The same, save Ground 1, are in respect of the quantum assessment. Ground 1 was not pressed during hearing and, accordingly, not responded to by the opposing side. The same is accordingly dismissed as not pressed. The ld. CIT(A) has in fact correctly appreciated the issue, and held, for the reasons stated at para 5 (read with paras 4.1, 4.2 and 4.2.1) of his order, that there was proper service of the notice u/s. 158 BC r/w s. 158 BD.
On quantum, the assessee being found to be the owner of a newspaper by the name 'Tameel-I-Irshad' ('TII' for short), as well as running a news agency by the name 'Kashmir Press Service' (KPS' for short), was assessed at Rs.81,66,932/-, as under:
Income from Tameel-I-Irshad for F. Year 2001-2002 Rs.21,84,680/- Income from Tameel-I-Irshad for F. Year 2002-2003 Rs.21,84,680/- Income from Tameel-I-Irshad for the period 01/04/03 to 11/05/03 Rs. 2,49,420/- Income from sale of Tameel-I-Irshad for the period 01/04/03 to 11/05/03 Rs.20,00,000/- Income from Kashmir Press Service for F. Year 2001-2002 Rs. 7,32,276/- Income from Kashmir Press Service for F. Year 2002-2003 Rs. 7,32,276/- Income from Kashmir Press Service for the period 01/04/03 to 11/05/03 Rs. 83,600/-
Akash Amin Bhat
Block Period 01-04-1997 to 11-05-2003
Total Income Assessed : Rs.81,66,932/-
4 IT (SS)A Nos. 03&04/Asr/2014
(BP 01.04.1997 to 11.05.2003)
Akash Amin Bhat v. Asst. CIT
The working of the income was based on the circulation of the newspaper (TII), taking it as a daily newspaper, as well as the sale of KPS, on the basis of the seized material. The assessee in the appellate proceedings showing, on the basis of the material on record (Annexure 1) that the paper (TII) was a weekly up to November, 2002, i.e., had four issues per month, as against 30, directed a pro-rata reduction (i.e., at 4:30) of the income up to that date (30/11/2002). The addition toward sale of business (Rs.20 lacs) was also deleted. Both the deletions are subject matter of the Revenue's appeal, raising the following two grounds:
'1. Whether the Commissioner of Income Tax (Appeals), Jammu was right in law in deleting the addition on account of income from sale of newspaper (Tameel-I-Irshad) for the period 01.04.2003 to 11.05.2003.
2. Whether the Commissioner of Income Tax (Appeals), Jammu was right in law in deleting the addition on account of income from sale of newspaper (Tameel-I-Irshad) till Nov. 2002.' 4.1 We shall take up the assessee's appeal first. At the outset, we, however, observe that the framing of assessment u/s. 144, i.e., as a best judgment assessment, is not in dispute, having neither been contested before the first appellate authority nor before us. We may at this stage also clarify that the assessment is based on the seized material, as is required under law to be, drawing inferences that flow there-from. As such, to contend, as assessee does vide Gd. 3, and strongly refuted before us by the ld. CIT-DR, that the assessment is based on presumption and conjectures, is not correct. Why, the assessment being of 'undisclosed income', as defined u/s. 158B, it cannot per se travel outside its' purview. The only question - the assessment being a best judgment assessment, is, therefore, to see if the inferences drawn are reasonable, or stand satisfactorily rebutted by the assessee in the assessment and the appellate proceedings. In fact, as a perusal of the appellate order reveals, the ld. CIT(A) has also, accepting the 5 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT assessee's contention that the matter is primarily factual, also called for a remand report from the Assessing Officer (AO). Toward this, the ld. counsel for the assessee, Sh. Ahmad, would submit with reference to the seized material (Annexure-A8), placing a copy of the same on record, that the same relates to the sale of newspaper only. The AO had wrongly considered it as the revenue of the news agency, working out the assessees' income (from KPS) on its' basis. In fact, he would continue, the AO was wrong in inferring the assessee to be running a separate, allied business of the news agency. Drawing our attention to Annexure A-8, the same, he explained, lists the details of the copies supplied to different vendors during the period February to April, 2003. The figure of Rs. 61023, which is taken by the AO as the average sale of the news agency (KPS) for the months of Feb. to April, 2003, is in fact the circulation (sale) of the newspaper TII for those months, i.e., in numbers. The names of the various news agencies stated therein are in fact that of the various news vendors. There is, accordingly, no separate income of KPS. On being questioned, then, about the basis of the circulation (sale) figures adopted for TII which, based on seized material (Annexure - A18, being the expenditure on printing), worked out at 45,820, he would explain that the same is not the sale figure, but, as apparent, that of the total newspaper printed. We find merit in the assessee's contention even as, as submitted by the ld. CIT-DR, the sales figures as available for the months covered by Ann. A8, being 60 K+ for February, 2003 and 65K + for April, 2003, be substituted instead of the admittedly wrong figures taken by the AO, to no rebuttal by the ld. counsel, Sh. Ahmad. We, accordingly, direct for deletion of the income of KPS included in income as assessed, i.e., at Rs. 15,48,152/-. We may though hasten to add that when we say so, we are not in any manner stating that KPS is not a news agency, separate and distinct from the newspaper TII, which it surely is, but only that no material 6 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT relating to its' income, or income generated there-from, stands found during search, so that it could not be assessed under block assessment.
Per contra, the sales figures for the months covered by Annexure-A8 be taken on the basis of the actuals, revising the purchase cost also correspondingly. We are conscious that the sales as per Ann. 8 may not represent total sales for the relevant months; the ld. counsel, Sh. Ahmad, himself explaining during hearing the same to be the list of vendors located on the outskirts of Srinagar, so that, clearly, the same is not a complete detail. The undisclosed income, however, could only be determined on the basis of materials found during or as a result of search. Even the circulation figures on the basis of seized material do not suggest a higher sales, which must therefore be based on Ann. 8 only. We may here also address another grievance by the assessee, i.e., that the figures available are only for the month of February, 2003 onwards, which date has been extrapolated by the AO to the earlier period, i.e., for fy 2001-02 and fy 2002-03, during which the newspaper was in existence. How, we wonder, then, the assessee having admittedly not returned any income, much less from the newspaper, for those years, the AO workout his income; it being permissible to draw reasonable inferences therefrom? The case law in the matter is legion even as we may, only to signify the law in the matter, refer to the decision in CST v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 (SC). There is nothing to suggest that the circulation for those years was not the same, or in the same range, i.e., as obtaining for these, latter months (February to April, 2003). Rather, the assessee has himself explained the paper to be a weekly up to November, 2002, so that the sales and income would need to adjusted downward. On the contrary, a weekly seeking permission for being allowed to issue paper on a daily basis only suggests of its growing acceptance and popularity with the news reading public. It is, however, reasonable to presume that the 7 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT circulation would stand to increase only with the acceptability of the newspaper with the public, which takes time. Accordingly, we regard it appropriate to apply a discount factor of 20% per annum, proceeding on calendar-year basis, so that the sales show a progression of 20% p.a., which may be exhibited as under:
Year Sales Quantity (say) Remarks
1 April to Dec., 2001 900 @ 100 p.m. (say)
January to March, 2002 360 1260 @ 120 p.m.
2 April to Dec., 2002 1080 @ 120 p.m.
January to March, 2003 432 1512 @ 144 p.m.
3 April to May 11, 2003 197 197 @ 144 p.m. (#)
(#) the average sale for the months of February to April, 2003 would stand substituted for '144', a derived figure based on initial sale of '100', and the other figures worked out accordingly.
Further, the sales for the period April, 2001 to November, 2002, are to be further scaled down to reflect the fact of the newspaper being a weekly up to November, 2002. We shall advert to this aspect in detail later, i.e., the reduction, directed in the ratio of 4:30 by the ld. CIT(A), while considering the Revenue's appeal.
4.2 The assessee next raises the issue that the advertisement from Government departments, which is the main source of revenue for a paper, as also in fact, as per the working by the AO, tabled as under, came about only w.e.f. April, 2003 in-as- much as the approval for Government advertisement was given to the newspaper only on 26.03.2003 (Annexure-3/copy on record):
Expenses (in Rs.) Income (in Rs.)
Purchase (A-18) 9,45,720 Sale of newspaper 10,99,680
Salaries (A-12) 2,52,000 Sale of adv. space 23,62,720
8 IT (SS)A Nos. 03&04/Asr/2014
(BP 01.04.1997 to 11.05.2003)
Akash Amin Bhat v. Asst. CIT
Electricity, Telephone & Others
(A-16, A-18) 80,000
Profit 21,84,680
Total 34,62,400 34,62,400
The sale of the advertisement space is based on Annexure A-13, i.e., for the month of April, 2003. No advertisement revenue can thus be taken for the period prior to April, 2003. That is, the advertisement from Government Departments during April, 2003, which forms the basis of the AO's working, cannot be imputed for the period prior to April, 2003. The ld. CIT(A) has not regarded this as a valid argument as the said approval by the Department of Information of the Government of J&K is vide letter number 14/2003, dated 27.05.2003, so that the assessee's plea is not tenable, i.e., on the face of it. That is, the communication by the Department of Information, Kashmir Division, Government of J&K, of the approval dated 26.03.2003, is only vide its letter dated 27.05.2003. The assessee could therefore receive it earliest by 27/05/2003. The advertisement from Government departments prior to this period, in April 2003, remains unexplained. Further, the advertisements includes that from Municipal Corporation, Srinagar; Northern Railway, etc., which are not departments of the Government of J&K. The rejection of the assessee's claim by the ld. CIT(A) is, in our view, therefore, valid. We may, however, add that the sale of advertisement space, which is also based on circulation, be also worked out proportionate to the newspaper sales, i.e., as tabulated hereinabove, inasmuch as the same cannot, similarly, be regarded as a constant, and can only be reasonably be expected to have increased with time.
The assessee has also impugned the estimation of the business income on the ground that the material found is not a valid material, i.e., being loose sheets, etc. 9 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT The argument is misconceived. The only thing relevant is if the material found is a valid material, to which in fact the presumption of truth of its' contents would also apply in view of s. 292C of the Act. In fact, each document found and relied upon is, we observe, one maintained in the regular course of business, viz. ledger, copy of bills, working of sales, advertisement receipt, etc. Why, the assessee has, on the basis of the same documents, raised pleas as to wrong estimation, wrong inference therefrom, etc. which has found acceptance by the ld. CIT(A), as also by us. Further, we do not observe any wild guess by the Revenue nor has any been contended before us. The assessee gets part relief in terms of the above.
5. We, next, come the Revenue's appeal. We shall take up the second ground - which relates the deletion of the addition on account of profit of the newspaper TII, first. Though the Form B (Annexure-1), as filed by the assessee as its' publisher/printer/editor with the Deputy Commissioner, Kupwara, declaring the change of periodicity of the paper from weekly to daily basis, is dated 26.09.2002, we observe that no dispute has been raised at any stage with regard to the same being a weekly up to November, 2002. The only question, therefore, is if the scaling down, applying the ratio of 4:30 on the income derived on daily basis, is correct. We find it to be seriously flawed, both ways. Firstly, the proportionate reduction would only be of the direct income and expenditure, viz. sales - of print as well as advertisement, and purchases, and not indirect expenditure. This is as the establishment expenditure, viz., on salaries, electricity, telephone etc., would remain largely the same. This is particularly so in the present case as it is being incurred at minimal levels. As regards the scaling down directed on the basis of a number of issues (4:30), the 'weekly' and 'daily' are two separate and incomparable products, so that their number alone will not be determinative of the matter. A 'weekly' cannot be considered to be of the same bulk and, resultantly, 10 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT price, i.e., as the 'daily'. If not having seven (7) times more printed matter, a weekly surely would have 2-3 times that of the daily, and also prized accordingly, say at Rs.5-6 per copy, as against Rs.2 per copy at which the TII (daily) is priced (refer Form B). Rather, the circulation of a daily being more affordable and frequent, should be more. In fact, even applying a straight, linear ratio (on the basis of frequency alone), as the ld. CIT(A) has, 1:7 is more appropriate ratio than 4:30, which works to a ratio of 1:7.5. The incongruity of applying such a ratio is that it presumes that the assessee's turnover, almost overnight, increased 7(7.5) times, and which would be presumptuous in view of the other incident factors which such a ratio overlooks. An increase of 2-3 times, however, is not out of bounds. We, accordingly, propose a ratio of 1:3. Accordingly, the sales and direct (purchase) expenditure for the period April, 2001 to November, 2002 (20 months) be scaled down to 1/3. The establishment expenditure is to be allowed in full, i.e., as already worked out. The income is to be computed accordingly, adopting the circulation figures as indicated earlier, rather than at the constant level as taken by the Revenue for the entire period. We decided accordingly.
6. We, next, consider the deletion qua the addition of Rs.20 lacs on the basis that the newspaper (TII) stands sold for that consideration, of which a part (Rs.5 lacs) (by way of first instalment) stands already received by the assessee on April 15, 2003. The assessee stands allowed relief by the ld. CIT(A) on the basis that the same is based on an affidavit by a third party, who is neither the owner nor competent to sell the same. Further, the AO, to whom this matter was specifically referred to by the ld. CIT(A), has chosen to remain silent thereon, even as he could have verified the authenticity of the transaction, examining the deponent, Sh. Ghulam Mohi-ud-Din, as well as the person/s in whose favour the proposed transfer is made. Before us, the ld. counsel, Sh. Ahmad would, besides relying on 11 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT the impugned order, submit that the assessee continues to be the owner of the newspaper to date. How could that be, he would add, if he had sold it way back in April, 2003? Besides, the transfer of a newspaper is not a simple property which could be sold merely on the basis of an affidavit, and would attract the provisions of Transfer of Property Act, 1882. Further, how could an affidavit, executed on April 5, 2003, record the receipt of payment on April 15, 2003? The ld. CIT(A) has, accordingly, rightly deleted the said addition. On being questioned by the Bench as to if, then, the assessee, being the owner, had disclosed any income from the said newspaper business for the subsequent periods, he could not furnish any satisfactory answer. The ld. CIT-DR would, on the other hand, submit that Sh. Ghulam Mohid-ud-Din is not, and cannot be regarded as, a third party. There is no inconsistency in the seized document in-as-much as it is a usual practice to, after executing a document, record the dates of payments, as envisaged therein, and which would only be subsequent, on a part/back side thereof. The payment is in cash, as apparent from the absence of any cheque details, so that, being not accounted or otherwise disclosed by the assessee, is undisclosed income, as would therefore be, the balance Rs.15 lacs, the transaction itself being undisclosed. Further, if the AO had omitted or failed to verify the transaction, even assuming the same to form part of the terms of the reference of remand thereto, the ld. CIT(A) ought to have directed him to do so, so that the matter could be decided on the basis of proper findings in the matter.
7. We have heard the parties, and perused the material on record.
Our first observation is the matter is that the same is principally and essentially factual, i.e., whether the document found could form a valid basis of sale of the assessee's newspaper business in the facts and circumstances of the case. The statutory presumption in the matter in law is enshrined u/s. 292C of the 12 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT Act, which provides that, inter alia, any document found during search or survey is to be regarded as belonging to the person from whose possession and control it is found; the contents of the document are true and, thirdly, the signature/s and the hand-writing is of the person to whom it purports. The section, which is in consonance with the principles of common law jurisprudence, it shall be apparent, is enacted to eschew 'disowning' of evidence found during search/survey, or dubbing the same as a 'dumb' document. The assessee in the instant case, to be fair to him, has neither disowned the document nor stated it to be a dumb document. The same, accordingly, needs to be explained, particularly as its' contents are, by law, presumed to be true. Why, the document, which is in the form of an original affidavit, was executed by Sh. Ghulam Mohid-ud-Din, can only be explained by him or by the assessee, the owner of the newspaper. Did the brothers plan to dupe the proposed buyer by projecting him or acting as the owner? It is in fact, by any stretch of imagination, difficult to regard him as a third or an outside party. The search was at his residence and business premises. All the documents and materials found in search are, thus, from his premises. In fact, it is only on his statement that not he, but the assessee, his younger brother, is the owner of the newspaper TII, and that he was only an 'employee' in the said paper, furnishing the registration of the paper in Form B, duly signed by the assessee, that the Revenue came to the conclusion that it is the assessee, and not he, who is owner of the said paper, registered on 29.06.1988. Again, it is on the basis of his statement that the income of the news gathering and circulating agency 'KPS', stated to be operative since 1984, was regarded as assessable in the assessee's hands (refer pg. 2 of the assessment order). These statements have not been refuted or disputed at any stage, which, where so, ought to have in fact been, having jurisdictional implications as well, at the inception, and the entire proceedings have proceeded on the truth of 13 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT those statements. How could he be regarded as a third party? By all accounts, it is a family affair, with the third brother, Sh. Mohammed Amin Bhatt, being also involved therein, even though the ownership of the business and, indubitably, is with the assessee, and which could possibly be for the reason that only a person who could function as an editor assume the risk of the ownership of the paper. In fact, all the three brothers were not at the premises at the time of search, and apparently in hiding. It is not unusual for the elders in the family to agree to a transaction, signed by one, in presence of witnesses knowing both the sides, which appears so in the present case as well, with the witnesses being also in the same trade, with one of them, Sh. Ashraf Bhatt s/o Mohammed Shaban Bhatt, editor of a daily 'Alsafa', also guaranteeing the transaction on behalf of the purchaser. Where is the question of an affidavit being witnessed or the stated transaction therein being guaranteed, so that the same, notwithstanding it being titled as an 'affidavit', is in the nature of an agreement. The execution of the document by Sh. Ghulam Mohid-ud-Din, thus, cannot be dismissed on the basis of he being not the owner of the business. As regards the contention that the same is not a proper document of sale, it is nobody's case that it is. The question before us is not if the newspaper business could be validly sold on the basis of the said document. For all we know, the said sale was to be kept undisclosed, or the proper document of sale, disclosing a lower consideration, executed later on the conclusion of the transaction, which was, at the time of sale, in the process of being implemented. Why, for that matter, the affidavit, which is not on record, may not even be notarized, but, in view of section 292C, is a valid and true document, unless of course, which it has not been, shown otherwise. The matter, it may be appreciated, is to be examined not from a de jure stand-point or perspective but a de facto one. Who are the persons to the transactions; their credentials, as also that of the witnesses and the guarantor. All 14 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT the signatures, none of which has been resiled, are true, i.e., of the persons to whom they purport to. The existence and, in fact, the truth of the 'agreement' is not in doubt; i.e., in law. It is not a case of document pertaining to a third party being found from the premises searched, the existence of which also has not been adequately explained.
Continuing further, the assessee not cooperating in the assessment proceedings, the AO was constrained to frame a best judgment assessment, the status of which as such is not in dispute and, thus, confirmed. The only condition therefore is that the same is to be based on material on record, drawing reasonable inferences therefrom. Further, the assessment being of 'undisclosed income' would necessarily be limited to or based on the material found in or as a result of search. It is open for an appellate authority to reappraise those evidences and draw different inference there-from, or arrive at different finding/s on the same materials, i.e., considering the explanation/s, if any, as already advanced. It is, however, not open for it to seek further explanation or clarification thereon. That would amount to converting a section 144 assessment into a section 143(3) assessment. Reference in this context be made to the decision in CIT v. Rayala Corporation Pvt. Ltd. [1995] 215 ITR 883 (Mad). Be that as it may, the ld. CIT(A) having remanded the matter back to the AO to enable the assessee another opportunity to canvass his case, the matter cannot be decided in the absence of the assessee furnishing an explanation in the said proceedings, leading to a positive finding/s by the AO, or even granting his confirming his earlier findings, their reversal, by issuing a positive finding/s in reversal/modification of that by the AO, by the first appellate authority. That is, the basis of a revision could only be the explanation/s or clarification/s issued by the assessee, which is conspicuous by its absence. The AO's silence could therefore not be interpreted as a reversal of his 15 IT (SS)A Nos. 03&04/Asr/2014 (BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT earlier findings, more so, as it appears, in the absence of any pleadings made by the assessee. That is, the absence of any findings in the remand proceedings could not per se be a ground to obliterate his earlier findings. In short, the silence or the absence of any findings in the remand proceedings would not operate to reverse the earlier finding which could only be on the basis of, as afore-noted, a positive finding/s. The AO omitting to do so, it was incumbent on the ld. CIT(A) to seek his specific observations in the matter, in case he considered it relevant to do so, of course, after providing opportunity of hearing to the assessee. As explained in Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC), an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to, if necessary, appropriate directions to the authority against whose decision the appeal is preferred in disposing the matter before it. In the instant case we observe that the ld. CIT(A) himself observes that the AO ought to have verified and examined the authenticity of the transaction. What, therefore, we wonder, prevented him from requiring the AO to do so? It was equally open for the ld. CIT(A) to issue his independent findings on the basis of the same material and the same set of explanations, i.e., without extending the scope of the enquiry or verification as by the AO. It is, as explained in Rayala Corporation Pvt. Ltd. (supra), after all, the best judgment of the assessing authority, and not of any other. As such, no positive inference could be drawn under the circumstances by the ld. CIT(A), as sought to be by him, from the AO remaining silent in the remand report, even as the terms of reference thereof, not on record, may have included the said addition. We have already considered the other arguments that prevailed with the ld. CIT(A), finding them as not valid. The statutory presumption of sec.292C has to be adequately met, and which we find has not been.
16 IT (SS)A Nos. 03&04/Asr/2014(BP 01.04.1997 to 11.05.2003) Akash Amin Bhat v. Asst. CIT Under the circumstances, we only consider it proper to restore the matter back to the file of the AO to allow the assessee to rebut the statutory presumption in relation to the truth of the document dated April 5, 2003 found during search, purporting to sell the assessee's newspaper business for a consideration of Rs.20 lacs, by leading positive evidences to the contrary. We do so giving the assessee a benefit of doubt of being prevented by sufficient cause for not being able to represent his case at the assessment stage, i.e., in the fact and circumstances of the case. The AO shall examine all aspects of the matter. Why, for instance, the document was executed in the first place? The assessee's argument that the transaction was not carried through, where canvassed, may also be examined on merits. Was the deal aborted, or was it suspended in view of the search operation? Further, the legal import of it being cancelled later, which could well be true, would also have to be examined, i.e., assuming such a finding by the AO. Was the amount, duly received, refunded back? That is, could it, on the basis of the said cancellation, be said that no capital gain accrued to the assessee? The AO shall decide in accordance with law, issuing definite findings of fact, after hearing the assessee and the evidences led by him. It is an open set aside, and we may not be construed as having issued any definite findings of fact. Further, subject to the fulfillment of the conditions of section 150 and other applicable provisions, it is open for the AO to take the steps consequent to the said proceedings.
We decide accordingly.
8. In the result, both the assessee's and Revenue's appeals are partly allowed.
Order pronounced in the open court on January 02, 2019
Sd/- Sd/-
(N. K. Choudhry) (Sanjay Arora)
Judicial Member Accountant Member
Date: 02.01.2019
17 IT (SS)A Nos. 03&04/Asr/2014
(BP 01.04.1997 to 11.05.2003)
Akash Amin Bhat v. Asst. CIT
/GP/Sr Ps.
Copy of the order forwarded to:
(1) The Appellant: Akash Amin S/o Abdul Rehman Bhat Media Enclave, Lambert Lane The Bund, Srinagar (2) The Respondent: Asst. CIT, Circle-3, Srinagar (3) The CIT(Appeals), Jammu (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order