Income Tax Appellate Tribunal - Ahmedabad
Chanod Cine Park, Vapi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD
BENCH "D"
Before Shri T.K.SHARMA, JUDICIAL MEMBER and
Shri N.S. SAINI, ACCOUNTANT MEMBER
Date of hearing:05/08/09 Drafted on:10/8/09
ITA(SS) No.228/AHD/2005
Block Period: 1-4-1996 to 17-7-2002
ITA NO.2070/AHD/2005
Assessment Year:2002-03
M/s. Chanod Cine Park Vs. The Asstt. Commissioner of
At & Post: Chanod, via Income Tax,
Vapi, Central Circle-2,
Tal.Pardi, Dist. Valsad. Surat.
PAN No:
(APPELLANT) .. (RESPONDENT)
Appellant by : K.K. Shah, A.R.
Respondent by: M.C. Panchal, Sr. D.R.
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
1. These are the appeals filed by the assessee against the against the order of the Learned Commissioner of Income Tax(Appeals)- II, Ahmedabad, dated 23-08-2005, passed in the block period 1-4-1996 to 17-7-2002 and the order of the Learned Commissioner of Income Tax(Appeals)-II dated 23-08-2005, passed in Assessment Year 2002-03. In these appeals the assessee has taken the following grounds of appeals:-
ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -2- ITA (SS) 228/A/05 Grounds of Appeal:
I The Ld. CIT(Appeals) erred in law and on facts in not appreciating the submissions of the appellant firm in proper perspective and consequently in dismissing the appeal filed against the block assessment order determining the undisclosed income of the appellant firm at Rs. 46,58,912/-.
2. The Ld. CIT(Appeals) erred in not taking into consideration correct and complete facts of the case of the appellant firm while confirming the assessment under section 158BD r.w.s. 158BC in this case,
3. The Ld. CIT(A) erred in accepting the finding of the Assessing Officer to the effect that "no books of account were maintained or produced during survey under section 133A" without ascertaining the fact whether the survey officer had asked for the books of accounts or whether he had asked a single question about the status of the books of account of the appellant firm. It is a fact that during the recording of the statement u/s 133A5 no question was asked about the firm's books of accounts.
4. Ld. CIT(A) erred in arriving at the conclusions without taking into consideration the correct and complete answers given by the partners regarding the payment of the on money. The Ld. CIT(A) could not appreciate the fact that both the partners had stated in unambiguous terms that the on money was paid out of their (own) unaccounted income and that they would - be disclosing the same and paying the taxes. This was specifically clarified by partner Shri. Madhubliai N Khoja in his answer to question No. 5 of his statement. In view of these clear admissions by partners, the action would lie in the cases of partners and not in the case of the firm.
5. The Ld. CTT(A) erred in law and on facts in not appreciating the submissions made in the rejoinder dt.
22-8-2005 relying on the Hon. -Gujarat High Court decision in the case ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -3- of Glass Line Equipments Co. Ltd. vs. CIT reported in 253 1TR 454 (Guj), -to the effect that' it is not open to the assessing authorities to pick and choose those which are more favourable to revenue - but the statement or confession as a whole should be taken into consideration.
6. The Ld. CTT(A) failed to appreciate that when the firm had commenced it's business on 25-5-2001 and the payment of on money was made on 14-6-2001, the firm could not have made this much unaccounted income within this short period of less than a month.
7. Without prejudice to the above, if the CIT(A) did not choose to accept the submission- that the payment in question was recorded in the books of accounts and was considered in the return filed by the firm on 31-10-2002, then he should have gone by the confessions made by the partners in their respective statements and should have been allowed this appeal.
8. The Ld. C.I.T.(Appeals) erred in law and on facts in confirming the addition of Rs. 9,25,912/-, although this addition was made by the A.O. merely on the basis of presumption that this amount also must have been paid during the block period ended 17-7-2002, without appreciating the fact that the amount was found to be outstanding, as per the paper seized during the search from the place of Shri. P. K. Patel on 17-7-2002. Therefore, this amount could not have been considered in this block assessment.
9. The Ld. CIT(A) erred in law by throwing the impossible burden of proof on the appellant to show that this payment was not made, although the partners had categorically stated in their statements that the land in question was purchased from Shri. P K Patel and others for consideration of Rs. 52,65,000/-.
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10. In the absence of any evidence or material to show that this payment of was made by the firm or partners, over and above Rs. 52,65,000/-, the addition of Rs.9,25,912/- cannot be upheld merely on presumption or surmises based on the noting on the seized paper, to any case, this amount cannot be considered in the block assessment for the period ended 17-7-2002 and hence this addition deserves to be deleted.
11. The Ld. CIT(A) erred in dismissing the grounds raised regarding the charging of interest and initiation of the penalty proceedings vide Ground No. V of the Appeal filed before him.
12. Your appellant craves leave to add, alter or amend the grounds of appeal.
ITA 2070/A/05 Grounds of Appeal:
1. The Ld. CIT(Appeals) erred in law and on facts in not appreciating the submissions of the appellant firm in proper perspective and consequently in dismissing the appeal filed by the appellant firm against the 'protective' assessment of the amount of Rs. 37,33,000/- in this case.
2. The Ld. CIT(Appeals) failed to appreciate that the amount of Rs.
37,33,000/- was accounted in the books of accounts of the firm and formed part of the audit report dated 30-10-2002, on the basis of which return of income was filed under section 139(1) on 31-10-2002. All this had happened much before the department issued notice u/s 158BD r.w.s. 158BC of the Act on 16-8-2004.
3. The Ld. CIT(A) also erred in not appreciating the fact that the claim for carry forward of business loss and unabsorbed depreciation allowance was reduced to the extent of the disclosed amount of Rs. 37,33,000/- in the return. The action of the Learned Commissioner of Income Tax(Appeals) in dismissing this appeal has resulted in double ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -5- assessment of the said amount in the hands of the same entity, as pointed out in the Statement of Facts.
4. Without prejudice to the appellant's claim that the amount of Rs. 37,33,000/- was correctly disclosed in the return u/s 139(1) in this case for A.Yr. 2002-03 and the same was not assessable as undisclosed income in the block assessment in this case, it is submitted that if according to the Learned Commissioner of Income Tax(Appeals) the amount was rightly assessed in the Block Assessment u/s. 158BC r.w.s 158BD in this very case, he should have directed the A.O. to delete this amount from the computation of the total income in the assessment under section 143(3) for A.Y. 2002-03.
5. It is well settled that in the appeal, the appellant authority should confirm the disputed addition either in the assessment made on protective basis or in the assessment made on substantive basis. The Learned Commissioner of Income Tax(Appeals), therefore should have deleted the disputed addition from one of the two assessments.
6. The Learned Commissioner of Income Tax(Appeals) should have, therefore, directed the Assessing Officer to exclude the income of Rs. 37,33,000/- from this assessment under section 143(3) and allowed the carry forward of unabsorbed loss/unabsorbed depreciation allowance fully without any set off against this income of Rs. 37,33,000/-.
7. The Learned Commissioner of Income Tax(Appeals) erred in law and on facts in not taking into consideration the rejoinder filed by the appellant vide letter dated 22-08-2005 to the remand report dated 19- 07-2005, which was submitted by the Assessing Officer before the Learned Commissioner of Income Tax(Appeals).
8. The Learned Commissioner of Income Tax(Appeals) has not fully appreciated the questions and answers given by the partners in their statements recorded during 133 A action and subsequently under ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -6- section 131 of the Act, although the same were specifically reproduced in the Rejoinder dated 22-08-2005 submitted before him.
9. The Learned Commissioner of Income Tax(Appeals) failed to appreciate the fact that during the course of Survey on 18-07-2002, no specific question was put to the partner(s) about the status of the books of accounts of the firm- in fact there is no question relating to the books of accounts of the firm. In spite of this fact, the Learned Commissioner of Income Tax(Appeals) has held that the books of accounts of the firm were not written - were not available at the time of survey and so on while rejecting both the appeals filed by your appellant.
10. The order of the Learned Commissioner of Income Tax(Appeals) is, therefore erroneous in law and also on facts and hence the same deserves to be set aside.
11. Your appellant craves leave to add, alter or amend the grounds of appeal.
2. Since the facts and the issue involved, in all the grounds of appeal taken in both the appeals by the assessee are similar they are being considered and decided as under.
3. The brief facts of the case are that a search under section 132 of the IT Act was conducted in the case of Shri. Pravinbhai Kikubhai Patel on 17-07-2002 wherein he admitted receipt of 'on-money in the sale of land at M/s Chenod Cine Park. A survey under section 133A was consequentially conducted on 18-07-2002 and the business premises of M/s Chenod Cine Park where in both the partners of the firm namely ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -7- Shri Barkatbhai Nimjibhai N. Khoja and Shri. Madhubhai N. Khoja admitted payment of 'on-money' in purchase of land for Rs. 52,00,000/- for which the documented price was shown at Rs. 15 lacs only. The above two partners had also admitted that the payment was unaccounted and not at all recorded in the Books of account of the firm. It was also admitted that the above Rs. 37,00,000/- will be shown as undisclosed income and tax will be paid accordingly. The assessee filed return of income for Assessment Year 2002-03 on 31-10-2002 declaring loss of Rs. 3,43,370/-. In the said return of income the assessee claimed that this was the first year of business and the assessee is entitled to depreciation of Rs. 72,44,944/- debited in the profit and loss account. The undisclosed income was declared by the assessee to be the business income which was set off against the depreciation claim. The assessment was made under section 143(3) on 31-03-2005, wherein the Assessing Officer assessed the loss at Rs. 3,43,370/- and observed that undisclosed income of Rs.37,33,000/- was assessable in Block Assessment pursuant to notice under section 158BD issued and served upon the assessee firm on 16-08-2004 since the assessee has disclosed the income of Rs.37,33,000/- in the regular return of income for Assessment Year 2002-03, the same was assessed in Assessment Year 2002-03 on protective basis. However, later on such income was set off against the losses of the year under consideration and the assessee did not disclose such income in response to the notice under section 158BD r.w.s. 158BC of the Act. The Learned Commissioner of Income ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -8- Tax(Appeals) held that in view of this fact and as per grounds of appeal taken in the case of Block Assessment there is no need to assess the undisclosed income in the regular assessment since the same is separately upheld in the assessee's block assessment in his order passed in appeal No. CIT(A)-II/CC.2/29/2005-06 dated 23-08-2005.
4. In the appeal filed against the block assessment order, determining the undisclosed income under section 158BD read with section 158BC of the Act, determining undisclosed income of Rs. 48,56,912/- by considering the price of the land at Rs. 63,50,932/- on the basis of the Block Assessment order under section 158BC of the Act passed on 30-07-2004 in the case of Shri. Pravinbhai K. Patel, the Learned Commissioner of Income Tax(Appeals) observed that the addition made of amount of Rs. 37,33,000/- and Rs. 9,25,912/- on account of undisclosed income both the amounts are emerging out of seized papers at the premises of Shri. Pravinbhai C. Patel, wherein it was stated that total consideration of land sold was Rs. 61,90,912/- out of which Rs. 52,65,000/- was paid and the remaining Rs.9,25,912/- was outstanding. The Learned Commissioner of Income Tax(Appeals) held as under:
"06. I have carefully perused the contentions raised by the appellant as well as the observations of the Assessing Officer in the assessment order. The issue raised by the appellant regarding validity of the present assessment under section 158BD read with section 158BC of the Act is not in accordance with law. From the ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09 -9- day i.e. search at the premises of Shri. Pravinbhai K. Patel on 17- 07-2002 and survey at the business premises of the appellant on 18.07.2002, the appellant was knowing that unaccounted and undisclosed investment has been made in the purchase of land for the multiplex and the same is required to be shown as undisclosed income as per mechanism of block assessment procedure. The appellant was deliberately avoiding payment of due tax and indulging in filing of regular return of income and trying to set off the undisclosed income against losses pertaining to the regular assessment. The appellant has stated that undisclosed income has been shown in the regular return and notice under section 158BD of the Act was not called for after a lapse of two years. The issue is whether the consequential action taken after the search in the shape of survey was valid or not and whether the appellant who admitted the undisclosed income for purchase of land was bound to declare the same and pay taxes accordingly. Thus this ground of the appellant is dismissed.
07. It is undisputed fact that the appellant had admitted undisclosed income of Rs.37,33,000/- which was not recorded in the books of account and further promised to pay tax accordingly. The appellant's filing of income-tax return for Assessment Year 2002-2003 is just side tracking the issue, an attempt to evade the legally admitted tax confuse the disclosure of undisclosed income admitted under section 133A of the Act and above all concocting the books of account with entries of payments made for purchase of land where as such books never existed at the time of survey. The appellant's plea that the amount was invested by partners hence, the same should be taxed in their hands is an afterthought and a plea to jeopardize the block assessment. There is no ambiguity in the statements of the partners who admitted that undisclosed investment in the purchase of land was not recorded in the Books of account. It is a fact that land was purchased in the hands of the firm and undisclosed income was also admitted in the firm. The appellant is trying to circumvent the facts that by ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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showing undisclosed income the onus is discharged. This is neither legal nor fair on the part of the appellant who knowingly well that the seiler party has admitted the same facts which were unearthed during the course of search proceedings admitted undisclosed income during survey under section 133A of the Act. The appellant has relied upon various judicial pronouncements but the facts of the present case are so distinguishable that the appellant can not take the benefit of such judgments in the face of a lapse and distrust shown to the Department. In the case of Amity hotels Pvt. Ltd. V. CIT 272 ITR 75(Delhi) notice under section 158BD of the Act was quashed by the High Court because no evidence of undisclosed income was found. However, in the present case both the partners have admitted undisclosed income of Rs.37lacs under section 133A of the Act consequential to a search action where payment of 'on money' was admitted. There was thus a cross verification of undisclosed income, hence the ratio of above judgment is not applicable in the present case. In Amarjit Sing Bakshi Vs. ACIT 86 ITD 13 (Dehli-Trib) the addition was made on the basis of a document from third party. However, here the document is not of a third party but the concerned party who paid the 'on money' and the appellant admitted receipt of such 'on money' during survey under section 133A of the Act. CIT vs. Vikram A. Doshi 256 ITR 192 (Bom) is also not applicable since the assessment is made under section 158BC and the undisclosed income was admitted prior to filing of regular return. The purchase of land and the payment of 'on money' is prior to the date of search hence the cases of Smt. Hemalata D. Shah Vs. DCIT 79 TTJ (Banglore) 188 and Vishwanath Prasad V. ACIT 86 ITD 516(Allahabad) and Babros Machinery Mfrs. (P) Ltd. Vs. DCIT-84 ITD 91(Ahd)|™ are not applicable. The appellant's statement that seized papers found at the premises of the third party are not relevant. Shri Pravinbhai K. Patel is not the third party but he is a party receiving the unaccounted payment in the shape of 'on money'. The Assessing Officer is justified in observing that but for the search action this amount would have remained untaxed .
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The seized paper is very relevant and has evidentiary value. It is admitted under section 132(4) of the Act. The appellant's statement made during the course of survey under section 133A of the Act has got evidentiary value and the appellant cannot devise ways and means to get rid of the truth and reality. Though at the cost of repetition but for the sake of clarity survey took place on 18.07.2002, just one day after the search at Shri Pravinbhai Kikubhai Patel's residence. The seized paper containing the details of payment regarding purchase of land including particulars of 'on money' was found and seized during the course of search. The appellant, therefore, cannot run away from declaring undisclosed income and paying resultant income-tax. The return for assessment year 2002-03 should not contain the disclosed income assessed under section 158BD r.w.s. 158BC of the Act. This section is the only effective instrument to tax the undisclosed income in the hands of those other or connected persons about whom evidence regarding escapement of income is unearthed during the search. Thus under these circumstances, additions of Rs.37,33,000/- is sustained. The other amount of Rs. 9,25,912/- which is shown as outstanding in the seized paper could not be satisfactory explained by the appellant. No fresh evidence has been filed before me. Hence, the above addition of Rs.9,25,912/- on account of undisclosed income is sustained."
5. The Learned Authorised Representative of the Assessee has re- iterated the same arguments as were made before the Learned CIT(Appeals) in the written submissions filed before the Learned CIT(Appeals) . They are as follows:-
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"Facts of the Case:-
The appellant firm is engaged for running a multiplex theatre at Vapi. There was survey proceedings U/s. 133 (A) Of the Act on the business premises of the firm on 18-07-2002 and in course of survey proceedings, Shri Barkatbhai Nimjibhai Khoda, partner of the appellate firm had agreed to pay tax on amount of cash payment for purchase of land for the theatre in his statement recorded on oath U/s. 133 (A) of the Act on 18-07-2002. The appellant firm had accordingly shown "on money"
payment of Rs. 37,33,000/- in the regular return of income which was filed on 31-10-3002. The learned ACIT Issued notice U/s. 158 BD of the Act on 16-08-2004 i.e. 21 months after the date of filing the return of Income for the A.Y. 2002-03. The appellant firm had filed return of income showing undisclosed income at Rs. Nil as the undisclosed income was already shown In the A. Y. 2002-03 as per the survey proceedings in its case. The learned ACTT had assumed sale price at Rs. 61,90,912/- and after deducting official value of Rs. 15.32/- lacs had taxed Rs. 46,58,912/-(61,90,913 - 15,32,000) in the case of firm in the assessment proceedings for the block year. The learned ClT(A) confirmed the addition in the block assessment proceedings. Being aggrieved by the order, the appellant prays for relief as per submission.
Submission :-
1. Income disclosed in survey proceedings :
1.1 The appellant strongly urges that there was independent survey proceedings in the case of firm on 18-07-2002 wherein In the Q/A. No, 4 to 6 in the statement of partner Madhubhai Nimjibhai Khoje (Page No, 6 to 8 of the paper book), the appellant had agreed to pay tax on cash payment against the total consideration of Rs 52.65 lacs for the purchase of land of the Cine Park. The appellant, therefore, urges that any amount disclosed during the survey proceedings in its own case, ought to be taxed in the regular assessment proceedings as the survey proceedings are not covered by the provisions of chapter XIVB of the Act i.e. block assessment proceedings.
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1.2 The appellant strongly urges that during survey proceedings, no evidence was confronted which was found in the search case of the landlord. The appellant strongly urges that, whenever there is independent survey proceedings, the undisclosed income if any, is required to be taxed in the regular assessment proceedings. 1.3 The appellant further urges that Shri Madhubhai Nimjibhai Khoja vide Q/A. No, 5 of his statement U/s. 131 of the Act on 16-09-2002 explained to pay tax on unaccounted investment of Rs. 37.33 lacs as undisclosed income for A.Y. 2002-03.
2. Satisfaction for issue of notice U/s. 158 BO of the Act:-
2.1 The appellant further urges that the Issue of notice U/s, 158 BD was made on 04-08-2004 (served on 16-08-2004) which was much later than the filing of return of income for the A.Y. 2002-03 i.e. regular return of income wherein the "on money" payment was already shown as undisclosed income and, therefore, as on the date, there was no undisclosed income as alleged.
2.2 The appellant strongly urges that the notice U/s, 158 BD of the Act dated 04-08-2004 was served on 16-08-2004 and, therefore, the satisfaction for issue of notice was made in the month of August' 2004 and since the undisclosed income in respect of "on money"
payment for purchase of land was already disclosed and accounted for prior to issue of notice U/s. 158 BD of the Act, there was no "on money" on the day of Issue of notice which remain to be disclosed and, therefore, the issue of notice U/s. 158 BD of the Act is s unjustified and bad in law.
3. Quantum of amount of "On Money":-
3.1 The appellant further urges that there is also dispute regarding quantum of amount of "on money". The appellant urges that, according to the seized record in the case of landlord i.e. Pravinbhai ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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K. Patel, there was total consideration of Rs. 60,42,400/- which was worked out taking into account the land rate 208 per Sq.yd, The appellant further urges that there was mere expectation of price of land and the value of land was finally decided at Rs. 52,65,000/-. The appellant further urges that the landlord might have worked out certain amount as per his expectations, however, the actual sale price of land was finalized at Rs. 52,65,000/- as is evident from the Page No. 28 of the seized records (Page No, 124 of paper books No.
2) wherein the commission paid by the landlord is taken at Rs. 1,00,000/- from the value of land of Rs, 52,65,000/-. The appellant further urges that on backside of Page No. 29 as well as on Page No, 28, Page No- 26 and Page No. 25 of the seized records (Page No. 126 of paper book No. 2), the value of land Is worked out at Rs. 1,95,000/- per Guntha i.e. Rs. 52,65,000/- in aggregate. The appellant further urges that in Q/A. No. 23 of his statement U/s. 132 (4) of the Act, landlord has categorically said and clarified the sale value of land at Rs. 52.65 lacs, The appellant further urges that the buyer of the land i.e. Barkatbhai N. Khoja vide Q/A. No. 6 in his statement U/s. 133 (A) of the Act during survey proceedings on 18-09-2002 also said that the land was purchased for Rs. 52/- lacs approximately. The appellant further urges that the other partner namely Shrl Madhubhai N. Khoja vide Q/A. No. 4 of his statement explained the value of land at Rs. 1.95 lacs per Guntha i.e. 52,65,000/-and he further said that there was "on money" of Rs. 37,33,000/- out of the said amount. The appellant strongly urges that the landlord Shri Pravin K. Patel while giving his explanation on Page No. 29, he categorically said that the value of land for different plots at Rs. 208 per Square feet which comes to Rs. 61,90,946/- is mere estimate giving his statement vide Q/A. No. 4 U/s. 131 of the Act on 16-09- 2002 (Page No. 11 of the paper book No. 1).
3.2 The appellant strongly urges that both the buyer and seller had agreed the value of land at Rs. 52.65 lacs only and, therefore, the estimate of value of land at Rs.61,90,912/- ought not to be taken and accordingly the further addition of Rs. 9,25,912/-ought not to be made and is unjustified.
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4. The appellant strongly urges that the addition of Rs. 46,58,912/- & undisclosed income for the block year is unjustified and bad fn law."
6. The Learned Departmental Representative supported the orders of the Learned Assessing Officer.
7. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The undisputed facts of the case are that the assessee purchased a plot of land from Sri Pravinbhai C Patel. In the case of Sri Pravinbhai C Patel a search and seizure operation under section 132 of the Act was conducted on 17.7.2002. During the course of the search certain documents were found in which Sri Pravinbhai C Patel has recorded certain information about the sale transaction entered into with the assessee. As per the said recording made by Sri Pravinbhai C Patel the value of land purchased by the assessee from him was more than Rs.15 lakhs which was the apparent consideration shown in the sale deed. Thereafter survey operation under section 133A of the Act was carried out at the premises of the assessee. In the statement recorded during the course of the survey partners of the assessee firm admitted of making of "on-money" payment of Rs.37,33,000/- against the purchase of the said land from said Sri Pravinbhai C Patel. The Learned Assessing Officer issued notice under section 158BD on 16.8.2004 to the assessee calling for Block Return. The assessee filed Nil Block Return and ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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contended that income of Rs.37,33,000/- being already disclosed in the regular Return filed for Assessment Year 2002-03 on 31.10.2002 the said amount cannot be the subject matter of Block Assessment. The Learned Assessing Officer was of the view that the relevant undisclosed income being unearthed because of a search proceedings carried out at the premises of Sri Pravinbhai C Patel the relevant income can be assessed in the Block Assessment only. He therefore assessed income of Rs.37,33,000/- declared in the regular return on protective basis only in the regular assessment and assessed the said income on substantive basis in the Block assessment. The Learned Assessing Officer further on the basis of Block Assessment made in the case of Sri Pravinbhai C Patel where sale price of the land was assessed at Rs. 61,90,912/- on the ground that Rs. 52,65,000/- was received by Sri Pravinbhai C Patel and Rs. 9,25,912/- was outstanding and on that basis further addition of Rs. 9,25,912/- was made in the Block Assessment Order passed in the case of the assessee. Thus, the total undisclosed income assessed in hands of the assessee was Rs. 46,58,912/- in the block assessment. On appeal Learned Commissioner of Income Tax(Appeals) after observing that undisclosed income was assessed on the basis of the statement made by both the partners of the assessee firm confirmed the action of the Learned Assessing Officer. We find that the issue before us is whether the relevant income involved in the transaction of purchase of land is to be assessed in the regular assessment or in a Block Assessment framed ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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in pursuance to the provisions of Section 158BD of the Act in the hands of the assessee. Section 158BD reads as under:-
SECTION 158BD Undisclosed income of any other person.
Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed 1601fc [under section 158BC] against such other person and the provisions of this Chapter shall apply accordingly.
8. From a reading of the above, it is evident that only when income is assessed on the basis of books of account, document, or asset of any other person found during the course of the search of another person, then only such income can be assessed under section 158BD of the Act. In the instant case, the Learned Commissioner of Income Tax(Appeals) has categorically recorded that assessment of income in the hands of the assessee was primarily on the basis of the statement recorded in the proceedings under section 133A of the Act and not on the basis of the materials found during the course of search at the premises of Sri. Pravinbhai C. Patel. Before us the Learned Departmental Representative could not bring any material to controvert the above findings of the Learned Commissioner of Income Tax(Appeals). The Revenue could not show any search material which was sufficient for ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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upholding the addition of any undisclosed income in the hands of the assessee. The revenue could not bring on record any material to show any books of account, document, or asset belonging to the assessee was seized in the course of the search at the premises of said Shri Pravinbhai C. Patel. The Revenue has brought no material on record to show that the document which was found during the course of search and which allegedly evidences that some 'on money' was paid by the assessee bears signature of the assessee firm or its representative. It is an well established position of law that the document found in the possession of person during the course of search can be treated as genuine and bona-fide evidence or material against the person from whose possession the same is found, but the same cannot be read as an evidence against a third person without there being any corroborative material like hand writing of the third person or signature of the third person etc. In the above facts and circumstances of the case, in our considered opinion, no addition could have been possibly made in the hands of the assessee from only on the basis of search material without the statement of the assessee recorded in a separate and distinct proceedings under section 133A of the Act. It is also a settled position of law that addition on the basis of materials found during the course of the survey can be made in regular assessment only and not in a block assessment. For the above view, reliance may be placed on the decision in the case of Prakash Tulsidas Vs. Assistant Commissioner of Income Tax, ITAT, Nagpur Bench [2000] 68 TTJ (Nag) 479. In the above ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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circumstances in our considered view, income of Rs. 37,33,000/- which was determined on the basis of the statement recorded under section 133A can be assessed only in regular assessment and not in the block assessment in the hands of the assessee. Further, in respect of remaining amount of Rs. 9,25,912/- we find that no material could be brought on record by the revenue to show that the assessee has in fact paid this amount at any time. It was admitted that as per the search material also this amount was not paid by the assessee and was shown as outstanding. In the circumstances, unless there is any material to show that payment was made by the assessee, it cannot be assumed that the assessee has actually paid the amount at any point of time out of some undisclosed source, which can only be treated as undisclosed income of the assessee. Therefore, the addition of Rs. 9,25,912/- is clearly unsustainable. In view of the discussion made hereinabove, addition of Rs. 46,58,912/- made in the block assessment is deleted in its entirety. Thus, the appeal of the assessee in respect of Block Assessment is allowed.
9. As a consequence of our above decision, in the block assessment, the assessment of Rs. 37,33,000/- in the regular assessment of the assessee requires to be made on substantive basis. We, therefore, set aside the order of the Learned Commissioner of Income Tax(Appeals) and confirm the assessment made by the Learned Assessing Officer on ITA(SS) No.228/AHD/2005 Block Period: 1-4-1996 to 17-7-2002 ITA NO.2070/AHD/2005 Assessment Year:2002-03 M/s.Chanod Cine Park Date of order:13/8/09
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protective basis which should be treated as assessed on substantive basis.
10. In view of our above decision the additional grounds of appeal taken by the assessee in block assessment regarding validity of initiation of proceedings under section 158BD and other grounds of appeal taken in the memo of the appeals have become academic in nature and therefore are not required to be adjudicated by us.
11. In the result, both the appeals of the assessee are allowed.
Order signed, dated and pronounced in the Court on 13th August, 2009.
Sd/- Sd/-
( T.K. SHARMA ) ( N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated:13/08/2009
Ankit*
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Deputy/Assistant Registrar), ITAT, Ahmedabad