Income Tax Appellate Tribunal - Agra
Davi Sarin vs Assistant Commissioner Of Income Tax on 10 June, 2002
Equivalent citations: [2003]84ITD391(AGRA), (2003)79TTJ(AGRA)39
ORDER
M.L. Gusia, A.M.
1. This appeal filed by the assessee is directed against the assessment order passed by Asstt. CIT (Inv.), Circle-I(1), Agra On 31st Oct., 1996, under Section 158BC r/w Section 143(3) of the IT Act, 1961, for the block period 1st April, 1985, to 14th Nov., 1995, Before dealing with the grounds of appeal, it is necessary to discuss the facts of the case,
2. The assessee along with Shri Nirankar Nath Mittal was travelling in a car No. UP-14-C-0040 on 8th Oct., 1995, and while drivirig on Agra Tundla road the car driver Shri Mata Prasad stopped it near Central Public School and then two unknown persons forced the assessee and Shri Mittal to hand over whatever money they were carrying in the said car. As per FIR 415/95 under Section 394 of IPC, dt. 8th Oct., 1995, recorded at Thana Itmad-ud-daula in Book No. 30534, it was claimed by Shri N.N. Mittal that a sum of Rs. 2 lakh was looted from them. On 31st Oct., 1995, both assessee and Shri N.N. Mittal addressed communications to SHO Itmad-daula, wherein, it was pointed out that on 8th Oct., 1995, actually the amount looted was about Rs. 1 crore, out of which Rs. 30 lakh was claimed to be owned by Shri N.N. Mittal and Rs. 70 lakh was claimed by the assessee to be his property. On the basis of the FIR lodged by Shri Mittal and information supplied to S.H.O. Itmad-daula, police authorities took action and recovered the amount aggregating to Rs. 72.60 lakh from the alleged looters including Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi. However, in the meantime the IT Department took search and seizure operation at the premises of the assessee on 26th Oct., 1995, and thereafter on the following day i.e. 27th Oct., 1995, warrant of authorisation under Section 132A was also issued in favour of the police authorities to hand over the recovered amount of looting to the IT Department. Meanwhile the Department also moved a petition in the Court of IIIrd Addl. District and Session Judge, Agra requesting to direct the police authorities to hand over the recovered amount to IT Department. Vide order dt. 8th July, 1996, the Hon'ble Addl. District and Session Judge, Agra in Criminal Misc. Appln. No. 54/95 under Section 394/411 IPC directed to hand over the amount of Rs. 72 lakh to the IT Department subject to an undertaking that the responsibility of safety and security of the amount and that the said amount shall not be disposed of without permission of the Court or that of any other Court superior than the said Court, as the case may be, and if directed by the said Court or any other competent Court, the amount shall be produced as and when so required. Subsequently, a further clarification was also issued by the Hon'ble Court on 7th Jan., 1997, that the order dt. 8th July, 1996, is clear, yet for the convenience of the IT Department, it was clarified that it has already been incorporated in the order dt. 8th July, 1996, that the amount of Rs. 72 lakh handed over to the IT Department is an undisclosed income. In such situation, the IT Department is competent under the provision of Tax Act to realise, collect and adjust as the case may be, the requisite income-tax from the said amount and also at liberty to take up entire proceedings contemplated under the IT Act subject to the condition already imposed in the order dt. 8th July, 1996, under which the IT Department shall be duty-bound to produce in the Court the amount or any part or balance thereof as and when so ordered by the said Court or any superior Court keeping the condition contemplated in the order dt. 8th July, 1996.
3. From the perusal of the judgment of Ulrd Addl. District and Session Judge, Agra in Criminal Misc. Appln. No. 64/95, dt. 8th July, 1996, it is further observed that the alleged looters of the cash on 8th Oct., 1995, had also claimed that the amount seized by the police on various dates belong to them. The contention of Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi regarding the sum owned by them which were seized by the police is as under :
Name of the person alleged to be owning the amount Quantum of money claimed to be owned by the said person Quantum of money actually recorded by police in the record Ashok Tyagi 10.00 lakh 6.90 lakh Devendra Tyagi 37.00 lakh 27.00 lakh Mukesh Tyagi 17.00 lakh 15.00 lakh
4. In view of the direction issued by the Court of IIIrd Addl. District and Session Judge, Agra, dt. 8th July, 1996, the cash was actually handed over by the police authorities to the IT Department on 16th July, 1996. Meanwhile on 18th April, 1996, notice under Section 158BC was issued by the AO to the assessee. It is also pertinent to note that the assessee was not sure that how much money was looted from him and Shri N.N. Mittal on 8th Oct., 1995. The different figures given about the looting amount is as under :
(i) On 8th Oct., 1995, Shri N.N. Mittal while travelling in the car along with the assessee lodged FIR at Thana Itmad-daula that a sum of Rs. 2 lakh was looted from him.
(ii) On 31st Oct., 1995, both the assessee and Shri N.N. Mittal addressed communication to S.H.O. Itmad-daula, wherein, it was pointed out that on 8th Oct., 1995, actual amount looted was about Rs. 1 crore out of which Rs. 30 lakh claimed to be owned by Shri Mittal and Rs. 70 lakh was claimed by the assessee.
(iii) During course of search and seizure operation, statement under Section 132(4) was recorded on 26th Oct., 1995. The assessee disclosed that he and Shri Mittal were carrying a total cash of Rs. 1.25 crores approximately in the car on 8th Oct., 1995, and out of which Rs. 30 lakh belonged to Shri Mittal and rest of the cash between Rs. 70 lakh to Rs. 90 lakh belonged to him and also deposed that the same amount is his undisclosed income earned through speculation business with initial investment of Rs. 5,000.
(iv) As per assessment order the assessee produced a report dt. 31st Oct., 1996, from S.O. Rakabgan] wherein it is mentioned that during the course of investigation carried out by the police, it has come to their knowledge that the amount of money looted was Rs. 1.03 crores.
(v) The assessee, as noted in the assessment order, requested the AO that the quantum of money indicated in the statement of the assessee under Section 132(4) recorded on 26th Oct., 1995, may be modified to the extent of amount intimated by the S.O. Rakabganj in his report dt. 31st Oct., 1996.
(vi) The assessee also filed two paper books wherein at p. 15A of 2nd paper book, statement of cash recovered from various persons and claimed by only three persons has been given which is reproduced as under :
Name of person Amount recovered Amount claimed Ashok Kumar Tyagi 6,90,000 10,00,000 Mukesh Tyagi 15,00,000 17,00,000 Devendra Tyagi 27,00,000 37,00,000 Bachchu Singh 10,000 Not claimed Uday Singh 10,000 Not claimed Usha Devi 10,000 Not claimed Ramesh Boja 10,000 Not claimed Om Prakash 70,000 Not claimed Satna Rly. station 22,60,000 Not claimed Total 72,60,000
(vii) In the return filed on 12th Aug., 1996, in response to notice under Section 158BC, the total undisclosed income was declared from 1st April, 1995, to 14th Nov., 1995, i.e., from the date of accounting period for the asst. yr. 1996-97 w.e.f 1st April, 1995 to 14th Nov., 1995 (the date on which search under Section 132 concluded) Rs. 52,60,900. The above return filed for undisclosed income of Rs. 52,60,900 was subsequently revised on 27th Sept., 1996, wherein, total undisclosed income has been brought down to Rs. 10,00,900 against the figure of Rs. 52,60,900 mentioned in the original return.
(viii) This revised return was filed by taking plea that the notice under Section 132A was not finally executed. Therefore, notice under Section 158BC was premature. However, the warrant of authorisation issued under Section 132 was concluded on 14th Nov., 1995. Therefore, the revised return is being filed showing computation of undisclosed income consequent to search and seizure operation under Section 132(1) of the IT Act, 1961 on 26th and 27th Oct., 1995.
5. From the above, it is clear that the assessee could not give exact quantum of amount looted from his possession. Anyhow, Shri N.N. Mittal'was sure that his amount looted was Rs. 30 lakh. The reason of this changed statement about quantum of looted money given by the assessee, during the course of hearing before us was that the assessee has not counted, the amount he carried for purchase of property at Kanpur. However, we find from the assessment order that the AO has considered in assessment order the total amount looted was at Rs. 1.03 (sic-crore), wherein, Shri N.N, Mittal's claim was accepted at Rs. 30 lakh as belongs to him and the balance amount of Rs. 73..00 lakh was added in the hands of the assessee as his undisclosed income.
6. The assessee also pleaded before the AO that the amount looted from him contained his identification marks on the first and last note of each bundle and the same was also handed over to the Court by the SHO Itmad-daula before depositing in treasury. The assessee vide his letter dt. 19th July, 1996, had also requested the AO that for deciding ownership of Rs. 72.60 lakh photocopy of the looted currency prepared on the direction of the Hon'ble Court may be examined to ascertain that identification marks of the assessee during the course of proceedings in the case of State v. Mala Prasad and Ors. under Section 354/415 of IPC Crime No. 419/95 are available. It was also mentioned in the said letter that photocopy of the currency notes was filed by SHO, Rakabganj in the Court of Addl. District and Session Judge, Agra. However, the AO in the assessment order considered total looted amount at Rs. 1.03 crores which is said to be looted, from the assessee and his companion Shri Mittal. It is also pertinent to note that the AO mentioned in the assessment order that without prejudice to the claim of Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi that a sum of Rs. 49 lakh out of Rs. 72.60 lakh seized by the police, belongs to them, the same amount was considered in the hands of the assessee because the assessee had claimed that on the basis of identification marks on the notes the said amount represented the part recovery of the amount looted from him and Shri N.N. Mittal when they were going in a car on 8th Oct., 1995. According to AO, since the matter is sub judice before the Hon'ble Court, no finding regarding the ownership of seized cash is given in the assessment order. It is also pertinent to note that substantive addition has also been made in the hands of Devendra Tyagi, Ashok Tyagi and Mukesh Tyagi on the ground that they have claimed before Court that Rs. 37 lakh, Rs. 10 lakh and Rs. 17 lakh, respectively, as they earned from their independent sources.
7. Now we take up the grounds of appeal. The first two grounds of appeal are general in nature, therefore, the same are not discussed.
8. The ground Nos. 3, 4 and 13 to 15 are interlinked ground of appeal and are as under :
3. "Because the notice under Section 158BC of the IT Act dt. 18th April, 1996, was illegal and bad in law as the assets have not been finally requisitioned under Section132A as the same remains as not executed."
4. "Because no undisclosed income was found in asst. yrs. 1986-87 to 1995-96 and as such the income of these years have been wrongly and illegally taken in block assessment. The AO can compute the income only for the years from which any adverse material, assets has been found."
13. "Because the addition of Rs. 73,00,000 on the basis of applicant's statement is wrong and illegal. The amount as held to be owned by the appellant, by the competent Court can only be assessed in the appellant's hand. No addition can be made on the basis of mere statement."
14. "Because in the original return looted amount was shown as income from other sources and the amount of Rs. 73,00,000 has also been assessed under Section 69A of the IT Act and as such question of addition of Rs. 5,00,000 as initial investment in speculation business is wrong and illegal."
15. "Because in any view of the case unrecovered looted amount is trading loss."
9. Facts of the issue are that warrant of authorisation to search the premises of the assessee was issued on 26th Oct., 1995. On the following date i.e., on 27th Oct., 1995, warrant of authorisation for requisition of cash of looted money was issued to SHO Police Station, Itmad-daula, Agra requiring him to handover the money to IT Department. Therefore, on 23rd Nov., 1995, the Asstt. Director of Income-tax (Inv.) II, Agra, made an application to Addl. District Judge, Anti Dacoity Affected Area, Agra requesting him to issue necessary direction to handover the recovered cash of looted money to IT Department to save interest of revenue in view of provisions under Section 132A of the IT Act, 1961, Copy of this application has been placed at pp. 22. & 23 of II paper book filed by the assessee and kept on record. Meanwhile, notice under Section 158BC of the IT Act was issued on 18th April, 1996, by the AO to the assessee, requiring him to furnish return of income within 16 days from the date of service of the said notice. The assessee vide his letter dt. 12th May, 1996, objected notice issued under Section 158BC for the reason that when requisition has not been made by issuing warrant of authorisation under Section 132A to take possession of cash, then unless the authority who held control/position of the cash deliver the same to the IT authority, the proceedings initiated by the issue of notice under Section 158BC is premature as the same can be issued only after receipt of assets.
10. The above contention has also been brought to the notice of CIT Agra, by the assessee vide his letter dt. 14th May, 1996. However, the CIT, Agra, vide his letter F. No. 422/Release/CIT/95-96/AGR/1354 dt. 4th June, 1996, informed to the assessee that there is neither any infirmity in the notice under Section 158BC issued by the AO nor the notice is premature (copy of these documents are placed on record at pp. 3 to 11 of II paper book filed by the assessee). Thereafter the return of income was filed under protest on 12th Aug., 1996, for the block period from 1st April, 1985 to 26th Oct., 1995, declaring undisclosed income at Rs. 52,60,900. The return was subsequently revised on 27th Sept., 1996, wherein total undisclosed income has been brought down to Rs. 10,00,900 against the figure of Rs. 52,60,900 mentioned in the original return. The reasons for filing revised return of income had been appended with the return pp. 57 & 58 of I paper book filed by assessee and placed on record. The relevant portion is reproduced as under:
"In the notice dt. 18th April, 1996, issued under Section 158BC, the AO has not mentioned the date of execution of warrant under Section 132A........."
"The notice does not indicate date of requisition of cash under Section 132A. The same merely mentions the block period 1985-86 to 1995-96, "The same has been issued without final execution of requisition under Section 132A which implies the conclusion for proceedings under Section 132 and/or 132A."
"............The CIT Agra vide letter dt. 4th June, 1996, F. No. 442/Release/CIT/95-96/AGR/1325 intimated to assessee that there is neither any infirmity in the notice nor the notice is premature. The assessee understands that consequent thereto, the Chief CIT, Kanpur, is of the opinion that two separate block assessments have to be made namely :
(a) "On consequent to search and seizure under Section 132 of the IT Act, 1961."
(b) "and the other consequent to requisition under Section 132A of the IT Act, 1961 dt. 27th Oct., 1995, to the SHO Itmad-daula. Accordingly, the directions have been issued to the AO which are on Income-tax records."..........................
"Therefore, the revised return is being filed showing computation of undisclosed income consequent to search and seizure operation under Section 132(1) of the IT Act, 1961 on 26th-27th Oct., 1995."......................................
"As soon as notice under Section 158BC of IT Act, 1961, along with Form No. 2B in connection with requisition under Section 132A issued SHO Itmad-daula is received, the return of income will be filed."
11. However, ignoring the above submission made by the assessee, the AO merged both proceedings initiated under Sections 132 and 132A of the IT Act in the assessment order passed on 31st Oct., 1996, under Section 158BC r/w Section 143(3) of the IT Act. A copy of notice dt. 18th April, 1996, issued under Section 158BC filed by the assessee at p, 2 of I paper book is placed on record. The said notice was issued without specification of the provisions of the section i.e., whether the same has been issued in pursuance of the provisions of Section 132 or 132A of the IT Act.
12. The recovered amount of cash was handed over to the Department on 16th July, 1996, in pursuant to judgment given by III Addl. District & Session Judge, Agra dt. 8th July, 1996, in Criminal Misc. Appln. No. 64/95 State v. Mata Prasad It is pertinent to note that neither in judgment dt, 8th July, 1996, nor in further clarificatory order dt. 7th Jan., 1997, the Hon'ble Court has stayed the proceedings under IT Act but decided that the IT Department is competent under the provisions of IT Act to realise, collect and adjust against income-tax demand from the amount handed over to the Department.
13. As already stated above that the AO has merged both the proceedings initiated under Section 132 vide search warrant dt. 26th Oct., 1995, and warrant issued for requisition of cash under Section 132A on 27th Oct., 1995. This is evident from the assessment order passed on 31st Oct., 1996, for the block period. At para 2.2 of p. 4 of the assessment order the AO has mentioned that--As an amount of Rs. 72.60 lakh had been recovered by the police, a requisition under Section 132A was also issued to SHO, Police Station, Itmad-daula on 27th Oct., 1995. Besides the search of the assessee's premises, the lockers of Shri Davi Sarin, his wife and other family members were also searched on 14th Nov., 1995.
14. At para (h) and para 2.1 of p. 4 of the assessment order, the AO has further mentioned as under :
(h) Without prejudice to the claims of S/Sh. Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi that sum of about Rs. 49 (sic-64) lakh out of Rs. 72.60 lakh seized by the police, belongs to them, the said- amount is being considered in the hands of the assessee because the assessee has claimed that on the basis of identification marks on the note the said amount represented the part recovery of amount looted from him and Sh. N.N. Mittal when they were going in car on 8th Oct., 1995. Since the matter is sub judice before the Hon'ble Court, no findings regarding ownership of seized cash is given presently.
2.1. Keeping in view the factual position indicated above and considering admission/statements given by Shri Davi Sarin and Shri N.N. Mittal before various authorities a sum of Rs. 1 crore 3 lakh which is said to be looted from the assessee and his companion Sh. Mittal is required to be considered for computing the undisclosed income of the assessee and Sh. N.N. Mittal. As Sh. N.N. Mittal had claimed that sum of Rs. 30 lakh belongs to him, the balance amount of Rs. 73 lakh is required to be considered while computing the undisclosed income of the assessee for the block period 1st April, 1985 to 14th Nov., 1995.
15. From the above, it is seen that common order was passed for action under Sections 132 and 132A of the IT Act by issuing single notice under Section 158BC of the IT Act for filing return for the undisclosed income claimed to have been detected during course of search under Section 132 at the premises of the assessee and bank lockers owned by him and his family members on 26th Oct., 1995, and also for the amount requisitioned on 16th July, 1996, from SHO, Police Station, Itmad-daula by issuing warrant of authorisation under Section 132A on 27th Oct., 1995. Hence the above grounds of appeal have been taken by the assessee.
16. The learned counsel of the appellant argued that the assessment order for the block period 1st April, 1985 to 14th Nov., 1995, passed on 31st Oct., 1996, is illegal and bad in law. According to the counsel, the looted amount was requisitioned by the Department from police authority on 16th July, 1996. Therefore, any warrant of authorisation was executed on 16th July, 1996, and only notice issued before that execution under Section 158BC is illegal. The learned counsel further argued that the block period for the previous year in which search was conducted should cover upto the date of requisition of looted money from the police authorities as it has been clearly defined in definitions of "block period" given in Section 158B(a). But in this case, assessment has been made for the block period from 1st April, 1985, to 14th Nov., 1995, and the looted money was requisitioned on 16th July, 1996. Therefore, addition made on account of requisitioned money in block period assessment is illegal and bad in law.
17. The learned counsel also argued that the addition of Rs. 73 lakh in regard to looted money was made in block period assessment under Section 69A of. the IT Act, whereas, according to deeming provisions of Section 69A, addition can only be made in the circumstances where assessee is found to be owner of amount of Rs. 73 lakh. But in the instant case the AO himself mentioned in sub-para (h) of p. 4 of the assessment order that since S/Sh. Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi (the alleged looters) had made claim in Court of Law that sum of Rs. 49 (sic-64) lakh out of Rs. 72.60 lakh seized by the police belonged to them and thus the matter is sub judice before the Hon'ble Court, no findings regarding ownership of seized cash is given. Accordingly the counsel forcefully contended that the findings given by the AO in assessment order is contradictory because at one stage he was unable to decide the ownership of the assessee of the amount of Rs. 73 lakh and on the other hand he had made substantive addition of Rs. 73 lakh under Section 69A of the IT Act which is illegal and bad in law. It is also submitted that the amount to the extent of Rs. 64 lakh, in aggregate, was also taxed on substantive basis in the hands of alleged letters S/Sh. Devendra Tyagi, Ashok Tyagi and Mukesh Tyagi.
18. It is further argued by the learned counsel of the appellant that when no undisclosed income was found during course of search under Section 132 at the premises of the assessee or from bank lockers owned by the assessee or his family members then how addition can be made for Rs. 73 lakh in the assessment order for the block period 1st April, 1985 to 14th Nov., 1995.
19. The learned counsel in support of his above contention relied on following judgments :
(i) Union of India v. Judicial Magistrate (Eastern Railway), Mughal Sarai and Anr. (1983) 140 ITR 553 (All);
(ii) CIT v. .Tarsem Kumar and Anr. (1987) 161 ITR 505 (SC); and
(iii) CBDT Circular No. 179 dt. 30th Sept, 1975.
20. On the other hand, the learned Departmental Representative argued that during course of search under Section 132 at the premises of the assessee, statement of the assessee under Section 132(4) of the IT Act, was recorded wherein he admitted that he earned undisclosed income amounting Rs. 70 lakh to 90 lakh for the Financial year 1995-96. Therefore, as search had been conducted, assessment was to be framed under Chapter XIV-B of the Act and the said amount was liable to be considered under Section 158BC of the Act. She further argued that in the instant case, non-receipt of requisitioned assets before issue of notice under Section 158BC does not jeopardise the validity of notice issued under Section 158BC. She further contended that the amount requisitioned under Section 132A does not represent a separate income over and above the one already detected in proceedings under Section 132 of the IT Act, Hence, according to her, separate block proceedings relating to Section 132A would have been unwarranted.
21. Regarding the undisclosed income added under Section 69A of the IT Act at Rs. 73 lakh in assessment order passed under Section 143(3) and under Section 158BC, the learned Departmental Representative argued that the same was based on statement recorded under Sections 132(4) and 131 of the IT Act. She further argued that return of income declaring undisclosed income of Rs. 52,60,900 was filed on 12th Aug, 1996. The said return was filed with the distinct knowledge that the ownership of the recovered cash by police authorities is disputed by the alleged looters. However, the recovered money of Rs. 42,60,000 shown as undisclosed income with the rider that if some one else is held to be the owner of the money the return may be treated as revised. According to learned Departmental Representative subsequently revised return was filed reducing undisclosed income from Rs. 52,60,900 to Rs. 10,00,900 by giving reason that as on the date of issue of notice under Section 158BC the warrant under Section 132A had not been executed since the recovered amount had not come into the Department's possession, therefore, two separate proceedings under Section 158BC were warranted, one for the period upto the date of search and another for the period ending on execution of Section 132A order which is unwarranted as the undisclosed income of Rs. 73 lakh was determined on the basis of statement given in Court and police report. She further stated that the Department relied upon, the evidentiary value of the statement recorded under ss; 132(4), 131 and police report.
22. The learned Departmental Representative also argued that statement recorded on oath under Section 132(4) on 26th Oct., 1995, by the authorised officer in respect of the requisitioned money has evidentiary value in respect of any proceedings under the IT Act in view of the provisions of Section 132(4) of the IT Act. In support of her contention she cited various judgments of High Courts and Supreme Court.
23. Thereafter, the learned Departmental Representative contended in regard to plea taken by the learned counsel of the appellant about contradictory findings given by the AO in regard to ownership of the looted money. The Departmental Representative argued that issue of determination of ownership by the Criminal Court of the recovered cash is immaterial and inconsequential to the assessment framed in the case of the assessee. According to her, the income of Rs. 1.03 crore stood earned and quantified as on 7th Oct., 1995, i.e., the eve of robbery. For the period 1994-95 this income had already been earned and it was being taken to Kanpur for some "undisclosed purpose" and looting of the income by some miscreants amounts to a form of appropriation of income. She further contended that how the income/taxable income is utilised is of no significance to the determination of the 'income' as per income-tax law. The fact of income earned is separate, distinct and independent of the enjoyment, disposal or treatment of the income. The two issues cannot be confused and treated as one or interrelated. Therefore, if the assessee is declared to be owner of the recovered cash, the Department will not be required to assess the amount because it already stands included in the amount of Rs. 73 lakh assessed as "income from other sources". If the alleged looters are declared to be the owner, then also Department is not required to take any action, because the amounts have already been taxed in their hands on the basis of their own source of income (winning from lottery, sales of property, etc.) as claimed in the Criminal Court. Thus, course of action for the Department lay in taxing the undisclosed income of Rs. 1.03 crore as declared by the assessee and Shri N.N. Mittal, no action by the Department is warranted against the final determination of ownership of the looted cash.
24. We have carefully considered rival submissions. We have also gone through the voluminous paper books filed by both the sides. Now We deal with first two grounds of appeal i.e., ground Nos. 3 and 4. The sum and substance of both the grounds is that notice dt. 18th April, 1996, issued under Section 158BC was illegal and bad in law as the assets have not been finally requisitioned by that date and the authorisation under Section 132A remained unexecuted therefore, no undisclosed income was found and thus addition made in block assessment on this account was wrong and illegal. To see the legality of notice issued, determination of block period and undisclosed income, we have gone through the provisions of Chapter XIV-B of the IT Act, 1961 which is containing special procedure for assessment of a search initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132A. Under Section 158BC notice was issued on 18th April, 1996. That section as it stood between 1st July, 1995, and 31st Dec., 1996, is reproduced as under :
"Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132A, in the case of any person, then :
(a) The AO shall serve a notice to such person requiring him to furnish, within such time, not being less than fifteen days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under Clause (i) of Sub-section (1) of Section 142, setting forth his total income including the undisclosed income for the block period ;
Provided that no notice under Section 148 is required to be issued for the purposes of proceeding under this Chapter;
(b) The AO shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-sections (2) and (3) of Section 143 and Section 144 shall, so far as may be, apply;
(c) The AO, on determination of the undisclosed income of the block period in accordance with this chapter shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;
(d) The assets seized under Section 132 or requisitioned under Section 132A shall be retained to the extent necessary and the provisions of Section 132B shall apply subject to such modifications as may be necessary and the references to "regular assessment" or "reassessment" in Section 132B shall be construed as references to "block assessment",
25. Section 158BC thus, in its main portion, contemplates a situation where
--any search has been conducted under Section 132, or
--books of account, other documents or assets are requisitioned under Section 132A.
26. In such a situation, Section 158BC in its Clauses (a) and (d) requires the following four things to be done :
(i) The AO shall serve a notice to such person requiring him to furnish a return including undisclosed income for the block period.
(ii) The AO shall proceed to determine the undisclosed income of the block period.
(iii) The AO on determination of the undisclosed income of the block period shall pass an order of assessment and determine the tax.
(iv) Assets seized under Section 132 or requisitioned under Section 132A shall be retained to the extent necessary and the provisions of Section 132B shall apply.
27. The "block period" and the "undisclosed income" have been defined in Section 158B of the Act. Section 158B contains definitions of block period and undisclosed income which is reproduced as under :
"Section 158B. Definitions,--In this Chapter, unless the context otherwise requires-
(a) 'Block period1 means previous years relevant to ten assessment years [underlined italicised in print] substituted for the words 'period of ten previous years' by the Finance (No. 2) Act, 1996 w.e.f.. 1st July, 1995] preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A, and includes, in the previous year in which such search was conducted or requisition made, the period upto the date of the commencement of such search or, as the case may be, the date of such requisition;
(b) 'Undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act."
28. On a plain meaning of definition of "block period" under Section 158B, it could only mean that proceedings under Section 132 is different from the proceedings under Section 132A and the block period would be upto the date of commencement of search under Section 132 or the date of requisition under Section 132A. In the instant case the dispute is in regard to separate block proceedings. According to learned counsel to the appellant that since separate warrant of authorisation for search under Section 132 was issued on 26th Oct., 1995, and warrant of requisition of cash was issued on 27th Oct., 1995, therefore, two separate block proceedings should be initiated by issuing two different notices under Section 158BC. The learned counsel further argued that in Section 158BC the word used is "requisitioned" and the wording used in definition of "block period" is the "date of such requisition" which means that the date of looted cash actually received by the Department from the police authorities. Therefore, on the date of issue of notice under Section 158BC i.e., 18th April, 1996, the warrant of authorisation under Section 132A had not been executed since the assets had not come into the Department's possession, It came in possession of the Department in the succeeding year i.e., on 16th July, 1996, Hence, the assessment for the block period from 1st April, 1985 to 14th Nov., 1995, made on 31st Oct., 1996, is illegal and bad in law which includes, the requisitioned cash from the police authorities on 16th July, 1996. In other words the cash requisitioned is out of the scope of block period.
29. While according to AO this is not a valid ground for the reason that the taxability of an income is not subject to its receivability or enjoyment. An income becomes liable to tax once it has accrued or arisen to the assessee or has been earned by him. It is further mentioned in the assessment order for the block period, that the very fact, that the assessee had admitted that he was in possession of looted unaccounted cash of about Rs. 73 lakh on 8th Oct., 1995, (date of robbery) and that a substantial part of the amount has also been recovered by the police and further that the assessee has also claimed the recovered amount as his own even before a Court of Law is more than sufficient evidence to tax the looted amount of Rs. 73 lakh in the hands of the assessee. The incidence of tax of any such income is not dependent on its recovery or enjoyment by the assessee.
30. We are unable to accept the view taken by the AO. The Finance Act, 1995 inserted a new Chapter XIV-B in the Act. The chapter provides a new concept for the assessment in cases relating searches conducted under Section 132. of the Act or requisitions made under Section 132A of the Act after 30th June, 1995. The assessment relating to actions initiated under Sections 132 or 132A after 30th June, 1995, will be made under the new provisions. Prior to the insertion of Chapter XIV-B, estimation of the undisclosed income was made in summary manner under Sections 132(5) and 132(7). No doubt Sub-section (3) of Section 132A says that where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of Sub-sections (4A) to (14) (both inclusive) of Section 132 and Section 132B shall apply as if such books of account, other documents or assets had been seized under Sub-section (1) of Section 132. But Sub-section (4A) to (14) of Section 132. contain procedure to give treatment to the cases where search is conducted. This procedure has entirely been changed by inserting special procedure for assessment of search cases in Chapter XIV-B of the IT Act, 1961, w.e.f 1st July, 1995. In the instant case, search commenced under Sections 132 and 132A on 26th Oct., 1995 and 27th Oct., 1995, respectively. Hence, assessment in regard to undisclosed income is to be made according to the procedure laid down in Chapter XIV-B of the Act.
31. The findings given by the AO in assessment order may be valid in context to regular assessment but not in regard to assessment made for block period. To set at rest the controversy as to whether block assessment subsumes the regular assessment or is independent of the latter, Finance (No. 2) Act, 1998, has inserted the clarificatory Explanations with retrospective effect from 1st July, 1995, after Sub-section (2) of Section 158BA of the IT Act clarifying that assessments completed under Chapter XIV-B shall be in addition to regular assessments in respect of each previous year included in the block period. Further, undisclosed income relating to the block period shall not include the income assessed in regular assessment. Similarly, income in regular assessment shall not include the income of the block period assessed in block assessment.
32. Similarly, we noted that there was dispute in regard to notice issued under Section 158BC on 18th April, 1996. The assessee vide his letter dt. 12th May, 1996, addressed to AO and thereafter vide letter dt, 14th May, 1996, addressed to CIT objected the notice dt. 18th April, 1996, for the reason that the authorisation issued under Section 132A for requisition of looted money recovered by the police authorities has not by that time taken over in possession by the Department and without requisition, notice under Section 158BC is premature and illegal in view of provisions of Section 158BC of the Act, which says :
"Where any search has been conducted under Section 132 or books of account, other documents of assets are requisitioned under Section 132A, in the case of any person, then,--
(a) The AO shall :
(i).............. serve a notice to such person requiring him to furnish, within such time, not being less than fifteen days;
(ii)............................................................"
33. However, the CIT, Agra informed the assessee vide his letter dt. 4th June, 1996, that the matter has been considered by him and found that there is neither any infirmity in the notice under Section 158BC issued by the AO nor the notice is premature and further advised to cooperate with the AO. In view of these backgrounds the assessee filed a return of income for the block period in Form No. 2B on 12th Aug., 1996, under protest declaring inter alia undisclosed income for asst. yr. 1996-97 at Rs. 52,60,900 which was subsequently brought down to Rs. 10,00,900 by filing revised return on 27th Sept., 1996. The reasons given for filing revised return of income was that notice dt. 18th April, 1996, under Section 158BC was issued without requisition of amount for which authorisation had been issued under Section 132A on 27th Oct., 1995 of the IT Act. The amount was actually received on 16th July, 1996, by the Department from police authorities for which separate notice was required to be issued after the date of receipt of the looted amount from the police authorities. However, no such notice was issued by the Department and block assessment completed on 31st Oct., 1996, for the block period 1st April, 1985, to 14th Nov., 1995. It is pertinent to note that the last date considered for assessment of the block period is the date of completion of search at the premises/bank lockers of the assessee which was initiated under Section 132 by issuing warrant of search dt. 26th Oct., 1995. It proves that notice dt. 18th April, 1976, issued under Section 158BC was for proceedings initiated under Section 132 of the IT Act, 1961, and not for proceedings initiated on 27th Oct., 1995, by issuing authorisation under Section 132A of the Act.
34. Though, the second proviso to Clause (a) of Section 158BC of the Act debars the assessee to file revised return of income for the block period but we cannot ignore the fact altogether that the original return was filed under protest for the reason that no notice under Section 158BC was issued for the proceedings initiated under Section 132A and hence, inclusion of requisitioned amount by the Department from police authorities on 16th July, 1996, in block assessment for block period 1st April, 1985 to 14th Nov., 1995, is illegal and bad in law.
35. To settle the controversy regarding meaning of the words "execution" and "requisition" while calculating the period of limitation in Section 158BE of the IT Act, the Finance (No. 2) Act, 1998, has inserted a clarificatory explanation with retrospective effect from 1st July, 1995. Expln. 2 to Section 158BE enacts deeming provisions and provides that for the removal of doubts, it is hereby declared that the authorisation referred in Section 158BE(1) shall be deemed to have been executed,--
(a) in case of search :
--On the conclusion of search as recorded in the last Panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued;
(b) in the case of requisition under Section 132A.-
--On the actual receipt of the books of account or other documents or assets by the authorised officer.
36. Even prior to the insertion (w.e.f. 1st July, 1995) of Expln. 2 to Section 158BE by the Finance (No. 2) Act, 1998, it has been held that on a plain reading of Section 158BE, execution of the authorisation means completion of search or implementation of search order. Any other interpretation would be inconsistent with the object for which the special provision has been enacted IT.O. Abraham & Co. v. Asstt. Director of Income-tax (1998) 149 CTP. (Ker) 207 : (1999) 238 ITR 501 (Ker)]. From the above judgment inference can be drawn that requisition of books of account, documents or assets under Section 132A means actual receipt by the authorised officer. .
37. In view of above provisions of the Act, and facts and circumstances of the case, we have no hesitation in mentioning that in this case two separate assessments should have been made, one for the block period upto date of search under Section 132 concluded i.e., 14th Nov., 1995, and another for the block period ending on requisition of amount of Rs. 72.60 lakh from the custody of police authorities i.e., 16th July, 1996.
38. However, in the instant case assessment for block period made on 31st Oct., 1996, covers the block period from 1st April, 1985 to 14th Nov., 1995, while the amount of Rs. 72.60 lakh was requisitioned under Section 132A of the IT Act from police authorities on 16th July, 1996, which is outside the block period. Hence, any addition in this regard is illegal and bad in law which is not sustainable.
39. However, in the instant case requisitioned amount of Rs. 72.60 lakh from police authorities was not considered for addition but in place of it amount of Rs. 1 crore 3 lakh was considered. The reason for it was mentioned in assessment order that Rs. 72.60 lakh had been requisitioned from SHO, Police Station Itmad-daula under Section 132A and simultaneously premises/bank lockers were also searched under Section 132 of the IT Act. During course of search statement under Section 132(4) was recorded. It is further mentioned that the appellant Shri Davi Sarin had also given statements and admitted before various authorities (outside the Department) that actually amount of Rs. 1 crore 3 lakh was looted from him and his companion Shri N,N. Mittal on 8th Oct., 1995. Shri N.N. Mittal had claimed that sum of Rs. 30 lakh belong to him. Therefore, the balance amount of Rs. 73 lakh was added in the hands of the appellant Shri Devi Sarin. Para 5 of p, 6 of the assessment order is reproduced for more clarification :
"The assessee in his statement under Section 132(4) has admitted that he was carrying cash to Kanpur to buy certain properties. The assessee during course of his statement under Section 132(4) on 26th Oct., 1995, was required to explain the source of the looted cash of Rs. 73 lakh. The assessee has admitted that he earned the amount of Rs. 73 lakh from speculation business done by him. Thus, the assessee has failed to explain the nature and source of Rs. 73 lakh which was looted from him on 8th Oct., 1995, the same will be added to the income of the assessee as undisclosed income for the period 1st April, 1995 to 26th Oct., 1995, under Section 69A of the IT Act, 1961."
40. From the above, it is clear that the AO has accepted that Rs. 30 lakh was owned by Shri N.N. Mittal, companion of the appellant. We have also seen that in the assessment order dt. 31st Oct., 1996, two separate proceedings have been merged, one initiated under Section 132A and another under Section 132. It is not in accordance with the provisions of IT Act, particularly, addition made on account of requisition of cash under Section 132A is illegal and bad in law as the same fall beyond the scope of block period. However, the assessment made for the block period 1st April 1985 to 14th Nov., 1995, covers the block period for proceedings initiated under Section 132 of the IT Act. Therefore, the addition made in view of proceedings initiated under Section 132 of the Act is to be decided on merits. To come out from this difficult situation, we first take the total amount requisitioned by the Department from police authorities under Section 132A on 16th July, 1996. The total amount requisitioned is Rs. 72.60 lakh. Out of that Rs. 30 lakh belongs to Shri N.N.Mittal as accepted in the assessment order, We were informed during course of hearing that Rs. 30 lakh has separately been taxed in the hands of Shri N.N. Mittal. Therefore, the balance amount is (72,60,000 -30,00,000) Rs. 42,60,000 which has been requisitioned in the case of the appellant under Section 132A fall beyond the scope of block period, hence addition of Rs. 42,60,000 is held as illegal and thus deleted. Accordingly, ground No. 3 is allowed.
41. It may be seen that in the hands of the appellant total addition of Rs. 73,00,000 has been made on account of robbery and claimed to be earned from speculation business as we have seen in foregoing paragraphs. This amount of Rs. 73,00,000 includes the requisitioned amount of Rs. 42,60,000 under Section 132A, therefore, the same is reduced (73,00,000 - 42,60,000) and thus remaining amount of Rs. 30,40,000 may be said as added under proceedings initiated under Section 132 and this amount falls within block period from which assessment was made on 31st Oct., 1996.
42. We have gone through the statement recorded in Devnagri script under Section 131 on 26th Oct., 1996, (the day on which proceedings subsequently converted into search proceedings under Section 132) placed at record at p. 99 to 102 of the paper book I filed by the assessee. In reply to question No. 3, the assessee has deposed as under (English Translation) :
Q. 3 The statement given by your younger brother, Shri Anil Sarin is being shown to you wherein he has stated that you have informed him that while travelling in car there was about one crore cash which had been looted and how much amount owned by whom, the details will be given by you.
Ans. I admit the statement. Rs. 30 lakh belonged to Shri Nirankar Nath Mittal. Balance amount of Rs. 70 lakh was my personal money. This money is not concerned in any manner with the firm M/s Sarin & Sarin. In the said car there was total amount of Rupees 1 crore 10 lakh to 1 crore 25 lakh. The amount was. not counted. Out of that Rs. 30 lakh belonged to Shri Nirankar Nath Mittal and the balance amount entirely belonged to me.
43. On the same day i.e., on 26th Oct., 1995, statement under Section 132(4) was also recorded in English which is placed at record at pp. 103 to 105 of paper book I filed by appellant. Reply to question Nos. 1 and 2 is reproduced as under :
Q.1 You are requested to explain the details of cash, stolen from the Maruti car of Shri N.N. Mittal on 8th Oct., 1995, for which FIR was lodged at Police Station, Itmad-u-daula, on 8th Oct., 1995, by Mr. N.N. Mittal.
Ans. As stated earlier in my statement recorded under Section 132 of IT Act, 1961, I and Shri N.N. Mittal were carrying total cash of Rs. 1.25 crore approximately, out of which only Rs. 30 lakh belonged to Shri N.N. Mittal and rest of the cash between Rs. 70 lakh to Rs. 90 lakh belonged to me, which I had put in 3 cartons and one small canvass bag and Shri N.N. Mittal had put the money in one canvass bag, which were stolen.
Q. 2. Please explain the source of the cash .........................................................
...................................................................................................... (illegible) Ans. We were going to Kanpur to invest the money in land and shares. As to the source of money, I have no evidence, whatsoever, to show that it was earned by me from speculation business. I have no records whatsoever of this-no bank pass book, no contract notes, no. books of account. I cannot even tell the name of the broker or the name of the stock exchange through which these transactions took place. I further state, that as on date i.e., 26th Oct., 1995, no records of this exist with me or with any other person. As stated earlier in my statement on oath under Section 131 of the IT Act, 1961, this money was earned during the financial year 1st April, 1995, till present on which I am ready to pay advance tax, and which I shall show in my returns for financial year 1995-96 in income-tax.
43.1 The learned Departmental Representative vehemently argued that the undisclosed income of Rs. 73 lakh has rightly been determined under Section 69A in the assessment order passed for block period 1st April, 1985 to 14th Nov., 1995, as the same based on statement of assessee and his family members recorded under Section 132(4), 131 and FIR and police report. She further argued that Explanation to Section 132(4) declares that the examination of any person under that sub-section may be not merely in respect of any books of accounts, other documents or assets found as a result of the search but also in respect of all matters relevant for the purposes of any investigation connected with any proceedings under the IT Act, 1961. Thus, the authorised officer has the power to record statements on oath on all matters pertaining to the suppressed income and such statement has evidentiary value.
44. We have carefully considered the submission made by the Departmental Representative and reliance placed by her on various decisions. But in the instant case, facts are different from the case law cited by her. In the decisions cited by the Departmental Representative the addition was upheld which was based on statement recorded. But in the instant case the statement recorded under Section 132(4) or 131 of the IT Act was not relied upon by the AO himself and thus addition was not based on the statement recorded. The addition made in block assessment passed on 31st Oct., 1996, was based on the report of the same date (31st Oct., 1996) from S.O. Police Station, Rakabganj. It will be clear from para (g) of p. 3 of the assessment order which is reproduced as under :
"(g) The assessee produced a report from S.O. RaKabganj wherein it is mentioned that during the course of investigation carried out by the police, it has come to their knowledge that amount of money looted was Rs. 1.03 crore and not Rs. 2 lakh which was indicated in the FIR lodged on 1st Oct., 1995. The assessee further concluded that in view of the clear indication regarding the quantum of money looted given in the latest report, dt. 31st Oct., 1995, by SO Rakabganj, the quantum of money indicated in the statement of the assessee under Section 132(4) recorded on 26th Oct., 1995, may be considered as modified to the extent indicated in the report of S.O. Rakabganj, Agra (as independent authority appointed for investigating robbery case)."
45. The above report of SO Rakabganj was accepted and after reducing the claim of Shri N.N. Mittal for Rs. 30 lakh, the balance amount of Rs. 73 lakh was added in the hands of the appellant. Now the question is whether police report given during course of investigation has more evidentiary value or statements recorded under Sections 131 and 132(4) on 26th Oct., 1995 ? Certainly police report, dt. 31st Oct., 1995, has no evidentiary value. We have already mentioned while dealing with facts of the case that the appellant gave different figures of his looted money either before the police authorities, Departmental authorities or while filing original/revised return of income. The reason of it was given during the course of hearing that the appellant had not counted the cash before proceeding to Kanpur on 8th Oct., 1995. However, the companion of the appellant Shri. N.N. Mittal has counted his money which was at Rs. 30 lakh, therefore, there is no difference in quantum of amount admitted by him at different stages. The appellant had also deposed in his statement recorded under Section 131 on 26th Oct., 1995, in reply to question No. 3 (reproduced in foregoing paragraphs) that he had not counted the money.
46. It is also an admitted fact that except statement recorded under Sections 131 and 132(4) on 26th Oct., 1995, and police report, the Department does not have any evidence in form of books of account or document to prove about the quantum of amount of undisclosed income looted on 8th Oct., 1995, though the premises owned by the appellant were searched under Section 132 of the IT Act. The police could recover only amount of Rs. 42,60,000 belonged to the assessee which has already been discussed. But the balance amount of Rs. 30,40,000 which was made part of addition under Section 69A of the IT Act, 1961, does not appear justifiable for the reason that the deeming part of Section 69A, dealing with unexplained money, etc. comes into play only if the following two conditions are fulfilled: (1) The assessee is found to be owner of any money, bullion, jewellery or other valuable article; and (2) such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by the assessee for any source of income, But in the instant case neither the amount of Rs: 30,40,000 was found to be owned by the appellant nor it is found as unrecorded in the books of account. Even no other evidence in form of loose paper or document was found to prove that the appellant owned undisclosed money of Rs. 30,40,000 except the statement recorded during course of search and that too was not relied upon by the AO while making addition under Section 69A of the IT Act. In view of the above legal position and facts of the case the addition of Rs. 30,40,000 is also deleted. Thus ground Nos. 4, 13 and 14 are allowed.
47. The 15th ground of appeal is that the unrecovered looted amount is trading loss. The addition on the amount concerned has already been deleted, therefore, this ground is not discussed as it would serve no purpose except academic discussion. Hence, this ground is rejected.
48. The 16th Ground of appeal is that addition of Rs. 5,00,000 as investment in speculation business is wrong and illegal. Neither there is proof of speculation business nor of any investment in the same.
49. Facts of the issue are that in assessment order it is mentioned that the assessee in his reply dt. 18th Sept., 1996, has stated that to earn Rs. 73 lakh (as discussed in foregoing paragraphs) the initial investment was made of Rs. 5,000 only. The AO is of the view that the initial investment cannot be said to be included in the amount of Rs. 73 lakh as the same has specifically been stated as representing speculation income for the period from 1st April, 1995 to 26th Oct., 1995. Therefore, having regard to meagre investment of Rs. 5,000, the AO asked the assessee to explain as to why addition of Rs. 5 lakh may not be made on account of initial investment to earn income of Rs. 73 lakh from speculation business. The assessee explained that speculation business of shares does not require any investment as transactions are settled on goodwill in the market in the confidence of other persons that parties will honour their commitments. The assessee further stated that no investment is required in such a business and Rs. 5,000 was spent by him in incurring initial expenditure. The contention of the assessee was not accepted because according to the AO, it is unbelievable that one can earn such huge amount of Rs. 73 lakh from speculation of shares between period 1st April, 1995 to 8th Oct, 1995, with a meagre investment of Rs. 5,000 only. Hence AO estimated undisclosed.
initial investment at Rs. 5 lakh for the financial year 1995-96 and made addition accordingly.
50. We have heard rival contentions in this regard. We noted during course of hearing that Department during course of search under Section 132 of the IT Act at the premises of the assessee could not get any evidence in form of entry in books of account or other documents or transaction about speculation business carried out by the assessee except the statement recorded under Sections 131 and 132(4) on 26th Oct., 1995, wherein the assessee admitted that he started speculation business from 1st April, 1995. Subsequently, during course of assessment proceedings, the assessee vide his reply dt. 18th Sept., 1996, explained that initial investment for this business was only Rs. 5,000. However, the AO estimated the initial investment at Rs. 5 lakh. Now question arises whether there is any scope to make any addition based on estimate in the assessment for block period ?
51. Sub-section (1) of the newly inserted (w.e.f. 1st July, 1995) Section 158BA opens with a 'non obstante' clause, namely 'Notwithstanding anything contained in any other provisions of this Act' and, thus, enacts provisions of overriding nature so as to prevail over any other provisions of the 1961 Act. According to that Sub-section (1), where after 30th June, 1995.-
--a search initiated under Section 132, or
--books of account, other documents or any assets are requisitioned under Section 132A, in the case of any person, then :
the AO shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B (containing Sections 158B to 158BH).
52. Now we have to see what is "undisclosed income". Clause (b) of Section 158B gives an inclusive definition of the expression "undisclosed income" so as to include :
--any money, bullion, jewellery or other article or thing, or
--any income based on any entry in books of account or other documents of transaction where :
--such money, bullion, jewellery, valuable article, thing, entry in books of account or other document or transaction represents wholly or partly income or property which :
--has not been, or
--would not have been disclosed for the purpose of this Act.
53. It, therefore, follows that what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income [N.R. Paper & Board Ltd. v. Dy. CIT (1998) 234 ITR 733, 741 (Guj))
54. The income from speculation business has never been disclosed nor any entry in books of account, document or transaction was found during course of search except the assessee admitted in his statement recorded under Section 131 and 132(4) on 26th Oct., 1995, that he did speculation business since 1st April, 1995. In that statement also neither question was raised nor reply given about the quantum of initial investment in speculation business. Therefore, we are of the considered opinion that there is no scope for estimation in undisclosed income. Hence, amount of Rs. 5,00,000 is deleted. Thus, this ground is also allowed.
55. The 5th and 6th grounds of appeal are inter-connected which read as under :
5. "Because the learned AO has erred on facts and in law in not allowing deduction under Chapter VI-A already allowed while completing the original assessments.
Asst. yr.
Deduction under Chapter VI-A allowed ia regular proceedings (Rs.) 1986-87 22,454 1987-88 19,444 1988-89 25.610 1989-90 30,850 1990-91 30,417 1991-92 13,000 1992-93 13,000 1993-94 7.000 1994-95 10,000 1995-96 10,000 1,81,775 The undisclosed income is liable to be reduced by Rs. 1,81,775."
6. "Because the AO has erred on facts and in law in computing the assessed income of the previous year ending 31st March, 1986 to 14th Nov., 1995, in column 3 of p. 6 of the assessment order as gross total income. As per provision of Section 158BB, the same should have been total income of the previous years after allowing deductions claimed and allowed in regular assessment. The income of the block period is liable to be reduced by Rs. 1,81,775."
56. The above grounds have already been decided in favour of assessee by the Tribunal, Agra Bench in combined order dt. 18th April, 2002, for the block period 1st April,1985 to 14th Nov., 1995, in Appeal Nos. ITA 6105/Del/1996 Anil Satin v. Asstt. CIT (Inv), Circle 1(1), Agra, 07/Del/1996, Smt Bela Sarin v. Asstt. CIT (Inv) Circle 1(1) Agra, 6106/Del/96, R.N.S. Sarin v. Asstt. CIT (Inv.) Circle 1(1), Agra, 8/Del/96, Smt. Rani Sarin v. Asstt. CIT (Inv.) Circle 1(1) Agra, 9/Del/96, Smt Abha Sarin v. Asstt. CIT (Inv.) Circle 1(1) Agra. In para 3 of p. 5 of the above order the Tribunal has given findings, the same is reproduced :
"We have heard the rival contentions of the parties and have perused the record of the case as well as the letter of CBDT as aforesaid and the case laws as referred to. It would be seen that the CBDT in the letter dt. 27th Aug., 1999, has clarified that any deduction under Chapter VI-A due to the assessee in any previous years included in the block period will not form part of the undisclosed income for the block period. In the case of Shri Satpal Singh v. Asstt. CIT (2000) 67 TTJ (Chd) 602, the Tribunal Chandigarh Bench has held that while computing income for the purpose of block assessment, the assessee will be entitled for deduction and adjustment under Chapter IV and VI-A of the IT Act. Thus, we hold that while computing the undisclosed income for the purpose of block assessment, the assessee is entitled to the deductions which have been allowed in the regular assessment."
57. Keeping in view the above decision, the AO is directed to modify the assessment order in the light of the aforesaid observation and compute the undisclosed income of the assessee accordingly. Both the grounds thus allowed.
58. Ground No. 7 is as under :
"Because the AO has erred on facts and in law in not allowing deduction of Rs. 53,000 in respect of cash found and belonging to the firm M/s Sarin & Sarin."
59. This ground of appeal has already been decided by Tribunal, Agra Bench, in ITA No. 6105/Del/1996 in the case of Ann Satin v. Asstt. CIT (Inv.) Circle 1(1), Agra for the block period assessment 1st April, 1985 to 14th Nov., 1995. In the above order necessary reduction of Rs. 53,000 in respect of cash found and belonging to M/s Sarin & Sarin has been directed to be allowed in the case of Anil Sarin. This ground of appeal is, therefore, rejected.
60. Ground Nos. 8 to 12 are interconnected which read as under :
8. "Because the AO has erred on facts and in law in including Rs. 1,00,500 in the income of the assessee during the previous year 1st April, 1992 to 31st March, 1993, being the alleged capital gain on account of retirement from the firm M/s Sarin Chemical Laboratory. The addition of Rs. 1,00,500 is liable to be deleted."
9. "Because the AO has ignored that sum of Rs. 36,666 was also debited in assessee's account in the firm on account of arrear of depreciation and thus the excess amount receivable was Rs. 1,00,500 - 36,666 i.e., 63,834."
10. "Because the AO has ignored that the excess amount received at the time of retirement from the firm is nothing but appreciation of assessee's interest in the partnership firm."
12. "Because the excess amount received on account of goodwill is liable to be excluded as the above amount was already credited in the book prior to the search."
61. During course of hearing the learned counsel of the appellant submitted that the facts and circumstances of the instant case are similar to the case of appellant's father Shri R.N.S. Sarin which has already been decided in favour of assessee by Tribunal, Agra Bench in ITA (SS) No. 6106/Del/1996 [Shri R.N.S. Satin v. Asstt. CIT (Inv.) Circle 1(1), Agral for the block period assessment from 1st April, 1985 to 14th Nov., 1995. A copy of the said order was also supplied during course of hearing by the appellant. We have gone through the said order wherein it is held as under :
"It follows that what the assessee had already been disclosed or what has been disclosed is not to be treated as 'undisclosed income'. In other words, the undisclosed income would be income which is hidden from the Department. Since the assessee had already disclosed the impugned income of Rs. 1,50,500 on account of goodwill in the return filed for asst. yr. 1993-94 and the same has been considered in the assessment order dt. 8th Feb., 1994, under Section 143, which fact has not been disputed by the Revenue Department. We are, therefore, of the view that the same cannot be said to be undisclosed income found during the course of search. Hence, the same goes out of consideration for the block assessment proceedings. Hence, the addition made in the impugned order in this regard are deleted."
62. Respectfully following the above decision we direct to delete the addition of Rs. 1,00,500 from the asst. yr. 1993-94. Since we have deleted the additions as aforesaid, we are not going into the issue as to whether any capital gain has arisen to the assessee on account of goodwill on his retirement from firm M/s Sarin Chemical Laboratories. In view of the above, the ground Nos. 8 to 12 are allowed.
63. In the result, the appeal filed by the assessee is partly allowed.