TMI Blog2000 (2) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... erial which was also served and assessee filed reply thereto. During assessment proceedings it was noted by the AO that seized material and books of account were of complex nature. He after seeking permission from CIT, Delhi-H, New Delhi, appointed M/s Dinesh Mehta Co. Chartered Accountants, Daryaganj, New Delhi as special auditors by passing an order under s. 142(2A) of the Act. The said firm of Chartered Accountants completed the special audit and submitted their report on14th May, 1998. The assessee was given show-cause notice based upon the scrutiny of seized material and also on the report of auditors to show as to why additions should not be made on the issues referred to by the special auditors as well as on seized material. The assessee filed written reply thereto and preliminary point was that Special Auditors were supposed to file report by31st March, 1998, which was illegally extended by the AO on15th May, 1998. This objection of the assessee was rejected by the AO who noted that he was appointed as observer by the Election Commission of India and was out ofDelhifor almost 40 days and Chartered Accountants could not have excess to the seized material during his absence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO did not find the ratio of Madras High Court in the case of CIT vs. Kasturi Estates (P) Ltd. (1966) 62 ITR 578 (Mad) applicable to the facts of the case. He also noted that Madras High Court has not discussed the ratio of Hon'ble Supreme Court in the case of Raja Jai Rajeshwar Rao. 2.2. The AO further noted in the assessment order that in the return of income filed by the assessee it was specifically mentioned by him that he was engaged in the business of sale and purchase of properties on commission basis and otherwise. In assessment proceedings for asst. yr. 1991-92 it was communicated by the assessee to AO that his main business was sale/purchase/renting of property. The AO on the basis of these facts was of the opinion that income of the assessee was to be treated as "business income" from asst. yr. 1990-91 onwards and the factum that such income was not treated as business income in the earlier years will not stop him from assessing-the income under the correct head. According to AO the assessee had wrongly shown the long-term and short-term capital gain of such transactions and assessment made as such on the income shown by the assessee would not operate as res judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act could be brought to tax under different heads of income during the block assessment period or not. He referred to the provisions of s. 14 of the Act which provides heads of the income and further provide that all incomes shall for the purpose of charge of income-tax and computation of total income be classified under the head "A" to "F". According to AO the assessee was carrying on the business of purchase and sale of immovable property and his income was to be assessed under the head "business income". He again took into consideration the decision of the apex Court in the case of New Jahangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR 137 (SC) and noted that if assessing authorities are in possession of additional facts then they will be justified to reach a different conclusion in subsequent proceedings. The AO was of the opinion that in the case in hand facts go to prove that assessee was engaged in the business of sale and purchase of lands and his income was to be assessed under the head "business income" which was wrongly assessed as capital gains and thus irrespective of earlier assessments which were finalised under s. 143(3) or under summary assessments, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. In this connection our attention was drawn by the learned counsel for the assessee to paper Nos. 115 to 118 of his paper-book which contain the details of profit/gains made on sale of land/property transacted by the assessee from the asst. yr. 1991-92 till the date of search. The learned counsel pointed out that in asst. yr. 1991-92 assessee had shown short-term capital gain and Department accepted the same. In subsequent year the assessee had shown short-term and long-term gains and likewise in all the assessment years. Not only this the learned counsel also took us to the statement of assessable income for asst. yr. 1991-92 as appearing at pp. 186 to 188 of his paper-book giving out the details of short-term capital gains also and duly supported with copy of balance sheet and P L a/c. Copy of assessment order for asst. yr. 1991-92 under s. 143(3) is appearing at p. 191 of the paper-book. Copies of statement of assessable income for asst. yr. 1992-93 with P L a/c as well as copy of acknowledgment for filing of return for asst. yr 1991-92 are appearing at pp. 192 to 198 of the paper-book. Copy of statement of assessable income for asst. yr. 1995-96 with P L a/c and copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... XIV-B relating to block assessment period was defined and it was made clear that block assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search. Explaining the very purpose of s. 158BA the Bench has concluded that it does not provide a licence to Revenue for making roving enquiry connected with completed assessment and it was beyond power of AO to review assessment completed unless some direct evidence comes to the knowledge of the Department as a result of search which indicates clearly the factum of undisclosed income. The plea of the learned counsel was that said reasoning is fully applicable to the facts of the present case as AO was not justified to make enquiries in respect of completed assessments and admittedly there is no other material than the facts noted in the books of account and earlier assessment proceedings and that alone cannot be the basis for making addition on account of undisclosed income. There is nothing in possession of the Department as a result of search which was made basis for making any addition. 2.9. The learned counsel also placed reliance on the decision of Parakh Foods Ltd. vs. Dy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dships have defined the scope of s. 158BA(1) which provides that AO can proceed to assess the undisclosed income only if a search is initiated. Their Lordships further laid down that undisclosed income is classified separately for the purpose of assessment and is required to be worked out in the manner prescribed therein and treated to a higher rate of tax. But this process did not disturb the assessments already made of the previous years and was only intended to sniff out what had remained hidden and would not have been disclosed by the assessee. The learned counsel stressed that Hon'ble High Court has specifically prohibited the AO not to disturb the already completed assessments. In the present case, the AO admittedly had disturbed the earlier assessments as on facts and figures of the earlier assessments the AO had tried to cull out a different conclusion than the earlier AO had arrived at. 2.13. The learned counsel lastly referred to the decision of the Hon'ble Kerala High Court in the case of Malayil Bankers vs. Asstt. CIT (1999) 152 CTR (Ker) 443 : (1999) 235 ITR 869 (Ker) in which their Lordships have pointed out that s. 158BA was intended to assess undisclosed income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain of Rs. 8,390 arising out of two transactions of sale and purchase of different plots. The assessee filed balance sheet as well as P L a/c and Department accepted the income shown by the assessee under s. 143(3) of the Act, copy of which is appearing at p. 191 of the paper-book. In subsequent two years the assessment was completed under s. 143(1) but fact remains that whatever the assessee had shown stands assessed as such and result of the same is that assessee who had shown short-term/long-term capital gain arising out of different types of transactions stand assessed as such by the Department till the date of search i.e. 30th Nov., 1997. It is also admitted fact that all these transactions did find place in the books of account in the same manner the assessee had shown in his returns of income for asst. yr. 1991-92 onwards. It also admitted fact that during search operation no material whatsoever has come in the possession of the assessee in respect of such transactions. The only thing which forced the AO to make the addition is the special auditor's report who had concluded that nature of transactions being carried out by the assessee goes to prove that he was carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AO as undisclosed income of the assessee are deleted. 3. The next substantial ground of the assessee is relating to addition of Rs. 22,18,744 made by the AO as undisclosed income on the basis of surrender made by the assessee. During search operations, statement of the assessee was recorded and after post search operation, the assessee was examined at so many times to elicit information and to confront with the seized material. Copies of statements recorded in between2nd Jan., 1997to13th Feb., 1997are appearing at pp. 1 to 66 of the paper-book. It appears from the perusal of different answers given by the assessee on different dates that assessee when cornered by the authorities, surrendered Rs. 20 lakhs as undisclosed income and whenever he was confronted with any seized material, the assessee got rid of by saying that the amount involved in the said paper stands covered by the surrender of Rs. 20 lakhs. The assessee filed return in pursuance to the notice issued under s. 158BC and did not include the amount of Rs. 20 lakhs so surrendered but appended a note to the return mentioning therein that he surrendered Rs. 20 lakhs on the presumption that there may be some undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that admission made on oath under s. 132(4) though retracted later on will be sufficient if it is proved that such statement was voluntarily given and not under any coercion or duress. The AO concluded that assessee made the admission in view of the documentary evidence and admitted about undisclosed income. The AO distinguished the case of CIT vs. Soorji Vallabdass Co. (1962) 46 ITR 144 (SC) and other cases relied upon by the assessee and concluded that Rs. 22,18,744 based on the annexure "C" of auditor's report was to be treated as undisclosed income and he made the addition thereof. 3.2. The learned counsel for the assessee challenging the addition submitted that assessee was forced to make surrender of Rs. 20 lakhs otherwise when there was no penalty or interest then why assessee will be going to make a surrender of Rs. 20 lakhs. In this connection our attention was drawn to office note appearing at p. 18 of the assessment indicating therein that no interest or penalty can be levied in the case of assessee as per Notification issued by CBDT. Second point of the learned counsel for the assessee was that as soon as first opportunity came, the assessee made the retrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oborated by material evidence and in the case in hand no such corroborative evidence has been brought by the Department particularly when surrender stands retracted by the assessee subsequently. The plea is that the amount of addition be deleted and in alternative the matter may be restored back to the file of AO. 3.4. As against it the learned Departmental Representative pointed out that amount of surrender has rightly been made the basis for making the addition of undisclosed income by the AO as each and every amount mentioned in Annexure "C" of auditor's report stands corroborated by admission of assessee made during statement recorded from time to time and for that he has invited our attention to the different admissions made by assessee in the statement recorded during 2nd Jan., 1997 to 18th Feb., 1997, and copies thereof had also been complied by the learned Departmental Representative in his paper-book. The plea of the Departmental Representative is that it is not a case of mere admission but that admission was made by the assessee when he was not able to explain the entries of different types of seized material found at the time of search. In this connection he further re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.V. Centre. A-12 99 09-01-1997 600,000.00 Jewellery-I do not have bill/ cash memo of jewellery purchased. "I have already declared a sum of Rs. 6,00,000.00 as my undisclosed income not reflected in my books". I admit this as my additional income and offer the same for taxation during the search on 29/30th Nov., 1996. A-24 14 09-01-1997 9,000.00 Receipt of Rs. 9,000.00 not explained in the books. A-45 29 18-02-1997 1,20,000.00 Unaccounted receipts forming part of surrender of Rs. 20 lakhs. A-45 24 18-02-1997 5,000.00 Entries on this page could not be explained and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of entries recorded in a diary which he deciphered correctly and explained that Rs. 10 lakhs may be taken as undisclosed income. This statement was recorded on18th Feb., 1997, much after the date of search and that was the last date of statement which actually recorded on nine dates. The plea of the assessee that these statements were out of fear, misconception or misguidance, is not tenable in view of the fact that statement of assessee was not recorded during search or any particular date but his statement was recorded on nine dates running between2nd Jan., 1997to18th Feb., 1997. The legal consequence under such circumstances will be that plea of assessee that he gave the admissions out of fear and misconception or misguidance is baseless and cannot be attached any credibility. We may refer the ratio of Tribunal Madras Bench in the case of T.S. Kumaraswami vs. Asstt. CIT also referred to by the AO in the assessment order in which it has been rightly concluded that statement of assessee if not proved to have been made or given under coercion or duress can be made the basis for addition. Apart from this it is not a case of admission alone but here admission of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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