TMI Blog2008 (6) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... imit of any previous year is not to be excluded from the undisclosed income of the block period for the purpose of section 158BC, if such income has not been declared by the assessee by filing the return of income. Clause (c) has been substituted by a clause with effect from 1-7-1995 by the Finance Act, 1995. The decision of Kerala High Court has been rendered redundant in view of said substitution. As held by the Kerala High Court itself in a subsequent judgment in the case of CIT v. M.M. Thomas [ 2003 (3) TMI 37 - KERALA HIGH COURT] . In respect of income which is subject to TDS. We noticed that there are various decisions on the issue including the decisions cited by the ld. AR of the assessee according to which such income is not to be treated as undisclosed income as such income was known to the department - Therefore, we are of the view that the income in the case where it was below taxable limit and income subject to TDS and advance tax, those income are not to be treated as undisclosed income. The AO is directed accordingly. Addition u/s 69 - Unexplained investments - search and seizure u/s 132 - slip of paper found attached with purchase agreements of the flats showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the explanation offered by the assessee is not satisfactory. We therefore of the considered view that the AO has wrongly invoke section 69. The addition made by the AO is not in accordance with the provisions of section 69 of the Income-tax Act and the same is liable to be deleted - Thus, we delete the addition made by the AO in both the cases. In the result, the appeal filed by the assessee Shri Harish Daulatram Innani is partly allowed and the appeal of Shri Daulatram Innani is allowed. - R.K. GUPTA AND A.L. GEHLOT, JJ. S.L. Jain for the Appellant. S.D. Srivastava for the Respondent. ORDER A.L. Gehlot, Accountant Member. - These two appeals are filed by two different assessees. The block periods are 1-4-1988 to 22-12-1998. The appeals are directed against the order of the CIT(A), dated 12-3-2003 17-2-2004 respectively. The appeals arise out of the assessment completed under section 158BA, read with section 158BD of the Income-tax Act, 1961. Since grounds rose in both appeals based on identical facts, therefore, for the sake of convenience both appeals are decided by this common order. The facts leading to the case have been discussed in det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37,040 30,000 1995-96 34,840 35,000 1996-97 54,120 40,000 1997-98 65,940 40,000 1998-99 73,700 40,000 Total 3,38,200 5. The addition made by the Assessing Officer has been confirmed by the CIT(A). 6. The ld. Representative of the assessee submitted that the total income of the previous year s falling within the block period has to be computed in accordance with Chapter IV of the Income-tax Act treating as undisclosed income. Out of such computed income specified under sub-clauses ( a ) to ( f ) of section 158BB is to be reduced and balance income is taxable as undisclosed income. The ld. AR submitted that the return of income has not been filed for the above assessment years as the income computed for the assessment years 1989-90, 1992-93 1995-96 are below taxable income. He further submitted that assessee s main source of income was salary and interest on which TDS was deducted. The employer, M/s. Apollo Finvest (India) Ltd. has filed its TDS return disclosing the amount of salary paid and TDS deducted. The ld. AR further submitted that the TDS return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Block assessment only undisclosed income is required to be computed. The assessee s income stated to be in the form of salary and interest which is subject to TDS. Clause ( c ) of section 158BB(1), prior to its sub-station laid down that in computing undisclosed income, income to be reduced for a particular year would be Nil if in relation to that year no return of income had been filed even though due date for filing of return of income had expired. Interpretation of this original clause gave rise to serious controversy between taxpayers and the Department plea of the taxpayers used to be that since there was no obligation to file return of income in relation to the year in which income of the taxpayer was below taxable limit, the entire income of such year could not be treated as undisclosed income and subjected to higher rate of tax solely on the ground that no return of such income had been filed. The department relied on literal interpretation of the words of said clause ( c ) as it stood prior to its substitution. There were some Tribunal decisions in which this point was decided in favour of assessee. The controversy came up for adjudicating before Kerala High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: By cheque 3,12,000 156000 2 15,60,000 50+50 Paid 11,00,000 Hari M.D. Kavurutlal 4,60,000 Balance Nil 12. The Assessing Officer concluded that the assessee had paid Rs. 7,82,000 as own money for purchase of the flat as per the seized paper. The addition made by the Assessing Officer has been confirmed by the CIT(A) with following observations : "I have considered the submission of the Ld. AR. The Assessing Officer has reported vide letter dated 10-2-2003 a remand report. After considering explanation of the appellant and remand report from the Assessing Officer, it is found that the seized slip very clearly shows that there is payment of Rs. 7,82,000 in cash for acquisition of the flat. The facts regarding transaction of flat No. 503, Siddharth Nagar, Borivali (E), Mumbai has been brought out in details by the Assessing Officer. He has also relied upon the figures as written on the seized paper where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P.V. Kalyanasundaram [2006] 282 ITR 259 (Mad.). 4. Biren Savla v. Asstt. CIT [2006] 155 Taxman 270 (Mum.)(Mag.). 5. New Excelsior Theatre (P.) Ltd. v. M.B. Naik, ITO [1990] 185 ITR 158 (Bom.). 15. It is also submission of the ld. AR that uncorroborated loose papers cannot be the sole basis for the addition. The ld. AR in support of his contention relied upon the following decisions: 1. Bansal Strips (P.) Ltd. v. Asstt. CIT [2006] 99 ITD 177 (Delhi). 2. Pankaj Dayabhai Patel (HUF) v. Asstt. CIT [1999] 63 TTJ (Ahd.) 790. 3. Satnam Singh Chhabra v. Dy. CIT [2002] 74 TTJ (Luck.) 976. 4. ITO v. Hanuman Poddar [2005] 98 TTJ (Asr.) 705. 5. Rakesh Goyal v. Asstt. CIT [2005] 87 TTJ (Delhi) 151. 6. Prarthana Construction (P.) Ltd. v. Dy. CIT [2001] 118 Taxman 112 (Ahd.)(Mag.). 7. M.M. Financier (P.) Ltd. v. Dy. CIT [2007] 17 SOT 5 (Chennai) (URO). 16. The ld. AR submitted that a summon under section 131 was issued to Mr. Anish Maheshwari from whom the flat was purchased. His statement dated 8-12-2000 has been recorded wherein Mr. Maheshwari confirmed not to have received any on money. The relevant questions and answers from the said st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook are reproduced below : "Q.No.14. Please give details of purchase of Flat Nos. 503 and 504 by you and your father Shri Daulatram Imani respectively. Ans. Both the flats were purchased on 1-12-1994 at the price of Rs. 1,56,000 each. Flat No. 503 in A-3 Bldg. Siddharth Nagar, Borivali purchased by me from Mr. Anish Maheshwari, Flat No. 504 in the same building was purchased by my father Shri D.R. Inani from Ms. Richa Maheshwari. The amount were paid in cheque. Q.No.15. Please confirm whether any amount was paid by you or your father in cash over and above the paper value of the flats of Rs. 1,56,000 each? Ans. No. Q.No.16. I am showing page No. 54 of loose paper filed Annexure A-1. This paper was found in the original documents to purchase Flat No. 503, Bldg. No. A-3, Siddharth Nagar, Borivali (E). Ans. This paper is not written in my handwriting and I do not know how and why it was placed in the original document of purchase of Flat No. 503. It may be coincident that the amount of Rs. 3,12,000 by cheque are related to the purchase price of two flats. Flat Nos. 503 and 504 in A-3 Bldg., Siddharth Nagar, Borivali (E) is at the cost of Rs. 1,56,000 each. I do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 1,060 sq. ft. An amount of Rs. 1,56,000 was paid for each flat and this payment was made by cheque and a total amount was Rs. 3,12,000. Therefore in the total document two of the facts have been accepted by the assessee, i.e., area of the flat and the amount paid by account-payee cheque. The ld. DR submitted that the subsequent writings, i.e., the cash portion of the transactions which are also recorded have not been accepted by the assessee which is just below the cheque amount. He further submitted that assessee was accepting part of the document. 20. The ld. DR submitted that section 132(4A) is very clear which provides that where any books of account, other documents, money bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed that said things belong to such person. 21. As regards the contention of the ld. AR that the assessee does not have the capacity for payment of such money. The ld. DR drew our attention on page-111 of paper book of the assessee wherein the investments in various companies were mentioned. The assessee has also made declaration under VDIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ong to such person and with the contents of books of account are true and that signature and every other part of such books of account and other documents are in handwriting of the persons who can be reasonably assumed to have signed or written them. 25. The Apex Court in the case of P.R. Metrani ( supra ) held that the presumption under sub-section (4A) is a rebuttable presumption. The relevant finding is reproduced as under (head note): "The words in sub-section (4A) of section 132 are may be presumed . The presumption under sub-section (4A) therefore, is a rebuttable presumption. The presumption under sub-section (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in section 132 or any other provision of the Act to indicate that the presumption provided under section 132 which is a self-contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment as well. Wherever the Legislature intended the presumption to continue, it has provided so. It has not been provided that the presumption available under section 132(4A) would be available for framing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. There is no error in the said finding recorded by the Tribunal. Section 69 could not be invoked in respect of the investments of the assessee". 27. From the above discussion, we find that presumption under section 132(4A) is rebuttable presumption. Statement under section 134(4) is one of the important evidence while making presumption under section 132(4A). Addition under section 69 can be made if the explanation offered by the assessee is not found satisfactory. In a search case where some material or loose paper is found, the department is to follow certain procedure viz., the assessee is to confront on the material found at the time of search. Examination of all concerned parties. For this purpose the Income-tax Act provides power to Revenue authorities under section 132(4) and under section 131 of the Income-tax Act. That income cannot be treated as undisclosed income merely because some loose paper is found during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d satisfactory, the Assessing Officer has to exercise his discretion keeping in view the facts and circumstances of the particular case. In the case under consideration, the assessee furnished comparable cases of prices of flats according to which the payment made by the assessee is the price prevailing in the market. The assessee has also filed necessary explanation to justify the purchasing cost of the flats. The revenue authorities have failed to appreciate this aspect of the facts of the case. We find that assessee has furnished satisfactory explanation regarding purchasing price paid by the assessee for purchase of flats and there is no material on record basis on which it can be said that the explanation offered by the assessee is not satisfactory. We therefore of the considered view that the Assessing Officer has wrongly invoke section 69 of the Income-tax Act. The addition made by the Assessing Officer is not in accordance with the provisions of section 69 of the Income-tax Act and the same is liable to be deleted. In the light of the above discussion, we delete the addition made by the Assessing Officer in both the cases. 29. In the result, the appeal filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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