TMI Blog2008 (7) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... m early 1993 for keeping records and shares. Accordingly, a warrant of authorisation under section 132A was issued authorising the authorised officers to take delivery from the Senior Inspector of Police, Crime Branch, Ghatkopar Police Station, the seized assets belonging to Shri Harshad S. Mehta. The premises contained certain shares and a huge pile of documents. Shares valued at Rs. 2,91,16,168.50 were requisitioned on September 9, 1995. Later, the Departmental officials visited the premises on various occasions to sift through the documents available in the premises and on December 12, 1996, requisitioned three loose paper files marked A-31, A-2 and A-3 from the police authorities. The action under section 132A was concluded on February 22, 1996. In view of the action under section 132A, the assessee, Shri Harshad S. Mehta who claimed the premises as being under his possession and control, was issued notice under section 158BC of the Income-tax Act, 1961, which was served on Shri Harshad S. Mehta on August 8, 1996 and on September 30, 1996. However, the assessee did not file any return for the block period in response to the notice under section 158BC. Brief and concise gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause as to why the same pertaining to the assessment years 1994-95, 1995-96 and 1996-97 should not be considered as an undisclosed income of the assessee because the assessee has not filed return of income for the assessment years 1994-95, 1995-96 and 1996-97 even though the due date under section 139(1) of the Act had expired. The assessee, in reply, submitted that the bank accounts referred to by the Assessing Officer as also the assets and income of the assessee and their sources are fully known to the Department and therefore there was no undisclosed income which can be brought to tax. The Assessing Officer, however, made a reference to the provisions of clause (c) of sub-section (1) of section 158BB of the Act which lays down the manner of computation of undisclosed income of the block period. The said provisions lay down that the undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of the Act. On the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITD 245 (Mum) (ix) Nagin Das M. Goradia v. Deputy CIT [2004] 83 TTJ (Mum) 151 (x) Raj Kumar Jain v. Asst. CIT [1994] 120 CTR (All) (Trib) 143 (TM) (xi) Lakshmi Jewellery v. Asst. CIT [2001] 73 TTJ (Mad) 981 It was next contended by learned counsel for the assessee that on and from the date when the assessee was declared a notified person all his properties, movable and immovable stood attached and they were to be dealt with only by the custodian so appointed. The bank account referred to by the Assessing Officer in the block assessment order was also one such bank account which stood attached and fell in the custody of the custodian. In the circumstances it was submitted that the source of income was within the domain of public information and it cannot be said that the Revenue detected this information as a result of authorisation under section 132A of the Act. Our attention was drawn to the decision of the hon ble Bombay High Court in the case of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 wherein the hon ble Bombay High Court has laid down that undisclosed income was to be based on material found as a result of search operations. Further reliance was placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer was justified in treating the interest income as undisclosed income. He submitted that where the words in a statute is clear, plain and unambiguous and where they are susceptible to only one meaning courts are bound to give effect to that meaning. In this regard he referred to the decision of the hon ble apex court in the case of Nathi Devi v. Radha Devi Gupta [2005] 2 SCC 271 and Orient Paper and Industries Ltd. [2006] AIR SCW 6017. He also distinguished the case laws on which reliance was placed by learned counsel for the assessee. In the case of Shamlal Balram Gurbani [2001] 249 ITR 501, he submitted, that the assessee maintained books of account in which the income in question was duly reflected. The case of Salvi Divakar Shankar v. Asst. CIT [2000] 72 ITD 552 (Pune) was a case where the source of income of the assessee was salary and the employer had deducted tax at source. In the case of Vidya Madanlal Malani (Sou.) v. Asst. CIT [2000] 74 ITD 341 the assessee had disclosed her income before the date of search. Thus, according to him, the facts in the aforesaid cases were different and cannot be compared with the facts in the case of the assessee. He, therefore, submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries result in computation of loss for any previous year falling in the block period ; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period ; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c). In the case of Parakh Foods P. Ltd. v. Deputy CIT [1998] 64 ITD 396, the Pune Bench examined the scope of the provision of section 158B(b) defining undisclosed income. In that case, it was held in paragraph 21 that definition clause in section 158B is in two parts. First part is inclusive one which enlarges the natural meaning of undisclosed income while the second part is a restrictive one which specifies its boundaries inasmuch as the Legislature has used the words has not been or would not have been disclosed . It was also held that scope of these two have to be considered with reference to the date of search. In paragraph 23, at page 416, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1994-95 should be considered as undisclosed income under section 158B. Perusal of the statement of income filed along with the returns for the assessment years 1992-93 and 1993-94 shows that sources of income of the assessee were tailoring business as well as preparation and sale of papads and pickles. Therefore, these sources were well known to the Department. There is no material on the record to show that the assessee intended to hide her income for the assessment year 1994-95 and the assessment year 1995-96. The income declared by the assessee and accepted by the Assessing Officer for the assessment year 1994-95 was just slightly higher than the taxable limit. In view of these facts, it cannot be said that the assessee would not have disclosed such income to the Department. The assessee cannot be punished merely because he/she failed to file his/her income before the due date or before the date of search. There may be cases that due to various circumstances, beyond the control of the assessee the return could not have been filed on or before due date and the search might have taken place just after the due date. In such case, it would be unreasonable to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in a partnership firm receiving income in the form of interest, salary and rent, did not file his return for three assessment years. The firm however had filed its return in which in the audited balance-sheet for the three assessment years, these payments had been disclosed. The court held that this disclosure in the firms return was enough disclosure and therefore the income in question cannot be construed as undisclosed income. Keeping in mind the principles laid down in the above judicial pronouncements let us examine the facts of the present case. In the present case, a requisition under section 132A was issued to the Maharashtra Police calling for the records, viz., large number of share certificates and other documents at premises DGI Complex, 813, First floor, Room No. 151, Golwada Maidan, Rifle Range, Ghatkopar(W), Mumbai. These premises was claimed by the advocate of Shri Harshad Mehta to be under the use of Shri Harshad Mehta, in a letter addressed to the Joint Commissioner of Police, Mumbai, for keeping records and share certificates. The impugned addition has nothing to do with the material that was detected as a result of issue of authorisation under section 132A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted and the same is directed to be deleted. The fourth ground of appeal of the assessee is allowed. The fifth and sixth grounds of appeal of the assessee read as follows : 5. The Assessing Officer has erred in law and in facts in determining the dividend income at Rs. 94,73,715 ; Rs. 1,07,58,381 ; and Rs. 1,50,65,804 for the periods April 1, 1993 to March 31, 1994 ; April 1, 1994 to March 31, 1995 and April 1, 1995 to February 22, 1996 respectively and taxing the same in the impugned order. The Assessing Officer has erred in law and in facts in determining the income from interest on short-term deposits at Rs. 41,89,220 ; Rs.1,89,39,753 ; and Rs. 3,56,69,053 for the periods April 1, 1993 to March 31, 1994 ; April 1, 1994 to March 31, 1995 and April 1, 1995 to February 22, 1996, respectively and taxing the same in the impugned order. The fifth ground of appeal relates to dividend income and the sixth ground of appeal relates to interest on term deposits. The information regarding the aforesaid incomes was received by the Assessing Officer on perusal of the bank statement which the Assessing Officer obtained from the custodian. The facts in respect of these dividend in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer. Even on the above grounds, the addition made is liable to be deleted. Ground seven of the assessee also succeeds. The eighth ground of appeal of the assessee reads as follows : 8. The Assessing Officer has erred in law and in facts in determining other interest income at Rs. 3,32,298 ; Rs. 23,48,297 and Rs. 1,54,84,200 for the periods April 1, 1993 to March 31, 1994 ; April 1, 1994 to March 31, 1995 and April 1, 1995 to February 22, 1996 respectively and taxing the same in the impugned order. This addition is made based on the interest credital amounts received from debtors and certain other interest. The source of information regarding this income is also is the information that the Assessing Officer received from the custodian. The reasons for deleting such addition as discussed in ground No. 1 will equally apply to this ground also. The addition made is therefore directed to be deleted. Grounds Nos. 9 and 10 read as follows : 9. The Assessing Officer has erred in law and in facts in determining the rental income of the appellant at Rs. 77,786 ; Rs. 41,971 and Rs. 29,210 for the periods April 1, 1993 to March 31, 1994 ; April 1, 1994 to March 31, 1995 and April 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the shares of LSL. The assessee vide letter dated October 8, 1996, took a stand that any asset lying in his premises after date from which he was declared as a notified person does not belong to him. The assessee also took a stand that the premises were hired by one of his employees and that he was not aware of the exact contents of the documents which were lying in the said premises. On being asked by the Assessing Officer to name the persons who were using the premises the assessee did not give the information so required. In the circumstances the Assessing Officer was of the view that the plea of ignorance putforth by the assessee about the shares of LSL could not be believed. The Assessing Officer had also given the distinctive numbers of the shares ; still the assessee did not choose to give any convincing explanation regarding the ownership of the shares. The assessee demanded physical inspection of the shares. The Assessing Officer allowed such inspection from January 30, 1997. According to the Assessing Officer such inspection continued till February 26, 1997. The order of assessment has been passed by the Assessing Officer on February 28, 1997. The Assessing Officer d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificates of LSL. The learned Departmental representative submitted that the assessee has through out the assessment proceedings, remained silent on many issues. It was also submitted that the assessee was guilty of non compliance before the Assessing Officer and in the circumstances no fresh opportunity should be allowed. We have considered the rival submissions. We are of the view that the addition made should be set aside and the matter should be remanded to the Assessing Officer with an opportunity to the assessee to explain the possession of shares of LSL. In this regard we are of the view that there was lack of proper opportunity to the assessee before the Assessing Officer. The inspection of the shares started from January 30, 1997 and continued till February 26, 1997. The order of assessment has been passed on February 28, 1997. In the absence of completion of the inspection by the assessee it was not possible to offer an explanation. We also find force in the submission of learned counsel for the assessee that in the absence of verification of the names of the shareholder register, folio number, date of registration, etc., by looking at the original shares certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition challenged in ground No. 14 was made by the Assessing Officer. Before us learned counsel for the assessee submitted that he had filed two affidavits dated February 25, 1994 and August 9, 1994 before the hon ble Special Court wherein substantial holdings of shares of Apollo Tyres, ACC Ltd. and GE Shipping were submitted. His further submission was that if a proper matching exercise is carried out it would transpire that 95 per cent. of the distinctive numbers found in the seized documents would match with the declaration made by the assessee before the custodian. It was further submitted that the seized documents by itself cannot lead to the conclusion that the assessee owned shares. In this regard it was submitted that a list containing distinctive numbers of shares by itself would not be evidence of ownership of shares. This argument is advanced in respect of shares which could not be matched by the assessee with the declaration made by him to the custodian. The ultimate prayer of learned counsel for the assessee in this regard was for setting aside the order of the Assessing Officer on this issue with a direction to carry out the exercise of matching the distinctive n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place at an arm s length because they were group concerns. The difference in this account was treated as undisclosed income of the assessee. Before us learned counsel for the assessee submitted that this addition has been made by the Assessing Officer purely on assumptions and surmises. It was submitted that the assessee was acting only as a broker and that there was no material for the Assessing Officer to come to the conclusion that Growmore Investments Ltd. acted as a sub-broker of the assessee and that there was no relation of a client and broker between the assessee and Growmore Investments Ltd. It was also submitted that there was no material for the Assessing Officer to substantiate the various allegations made in the order of assessment for making the impugned addition. The learned Departmental representative relied on the order of the Assessing Officer. We have considered the rival submissions. We notice that the Assessing Officer in paragraph F.1 on page 23 of his order has described Growmore Investments Ltd. as a client. Thereafter the Assessing Officer came to the conclusion that the transaction reflected in the seized document was between the assessee and Growmore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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