TMI Blog1997 (4) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... by him to the appellant. 2. That the authorities below were not justified to make an addition of Rs. 51,91,000 in the block assessment as alleged undisclosed income without any basis and without even referring to the section or provision of Income-tax Act under which the same has been brought to tax.That the authorities below were not justified to treat these credits as undisclosed income since these were duly accounted for in the regular books of account and these could not be treated as income which has not been disclosed or would not have been disclosed to the Department. Hence, it is not the subject-matter of block assessment. 3. That in the alternative, the addition if at all called for, should be on peak basis and not on cumulative and multiple basis, in respect of alleged transactions with Rubina Leasing and Credits P. Ltd. for which addition of Rs. 51,91,000 has been made. 4. That the authorities below were not justified to make addition of Rs. 51,91,000 against the factual and legal position and ignoring the detailed submissions and explanations furnishing. 5. That the authorities below were not justified to treat a sum of Rs. 3,50,000 as disallowable items whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------------------------------------------------------------------------------------------- 1993-94 13,67,000 --- 13,67,000 1994-95 38,24,000 3,14,993 41,38,993 ---------------- --------------- ----------------- 51,91,000 3,14,993 55,05,993 ---------------- --------------- ----------------- Total income rounded to 55,06,000 The Assessing Officer has, however, computed the total undisclosed income in the impugned order without giving yearwise bifurcation, as below : "Total undisclosed income 51,91,000 Income as disclosed above 3,14,993 ---------------- Total income 55,05,993 ---------------- Rounded off to 55,06,000" ---------------- It is also not clear from the impugned order, as to how the income of Rs. 3,14,993 has been determined, as the discussion in the impugned order, inter alia, shows that the Assessing Officer had disallowed a sum of Rs. 3,50,000 out of the expenses claimed in the year ended on31-3-1995. 3(c). The learned counsel submitted that the proceedings of search conducted under section 132 in the case of the assessee was itself invalid, as the conditions precedent for authorising the search and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd unjustified. As regards addition of Rs. 51,91,000 made in respect of entries in the account of Rubina is concerned, the learned counsel invited our attention towards the elaborate reply submitted to the Assessing Officer vide letter dated September 4, 1996 (copy at pages 53 to 59 of the paper book) as well as towards a detailed letter dated September 25, 1996 submitted to the CIT (copy at pages 68 to 75 of the paper book). The learned counsel also drew our attention towards a Note dated 19-9-1996 submitted by Shri G.S. Chhabra, a common director of the appellant company (Express Movers Pvt. Ltd.) and M/s Rubina Leasing and Credits Pvt. Ltd. (copy placed at page 76 of the paper book) explaining the nature of entries in the relevant bank account of the appellant as well as of Rubina. Our attention was also drawn towards copies of accounts of Rubina placed at pages 77 to 79 of the paper book, copies of Bank statement of Rubina in respect of their current A/c No. 5864 with Canara Bank (copies placed at pages 80 to 87 of the paper book), cash flow statement showing sources of amount deposited in bank account of Rubina (at page 88 of the paper book), copies of Bank of the appellant-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that such an ad hoc disallowance out of expenses duly recorded in the books of account clearly fall outside the definition of undisclosed income under section 158B(b) and it has to be excluded in view of specific provision contained in section 158BA(3) of the Act. Even otherwise, he submitted that expenses are supported by entries in the regular books of account and no such ad hoc disallowance is permissible. In any case, the regular assessment for this year is pending and such a question can be more appropriately decided in the regular assessment. The learned counsel thus strongly urged that the impugned order passed by the Assessing Officer should be cancelled and the entire demand created by him should be quashed. 4(a). The learned Departmental Representative (DR) submitted that legality of search cannot be challenged before the Tribunal. The Tribunal has no jurisdiction to decide the question relating to validity of the proceedings of search. 4(b). The learned DR further submitted that the newly inserted Chapter XIV-B which prescribes the Special Procedure for Assessment of search cases clearly applies in all cases where action for search has been initiated after30- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (3) read as under: "158BA(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995, a search is 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 Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. (2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such, income or the transactions relating to such income are recorded on or before the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8B(b) is an inclusive definition and has a very wide connotation. It would, inter alia, include any income based on any entry in the books of account, or other documents or transactions, where such entry in the books of account, or other documents or transactions, represents wholly or partly income or property, which has not been or would not have been disclosed for the purposes of this Act. Thus, if an entry or transaction representing income has been shown as a liability or a loan, and not as income, it will come within the ambit of the definition of 'undisclosed income' given in section 158(b). Section 158BB(3) further provides that the burden of proving to the satisfaction of the Assessing Officer that any undisclosed income has already been disclosed in any return of income filed by the assessee before the commencement of search shall be on the assessee. 5(d). The provisions of section 158BA(3) as well as section 158BB(1)(d) also provides for exclusion from the aggregate of the undisclosed income of the block period of only that amount of income of the previous year for which the date of filing the return of income under section 139(1) has not expired, which has shown in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of Rubina. 5. That the bank account of Rubina was used only for the above purpose after January 1994 when the first accommodation was made and all the subsequent transactions were of this nature." Place:New DelhiFor Rubina Leasing Dated :19-9-1996Credits (P.) Ltd. Sd/ (G.S. Chhabra) Director" 6. The facts stated in the aforesaid note submitted by Shri G.S. Chhabra, Director of the appellant-company were supported by various documents found during the course of search as well as further documents submitted in the course of assessment proceedings. 6.1 A perusal of the statement of account of Rubina reveals that the appellant-company received cheques from the Rubina on various dates throughout the accounting period from28th January, 1994to30th March, 1994. The aggregate total of such cheques received from Rubina on different dates comes to Rs. 17,52,000. The assessee after a gap of couple of days of receiving each such deposit by way of cheque made repayment in cash with the narration that such cash has been deposited in bank account of Rubina Leasing. The aggregate payment debited in their account between January 1994 to31-3-1994comes to Rs. 13,67,000. A bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 Canara Bank23-3-199423-3-1994315000 250000 Canara Bank26-4-199426-4-1994380000 60000 Canara Bank28-4-199428-4-1994115000 110000 Canara Bank7-5-19949-5-1994225000 200000 Canara Bank9-5-19949-5-1994220000 210000 Canara Bank13-5-199414-5-1994250000 230000 Canara Bank21-5-199421-5-1994220000 215000 Canara Bank24-5-199424-5-1994320000 310000 Canara Bank27-5-199427-5-199460000 24000 Canara Bank6-6-19946-6-1994315000 300000 Canara Bank8-6-19948-6-1994370000 320000 Canara Bank10-6-199410-6-1994305000 300000 Canara Bank8-7-19948-7-1994440000 335000 Canara Bank22-7-199422-7-1994520000 460000 Canara Bank29-7-199429-7-1994310000 300000 Bank of Madura4-8-19946-8-199485000 100000 ------------------ 5191000 ------------------ *Balance of Rs. 15,000 deposited out of cash in hand. 6.3 The assessee has also submitted copies of bank statements of Canara Bank and Bank of Madura to prove the correctness of the fact that the amount as stated in the aforesaid chart were duly withdrawn by the assessee from their bank account. The appellant-company has also submitted copies of bank statements of M/s Rubina with Canara Bank showing that such cash was deposited o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g an addition of the said sum of Rs. 51,91,000 in the hands of the assessee as its income. The assessee has categorically submitted that M/s Rubina had no bank balance at the time when the cheques were issued in favour of the assessee-company. The assessee deposited the cheques in their bank account and on the security of such cheques, the bankers allowed encashment of the cheques issued by the assessee-company to outside parties. The assessee thus took the advantage of the clearing period of 3/4 days. The assessee, in the meantime, arranged funds and it had withdrawn the equivalent amount of cash from its bank account and deposited the same in the bank account of Rubina so that the cheques issued by Rubina in favour of the assessee-company could be cleared. It was purely an arrangement in the nature of temporary accommodation of funds by obtaining the cheque of a sister company. Since M/s Rubina did not have any taxable income, it was not necessary for them to file any return of income. Even assuming that Rubina had taxable income and they did not file their returns of income, this fact by itself cannot justify the addition of the said amount as income in the hands of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR did not point out any mistake or discrepancy in the aforesaid charts submitted on behalf of the assessee. 7.4 Furthermore the deposits in the bank account of Rubina have been made during the period from January 1994 to August 1994. The instances of cash deposits made in bank accounts given by the Assessing Officer pertaining to the month of September 1994 and September 1995 do not in any manner relate to any of the entries in the bank account of Rubina. The entries of deposits made in bank account of Rubina have been properly accounted for in the books of accounts maintained by the appellant. The sources for such deposits have been properly explained and all such entries are verifiable from the cash book, ledger and bank statements produced by the assessee. It is, therefore, beyond comprehension as to how the Assessing Officer has relied upon these two instances of September 1994 and September 1995 for supporting the aforesaid addition of Rs. 51,91,000. 7.5 Thus all the reasons given by the Assessing Officer in the assessment order while making the aforesaid addition do not in any manner support the erroneous conclusion arrived at by him for supporting the said addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1995. The date for filing the return of income under section 139(1) for the aforesaid year had not expired on the date of search. The provisions of section 158BA(3) clearly indicate that if income or the transactions relating to income are recorded before the date of the search in the books of accounts maintained in the normal course relating to such previous year, the said income shall not be included in the block period. The question relating to disallowance of a part amount out of expenditure recorded in the books of accounts in the normal course cannot be equated with an entry in the books of accounts establishing the existence of undisclosed income. The entries of expenses incurred by the assessee are duly verifiable from the regular books of accounts maintained by the assessee. No incriminating documents were found during the course of search indicating that the assessee has in any manner inflated the expenditure in question. On the other hand, a perusal of the order passed by the Assessing Officer reveals that cash amounting to Rs. 17,900 was found during the course of search, which has been accepted as fully explained and verifiable from the books of accounts. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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