TMI Blog2004 (9) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... hs being the share of undisclosed income from M/s. Khivsara Lunkad Co. available for investment and remained to have been considered for adjustment while disclosing investment at the time recording statement under section 132(4). (b) Claim of Rs. 4,50,000 on account of amounts erroneously declared as investment, though factually not invested in case of following parties: (i) Phiroz Mistry Rs. 1,00,000 (refer to question No. 10 page No. 8 of paper book), (ii) B.C. Porwal Rs. 1,50,000 (refer to question No. 7 page 2 of paper book), (iii) Navlakha Agency Rs. 1,00,000 (refer to question No. 7 page 2 of paper book), (iv) B.B. Raisoni Rs. 1,00,000 (refer to question No. 8 page 8 of paper book). (c) Not allowing claim of bad debts amounting to Rs. 3 lakhs written off in the books of account since the amount became irrecoverable from Porwal Builders Rs. 2 lakhs (page 60 para 3) and Sancheti Traders Rs. 1 lakh (page 13 para g). The said amounts have not been recovered till date. Further not allowing professional fee payable Rs. 10,000 and professional tax Rs. 600. The assessment was completed by the Assessing Officer under section 143(3) on an income of Rs. 51,18,368 by not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced to Shri Jal Firoz Mistry, it was submitted that the assessee had given Rs. 1,00,000 to Jal Firoze Mistry and his wife Sou. Firoza Firoze Mistry on 11-7-1991, but after three months they repaid the amount of Rs. 1,00,000 as the deal could not be completed and all these happened before the search. The Assessing Officer was not satisfied with this explanation and stuck to the point since the assessee had made a declaration of Rs. 35 lakhs during the course of search, the same has to be added. 5. The assessee appealed to the ld. CIT(A) and reiterated the submissions made before the Assessing Officer. The CIT(A) was not satisfied and held that after considering the facts and circumstances "in their entirety" he was inclined to agree with the findings of the Assessing Officer that the amount declared originally under section 132(4), viz- Rs. 35,00,000 has to be adopted since all the contentions raised are "after thoughts and not supported by any acceptable documentary or circumstantial evidence". 6. Shri N.C. Khandelwal, the learned counsel for the assessee has filed Paper Book No. 1, Paper Book No. 2 and Paper Book No. 3 containing pages 1 to 65,1 to 5 and 1 to 29 respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him. The learned counsel submitted that it may be noted that at the time of recording of statement under section 132(4), the assessee had not declared the amount which was paid to Shri B.C. Porwal, but had stated the amount which was receivable as per his calculations as on the date of search. He submitted that Rs. 1,50,000 was never realised or admitted by Mr. Porwal and accordingly, the authorities below ought to have accepted the contention of the assessee that only Rs. 5 lakhs was due from Shri Porwal instead of Rs. 6,50,000. The learned counsel further submitted that the amount paid to Jal Phiroz Mistry of Rs. 1,00,000 had been recovered within three months which is prior to the date of search. In this connection, he drew our attention to answer to question No. 10 appearing on page 8 of the paper book. As regards the declaration of Rs. 10 lakhs by the firm M/s. Khivsara Lunkad Co. the learned counsel submitted that the said firm had declared Rs. 10 lakhs as its undisclosed income and was so assessed in the case of the said firm. The assessee has received Rs. 5 lakhs from such undisclosed income towards his share. The other partner Shri B.B. Lunkad also received similar am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5 lakhs from such undisclosed income towards his share. The other partner Shri B.B. Lunkad also received similar amount from the said source. Accordingly, this amount was available with the assessee for the purpose of investment. This Tribunal in the case of the other partner, namely Shri B.B. Lunkad on similar facts has held that the amount of Rs. 5 lakhs received as his share from the firm's undisclosed income was available. Following the aforesaid order of the Tribunal placed at page 58 of the paper book and the reference application filed by the Revenue having been rejected, we hold that there is no justification for the addition of Rs. 5 lakhs. The Assessing Officer is directed to exclude the same because there cannot be double taxation. 10. After perusing the reconciliation statement filed by the learned counsel and after perusing Annexure-D to the statement under section 132(4) and after perusing confirmation letters from M/s. Navlakha Agency and M/s. B.B. Raisoni Sons, which have not been rebutted either by the Assessing Officer or by the CIT(A), we hold that there were no payments made for the so-called deals made to M/s. B.B. Raisoni Sons and M/s. Navlakha Agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 10 appearing on page 8 of the paper book. Accordingly, this fund was available with the assessee for making investment before the date of search. At the time of recording of the statement under section 132(4), the assessee had mistakenly offered Rs. 1,00,000 as the amount receivable from Jal Phiroz Mistry and his wife Sou. Firoza Firoze Mistri which in fact was already received. Accordingly, this amount of Rs. 1,00,000 is not considered as forming part of the undisclosed income. The addition of Rs. 1,00,000 is accordingly deleted. 12. Now, coming to the arguments of the learned D.R. that till today no retraction has been made, we do not find any merit in the same. No doubt, during the course of statement under section 132(4) the assessee did declare undisclosed income of Rs. 35 lakhs, but on further examination of his state of affairs and accounts he realised his mistakes and accordingly in the return of income he declared only an income of Rs. 25,98,061. That amounts to retraction and all-through the assessment proceedings before the Assessing Officer the assessee maintained that he had erroneously declared certain investments as undisclosed income and he also furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , no books had been maintained) as per provisions of section 36(1)(vii), the claim of bad debts of Rs. 3 lakhs was not allowable. As regards Rs. 10,000 on account of professional fees and Rs. 600 on account of professional tax, the Assessing Officer disallowed the same as no proof of payment had been submitted before him. 15. On appeal, the ld. CIT(A) confirmed the additions accepting the reasons given by the Assessing Officer for making disallowances. 16. Shri N.C. Khandelwal, the learned counsel for the assessee, submitted that the assessee was doing business of dealing in real estates and had stated so during the assessment proceedings. He drew our attention to the assessee's letter to the ACIT, Inv. Cir. 1(1)and submitted that the assessee had given details of deals made with people for his real estate business. These facts have never been rebutted by the Assessing Officer and the ld. CIT(A) has simply stated that the assessee is not carrying on any real estate business without giving any finding to this effect. The learned counsel submitted that during the course of hearing the assessee had submitted copies of agreements entered into with different parties for entering int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the disallowance of Rs. 10,000 on account of professional fees and Rs. 600 on account of professional tax, the learned counsel submitted that the Assessing Officer had never questioned about the provisions of expenses claimed in the statement of income. After receiving the assessment order, it was noticed by the assessee that the claims had not been allowed. The assessee had not been given any benefit of the reasoning for disallowance of this claim as it is neither mentioned in the assessment order nor was it ever questioned to the assessee during the assessment proceedings. The assessee, during the first appeal, submitted that there is no requirement as per law to attach any proof for claiming such expenses as provisions as stated by the Assessing Officer during the course of appeal proceedings. This fact was brought to the notice of the CIT(A) vide its letter dated 20-10-1994 appearing on page 60 para 3 of the paper book. According to the leaned counsel, in fact, the professional charges were paid by the assessee in the subsequent year against such provision. 17. Shri K. Srinivasan, the learned D.R. strongly supported the orders of the authorities below. 18. We have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 20.96 lakhs including the cost of the land of Rs. 3.83 lakhs. The assessee obtained a valuation report from the approved valuer who certified that the cost of construction was Rs. 14.88 lakhs. In the course of search, the assessee had made declaration of income of Rs. 4.25 lakhs towards the cost of construction in addition to his cost of construction recorded in his books. It was pleaded before the Assessing Officer that since the assessee had shown the cost at Rs. 20.96 lakhs as against Rs. 14.88 lakhs worked out by the registered valuer, the cost shown by the assessee be accepted. The Assessing Officer, however, referred the matter to the Valuation Officer who put the cost at Rs. 28,75,000. The assessee submitted before the Assessing Officer that the reference to the Valuation Officer was not in order because the value of the property being more than Rs. 20 lakhs, it should have been referred to the District Valuation Officer and further that the Valuation Officer had not given proper opportunity and had estimated the cost of construction at an exorbitant figure of Rs. 28.75 lakhs without considering the objections of the registered valuer of the assessee. The Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also communicated the details of actual cost incurred by the assessee vide letter received by the Valuation Officer's office on 11-8-1993 which is appearing at page 35 of the paper book. According to the learned counsel, since the assessee was maintaining records in the form of books and vouchers for the construction of the bungalow, there was no scope for making any addition, unless such details were found false or incomplete by the Valuation Officer. In support of this contention, he placed reliance on the decision of the Hon'ble Rajasthan High Court in the case of CIT v. Hotel Joshi [2000] 242 ITR 478. The learned counsel further submitted that the Valuation Officer in fact should not have based his valuation adopting CPWD rates since the construction had been done by a private party. The report of the Valuation Officer as appearing on page 28 of the paper book clearly shows that the valuation is based on CPWD valuation rates. In support of this contention, he placed reliance on the decision of the Cochin Bench in the case of Upasana Hospital Nursing Home v. ITO [1989] 31 ITD 177, Shekhar Chand Jain Sons v. IAC [1988] 32 TTJ (Delhi) 570 and ITO v. Smt. Santosh Khanna [1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 234A as, according to him, the return was filed late. It has been pointed out by the representative of the assessee that due date for filing the return under section 139(1) was 31-10-1991. 31st October, 1991 was Saturday and 1st November, 1991 was Sunday. Both the days were closed days and holidays and as such return was filed immediately on the next working day i.e., on Monday, the 2nd November, 1991 which should have been considered as filed within the time limit prescribed under section 139(1) of the Act as per the Circular No. 639 dated 13-11-1992 issued by the CBDT appearing in 199 ITR (St.) 1. 28. The above factual position given by the learned counsel is correct and accordingly, we hold that there is no interest chargeable in this respect for such a delay in filing the return as the return was filed in time. We accordingly direct the Assessing Officer to delete the interest charged under section 234A. 28A. Ground No. 5 reads as under: "The appellant prays to be allowed to add, rectify, modify, delete any grounds of appeal at the time of hearing." Obviously, this ground is general in nature and calls for no comments. 28B. On 8-8-2001, the assessee moved the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, we decline to interfere. This additional ground raised by the assessee is accordingly dismissed. 30. In the result, the appeal is allowed in part. ITA No. 460PN/1995-Asst. year 1992-93 Per U.B.S. Bedi, Judicial Member 31. I have had an occasion to through the order of the learned Accountant Member and despite my best persuasion to myself, I have not been able to fully agree with the proposed order passed by the learned Accountant Member and I proceed to write my dissenting order with respect to findings and conclusions drawn by him in deleting the following additions: (1) Rs. 5.00 lakhs being the share of undisclosed income from M/s. Khivsara Lunkad Co. available for investment and remained to have been considered for adjustment while disclosing investment at the time of recording statement under section 132(4). (2) Claim of Rs. 3,00,000 on account of amounts erroneously declared as investment, though factually not invested in case of following parties: --------------------------------------------------- (a) Phiroz Mistry Rs. 1,00,000 (b) Navlkha Agency Rs. 1,00,000 (c) B.B. Raisoni Rs. 1,00,000 ------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non-availability of Rs. 5.00 lakhs on pages 3 and 4 of his order while confirming the action of the Assessing Officer and not accepting the plea of the assessee as under: "In response to the above claim of the appellant, the learned Assessing Officer reported that the declaration in the case of M/s. Khivsara Lunkad Co. had been made on account of transactions not recorded in the books of account. In the case of the assessee, the declarations were made in the nature of unaccounted investments. It was thus argued by him that Rs. 5.00 lakhs which the appellant claimed to have included in his declaration of Rs. 35 lakhs cannot be justified in any way. As regards the appellant's claim that Rs. 5 lakhs out of the declaration of Rs. 10 lakhs made in the case of the firm was available with him and was used to make investments in the residential property and real estate business, the learned Assessing Officer stated that in his return of income the appellant has not submitted his capital account in the firm M/s. Khivsara Lunkad Co. However, the appellant's capital account has been submitted during the course of assessment proceedings in the case of firm M/s. Khivsara Lunkad and Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence it cannot be added in the income of the assessee. The learned D.R. relying upon the basis and reasoning as given by the CIT(A) has pleaded for conformation of the impugned order in this regard. 36. Having heard both the parties and going through the record, I find that as per the question Nos. 8, 9, 10, 11, 13 and 16 and answers thereof of the statement recorded on 17-12-1991 placed at pages 8 and 9 of the paper book, the addition has been made as the assessee was not able to explain how this amount was spent as the same was not added in the account books. The relevant questions and answers as noted above are reproduced as under: Q.No.8: Today while taking search at your residence in your residence sixteen cheques were obtained as per Annexure D. To whom these cheques belong and why these cheques are taken? Are there any other deals than this? Ans.: I have seen the list of sixteen cheques as per Annexure-D. These cheques are given to me by these persons against the loan amount given by me to them. Other than these persons I have made deals with B.B. Raisoni and Sons and Navlakha Agencies from Pune for Rs. 1 lakh each. Out of total of Rs. 21,50,000 as per Annexure-D, Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and when was made available? Ans.: I brought this total Rs. Thirty one lakh and twenty thousand from my business and the same was available in the current financial year. Q.No. 16: Now I am explaining to you section 132(4) of Income-tax Act in respect of voluntary declaration of income. You have stated that you have understood them/whether you have to state anything giving regard to this provision? Ans.: Giving regard to these provisions I have to state that the mistake made by me e.g. the deals not shown in the books and to compensate the same as per the answer of question Nos. 13 to 14 of concluding statement Rs. 31,20,000 (Rs. Thirty-one lakhs twenty thousand only) and Rs. 3,80,000 (Rs. three lakhs eighty thousand only) expended for the construction of business in Ruturaj Society, I voluntarily declared as extra income of the current year. On the said amount no interest and fine may be calculated. I will pay the tax on this extra income and I want to make the prayer that no cross to be resumed immediately in respect of the deals of the cheques because if so done I will be in difficulty in getting the said money and I will not be able to pay the income-tax in time. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the order of the Accountant Member in deleting the addition of Rs. 1,00,000, with respect to Navlakha Agency and B.B. Raisoni, each, is justified or the order of the J.M. in restoring the matter back on the file of the Assessing Officer in this regard is justified. 3. Whether on the facts and in the circumstances of the case, the deletion of Rs. 1,00,000 found to have been given to Phiroz Mistry stated to have been received back within three months from the date of search is justified in view of the admission made by the assessee, the same is required to be confirmed?" Per Chhibber, Accountant Member - As there is a difference of opinion between the Accountant Member and the Judicial Member, the matter is being referred to the President of the Income-tax Appellate Tribunal with a request that the following questions may be referred to a Third Member or to pass such orders as the President may desire: 1. Whether on the facts and circumstances of the case, the CIT(A) is justified in confirming the addition of Rs. 5,00,000 being the share of undisclosed income from M/s. Khivsara Lunkad Co. 2. Whether on the facts and circumstances of the case, the order of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and unjustified and is requested to be deleted. Just and proper relief be granted to the appellant in this respect." 3. While deciding the issue, the Tribunal held: ".....Since the additional income of the firm was outside its books, that income could have been withdrawn by the partners only outside the books. We, therefore, see no merit in the reasoning of the Assessing Officer that since the withdrawals by the assessee in the books of the firm were not sufficient to explain the investment in ornaments and shares etc. it should be presumed that these investments were made not out of the assessee's share of profit in the additional income declared by the firm. There is sufficient force in the argument of the learned counsel that since the additional income in the case of the firm did not appear in the books of the firm, utilization of the same income could only be outside the books of the firm...." 4. It is pertinent to note that M/s. Khivsara Lunkad Co. made the declaration of Rs. 10,00,000 as its undisclosed income. It was assessed accordingly in the hands of the firm. The assessee had 50% share in the said firm. Ex consequenti, the assessee did receive Rs. 5,00,000 from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, the maxim of "Audi Alteram Partem" was not followed by the Assessing Officer. In a case where the flaw in the order appealed against consists of in the non-observance of certain procedure or in not giving effect to the maxim "Audi Alteram Partem" the impugned order should not be quashed. Infirmity crept in the order should be directed to be cured. Assessing Officer should be directed to follow the rules of procedure and principles of natural justice. This view was taken by the Hon'ble Supreme Court in the case of Guduthur Bros. v. ITO [1960] 40 ITR 298. This is so because breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the authority concerned. 9. No doubt, the infirmity affecting the validity of the order could also be cured by the Tribunal. In that eventuality, the Tribunal should call both the parties and after hearing the matter, decide the issue in accordance with the principles of natural justice. On removal of the infirmity, the original order merges with the appellate order and such appellate order shall validly govern the matter. 10. This was not done. Instead, the order was quashed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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