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TMI Blog2008 (1) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 158BC/BA of the Act in absence of any valid search conducted on 9-6-2002 and assessment pertaining to block period from 1-4-1995 to 9-6-2002 completed on the absence of infructous and illegal notices orders passed under section 132B of the Act. 3. On the facts and circumstances of the case of Ld. CIT(A) has erred in confirming validity of assessment order passed under section 158BC/BA of the Act without invoking provisions of section 158BD at any time during assessment proceedings or passing the block order assessment under the aforesaid provisions. 4. On the facts and circumstances of the case of Ld. CIT(A) has erred in confirming the arbitrary justification of the Ld. Assessing Officer that adequate opportunities to substantiate the block returns was provided to the appellant. 5. On the facts and circumstances of the case of Ld. CIT(A) has erred in confirming the entries in the bank account of the appellant as income from undisclosed sources without concretely establishing any undisclosed sources of the appellant from the seized material. 6. On the facts and circumstances of the case of Ld. CIT(A) has erred in rejecting on flimsy grounds the submissions of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AR for the assessee before us is that in the instant case, at most, the assessment could be framed against the assessee under section 158BD on the basis of the documents found during the search conducted in the case of her husband, i.e., Shri Syyed Iftikar Gilani on that very day, but, in that case the satisfaction was required to be recorded by the Assessing Officer and since the same had not been done by the Assessing Officer in the case of the assessee, Shri Syyed Iftikar Gilani, even assessment under section 158BD would be illegal and invalid. Another point raised by the learned AR for the assessee was that the department has placed on record the authorization for search issued by Joint Director (Investigation) and the same is not a valid authorization as under section 132(1) authority to take action for search is Director of Income-tax (Investigation). In support of the contentions, learned AR for the assessee relied upon the following cases:- (a) Mrs. Raj Bala Moudgil v. Dy. CIT [2004] 1 SOT 551 (Delhi) (b) Dr. Nalini Mahajan v. DIT (Inv.) [2002] 257 ITR 123 (Delhi) and (c) CIT v. Ms. Pushpa Rani [2007] 289 ITR 328 (Delhi). 8. On the other hand, learned DR for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the same was of no help to the assessee. He further contended that since the assessment under section 158BC/BA of the Act has been framed on the basis of valid authorization, the assessment framed by the Assessing Officer is valid and in view of this fact, there was no question of the assessment being framed by the Assessing Officer under section 158BD of the Act and the arguments of the assessee relating to framing of assessment are of no consequence. 9. We have considered the rival contentions of both the parties, perused the records and carefully gone through the orders of the tax authorities below as well as the case laws relied upon by the learned AR for the assessee on this issue. 10. In the instant case, one of the objections raised by the learned AR for the assessee before us is that the authorization issued by Joint Director (Investigation) dated 10-6-2002 was not a valid authorization under section 132(1) because under the Act only DI (Investigation) was autho- rized to issue such search. Now, in order to consider this contention of leaned AR for the assessee, we have to look into the entire facts of the case in which the search had been conducted at the premises in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CBDT clarified that the Notification F. No. 286/343/89-IT (Inv. II), dated 11-10-1990 would apply mutatis mutandis as it was issued for the Notification dated 6-11-1979 clarified by a covering letter by which the scope and powers vested through the said notification were clarified. Therefore, CBDT through the latest Notification dated 11-10-1990 em-powered and authorized all the DDIs (Inv.) posted under Director General of Income-tax (Inv.) or posted under Director of Income-tax (Inv.) to take action under sub-section (1) of section 132 of the Act. However, their scope and powers are limited by a clarificatory letter issued by CBDT on 31-1-1992 wherein the Board specifically mentioned that the powers should be exercised strictly in a limited manner confined to consequential searches only. 12. Now, we proceed to decide the issue whether the search warrant issued by JDI (Inv.) in the name of assessee, Smt. Aneesa Baitool is in compliance with the directions issued by CBDT in Notification F. No. 286/343/89-IT/Inv.II, dated 11-10-1990 wherein CBDT empowered DDI (Inv.) to take action under sub-section (1) of section 132 of the Act in a strictly limited manner confined to consequential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich a search on 'B' is necessitated. Now, we again revert to the facts of the instant case of the assessee, Smt. Aneesa Baitool Gilani. A search in the case of Shri Iftikhar Gilani, husband of the assessee, was conducted on 9-6-2002 under authorization issued by DI (Inv.). During that search a key of a bank locker belonging to his wife, the present assessee Smt. Aneesa Baitool Gilani, was found and in a statement recorded on oath on that very day under section 132(4) some relevant information and material was disclosed by Smt. Aneesa Baitool Gilani on account of which it was felt necessary by the department for conducting a search on Smt. Aneesa Baitool Gilani, the wife of Shri Iftekar Gilani, so, a restraint order dated 9-6-2002 against the operation of the bank locker was passed under the same authorization of DI (Inv.) and thereafter on 10-6-2002 an authorization to conduct search of the bank locker belonging to Smt. Aneesa Baitool Gilani, wife of Sh. Iftekhar Gilani who was living in the same premises was issued by JDI. 14. Hence, in our onion, in the existing facts, the authorization issued by JDI (Inv.) to conduct search on the bank locker of the assessee Smt. Aneesa Baitool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was any question of considering the fact of consequential search. Further, the warrant of authorization under consideration before the High Court was the warrant of authorization issued when the survey was converted into search. In these facts, Their Lordships have held that the search warrant issued by the ADI (Inv.) under section 132(1) to be invalid because Notification dated 6-9-1989 empowered only the Director of Investigation to issue authorization for search and seizure operation all over India and in that Notification ADI (Inv.) or JDI were not included as authorities for issuing the warrants of authorization. In that case, Their Lordships had not said that CBDT had no power to issue notification empowering ADI/JDI/DDI (Inv.) to issue warrants of search thereafter. In the light of the letter Notification issued by CBDT dated 11-10-1990, which clearly empowered even DDI (Inv.) to issue authorization for search under section 132(1) of the Act in cases of consequential searches the facts of the instant case are distinguishable from that of the case Dr. Nalini Mahajan (supra) decided by Hon'ble Delhi High Court. The Ground Nos. 1 to 3, of the assessee's appeal, are rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together with list of people from whom some petty gifts on various occasions had been received and not even in one case the submissions had been proved incorrect on cross verification by the department. Treating such amounts received as undisclosed income without even a single entry having been proved incorrect, the conclusions are mere presumptions neither borne by facts nor by documentary evidence. Further, that in absence of any remotest link established to prove any undisclosed sources of income, when neither the search had yielded incriminating evidence to prove undisclosed income nor the department has placed on record any incriminating evidence of any undisclosed income the learned Assessing Officer had proceeded arbitrarily in finalizing the assessment by treating all deposits in bank(s) as undisclosed income. 22. On the case of Hemalatha D. Shah v. Dy. CIT [2004] 1 SOT 857 (Bang.) wherein the Tribunal has held that the assessment order under provisions of Chapter XIV-B envisages block assessment on concrete and tangible evidence in support of unaccounted income and not on surmises and conjectures which is against the spirit of block assessments. 23. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties, perused the records and carefully gone through the orders of the tax authorities below as well as Paper Book Pages 43-45 wherein, according to the learned AR for the assessee, the deposits representing savings from household expenses, from tuition income earned by the assessee and gifts received by the assessee on festivals and on the birthdays of her children have been explained. 28. In this case, we may reiterate that the bank deposits were unearthed by the search party during the search and these would not have seen the light of the day had there been no search on the assessee because the deposits were never disclosed by the assessee before the date of the search. We have also mentioned that in a case of block assessment only explanations supported by cogent evidence can be accepted for considering whether those explanations are satisfactorily explaining the deposits found recorded in the bank pass books. 29. In the case of Smt. Dhanvidya A. Dalal v. CIT [2007] 294 ITR 277 (Bom.), jewellery was found from the locker of the assessee during the search. The contention of the assessee was that jewellery was inherited by her from her father. Their Lordships observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he returns filed within the said time should also be treated as returns filed within the meaning of expression 'due date' under section 158BB of the Act. The assessee also contended that the deduction of expenses for Rs. 3,20,000 for assessment years 1991-92 to 1995-96 should have been allowed having regard to the fact that the deduction of the expenses to the tune of Rs. 1,35,000 had been allowed for assessment year 1995-96. The Tribunal rejected both the contentions. On appeal, Their Lordships of Punjab & Haryana High Court dismissing the appeal of the assessee held (i) that the Tribunal has recorded a finding that the claim of deduction could not be proved by the assessee by relevant evidence. The disallowance of expenses was, therefore, justified; and (ii) that no advance tax or self-assessment tax had been paid at the relevant time. In such a situation, the return filed under section 139(4) of the Act could not be taken into account. 32. From the ratio of the decision (supra), it emerges- (1)That, in a block assessment mere explanation of the assessee is not sufficient for justifying the investments or expenditures or income unless supported and proved by cogent evidence by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 158BC/BA of the Act was passed by the Assessing Officer on 15-6-2004, whereas, the returns for assessment year 2002-03 was filed on 28-3-2003 and for assessment year 2003-04 was filed on 29-3-2003 and assessments were completed under section 143(3) of the Act on 11-2-2005 and 27-2-2006, respectively as per record, accepting the income returned by the assessee. 36. The assessee had not filed any return before the search and seizure operation but declared her taxable income for assessment year 1997-98 to 2003-04 in Form No. 2B at Rs. 36,000; Rs. 18,000; Rs. 21,156; Rs. 51,211; Rs. 64,640; Rs. 74,618 and at Nil as detailed in the order of the Assessing Officer. The income declared by the assessee as detailed above exceeds the maximum amount not chargeable to tax and no tax, no return of income and no advance tax or self-assessment tax has been paid till the relevant time and no return of income was filed by the assessee before the search and seizure operation. 37. Now, the grievance of the assessee regarding these assessments is that the Assessing Officer assessed and taxed the income for these assessment years twice, first under section 158BC of the Act because the returns for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period." From reading the Explanation 'C' to section 158BA(2) of the Act, it becomes clear that the explanation has been introduced to clarify that the block assessment would be in addition to regular assessment in each of the previous years included in the block period and that what is included in the block period cannot be subjected to regular assessment. Section 158BA is charging section and as far as block assessment is concerned it is to be made in accordance with Chapter XIV-B of the Act and the section empowers the Assessing Officer to assess statutorily 'the undisclosed income'. The sub-section (2) makes it further clear that the undisclosed income of block period will be charged at the rate specified under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es recorded in the bank pass book cannot be treated as entries made in the normal course as the bank Pass Book is maintained by the bank and not by the assessee and, but for the seizure of bank pass book, these transactions would not have been disclosed by the assessee. Therefore, the Assessing Officer was justified in coming to a conclusion that the assessee had failed to discharge the onus to prove to the satisfaction of the Assessing Officer that the entry was made in a normal course. It means that in view of the facts of the instant case and discussions with regard to relevant provisions hereinabove that under both the provisions, i.e., section 158BA(3) of the Act and as per Explanation 'C' to section 158BA(2) of the Act no benefit can be given to the assessee for the regular assessment made by the Assessing Officer under section 143(3) of the Act in respect of assessments for assessment years 2002-03 and 2003-04. For the reasons narrated above, the order of CIT(A) in this regard is upheld and Ground No. 6 of the appeal of the assessee is rejected. 41. Now we shall deal with Ground No. 2 of the appeal of the revenue relating to the issue of adoption of the valuation of the fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 13 lakhs as taken by the Assessing Officer and held that the amount of Rs. 2.5 lakhs incurred by the assessee was made out of disclosed sources and deleted the addition of Rs. 2.5 lakhs by making following observations in his order:- "The Assessing Officer had taken the price of the flat at Rs. 13 lakhs only on the statement of Mrs. Anisha Batol Gilani which has been retracted later. However, the appellant maintained that only an amount of Rs. 2.5 lakhs was paid and is evidence by the registered sale deed. The issue to be decided is whether the amount mentioned in the sale deed or the amount adopted by the Assessing Officer on the basis of statement made under section 132(4) is correct. In this regard, the Assessing Officer has not brought any other evidence during the course of assessment proceeding other than the statement made by the appellant. The appellant retracted the statement made earlier and submitted that the flat was purchased at Rs. 2.5 lakhs only. During the course of search operation also no corroborative evidence or documents were found to substantiate that the appellant had actually paid Rs. 13 lakhs not Rs. 2.5 lakhs for the flat in question. Department also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e? Answer My locker which I have stated above contains cash of Rs. 40,000 which belongs to my sister-in-law, Ms. Urui Gilani and apart from this 100 $ (US) and 60 GBP (UK) are lying there which belong to my sister, Farhat, who lives in Jeddah, Saudi Arabia and some jewellery which belongs to me. I have nothing to say any more and at the end of the statement a certificate has also been appended which is given below:- "I have read the above statement and found it correct. Statement has been recorded without any undue threat, duress or coercion." 46. Learned DR for the revenue further contended that since the assessee is a person who owns this flat so it was only within her knowledge as to how much over and above the recorded Registered Sale Deed price of Rs. 2,50,000 was paid and that is why she was able to state on oath that the amount of Rs. 13 lakhs paid by her for the purchase of this house. Hence the figure of Rs. 13 lakhs as purchase price of the flat should be taken as correct. In case, later on, she states that the purchase price was Rs. 2.5 lakhs and not Rs. 13 lakhs then the burden lies on her to prove the same by producing the evidence but except her statement she has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This statement was not witnessed by any person except the Police Official so this statement was recorded under duress. This statement has been retracted by the assessee before the Income-tax Officer on 7-6-2004 stating that the said property was purchased by her for Rs. 2,50,000. He further submitted that in response to Question No. 7, she has clearly stated that "I do not know how the figure of Rs. 13 lakhs was written but the property was purchased for Rs. 2,50,000. He further submitted that even her retracted statement was corroborated by her husband, Mr. Iftikhar Gilani, whose statement was recorded on the same date, i.e., 9-6-2002 wherein in reply to Question No. 10; he stated that "this property was purchased in the name of my wife somewhere in March 2001. I do not exactly remember the other details. However, the cost of the acquisition was roughly Rs. 2 to 3 lakhs. Lastly, according to the learned AR for the assessee while completing the assessment for assessment year 2002-03, the Assessing Officer has himself accepted the capital gain shown by the assessee at Rs. 2,20,500 and her claim of exemption under section 54F of the Act for the purchase of the said property and as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 under section 132(4) of the Act during the course of the search, wherein she stated that the flat in question was purchased by her for a sum of Rs. 13 lakhs and the subsequent statement wherein she stated before the Assessing Officer that the flat was purchased for the recorded registered sale deed price of Rs. 2.5 lakhs and not for a sum of Rs. 13 lakhs. We may mention that the statement made first by the assessee on oath stating the purchase price of the flat at Rs. 13 lakhs has an evidentiary value for the purpose of making the block assessment. In our this view, we find support from the decision of the Apex Court in the case of Pullan Gode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 , wherein Their Lordships held that an admission is an extremely important piece of evidence though it is not conclusive and that it was open to the person to make an attempt to show that it was incorrect. Relying on the above mentioned decision (supra) of the Apex Court Their Lordships of Allahabad High Court in Dr. S.C. Gupta's case (supra) held that- "a statement made voluntarily could form the basis of assessment. The mere fact that the assessee retracted the statement could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ials were the witnesses of the assessee's statement under section 132(4) of the Act during the search, the same has evidentiary value unless proved under coercion, threat or inducement. 56. Now, reverting to the facts of the instant case and on examining the statement of the assessee recorded on 9-6-2002 under section 132(4) of the Act, we find that to a query regarding the purchase amount of the flat the assessee replied that it was purchased for a sum of Rs. 13 lakhs. In her retracted statement, the assessee simply stated that the flat was purchased for a sum of Rs. 2.5 lakhs as per the registered sale deed and not for a sum of Rs. 13 lakhs as stated earlier. We would like to observe that in underhand dealings wherein a person pays a sum over and above, the recorded registered sale deed price is only in the knowledge of the person, first, who paid the price or, second, the person who received that amount, i.e., the seller. We again observe that both these persons, i.e., seller and purchaser do not want to disclose that amount because then the purchaser has to explain the source of the investment and the seller has to pay tax thereon. Incase the person neither pays the sum over a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to prove that in fact the actual price of the flat was the recorded sale deed price at Rs. 2.5 lakhs and not Rs. 13 lakhs as stated by her earlier. Neither any cogent material nor any evidence has been brought on record by the assessee to prove the retracted statement to be correct. Similarly, the assessee has not led any evidence to prove that her statement under section 132(4) of the Act was recorded by the revenue department under threat, pressure or influence. It is a vague allegation which does not have any significance because the assessee has neither given the name of the police personnel or the officer of revenue department who exerted coercion, threat or influence on her to make such statement nor has filed any report against any such person with the higher officials to prove the genuineness of the allegation. 60. Hence, in the above discussed facts, the retracted statement of the assessee cannot be relied upon. On the contrary the earlier statement made under section 132(4) of the Act admitting the purchase price of the flat at Rs. 13 lakhs neither seems to be recorded under coercion, threat or influence nor it appears to be non-voluntary, so, in the light of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in the block assessment. Consequently, the order of the Assessing Officer in this regard is upheld and that of CIT(A) in holding the purchase price of the flat at Rs. 2.5 lakhs and treating the same as duly explained is reversed. Accordingly, the Ground No. 2 of the appeal of the revenue is allowed. 64. Now, we shall take up Ground No. 3 of the revenue's appeal relating to the issue of addition made on the basis of seized paper on which it was written 'bill'. 65. Briefly, the facts relating to the issue are that during the course of search and seizure operation a hand written bill amounting to Rs. 1,10,750 was seized as Annexure-A5 Page 33 which was for woodwork and other renovation of the property at the residence of the assessee. The Assessing Officer asked the assessee to explain the source of these expenses. The assessee replied that the referred pages were not a bill but was only an estimate given by a carpenter whom the assessee had called to make certain wooden fixtures to be replaced at her residence by teak board instead of ordinary commercial board already existing at her flat. Further, according to the assessee the estimate was quite heavy; therefore, the job was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified the payment and also the payee since there was none to be verified. The department also could not find anything to prove that actual wood work was done in the flats. If it was already done, same would have been visible and noted by the search party or valuation could have been done to verify the correctness of the amount mentioned in the estimate. On this ground, I am inclined to agree with the view and explanation given by the appellant. I am of the considered opinion that the rough paper noting could only be taken as estimate of work. Entries in loose sheets are of no evidentiary value unless there are other corroborative evidences, direct or indirect. In this case there is no other corroborative evidences. Therefore, no addition on his account could be made. The addition made by the Assessing Officer of Rs. 1,10,750 is directed to be deleted and appellant gets relief of the same." 68. Before us, learned DR for the revenue relying upon the reasoning given in the order of the Assessing Officer submitted that the Assessing Officer on the basis of the seized paper wherein at the top of the page the words 'Bill for Wood Work' was mentioned giving minute details of the wood ..... X X X X Extracts X X X X X X X X Extracts X X X X
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