TMI Blog2008 (1) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order passed under 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same is required to be quashed. The other point raised by learned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR for the revenue contended that the case law given by the assessee was distinguishable on facts, and, hence, 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax (Investigation) to take action under sub-section (1) of section 132 of the Act. Again vide letter dated 31-1-1991, 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 DD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of B even if as a result of search in the case of A on the 1st authorization, material is found against B on the basis of which 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 onio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alini Mahajan ( supra ), it was a case of survey converted into a search and seizure operation and, hence, neither these could be any consequential search nor there 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 di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1998-99, Rs. 1,38,000 for assessment year 1999-2000, Rs. 92,000 for assessment year 2000-01 and Rs. 62,600 for assessment year 2001-02 were incomes from undisclosed sources without cross verifying the explanations for each credit submitted by the assessee along with relevant supporting evidence. Further, that the assessee had duly submitted details of each and every credit in bank account 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 ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from her husband the CIT(A) treated this amount as explained and allowed a relief to this extent to the assessee but sustained the balance addition of Rs. 2,89,000 on account of unexplained cash deposits because these amounts were relatively, big as detailed in the order, and finding the explanation of the assessee regarding those deposits as unsatisfactory." 27. 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 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. The assessee was earning commission income from encashment of demand drafts. The assessee filed returns after search and seizure from assessment years 1994-95 and 1995-96. The Assessing Officer treated the income disclosed by the assessee as undisclosed income under section 158BB of the Act. The contention of the assessee was that the returns filed by the assessee were within the time allowed under section 139(4) of the Act and the 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, j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently, Ground No. 1 of revenue s appeal is allowed and Ground No. 5 of assessee s appeal is rejected. 34. Now, we shall deal with Ground No. 6 of the appeal of the assessee relating to the issue of clubbing the income for the assessment years 2002-03 and 2003-04 with block assessment in view of the provisions of section 158BA(3) of the Act. 35. In brief, the facts relating to the issue are that in the instant case the order in a block assessment under section 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block period; ( b )the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; ( c )the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. Sub-section (3) of section 158BA reads as under: "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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn. The question would again arise whether it would cover all the entries in the books or evidenced by documents or only those which but for the search the assessee would have disclosed or had already disclosed. 40. In the instant case, the assessee was not filing regular returns of income for the assessment years prior to the block period and that what is included in the block period is the amount represented by the bank entries recorded in the bank pass book and unearthed during the course of search. The entries 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time the statement was recorded. Accordingly, the assessee retracted the statement recorded under duress and the Assessing Officer recorded a fresh statement on 7-6-2004 in which she stated that it was purchased for Rs. 2.50 lakhs and hence this statement recorded on 9-6-2002 during search has no relevance whatsoever and any reliance thereof is nullity in the eyes of law. 44. On considering the detailed submissions of the assessee, the CIT(A) treated this flat to have been purchased by the assessee for Rs. 2.5 lakhs instead of Rs. 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 statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned that this flat was purchased by her in April and June 2001 for a consideration of Rs. 13 lakhs and she has kept the papers of this property in Locker of the Bank of Punjab Ltd. Learned DR for the revenue further submitted how such a statement could be under duress or under coercion when while making the statement the assessee was quite specific in giving the details of the articles kept in the locker which becomes clear when we read the answer given by her to Question No. 13 as under: Question No. 13 Do you want to say anything more? 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 (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 ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] 248 ITR 782 (All.) (5) Surjeet Singh Chabra v. Union of India 1997 AIR SC 2560. Wherein Their Lordships held that the statement recorded before the Customs Officials, even if retracted subsequently, had evidentiary value. 48. Whereas on the other hand, countering the arguments of learned DR for the revenue, learned AR for the assessee submitted that this addition made by the Assessing Officer was only based on the statement recorded on 9-6-2002, which was under duress as there was a large contingent of police personnel conducting the search along with I.B. officials. 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1983 and during the pendency of the proceedings, the assessee voluntarily filed W.T. Return for assessment year 1975-76 to assessment year 1983-84 disclosing the said jewellery as inherited from her father. Mere acceptance of the said return without any investigation would not preclude the Assessing Officer to tax the jewellery on being found that the said jewellery constituted unexplained investment." For the reasons stated above, the contention of the assessee in this regard, having no force, is rejected. 51. Now, we shall deal with statements made by the assessee first on 9-6-2002 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important piece of evidence which could form the basis of the block assessment. ( b )that, such statement made by the assessee would not become unacceptable merely because the assessee has retracted from the statement. ( c )that, the onus lay on the assessee to establish that the admission made in the statement was wrong and that the retracted statement was correct. ( d )that, the assessee must give justifiable reason and material for the retraction to be acceptable and also give cogent and material evidence to show that the admission made in the statement was under pressure or coercion and was not voluntary. ( e )that, even if police officials 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and the assessee in reply specifically stated that the investment in the purchase of the flat was made by her through sale of her jewellery and loans taken from relatives and friends. 59. On the other hand, the assessee, though while retracting from her earlier statement, stated that she in fact had purchased the flat for Rs. 2.5 lakhs and not for Rs. 13 lakhs as stated earlier but she has not explained how the figure of Rs. 13 lakhs came to her mind while making the earlier statement and why this figure should not be taken as the correct figure and why the recorded sale deed price of Rs. 2.5 lakhs should be taken as incorrect. The burden was upon the assessee 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 signifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o justify the investments, expenditure or income unless supported and proved by cogent evidence by the assessee as is evident from the ratio of the following decisions of various High Courts: (1) M.R. Singhal v. Asstt. CIT [2007] 290 ITR 162 (Punj. Har.) (2) Smt. Dhanvidya A. Dalal s case ( supra ) (3) T.C. Eapen v. CIT [2007] 293 ITR 221 (Ker.) 63. Accordingly, for the reasons stated above, it is held that the assessee failed in establishing the source of investment of Rs. 13 lakhs in the purchase of the flat and the Assessing Officer was, therefore, fully justified in treating the investment of Rs. 13 lakhs as investment from undisclosed sources in the hands of the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as no returns being filed before the search and seizure operation have not been controverted by the learned AR for the assessee before us, so, the Assessing Officer was fully justified in not giving benefits of the income declared by the assessee in those assessment years while framing the assessment for the block period. 67. Aggrieved, the assessee filed an appeal and reiterated the submission before the CIT(A) which he made before the Assessing Officer. The CIT(A) deleted the impugned addition while making following observations in the order: "The assessee has pointed out that during the course of search no evidence have been found to prove that actual payment have been made. Department has not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the ratio of the decisions ( supra ) discussed by us hereinabove while disposing off Ground No. 1 of the appeal of the revenue and Ground No. 5 of the assessee s appeal. The assessee has not discharged this onus by producing the carpenter before the Assessing Officer or by producing any other cogent evidence/material to prove that it was simply an estimate and no actual work was carried out by the carpenter. 71. In these facts since the assessee has not led any evidence to prove the source of this expenditure, the Assessing Officer on the basis of the bill seized from the residence of the assessee was fully justified in assuming that unexplained expenditure amounting to Rs. 1,10,750 was incurred by the assessee as on the top of seized paper the words mentioned were "Bill for Wood Work" and not "Estimate for Wood Work". Hence, we are of the opinion that the Assessing Officer has rightly made the impugned addition of Rs. 1,10,750 and the CIT(A) has erred in deleting the same by accepting the explanation of the assessee which was not supported by any cogent evidence. Accordingly, the order of the CIT(A) in this regard is set-aside and that of Assessing Officer is restored. Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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