TMI Blog2009 (5) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... d ending 28th Nov., 2002, involving identical issues, were heard together and therefore these are being decided by a common order for the sake of convenience. 2. The facts of the case in all these appeals are, admittedly, identical. However, for the sake of discussion, the facts relating to M/s Shri. Lakshmi Finance are being mentioned in the following paras. The identical grounds raised by the assessee-firms in these appeals are as under: "1. The CIT(A) is erred in upholding the order passed under s. 158BC r/w s. 143(3) which is opposed to law, facts and circumstances of the case. 2.1 Without prejudice to the above the appellant submits following grounds as below: -------------------------------------------- Year ending Assessed undisclosed income (Rs.) -------------------------------------------- 31-3-1997 1,54,400 -------------------------------------------- 31-3-1998 1,54,400 -------------------------------------------- 31-3-1999 1,52,400 -------------------------------------------- 31-3-2000 4,39,400 ----------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Part period) --------------------------------------------------------- Total 18,82,566 --------------------------------------------------------- Less: 2,64,651 --------------------------------------------------------- Total 'undisclosed income' 16,17,915 --------------------------------------------------------- 5. The CIT(A) has upheld the AO's action and his order has been challenged by the assessee in the present appeal. 6. Shri A. Arjunraj, the learned Authorised Representative, argued these five appeals together, and made common contentions. He reiterated the arguments which were put forward on behalf of the assessee before the AO and the CIT(A). The submissions made by him are summarized below: - that prior to search, the assessee-firms were filing regular returns for all the years falling in the block period; - that the deposits and interest paid thereon were shown in regular returns filed by the assessees; - that the deposits and interest thereon which were shown in regular returns could not be treated as 'undisclosed income' for the block a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in these five appeals were identical. 9. Shri Arjunraj reiterated that what was added by the AO as the 'undisclosed income' of the assessee-firms represented deposits which were appearing in their regular books of account in all these years. He submitted that the 'undisclosed income' is that which is discovered as a result, inter alia, of a document or transaction which has not been or would not have been disclosed for the purpose of the Act. He contended that both the requirements were necessary for assessing the 'undisclosed income', namely the material showing that the amount had not been or would not have been disclosed and that the deposit and the interest paid on the deposits are shown to be false on the basis of the evidence found during the search. 10. The learned Authorised Representative explained that in the present case the very first requirement of non-disclosure of the material did not arise because the assessee had disclosed the transaction in its regular books of account. He placed heavy reliance on the decision of the Delhi High Court in the case of CIT vs. Ansal Buildwell Ltd. (2008) 219 CTR (Del) 238 : (2008) 5 DTR (Del) 246 : (2008) 304 ITR 378 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group concerns was confronted by the statement given by Shri Arthnareeswaran. In his statement recorded on 14th Nov., 2002, by the authorized officer during the search, Shri Shanmugasundaram admitted, vide answer to question No. 3 that the interest to the extent of 1.25 per cent was not accounted in books of account in respect of hire purchase loans. The answer given by him has been reproduced by the AO in para 4 of his order as under: "No, we are accounting hire purchase loan interest of 9 per cent to 12 per cent. The remaining 1.25 per cent is not accounted in the books. This is an unaccounted interest receipt." 15. It was further admitted by Shri Shanmugasundaram, vide answer to question No. 4, that in respect of pronote loans, interest was being charged at 4 per cent higher than what was recorded in the books of account. The answer given by him has been reproduced by the AO in para 4 of his order as under: "In respect of pronote loans given to parties we are actually charging interest @ 4 per cent higher than the interest what were recorded in the books of account." 16. Another customer, Shri V. Kandasamy, was also present at the time of search. He stated that a penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars Amount No. -------------------------------------------------------------- 1. Deposits/loans in the names of R. Saraswathy, C. Sadayappan, R. Pappu, R. Ettammal, A.R. Rasappan, C. Nallammal and R. Selvaraju 1,31,000 -------------------------------------------------------------- 2. Interest thereon for the block period 47,180 -------------------------------------------------------------- 3. Cash found at the time of search (1/5th) 17,069 -------------------------------------------------------------- Total 1,95,249 -------------------------------------------------------------- 23. The facts with regard to the individual creditors/depositors appearing in the list at Annex. (1) have been discussed by the AO in detail in his order. The AO, on the basis of post-search enquiries conducted by him, has inter alia, noted that the creditors/depositors were closely related to one partner or the other, that all the alleged loans were stated to have been advanced in cash, that the alleged creditors/depositors were small agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation as are available with the AO and relatable to such evidence. 28. In our opinion the provisions of cl. (b) of s. 158B and sub-s. (1) of s. 158BB are squarely applicable to the facts of this case, as discussed in the following paras. The transaction that was taking place at the time of search, and was detected by the authorized officers, represented the modus operandi of suppressing income which had not been offered by the assessee-firms for tax. And the statements recorded during the search, as discussed in the above paras, represented the evidence on the basis of which the 'undisclosed income' was computed. This evidence brought out the falsity of the entries made by the assessee-firms in their regular books of account, to hide the taxable income. 29. Shri Arjunraj placed heavy reliance on the decision in the case of Ansal Buildwell Ltd. In that case during the search conducted at the business premises of the assessee, a bill for Rs. 14,69,250 in respect of commission on sale of flats by M/s Televista Electronics Ltd. was found. In the books of account Rs. 12,50,000 was shown towards commission. According to the AO, the post-search inquiries revealed that the bill was b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -firms. 32. The Tribunal, Delhi Bench (Special Bench) in the case of Promain Ltd. vs. Dy. CIT, observed in para 73 of its order that s. 158BB required the AO to determine the total undisclosed income with reference to the evidence found as a result of search, and such other material/information relatable to such evidence, and that this evidence includes the statements recorded in the course of search. 33. In the case of Mange Ram Mittal vs. Asstt. CIT (2006) 105 TTJ (Del)(SB) 594 : (2006) 103 ITD 389 (Del)(SB), the Tribunal (Special Bench) held that the debate, as to whether the computation of undisclosed income in an order under s. 158BC should be restricted to the undisclosed income discovered as a result of search only, stood already concluded by the amendment to s. 158BB by the Finance Act, 2002 with retrospective effect from 1st July, 1995. 33.1 The Finance Act, 2002, has with retrospective effect from 1st July, 1995 added the words "and relatable to such evidence" in s. 158BB(1). Thus, the undisclosed income has to be computed on the basis of evidence found as a result of search and/or other materials or information relatable to such evidence. In its order the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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