TMI Blog2011 (9) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of this bunch of 5 appeals, all the appeals are filed by the assessees. The four appeals are filed by four individuals against respective block assessment order passed by the Assessing Officer on 29-4-1997 in the case of Sri Sibu Soren, Sri Suraj Mondal, Sri Simon Marandi Sri Shailendra Mahto. The remaining one appeal is filed in the case of Jharkhand Mukti Morcha, a political party. This appeal is directed against the assessment order passed by the Assessing Officer on 18-11-1997 under section 158BC read with section 158BD and section 144 of the Income-tax Act, 1961. These appeals are first appeals before the Tribunal because during that period of time, block assessment order was required to be passed with the approval of CIT and hence, the 1st appeal was required to be filed before the Tribunal. It was agreed by all the sides that the facts in all these cases are similar and interconnected and the arguments are also more or less similar and hence, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. It was also agreed by all the sides that the facts discussed in the case of Sibu Soren may be considered and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his name belongs to Jharkhand Mukti Morcha party (hereinafter referred to as 'JMM'), who raised it through donations (this was stated by the assessee on statement recorded under section 131 on 14-3-1996 before ADI Unit 1, New Delhi). The Assessing Officer has also noted that the notice also covers the details of various assets for which information was in possession of the Department that these belong to the assessee and the assessee was asked to file the source of acquisition of these assets. The assessee was also asked to file details with source of any other assets owned by the assessee but not included in the above list. The assessee was also asked to give details of his income and household withdrawals during the block period. Thereafter, several adjournments were taken by the assessee. It is also noted by the Assessing Officer that the Ld. A.R. of the assessee Mr. Rajendra Gupta, CA obtained photocopy of JMM bank account and assessee's bank accounts on 5-3-1997. It is also noted by the Assessing Officer that a letter dated 3-3-1997 asking the assessee to contact ADI Unit 1, New Delhi for inspection of the search documents, was served on the Ld. A.R. of the assessee on 5-3-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information submitted with the return of income and was asked to show cause why the assessment should not be completed on the basis of the material available on record as reply to all the points covered in the questionnaire dated 11-2-1997 have not been furnished. Thereafter, on 10-4-1997, one Shri Uma Shankar, not in the capacity of Ld. A.R. of the assessee appeared and carried a letter of the assessee requesting for adjournment. The next date of hearing was fixed for 15-4-1997. On 15-4-1997, Shri J. Jaipuriar, CA appeared and filed power of attorney but did not file any reply. On his request, the case was adjourned to 17-4-1997. Some other information was also called for as per order sheet entry dated 15-4-1997. On 17-4-1997 Shri J. Jaipuriar CA appeared and filed some details. He was asked by the Assessing Officer to file reply to the remaining queries and furnish the documents in support of the submissions and the case was adjourned to 21-4-1997 and it was pointed out to him that this is the last opportunity for the assessee to file evidence and explanation. The Assessing Officer also noted that the assessee was also served with copy of statement of Shri Shailendra Mahto recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the bank so that it could be used for the party's activities in New Delhi but this contention of the assessee and the JMM was not accepted by the Assessing Officer and he has referred to the statement given by Shri Shailendra Mahto during the course of trial proceedings under the provisions of Prevention of Corruption Act in the court of Special Judge Hon'ble Shri Ajit Bharihoke and under section 164 Cr.P.C. on 22-3-1997 before the Metropolitan Magistrate Shri Harish Dudani. The Assessing Officer also noted that in the statement, he has admitted that the amount deposited in the PNB in his name represents the amount of Rs. 50 lakhs received by him for voting against No Confidence Motion against the then Central Government, which was physically handed over to him by Shri Simon Marandi. The Assessing Officer also noted that he has stated that other three persons namely Shri Suraj Mandal, Simon Marandi and Shailendra Mahto also received almost the similar amounts which were deposited in PNB in their respective bank accounts. The Assessing Officer heavily relied on the statement of Sri Shailendra Mahto in rejecting the claim of the assessee that the amount deposited in these bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on 11-7-1996 (copy given to the assessee) that these donation coupons were printed by RR Paper Stores Chas Road, Bokaro in the years 1992 1993. The Assessing Officer further noted that he also stated that in the years 1995, donation coupons of JMM were printed by M/s. Sheth Art Printers, Bye Pass Road, Chas. The Assessing Officer has further noted that subsequently, survey under section 133A of the Income-tax Act, 1961 was conducted in the business premises of M/s. RR Paper Stores and Seth Art Printers on 12-7-1996. The Assessing Officer has noted that these facts emerged in the course of survey that M/s. RR Paper Stores was closed sometime in Sep. 1991 and hence, they could not have printed the donation coupons of JMM as has been submitted by the assessee. Regarding M/s. Seth Art Printers, it is noted by the Assessing Officer that there are two types of coupons. In type one of coupons, the year 1991 is printed but these coupons are only of Rs. 2 lakhs and would have been used in years 1991 1992. The other type of coupons i.e. type 2 are the coupons printed in the year 1995 of Rs. 100.50 lakhs which bear the marking of SAP which denoted Seth Art Printers. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Similarly, in the case of Simon Marandi, an amount of Rs. 12 lakhs was deposited on 1-8-1993 in the joint account No. 197 standing in the name of Simon Marandi Sushila Hansda. In the same bank account No. 197, an amount of Rs. 21 lakhs was deposited on 2-8-1993. The total addition on account of these deposits in the bank account No. 197 is of Rs. 33 lakhs and 1/4th of the deposit in the joint FD 195 i.e. Rs. 7.50 being l/4th of Rs. 30 lakhs, was also added in the hands of Shri Simon Marandi. In addition to this, various other additions were made in the hands of Shri Simon Marandi on account of interest income, on account of various investments and also on account of salary as MP. The total additions made in his hands are Rs. 53,53,620 including addition on account of deposits in PNB and the interest income as under: Financial year Deposits (Rs.) Interest (Rs.) 1993-94 40,52,500 1,10,793 1994-95 1,66,207 1995-96 1,38,229 April 1996 5. Similarly, in the case of Shri Shailendra Mahto, addition was made on account of deposits in the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upto 27-9-97 2,36,19,160 9. The Assessing Officer further noted that out of this total addition to be made in the block of Rs. 23,619,160, the amount of Rs. 12,998,449 has already been assessed on protective basis in the regular assessment proceedings of the assessee for the assessment year 1994-95 and hence, only balance amount of Rs. 10,620,711 has been added in the block assessment order on protective basis. 10. Now, all these five assessees are in appeal before us. 11. It was agreed by all the sides that the case of Shri Shibu Soren will be argued first and the arguments raised in this case will be applicable in the remaining three cases of individual also and hence all these four cases of individuals can be decided on the basis of arguments in the case of Shri Shibu Soren. It was agreed that in the remaining three cases, respective counsels will make their submissions only with regard to any additional arguments required in the facts of that case. 12. This is the 1st argument on behalf of the assessee that there is no search on the assessee in the present case. It was submitted that the alleged warrant of authorization under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following judgments: (a) CIT v. Ashwani Gupta [2010] 322 ITR 396 (Delhi) (b) Kishanchand Chelaram v. CIT [1980] 125 ITR 713 (SC) (c) CIT v. S M Aggarwal [2007] 293 ITR 43/162 Taxman 3 (Delhi) (d) CIT v. SMC Share Brokers Ltd. [2007] 288 ITR 345/159 Taxman 306 (Delhi) (e) CIT v. Dharam Pal Prem Chand Ltd. [2007] 295 ITR 105/[2008] 167 Taxman 168 (Delhi) (f) CIT v. Pradeep Kumar Gupta [2007] 207 CTR 115 (Delhi) 13. In addition to various above arguments on technical aspect, regarding merits of various addition made by the Assessing Officer, it was submitted that under the provisions of Chapter XIVB of the Income-tax Act, 1961, an assessment of an undisclosed income can be made only in respect whereof an evidence has been found as a result of search and such other material or information as are available with the Assessing Officer but such material or information must be relatable to such evidence as has been found as a result of search. In support of this contention, reliance was placed on the following judicial pronouncements: (a) L R Gupta v. Union of India [1992] 194 ITR 32/[1991] 59 Taxman 305 (Delhi) (b) CIT v. Vishal Aggarwal [2006] 283 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at copy of statement dated 14-3-1996 is available on pages 72-77 of the paper book-II filed by the assessee and hence, even the deposits into these bank accounts are also not a new evidence found in the course of search because such deposits were also duly disclosed before the department in their statements recorded on 14-3-1996. and hence, the deposits in those bank accounts is also not a discovery of search and hence, even in respect of deposits in those bank accounts with PNB, Noroji Nagar, New Delhi which were subjected to search, no addition can be made in the block assessment because these bank accounts and deposits therein are not a discovery of search. 16. The counsel of Mr. Simon Marandi did not raise any new argument and he simply submitted that the arguments raised in the case of Shri Shibu Soren may be considered in his case also. Ld. Counsel for the assessee Shri Suraj Mandal also submitted that the arguments raised in the case of Shri Shibu Soren are to be considered in his case also. One new contention was raised by him that the finding of facts as recorded by the Assessing Officer no longer stand because the issue has been adjudicated on the same factual matrix by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Party to JMM party was not against the objects of the party. He submitted that the amount received by JMM from Congress was donation which is exempted under section 13A of the Income-tax Act, 1961. It is also submitted that the fact that the amount was paid by the Congress party is fully noted by CBI and as per the observation and finding of the Assessing Officer. He submitted that the amount was donated by Congress party and it is exempt under section 13A of the Income-tax Act, 1961 and he submitted that this is an alternative submission in the light of facts and circumstances of the case and provisions of law. 17. The counsels of the remaining individual i.e. Shailendra Mahto also submitted that his case may also be decided on the basis of the arguments raised in the case of Shri Shibu Soren. 18. In reply, it was submitted by the Standing counsel for the revenue Smt. Rashmi Chopra that as per the decision of Hon'ble Delhi High Court rendered in the case of M.B. Lal v. CIT [2005] 279 ITR 298/149 Taxman 490, validity of search cannot be assailed in the appellate proceedings and proper recourse would be to impugn the same in a writ petition which has not been done by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g withdrawal of money by the income tax Department and not with regard to the question of the premises to be searched and/or the assessee to be searched. Regarding the argument of Ld. counsel for the assessee in relation to violation of principles of natural justice, i.e. no adequate hearing, it was submitted by her that the assessee did not file any details and only sought adjournments up to 22-4-1997 whereas the assessment was to be completed on or before 30-4-1997. She further submitted that on 2-4-1997, despite seeking number of adjournments earlier, authorized C.A. withdrawn and the assessee does not appear. She further submitted that in the absence of details, the Assessing Officer issued notice under section 144 for best judgment assessment as the time was running out. She further submitted that the assessees' A.R. appeared on the date fixed in the notice issued by the Assessing Officer under section 144 i.e. on 10-4-1997 but still did not file any detail and sought adjournment knowing fully well that the time-limit for completing the assessment is to expire on 30-4-1997. She submitted that under these facts, there is no denial of adequate opportunity to the assessee but in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search as the document/evidence of seizure. It was also submitted that prohibitory orders under section 132(3) of the Income-tax Act, 1961 as in the present case, does not amount to seizure as it was not practicable to seize the money. She also submitted that the search is concluded when prohibitory order is lifted and books of account/valuable articles are actually seized and panchnama is prepared. She also submitted that panchnama in any case is relevant only for the purpose of exclusion of period of limitation and in the absence of any seizure, it has no significance and definitely does not vitiate the search. Reliance was placed on the Tribunal judgment rendered in the case of Promain Ltd. v. Dy. CIT [2005] 95 ITD 489 (Delhi)(SB). Reliance was also placed on the judgment of Hon'ble Bombay High Court rendered in the case of CIT v. Sandhya P. Nayak [2002] 253 ITR 534/124 Taxman 384. 23. Regarding this contention that since it was held by the Hon'ble Apex Court in the criminal case with regard to these deposits in the bank that immunity is available to these persons, it was submitted by her that Article 105 of the Constitution or any other Article or section of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed income. 27. Regarding merits of various additions, she submitted that the Assessing Officer has indicated that the assessee has not been able to rebut the presumption under section 132(4A) of the Income-tax Act, 1961 in view of the discrepancies and infirmity as mentioned in the assessment order and hence, all the additions made by the Assessing Officer should be upheld. 28. In the rejoinder, Ld. ARs of the assessee reiterated the same arguments which were raised by them earlier. 29. We have considered the rival submissions, perused the material on record and have gone through the judgments cited by both the sides. As per the provisions of section 158BA(2) and its Explanation, the block assessment under chapter XIV - B is in addition to the regular assessment and if any addition is made in such regular assessment or is required to be or is eligible to be made in the regular assessment then such income cannot be added in the block assessment. This is by now, a settled position of law that in the case of block assessment proceedings, addition can be made on the basis of evidence found as a result of search or requisition of books of account or other material and such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her additions are made on the basis of material and information available with the Assessing Officer as per post search enquiry but these other material and information are not shown to be relatable to any alleged evidence found in the course of search and hence, all other additions made by the Assessing Officer in these block assessment orders are not sustainable. We are taking this view by respectfully following various judgments of Hon'ble High Court of Delhi cited by Ld. A.R. as has been noted by us in Para 14 above. For the sake of ready reference, we note down the relevant findings of some of these judgments which are as under: (i) In the case of Vishal Aggarwal (supra), a search was conducted under section 132 of the Income-tax Act, 1961 in Feb. 1997 but no incriminating material was discovered during the search but the Assessing Officer resorted to section 158BC of the Income-tax Act, 1961 and treated various gifts received by the assessee in assessment year 1993-94 as concealed income. Under these facts, it was held by the Ld. CIT(A) in that case that it is important that some material document or information should have been discovered during the search operation whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the money deposited in various saving accounts and FDRs and it is not even an allegation that anything else was found in course of search, in addition to various bank accounts including FDRs with PNB, Noroji Nagar, New Delhi, and other additions made by the Assessing Officer is not on the basis of any material found in course of search or information with the Assessing Officer which is relatable to such alleged evidence found in the course of search and hence, by respectfully following these judgments, we hold that all other additions made by the Assessing Officer are not sustainable since the same are not on the basis of or relatable to any evidence found in the course of search. 32. Now, regarding the addition made by the Assessing Officer with reference to the deposits in various bank accounts and FDRs with PNB, Noroji Nagar, New Delhi, there are two relevant aspects. One aspect is this that whether the money deposited in the bank is income of the assessee and the second aspect is this that even if it is accepted that the money deposited in these bank accounts and FDRs is income of the assessee, whether such income can be added in the block assessment. Regarding the first a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nagar Branch. It was also stated that he does not remember the account number and there is one more account in the same branch of PNB which is in the joint names of himself, Shri Shibu Soren, MP, Shri Suraj Mandal MP, and Shri Shailendra Mahto MP and it was also submitted that copies of bank statement of both these bank accounts will be supplied within one month and if there is any other bank account in addition to these two bank accounts, he will send the copy of such bank accounts also. When this question was raised, as to what are the details of FDRs with PNB, Noroji Nagar, New Delhi as per Question No. 11, it was submitted in reply that complete details will be provided within one month. One more question was raised that as per the information of the department, he has deposited on 1-8-1993, Rs. 12 lakhs and Rs. 21 lakhs with PNB, Noroji Nagar, New Delhi, in FDR and there is deposit of Rs. 10,000 in a joint saving bank account No. 18914 in the joint name of Shri Shibu Soren, Shri Simon Marandi and Shri Shailendra Mahto and there is one FDR No. 195, of Rs. 30 lakhs in the joint name of these four persons. In reply, it was submitted that these are the money of JMM party which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, statement of Shri Suraj Mandal was also recorded by ADI (Investigation), New Delhi under section 131 on 14-3-1996. Question No. 4 was regarding details of bank accounts of himself and his family members. In reply, he has narrated full details of various bank accounts which include even account with State Bank of India, Karmatand which is in his name and there is one account with State Bank of India at Patna, Vidhan Sabha Branch in which his salary as MLA was being deposited. It was also submitted that there is one account in State Bank of India, Godda Branch and it was also submitted that there is one account with State Bank of India, Sansad Bhavan branch where his salary as MP was being deposited. It was also submitted that there is one saving bank account in his name with PNB, Noroji Nagar, New Delhi in which the money lying was of JMM party. It was also submitted that there is joint saving bank account with PNB Noroji Nagar, New Delhi which is in joint name of four JMM MPs. It was also submitted that there is one FDR in his and in the name of his wife at SBI Karmatand and 2nd FDR with PNB in the joint name of himself and other three JMM MPs. When the question was raised rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts is an incriminating material found as a result of search particularly when the department was knowing beforehand regarding existence of these bank accounts and the details regarding deposits of various amounts on various dates in these bank accounts and such existence of bank accounts and the amounts lying deposited in these bank accounts was also accepted by these four persons in the course of statement recorded by ADIT under section 131 in the month of March, 1996 i.e. prior to the date of search. The case will be different if the department has some vague information regarding existence of some undisclosed asset lying somewhere. But the case is different when concrete and detailed information is available with the department such as name of bank account holder, name of the bank and its branch, account number, amount of deposits and date of deposits etc. In the present case, complete details including the name of the persons in whose names the money was deposited, name of the bank with its branch details, account number, date and amount of deposits etc. was very much available with the department prior to the date of search and even after search, there was no seizure also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil in cases not falling under clause (c);] (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing set off in the regular assessments." 39. From the above provisions of clause (b) of section 158B, it is seen that undisclosed income includes any money, bullion, jewellery and other valuable article or thing and any income based on any entry in the books of account or other document or transaction where such money, bullion, jewellery etc. represent wholly or partly income of the property which has not been and would not have been disclosed for the purpose of this Act. Now, we analyze the facts of the present case in the light of these provisions of section 158B(b) of the Act. In the present case, we find that money lying in various bank accounts was already in the knowledge of the department with complete details and when the department confronted the assessees, in the statements recorded under section 131 in the month of March 1996, all these persons have duly accepted and given details of these deposits in these bank accounts including the date and amount of deposits and hence, the question is whether these bank accounts can be said to comply with the requirement of the provisions of section 158B(b) that this would not have been disclosed for the purpose of this Act. In add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been the income of an assessee which has not been disclosed for the purpose of the Act. The said sub-clause pertains only to movable and not immovable assets. Secondly, it pertains to those assets which, wholly or partly, represent what should have been his income. The expression income "which has not been, or would not be, disclosed for the purposes of the Income-tax Act" would mean, that income which is liable to tax but which the assessee has not returned in his income-tax return or made known to the Income-tax Department. The sub-clause itself refers to this as "undisclosed income or property". In our opinion, the words "undisclosed", in that context, must mean income which is hidden from the Department. Clause (c) would refer to cases where the assessee knows that the movable asset is income or represents income which is taxable but which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, the existence of the money or asset is known to the Income-tax Department and where the case of the assessee is that the said money or valuable asset is not liable to be taxed, then, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When as per the Hon'ble High Court of Delhi, if the existence of asset is known to the department, the department may be justified to issue notice under section 148 but search under section 131 is not justified, then how it can be said that on the basis of a search conducted under these facts, the existence of such asset which was in the knowledge of the department can be said to be an incriminating evidence found in the course of search. Anything found in the course of search 'which is not already known' may be considered as incriminating evidence but a known thing cannot be found again suggesting that an incriminating evidence is found as a result of search. This can be understood with the help of an example also. Let us presume that the department knows that a person "B" is having an amount of Rs.l lakh in his briefcase lying with "A". When a query is raised, that person also accepts that he is having an amount of Rs. 1 lakh in his briefcase lying with "A" and later on, only that briefcase is searched and it is found that his briefcase was having an amount of Rs.l lakh only. Before searching the briefcase, it was known to the department that this briefcase is belonging to "Mr. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued a notice under section 148 of the Income-tax Act, 1961. If this be so then can it be said that under the same facts, an addition can be made on the basis of notice issued to the assessee under section 148 and also in the case of block assessment under Chapter XIV-B which will result into attraction of higher rate of tax at the rate of 60 per cent. This is by now a settled position of law that block assessment is with respect to the undisclosed income, found as per the evidence found in the course of search and regular assessment has to be completed on the basis of regular return of income filed by the assessee as per section 139 or section 142(1) or on the basis of notice issued under section 148 and hence, an income cannot be subject matter of addition in the block assessment as well as in regular assessment. As per the above cited judgment of Hon'ble High Court of Delhi, this can be a subject-matter of regular assessment, by way of issuing notice under section 148 and hence, it is implied that this cannot be a subject matter of block assessment under Chapter XIV-B. Whether the department has taken action for regular assessment or not, is not relevant for the purpose of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration and addition in block assessment proceedings. We, therefore, delete the addition on account of these bank accounts also by holding that the same cannot be considered or added in block assessment. 43. In the light of this decision as per which we have held that no addition is justified in the present case, either in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi or various other additions made by the Assessing Officer, which are not relatable to any evidence found in course of search, we are of the considered opinion that no adjudication is called for regarding various other contentions raised by the Ld. A.R. regarding non-existence of search, or non validity of search for the reason that there is no panchnama or that there is no notice issued by the Assessing Officer under section 143(2) after filing of block return etc. We do not decide these aspects because now these aspects are of academic interest only once it is held by us that no addition made by the Assessing Officer in the present cases is sustainable. We, therefore, do not decide these aspects. 44. In the result, all these four appeals filed by these four individual assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X
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