TMI Blog2010 (10) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... - Held that:- The Assessing Officer is free to complete the assessment on the basis of materials available on record and on the basis of the appellant's explanation. There is no such direction as alleged by the appellant in the instant case. - the question raised by the assessee is a pure question of fact that has already been answered by the forum below against the assessee. - Tax Case No. 165 of 2010 - - - Dated:- 20-10-2010 - DHIRENDRA MISHRA, CHANDRAKAR R. N. JJ S. Rajeshwara Rao for the Appellants. Rajeev Shrivastava for the Resopndents. Tax Case No. 72, 74 to 100, 106 to 132, 134 to 147 149 to 165 of 2010 JUDGMENT The judgment of the court was delivered by Dhirendra Mishra J.- These tax appeals under section 260A of the Income-tax Act, 1961 preferred by the assessee and cross-objectors are being disposed of by this common judgment as they are directed against the common order dated March 29, 2010 passed by the Income-tax Appellate Tribunal, Bilaspur, Bench Bilaspur (in short "the Tribunal"), by which all the connected appeals preferred by the Revenue, assessee and cross-objectors have been disposed of. 2. With the consent of learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome to tax in their individual capacity ? 5. Whether the Income-tax Appellate Tribunal is legally correct in confirming the addition of Rs. 22,13,218 made under section 68 as unexplained cash credit, especially when the gift was received with the rider that if the same was not recognized as gift for any reasons, the same shall be returnable to the donor, whose identity and creditworthiness and genuineness of the transaction were sub-stantiated by the appellant ?" 5. Briefly stated, the facts of the case are that on August 24, 2004 assessee was carrying Rs. 24,85,000 in cash while travelling from Mumbai to Raipur by flight. Information to this effect was received from the Investigation Wing of Bombay. He was intercepted at Mana Airport and his statement was recorded at the airport. Later on, survey under section 133A of the Income-tax Act, 1961 (in short "the Act") was conducted in the business premises of the assessee. In his statement, the assessee admitted that the cash found in his brief case is his income from undisclosed sources. There-after, survey was converted into search and the cash was seized. However, the assessee retracted his statement by filing an affidavit on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s undisclosed income of the assessee. The Assessing Officer by reference to the assessment order of the assessment year 1999-2000 rejected the claim of agricultural income of Rs. 85,000 and also assessed the income of 35 benamidars of Rs. 4,72,31,310 in the hands of the assessee on substantive basis. The expenditure of Rs. 18,41,758 being amount of bills of Adarsh Service Station, Supela, Bhilai, seized during search proceedings issued in the names of different persons, has been assessed in the hands of the assessee as unexplained expenditure with a finding that the same was unexplained expenditure of the assessee through benamidars. Similarly, an amount of Rs. 18,096, on the basis of details mentioned in three papers found from the room of Manoj Chelak and Rs. 22,13,218 received by the assessee as gifts from Parminder Singh Bains ($ 25,000) and Shri Deepak Kumar ($26,100) have been added under section 68 as unexplained cash with an observation that the assessee has failed to furnish confirmation or any evidence regarding relationship or creditworthiness of the donors. 9. Depreciation of Rs. 1,22,581 claimed by the assessee on Qualis vehicle has also been rejected on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namidars) preferred separate appeal against the order of the Commissioner of Income-tax (Appeals) passed for each assessment year, and the Tribunal has disposed of all the appeals by a common order in the following terms : (1) Rejecting the objection of the assessee and confirming the order of both forums below against the initiation of survey under section 133A at the airport, it was held that the scope of survey under section 133A includes verification of cash with reference to books of account. Since the cash found with the person of the assessee was to be verified with reference to books of account, survey was conducted. The assessee was accompanied to his office and when he could not satisfactorily explain the nature and possession of the cash found with him, survey was rightly converted into search. (2) Considering the cross-objection of the assessee with regard to validity of the notice under section 153C and subsequent assessment, it has been observed that there was no requirement for recording of satisfaction that the documents found and seized reflected earning of any undisclosed income, as the provision under section 153C and the erstwhile provisions under section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis. Similar issue has been raised by the Revenue on the point of benamidars of Shri Trilok Singh Dhillon, in case of different assessees. The facts and modes operandi being the same, so following the same reasoning, we hold that all other assessees are also benamidars of Shri Trilok Singh Dhillon. Accordingly these liquor business income is also directed to be assessed on substantive basis, in the hands of Shri Trilok Singh Dhillon. The Assessing Officer is directed accordingly." First substantial question of law Whether survey under section 133A can be conducted at the airport on a person getting out of the aircraft instead of search under section 132(1)(B)(iia) exclusively provided for such circumstances and if not, whether the survey and all the subsequent proceedings which followed such survey are valid, specifically keeping in view the law laid down by the hon'ble Supreme Court in the case of Union of India v. Ajit Jain [2003] 260 ITR 80 ? 12. Shri Rajeshwar Rao, learned counsel appearing for the assessee, argued that survey under section 133A can be conducted at business premises. This aspect has been overlooked by all the forums below. In the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted into search. His initial statement was recorded at the airport. All the three forums below have recorded a concurrent finding of fact with regard to legality of search. It was further argued that validity of search cannot be questioned in the assessment proceedings. 16. Reliance is placed on the decisions in the matters of CIT v. Paras Rice Mills [2009] 313 ITR 182 (P H), M. B. Lal v. CIT [2005] 279 ITR 298 (Delhi) and Gaya Prasad Pathak v. Asst. CIT [2007] 290 ITR 128 (MP). 17. It was further argued that the judgments relied upon by the appellants have been delivered by the hon'ble Supreme Court and different High Courts in matters arising out of writ proceedings and not in proceedings arising out of the assessment order. Finding 18. In the assessment order, the Assessing Officer has mentioned that on receipt of information that the assessee was carrying cash, his statement was recorded at the airport. Later on, survey under section 133A was conducted in the business premises of the assessee. The Commissioner of Income-tax (Appeals) rejecting the argument of the assessee in this regard held that the scope of survey under section 133A includes verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 132, there has to be a rational connection between the information or material and the belief about undisclosed income. Holding the search to be without jurisdiction and void ab initio on the facts of the above case, it was further held that provisions of Chapter XIV-B can also not be invoked pursuant to the said search and consequently, the block assessment order cannot be sustained. 21. The Revenue went up in appeal before the hon'ble Supreme Court and the Supreme Court affirmed the order of the High Court, vide Union of India v. Ajit Jain [2003] 260 ITR 80 (SC) ; [2003] 181 CTR (SC) 22 ; [2003] 129 Taxman 74. 22. Chapter XIV-B deals with special procedure for assessment of search cases. Section 158BC provides for procedure for block assessment, whereas section 158BD deals with undisclosed income of any other person and section 158BE prescribes time limit for completion of block assessment. Section 158BE(1)(b) and Explanation 2 are relevant for the present purpose and the same may be extracted as under : "158BE. Time limit for completion of block assessment.-(1) The order under section 158BC shall be passed,- . . . (b) within two years from the end of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seizure is neither jurisdictional fact nor adjudicatory fact and, therefore, the same cannot be dwelled upon or delved into in an appeal. The submission that the Tribunal having been constituted under article 323 of the Constitution can delve into it, is an unacceptable proposition in law, especially in the teeth of the provision contained under section 253. 26. Shri Rajeshwara Rao, learned counsel for the assessee, placing reliance on the decision in the matter of CIT v. Smt. Chitra Devi Soni [2009] 313 ITR 174 ; [2008] 214 CTR (Raj) 118 ; [2008] 170 Taxman 164 ; [2008] 1 DTR 98 argued that the question as to whether there existed any material at all, which constituted reason to believe, is a matter which can definitely be looked into by the Tribunal, as also by the court, as the absence would vitiate the entire action. He stressed upon the proviso to section 133A(6) and argued that to proceed under sub-section (1) or (3) to section 133A, approval of the Joint Director is a condition precedent. However, the respondent has not filed copy of the order/legal sanction under which the assessee was intercepted at the airport. 27. Considering the aforesaid submission of learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel appearing for the Revenue, would argue that the Assessing Officer has recorded a categorical finding based on evidence available on record. The assessee has not disputed the factual findings in the assessment order and there is no perversity in the order. The argument of the assessee in this regard is based on conjectures and surmises without any material or legal foundation. Reference to earlier order in the case of Kamlesh Chandel and others is of no avail as the said persons filed their return on March 31, 2004 for the relevant assessment year and the assessment order was passed on March 28, 2006 whereas search was conducted on August 24, 2004, and Kamlesh replied to the notice under section 153C on February 24, 2006 and assessment order was passed on December 28, 2006. The notice under section 153C was issued on February 16, 2005. In view of sub-section (1)(b) of section 153A, the assessment order passed by the Assessing Officer in the case of Kamlesh Chandel under section 143(3) is a nullity, without jurisdiction and void ab initio. Finding 30. The objection of the assessee in this regard has been rejected by the Commissioner of Income-tax (Appeals) with an obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer as also that of the Commissioner of Income-tax (Appeals) in this regard and we are of the opinion that restoration of the above matter to the Assessing Officer for fresh adjudication after affording opportunity of hearing to the parties does not involve any substantial question of law. Fourth substantial question of law- Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to treating various persons as benamidars of Shri Trilok Singh Dhillon, a co-partner, without disputing the genuineness of the firm, which has advanced the money, without questioning the genuineness of sources of the money advanced, when the borrowings were interest bearing, when the interest income was separately assessed in the hands of the firm/other partners, when the other persons were not treated as benamidars of the other partners who stand on the same plank as the appellant with respect to their capital contribution in the firm and loaned to the appellant when the excise licence was issued by the excise department in the names of different persons, when the Excise Department certified the execution of license by them and when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ums, it is clear that the above addition under section 68 has been made as unexplained cash credit when the assessee failed to produce confirmation of the gifts by the donors even after he was afforded opportunity for the same by the Commissioner of Income-tax (Appeals). We find substance in the argument of learned counsel for the Revenue that the above addition as unexplained cash credit has been rightly made, especially when the gift was received with the rider that if the same was not recognized as gift for any reason, it shall be returnable to the donor, whose identity, and creditworthiness and genuineness of the transaction were not substantiated by the assessee. We find that the question raised by the assessee in this regard is a pure question of fact and the same does not give rise to any substantial question of law. 37. Apart from the above issue, learned counsel for the appellants was also heard on the following substantial questions of law, proposed in other connected appeals at the instance of the appellants other than Trilok Singh Dhillon. SQL No. 6 : Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arguments of the appellant in this regard by a concurrent finding and held the notices issued under section 153C valid. This issue has been dealt with by the Tribunal in paragraph 8 of its order in detail. The assessee could not point out any fault with the findings recorded by the Tribunal. Even if the contention of the assessee with respect to issuance of subsequent notice under section 153C is accepted, it is a mere procedural irregularity and not any illegality, and the entire assessment proceedings cannot be held to be invalid on this ground only. Finding 42. The Tribunal has dealt with the issue of validity of notice under section 153C in detail from paragraphs 6 to 8 of its order, wherein it has been held that there was no requirement of recording satisfaction that the documents found and seized reflected the earning of any undisclosed income. The satisfaction may be inferred from the facts and circumstances of the case. The provisions of section 153C were not at par with the erstwhile provisions of section 158BD as the provisions under section 153C are differently worded. As per the amended provisions of section 153C, satisfaction has to be arrived at with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, without disputing the genuineness of the firm, which has advanced the money, without questioning the genuineness of sources of the money advanced, when the borrowings were interest bearing, when the interest income was separately assessed in the hands of the firm/other partners, when the appellant was not treated as benamidar of the other partners who stand on the same plank as Shri Dhillon with respect to their capital contribution in the firm and loaned to the appellant, when the excise licence was issued by the Excise Department in the appellant's name, when the Excise Department certified the execution of licence by the appellant and when the appellant offered the income to tax in his individual capacity ? Finding 44. This issue has already been considered while considering issue No. 4 and answered against the assessee and in favour of the Revenue. SQL No. 10 : Whether the Assessing Officer had jurisdiction to take the case under scrutiny for the assessment year 2005-06 as a consequence of notices issued under section 153C read with section 153A for the preceding six assessment years against the provisions of the Act ? Finding 45. The above issue has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law and without jurisdiction, when there was no search conducted under section 132 in the premises of the person from whose possession the seized material was found and particularly when he owned the same ? Finding 49. In the light of reasonings detailed in this order while considering the issue No. 4 and issue No. 8, this question is also decided against the assessee and in favour of the Revenue. SQL No. 13 : Whether the Appellate Tribunal was legally correct in not following the order of the jurisdictional Bench without ascribing any reasons ? 50. In the matters of Arihant Builders, Developers and Investors P. Ltd. v. ITAT [2005] 277 ITR 239 (MP) ; [2005] 197 CTR 471 ; [2005] 144 Taxman 121, in a writ petition filed by the assessee, the matter was remanded to the Tribunal for decision afresh in accordance with law on the ground that the decision was passed by the Tribunal in the past and the Tribunal ought to have followed the same in later appeal to maintain consistency. 51. In Berger Paints India Ltd. v. CIT [2004] 266 ITR 99 (SC) ; 2 RC 702 ; [2004] 187 CTR (SC) 193 ; [2004] 135 Taxman 586 the hon'ble Supreme Court considering that the issue involved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the Assessing Officer, when the order of the Commissioner of Income-tax (Appeals) itself was based on the rate of profit estimated by the Revenue in identical cases ? Finding 56. Since the Tribunal has restored the matter to the Assessing Officer with a direction to re-compute profit on the basis of profit shown in other similar cases the same does not give rise to any substantial question of law. SQL No. 16 : Whether the order of the learned Appellate Tribunal, in the facts and circumstances of the case, is perverse with respect to confirming the disallowance of interest expenses, which are also assessed to tax in the hands of the recipient firm and without disputing the genuineness of the firm and all related transactions in the firm's case ? Finding 57. The Tribunal, on the basis of material available on record, has arrived at a conclusion that the firm M/s. Supreme Traders is only an instrument to finance the money of Shri Trilok Singh Dhillon and his concerns etc., and the assessees were made partner for obvious reasons. The claim of interest of Rs. 2,88,000 has been disallowed with a finding that the entire funds are those of Shri Trilok Singh Dhill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee and in favour of the Revenue by the Tribunal, which is the final court of fact. SQL No. 21 : Whether the order of the Tribunal, in the facts and circumstances of the case, is perverse with respect to recording of satisfaction for initiating proceedings under section 153C of the Act, particularly when the seized bills were found verifiable from the records maintained by the appellant ? Finding 61. The notices have been issued under section 153C to the appellant after the Assessing Officer has recorded satisfaction that the assessee was running the restaurant as benamidar of Trilok Singh Dhillon and after due enquiry, the addition has been made. However, the Tribunal has restored the matter to the Assessing Officer with a direction that in case, the assessee is running restaurant as benamidar of Trilok Singh Dhillon, then the same has to be assessed at the hands of Trilok Singh Dhillon. There is a specific direction to the Assessing Officer to decide the same as per facts and law after providing opportunity of hearing to the assessee. In our considered view, the above issue is to be ultimately decided by the Assessing Officer afresh after affording ..... X X X X Extracts X X X X X X X X Extracts X X X X
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