9911796707
TMI Blog2015 (8) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... ukmani Industries and M/s Telesystems International. The assessee was awarded contract by Government of India to take photographs for voters identity card. The Revenue authorities also found investment to the extent of Rs. 1,99,64,950/- in M/s Diksaat Transworld Ltd. The assessee, by letter dated 10.12.2004 gave the details of equity shares held by him and his family members in M/s Diksaat Transworld Ltd. as on 5.12.2002. The share application money contributed by the assessee and his family members works out to Rs. 1,96,99,950/-. Thus, the total contribution made by the assessee and his family members in M/s Diksaat Transworld Ltd. was to the extent of Rs. 3,62,16,950/-. For the entire block period the assessee has not reported positive income and for the assessment year 2000-01 alone the income was shown to the extent of Rs. 23,22,093/-. For all other years in the block period the assessee returned loss in the business. The assessee made an attempt before the Assessing Officer to explain the source as if he has received contract from Government of India for taking photographs of the voters for preparing the identity cards. The Assessing Officer found that the assessee has not mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in M/s Diksaat Transworld Ltd., according to the ld. DR, the Assessing Officer has rightly made the addition to the extent of Rs. 3,62,14,950/-. However, the CIT(A) found that if the investment by family members in the share of the company was bogus then it was free to proceed with the family members in respect of the income. The CIT(A) further found that the family members are assessed separately, therefore, the income and asset declared under VDIS cannot be ignored. The CIT(A) further found that the assessee himself made the investment to the extent of Rs. 1,62,50,000/-. In respect of the investment made by the family members to the extent of Rs. 1,99,64,950/-, the CIT(A) found that there was debit balance in the proprietary concerns namely, M/s Rukmani Industries and M/s Telesystems International. The money withdrawn from these proprietary concerns was used for making investment. After taking into consideration all the material facts including the liability of the videographers, investment in equity shares, purchase of property and jewellery, the expenses etc., the CIT(A) confirmed the addition of Rs. 1,62,50,000/-. However, he deleted the addition to the extent of Rs. 1,99,64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Department under the VDIS. According to the ld. Counsel, the disclosure made by the assessee and his family members to the Department in respect of the investment, assets and jewellery under the VDIS cannot be ignored while computing the undisclosed income. Referring to the judgment of the Apex Court in Sumathi Dayal(supra), the ld. Counsel submitted that the entire investment was made by the respective family members of the assessee therefore, the burden of proof is on the Revenue to show that the assessee made the investment in the name of respective family members. In the absence of any material found during the search operation, according to the ld. Counsel, the CIT(A) ought to have deleted the entire addition of Rs. 3,62,14,950/- instead of restricting the same to Rs. 1,99,64,950/-. 6. We have considered the rival submissions on either side and also perused the material available on record. Under the scheme of the Income-tax Act, 1961, undisclosed income for the block period has to be computed on the basis of the material found during the course of search operation and the information which is relatable to the material found during the course of search operation. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der VDIS. He further found that the addition towards equity shares and share application money in the name of family members cannot be sustained. Accordingly, he deleted the addition to the extent of Rs. 1,99,64,950/-. The CIT(A) also failed to consider the provisions of section 158BB of the Act. The CIT(A) further found that the assessee could not satisfactorily explain the source of investment in the share application of M/s Diksaat Transworld Ltd. to the extent of Rs. 1,62,50,000/-. This Tribunal is of the considered opinion that in the absence of any seized material during the course of search operation, this amount of Rs. 1,62,50,000/- also cannot be treated as undisclosed income for the block period. At the best, it may be assessable in the regular assessment provided the time limit is available under the statutory provisions. This Tribunal is of the considered opinion that the total investment made by the assessee and his family members to the extent of Rs. 3,62,14,950/- was not supported by any of the search material, therefore, the same cannot be treated as undisclosed income for the block period. Accordingly, the orders of the lower authorities are set aside and the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee admitted receipt of Rs. 13,40,22,400/- from M/s Indian Telephone Industries Ltd. for taking photographs of the voters to prepare identity card, the ld. Counsel submitted that deposit of such money in the bank account cannot be treated as undisclosed income for the block period. Referring to the assessment order, more particularly page 27, the ld. Counsel submitted that merely because the assessee hired the services of photographers of the neighbouring States, the Assessing Officer doubted the genuineness of withdrawal from the bank account. According to the ld. Counsel, the assessee has to make arrangement for taking photographs of the voters simultaneously in several places . In the absence of any videographers/photographers in the State of Tamilnadu, the assessee has to necessarily hire people from the neighbouring States like Andhra Pradesh, Karnataka and even from Delhi. The ld. Counsel submitted that the assessee was required to hire 3000 videographers/photographers at every point of time to complete the project. This was done three times and every time the assessee entered into contract with these videographers/ photographers. The ld. Counsel further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only the bank statement. The assessee has explained the receipt of Rs. 13,40,22,400/- from M/s Indian Telephone Industries Ltd. which was not disputed by the Assessing Officer. In the absence of any other material to indicate that the assessee has deposited the undisclosed money in the bank account, this Tribunal is of the considered opinion that the entire amount of Rs. 1,69,27,817/- was deposited from the business receipt of the assessee, in other words, the money received from M/s Telephone Industries Ltd. Moreover, as observed by the CIT(A), the amount withdrawn to the extent of Rs. 1,50,00,000/- is also available with the assessee for deposits. Therefore, this Tribunal is of the considered opinion that the CIT(A) ought to have deleted the entire addition instead of restricting the same to Rs. 19,77,817/-. According, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the entire addition of Rs. 1,69,27,817/-. 13. The next issue arises for consideration is unexplained investment in M/s Dimka Petro Products Ltd to the extent of Rs. 85 lakhs. 14. Shri N. Rengaraj, Ld. Departmental Representative submitted that the assessee has pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee. Therefore, the CIT(A) found that making a further addition with regard to payment made by the assessee to M/s IDL Industries Ltd would amount to double addition. Even the Assessing Officer has made addition only on the ground that the assessee has not maintained any proper accounts. The fact remains that the deposit made in the bank account was explained and the payments were made from the deposit made in the bank account by way of demand drafts and cheques. Therefore, this Tribunal is of the considered opinion that the CIT(A) has rightly deleted the addition of Rs. 85 lakhs. This Tribunal do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed. 17. The next ground of appeal is with regard to interest payment to M/s Mansi Mercantile Co. to the extent of Rs. 1,08,000/-. 18. Shri N. Rengaraj, Ld. Departmental Representative submitted that during the course of search operation, a loose sheet was found and it was impounded. In one of the loose sheets, the assessee's transaction with M/s Mansi Mercantile Co. was found. The assessee apparently paid a sum of Rs. 1,08,000/- towards interest between 24.12.2001 to 24.3.2001. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer found that it was not possible to verify the entries in the individual books of account in the absence of consolidated account of the assessee's business activity. Referring to the payment made by the assessee to the extent of Rs. 10 lakhs on 24.6.2000, the ld. DR submitted that the payment was claimed to be made by M/s Dheva Investments & Finance. The Assessing Officer found that M/s Dheva s & Finance was engaged in hire purchase finance till 1996. Since the assessee has not maintained any proper accounts, the investment made could not be explained properly. Therefore, the Assessing Officer treated the entire amount of Rs. 15 lakhs as undisclosed income of the assessee. The CIT(A), however, found that a sum of Rs. 10 lakhs was paid from M/s Dheva Investment & Finance. Accordingly, he deleted the addition. In respect of Rs. 5 lakhs paid from the savings bank account of the assessee, he confirmed the same in the absence of cash flow statement. 23. On the contrary, Shri Devanathan, ld. Counsel submitted that a sum of Rs. 5 lakhs was paid from the savings bank account of the assessee in which the business proceeds were deposited. The remaining Rs. 10 lakhs was paid by M/s D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing activities. The assessee has also filed the account copies of M/s Telesystems International and partnership firm M/s Fire Challenger. Referring to the assessment order, the ld. Counsel submitted that the entry is with regard to Rs. 22 lakhs and the Assessing Officer has taken only Rs. 10 lakhs on 27.4.1996. The Assessing Officer presumed that the assessee paid a sum of Rs. 10 lakhs by cash in the absence of entry in the books of account of M/s Telesystems International. 27. On the contrary, Shri N. Rengaraj, ld. Departmental Representative submitted that during the course of survey at the office of M/s Diksaat Transworld Ltd. it was found that the assessee has paid a sum of Rs. 10 lakhs in cash on 27.4.1996. The Assessing Officer found that there was an entry in the cash book of M/s Telesystems International for payment of Rs. 10 lakhs on 27.4.1996. Since the assessee could not explain the payment of Rs. 10 lakhs in cash to Shri Rakesh Sarin on 27.4.1996, according to the ld. DR, the CIT(A) has rightly confirmed the addition made by the Assessing Officer. 28. We have considered the rival submissions on either side and also perused the material available on record. Admittedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that the assessee mobilized funds from the public. Since the assessee handed over all the books of account to the subsequent incumbent of the office bearers, he was not in a position to produce the same before the Assessing Officer. 30. On the contrary, Shri N. Rengaraj, Ld. Dr submitted that the explanation of the assessee was that the party fund was paid to the extent of Rs. 28,36,000/- to Shri Thirunavukarasu is general in nature. In the absence of any material to show that the assessee collected funds to the extent of Rs. 28,36,000/- from general public out of which Rs. 23,50,000/- was paid to Shri Thirunavukarasu and Shri Karthikeyan could not be accepted. In the absence of any material, according to the ld. DR, the CIT(A) has rightly confirmed the addition made by the Assessing Officer. 31. We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee was State President of Bahujan Samaj Party . It is also not in dispute that Bahujan Samaj Party is a national political party. The political party used to collect money from the general public by way of donation to meet their expenditure fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red the rival submissions on either side and also perused the material available on record. It is not in dispute that payment of Rs. 5,10,000/- was found by the Revenue authorities during the course of survey operation in the office of M/s Diksaat Transworld Ltd. No material was found during the course of search operation. In view of section 158BB(1), the Assessing Officer has to compute the undisclosed income for the block period on the basis of the material found during the course of search operation and the information which is relatable to the material found during the course of search operation. Therefore, this Tribunal is of the considered opinion that the material found during the course of survey operation cannot be a basis for making any addition. In view of the above, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of Rs. 5,10,000/-. 35. The next ground of appeal is with regard to production expenses. 36. Shri N. Devanathan, ld. Counsel for the assessee submitted that the assessee was a proprietor in M/s Dimka Productions. The assessee has produced a Tamil feature film called 'Aagayam'. According to the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not admitted any positive income for the assessment year 1999-2000. Shri T. Thiagarajan filed his return of income for the assessment year 1998-99 admitting income of Rs. 60,000/- only as salary from M/s Dheva Investment & Finance. Therefore, Shir T. Thyagarajan has no financial capacity to make investment in film production. In those circumstances, the Assessing Officer, according to the ld. DR, has rightly taken the entire investment of Rs. 53,17,300/- as that of the assessee. 38. We have considered the rival submissions on either side and also perused the material available on record. From the order of the lower authority, it appears that the loose sheet found during the course of survey operation discloses the payment made to film artists and other expenses incurred in the production of feature film. The total expenditure appears to be Rs. 50,25,763.50. The assessee has also spent another sum of Rs. 3 lakhs. The assessee himself admitted during examination on 7.10.2003 that he was the proprietor of the concern. The capital account of M/s Dimka Productions shows that is if the funds were received from Shri T. Thiagarajan, brother of the assessee. From the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for getting telecast rights of the film 'Dr. Ambedkar'. Since the payment was not evidenced by way of search material, according to the ld. Counsel, it cannot be added for the block period. 40. On the contrary, Shri N. Rengaraj, ld. Departmental Representative submitted that though the Assessing Officer has not made any reference about the seized material, while making addition of Rs. 3 lakhs, the Revenue authorities during the course of search operation found a loose sheet which shows the payment made for production of film and telecast rights, therefore, the assessee has to explain the source for making the payment of Rs. 3 lakhs as claimed. 41. We have considered the rival submissions on either side and also perused the material available on record. No doubt the Revenue authorities found payment of Rs. 3 lakhs during the course of search operation for obtaining telecast rights of two feature films 'Mustafa' and 'Dr. Ambedkar'. While considering the investment made by the assessee in production of the feature film, this Tribunal found that the assessee invested the same from the business receipts of Rs. 13,40,22,400/- received from M/s Indian Telephone Industries. The CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of property at Ambattur. According to the ld. Counsel, no material was found during the course of search operation. The assessee filed certain details during the course of assessment proceedings. There is no mention about purchase of this property in the balance sheet also. The property was purchased during 1.4.1996 to 5.12.2012 out of the money received from M/s Indian Telephone Industries Ltd. Since no material was found to support the addition made by the Assessing Officer, according to the ld. Counsel, this amount cannot be treated as undisclosed income for the block period. 48. On the contrary, Shri N. Rengaraj, Ld. Departmental Representative submitted that the assessee has purchased a piece of land measuring 0.76 Acres in Industrial Estate at Ambatur. The assessee claimed before the Assessing Officer that he paid Rs. 10,57,000/- out of the collection from Indian Telephone Industries Ltd. The Assessing Officer further found that Tamilnadu Industrial Development Corporation allotted the vacant land to the assessee and the assessee had constructed a building which was used for carrying on soap manufacturing activity. In the absence of any details regarding the constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive submitted that the assessee's sister Smt. Kamala purchased 13.5 cents of land on 11.12.1997 and sold 11 cents of land on 23.9.2000. The claim of the assessee that his sister purchased the property by investing the sale proceeds of gold jewellery is not supported by any material. The assessee has withdrawn funds from M/s Telesystems International. Therefore, the Assessing Officer made an addition of Rs. 10,16,307/- for the block period. 53. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, there was no material found during the course of search operation with regard to purchase of property at Kottivakkam. Apart from that, Smt. D. Meenakshi, assessee's wife is also an independent assessee. If at all, the assessee's wife could not explain the source of making investment, addition could be made in the hands of the assessee's wife and definitely not in the hands of the assessee. Similarly, Smt. Kamala could not explain the source for purchasing the property, addition has to be made in the hands of the above said Smt. Kamala. In the absence of any material found during the course of search operation, this Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial was found during the course of search operation. In those circumstances, this Tribunal is of the considered opinion that the same cannot be taken as undisclosed income for the block period. Accordingly, the orders of the lower authorities are set aside and the Assessing Officer is directed to delete the addition of Rs. 1,54,500/-. 58. In the result, the appeal of the Revenue in I. T.(SS)A. No.18/Mds/2013 is dismissed and the appeal of the assessee in I. T.(SS)A. No.19/Mds/2013 is partly allowed. 59. Now, coming to the regular assessment for the assessment year 2000-01. Both assessee and Revenue filed appeal against the very same order of the CIT(A). 60. Shri A. V. Sreekanth, ld. Departmental Representative submitted that the Assessing Officer made addition of Rs. 1,25,00,000/- towards unexplained expenditure for taking photographs. According to the ld. DR, the assessee was following project completion method. The assessee has not maintained any books of account, therefore, the expenditure claimed by the assessee could not be verified. In respect of M/s Rukmani Industries and M/s Telesystem International, the assessee claimed an expenditure of Rs. 4,14,17,166/- and Rs. 2,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed Rs. 2,88,25,244/- as expenditure in the case of M/s Rukmani Industries. The Assessing Officer found that vouchers for which expenditure was claimed are not supported by any back papers and relevant documents for verification. What was available is only internal vouchers. The Assessing Officer failed to appreciate that assessee has not employed any employee on monthly basis. The assessee then and there employed photographers and paid the salary. In those circumstances, producing vouchers for payment of the salary is not practically possible. Internal vouchers are available on record. This was admitted by the Assessing Officer in the assessment order. It is not the case of the Assessing Officer that it could not be verified by him. The case of the Assessing Officer is that the auditors are not able to certify the correctness and completeness of the accounts maintained by the assessee. This Tribunal is of the considered opinion that when the assessee is maintaining internal vouchers, the expenditure cannot be doubted especially if it is verifiable by the Assessing Officer. The Assessing Officer has to consider the nature of the assessee's business and how the employees are paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited cash of Rs. 1 lakh and Rs. 8,000/- on 10.4.2002 and 24.7.2002 respectively in Hongkong Bank. The assessee claimed before the Assessing Officer that he sold a property on 11.12.2002 out of which a sum of Rs. 10 lakhs was deposited in Canara Bank on 2.1.2003. After perusing the documents, the authorities below found that the assessee, his wife and one Shri N. Pradeep Kumar sold a property at Puzhal on 11.12.2002 for a sale consideration of Rs. 20 lakhs to one Shri N. Sethurapandian, Shri S. Arunachalam and Shri V. Kumaravel. The consideration received by the assessee, his wife and Shri Pradeep Kumar was Rs. 6,49,820/-, Rs. 3,61,011/- and Rs. 9,89,169/- respectively. The assessee has received Rs. 6,49,820/- in cash on 11.12.2002 therefore, the explanation of the assessee that the same was deposited on 2.1.2003 appears to be reasonable. Hence, the CIT(A) accepted the same. However, in respect of the balance amount of Rs. 3,50,180/- in the absence of any explanation, the CIT(A) has confirmed the same. Similarly, in respect of the deposit of Rs. 2 lakhs in Canara Bank, the CIT(A) has accepted the explanation of the assessee to the extent of Rs. 99,500/- out of the collection fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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