TMI Blog2016 (2) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search the audited books of accounts were not found. The assessee in the block return declared long term capital loss for first 2 years, i.e. A.Yrs. 1994-95 and 1995-96 whereas for A.Yrs. 1996-97 and 1997-98 the assessee declared long term capital gain. The AO considering the continuous purchase and sale of land by the assessee treated the same as adventure in nature of trade. The Ld.CIT(A) after considering the facts of the case and on proper appreciation of the seized documents vis-à-vis reply of the assessee from time to time has enhanced the income of the assessee by ₹ 4,75,000/-. We do not find any infirmity in the order of the CIT(A) in absence of any material brought to our notice to take a different view. Addition u/s 68 - Held that:- ind in the instant case the AO made addition of ₹ 4 lakhs to the total income of the assessee u/s.68 on the basis of the statement recorded from the assessee that he had taken loan of ₹ 4 lakhs on different dates during F.Yrs. 1994-95 to 1997-98 in cash from Shri P.S. Puslori. We find the CIT(A) deleted the addition on the ground that while the AO has recorded the statement of Shri P.S. Puslori, however, the AO di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. A search action u/s.132 of the I.T. Act was conducted on 16-02-1999 at the residential and business premises of the assessee. During the said search action, cash of ₹ 9,000/- was found in the premises of the assessee. Certain documents/loose papers were also found and seized in the course of the said search and seizure action. The AO issued notice u/s.158BC to the assessee on 15-09-1999. Since the assessee did not file the return of income, he was issued a questionnaire along with reminder for filing the return on 03-10-2000. Subsequently, the AO issued a notice u/s.142(1) to the assessee on 03-10-2000 along with a detailed questionnaire vide letter dated 03-10-2000. The assessee thereafter filed his return of income for the block period in Form 2B on 08-12-2000 by disclosing ₹ 12 lakhs as undisclosed income for the block period. A notice u/s.143(2) was issued to the assessee on 29-01-2001. The assessee in response to the said notice appeared before the AO and filed certain details. 4. The AO noted that the assessee is an individual and running a cable network at Kothrud, Pune in the name of the following concerns : 1. M/s. Snehal Communitations (Prop. of his w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He had also enquired with his auditors who had admitted that books were not with them. Since he was unable to produce the books of account and was not aware as to where the books of accounts are lying, the assessee in his reply to Question No.24 stated that the returns filed for various assessment years were done by taking data directly from the computer in which all data in its regular course was being fed. 6. The assessee in his subsequent reply in the statement recorded u/s.132(4) on 26-02-1999 expressed his inability to produce the books of accounts for Snehal Communications and in his individual case as well. 7. Since the assessee was unable to produce the books of account and the books of account were not found during the course of search the AO analysed the various documents seized from the premises of the assessee during the course of search. After considering the explanations given by the assessee from time to time, the AO determined the undisclosed income of the assessee for the block period at ₹ 1,08,82,364/- being unexplained cash loans, unexplained business income on purchase and sale of land, unexplained cash credits and unexplained transactions for vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,50,000/- from the block assessment. 7. On the facts and in the circumstances of the case and in law and on reading the entire Block assessment it transpires that there is double addition of ₹ 12,00,000/- and one single addition of ₹ 12,00,000/- be deleted. 8. On the facts and in the circumstances of the case and in law the assessee denies his liability to pay interest u/s.158BFA(1) of the Act and same be deleted. 9. On the facts and in the circumstances of the case and in law no surcharge is leviable u/s.113 and it be held accordingly. 10. The appellant craves to leave, add/amend or alter any of the above grounds of appeal. 10. The assessee has also taken the following additional ground : On the facts and in the circumstances of the case and in law the block assessment is vitiated in law inasmuch as the statutory and mandatory notice u/s.143(2) was not served in accordance with the proviso to that section but the said notice was served prior to the filing of the Return in F.2B. The lower authorities have not held the said return invalid. Since the provisions of proviso to S.143(2) have been violated the resultant assessment is bad in law, without ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The grievance of the assessee in the ground is regarding validity of the assessment proceedings in absence of issue of notice through RPAD with acknowledgement due. The CIT(A) had given a categorical finding that the notice u/s.158BC was issued on 15-09-1999 and served on the assessee by Registered post sent on 21-09-1999. It is addressed to Shri Sambhaji S. Patil as proprietor of a concern and thus is in his individual capacity. As per the said notice, the return of income was to be filed within 16 days of the service of the notice and the block period mentioned is upto 16-02-1999. In response to the said notice the assessee, in his individual capacity, had filed a return in Form 2B on 08-12-2000. Thus, the CIT(A) has held that the assessee has not only duly received the notice but has also filed return of undisclosed income for the relevant block period although the same was beyond the time given in the notice u/s.158BC. In view of the above, he held that the stand taken by the assessee about the criteria of the notice u/s.158BC is not acceptable. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement recorded from the assessee u/s.131. The AO accordingly made addition of ₹ 27,31,000/- to the total income of the assessee for the block period, (i.e. ₹ 15,57,000/- for A.Y. 2004-05 ₹ 11,74,000 for A.Y. 1998-99). 20. In appeal the Ld.CIT(A) gave certain relief to the assessee and sustained addition of ₹ 4,75,000/- which are unrecorded by observing as under : 10.3 I have gone through the statement on oath of the appellant u/s.132(4) and u/s. 131 as well as perused the seized papers which were produced before me by the assessing officer and copies of which along with explanation have been submitted by the appellant as well. Copies of the explanation of the appellant along with photocopies of the relevant seized papers is given in Annexure-3 to this appellate order. After going through all this information on record, I have to hold that the decision arrived at by the assessing officer in this regard is not based on proper appreciation of the facts and the evidence available. Infact, there is no circumstantial evidence available on record and no attempt whatsoever has been made by the assessing officer to gather any evidence from Mr.Jugal So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s.132(4) could not be considered as a reasonable piece of evidence in support of 'on money payment' evidence against the appellant for purchase of the property, in so far as sale of plots is concerned, the statement on oath of the appellant, which refers to personal knowledge of the appellant and has not been rebutted by the appellant at later stage, the details of unrecorded sale has not been received by the appellant is required to taken over and above the recorded consideration. In the statement on oath u/s. 132(4) dated 17.02.1999, which was recorded in an elaborate manner wherein the appellant has admitted the total receipts from the sale of plots of land of ₹ 25,70,000/-, out of which the following amounts are unrecorded: F.Y.1993-94 Rs.1,80,000 F.Y.1994-95 ₹ 20,000 F.Y.1995-96 Rs.2,75,000 Rs.4,75,000 The appellant also admitted that these money has been utilized by him for business purposes and to pay back his outstanding loans. In this manner, while this addition of ₹ 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of appeal No.10 being general in nature is dismissed. 26. So far as the additional ground is concerned it is the submission of the Ld. Counsel for the assessee that since the notice issued u/s.143(2) is prior to the date of filing of the return in Form 2B, therefore, the entire assessment proceedings is bad in law. 27. The Ld. Counsel for the assessee submitted that the search took place on 16-02-1999 u/s.132 of the Act and the notice u/s.158BC(c) was issued on 15-09-1999. The assessee filed the return in Form 2B on 08-12-2000 and the notice u/s.142(1) was issued on 03-10-2000. Subsequent to the issue of notice u/s.142(1) the AO issued notice u/s.143(2) on 23-11-2000 which is before filing of the return. Relying on various decisions he submitted that the notice u/s.158BC is not a mere procedure. The AO acquires jurisdiction to initiate block assessment only on issue of notice. Failure to comply with the provisions of section 143(2) cannot be taken lightly and the action of the AO in not complying with the said provisions cannot be justified. He further submitted that notice was not issued through RPAD. Relying on various decisions he submitted that a notice sent under certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the return in Form 2B. The various decisions relied on by the Ld. Counsel for the assessee are therefore not applicable to the facts of the present case. First of all, the assesssee has not filed the return within the statutory period after the issue of notice u/s.158BC. The AO has also issued a notice u/s.143(2) after the assessee filed the return in Form 2B. Therefore, the earlier notice issued u/s.143(2) may be a procedural mistake by the AO, however, the same cannot make the entire assessment proceedings invalid since a fresh notice u/s.143(2) has been issued by the AO after filing of the return in Form 2B by the assessee. The notice was duly served on the assessee and the assessee had participated in the assessment proceedings. Things would have been different had the AO not issued a fresh notice u/s.143(2) after the return was filed. Under these circumstances, the various decisions relied on by the Ld. Counsel for the assessee are not applicable to the facts of the present case and are distinguishable. In view of the peculiar facts and circumstances of the present case the additional ground raised by the assessee is accordingly dismissed. ITA No.132/PN/2004 : 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. The AO noted that the assessee in his statement recorded u/s.132(4) was unable to give verifiable sources for the advances made and was unable to furnish any plausible explanation for not considering the advance as undisclosed income. He, therefore, made addition of ₹ 24,24,428/- to the total income of the assessee. 33.1 On the basis of the various submissions filed by the assessee, the Ld.CIT(A) called for a remand report from the AO. After considering the remand report the Ld.CIT(A) deleted the addition made by the AO. While doing so, he noted that it is not possible to work out from the seized diary about the figure which total up to ₹ 24,24,428/- and the only basis of addition was the statement recorded u/s.132(4) of the Act. Although the AO was required to verify each and every entry made in the diary numbers 38, 39 and 46 with respect to the books of account and other charts relating to cash flow statement submitted by the assessee during the assessment proceedings as well as before the appeal proceedings, the CIT(A) noted that the AO in the remand report has mentioned that those entries in the diaries have been verified and found to be properly entered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order. 36. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 37. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the Ld.CIT(A) while deleting the above 2 additions has categorically stated that the addition made by the AO is not based on proper appreciation of facts and the evidence available. Even there is also no circumstantial evidence available on record and no attempt has been made by the AO to gather any evidence from Shri Jugal Soni, Shri Shriram Soni or the Kumbre s or any other person as mentioned in the loose papers. He has also given a finding that the AO in the computation of undisclosed income had made certain apparent double additions. After considering the various submissions made by the assessee and after considering the remand report the Ld.CIT(A) has deleted the above 2 additions. The Ld. Departmental Representative could not controvert the findings given by the CIT(A). Therefore, in absence of any contrary material brought to our notice against the order of the CIT(A) we find no infirmity in his order deleting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s quoted hereunder: The A.O when he says that he had taken a loan in cash has been accepted by him in his own submission is not correct. No cash loans were taken from Soni's. they were by account payee cheques and have been routed through savings bank account of the assessee. The payment of ₹ 3,26,000/- was made to Sonis as per assessee which is included in the figure of ₹ 15,57,000/-. The A.O gives credit of ₹ 3,26,000/- from the amount of cash loan of ₹ 15,00,000/- alleged to have been taken from sonis and, therefore, makes an addition of ₹ 11,74,000/- as 'undisclosed income'. The original amount of ₹ 15 lakhs treated as cash loan is itself an imagination and, therefore, giving credit of ₹ 3,26,000/- from this figure and sustaining an addition of ₹ 11,74,000/- itself is imaginary. 16.1 After considering the facts of the case, I have to hold that the addition of ₹ 11,74,000/- is not at all justified and the same is directed to be deleted. The grounds of appeal Nos. 22 to 26 are accordingly allowed in favour of the appellant. 40. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that neither the books of accounts of Shri Puslori were shown to the assessee nor Shri Puslori was allowed to be cross examined by him. Therefore, the observation of the AO are against the principles of natural justice. It was argued that as per the provisions of section 68 the AO was duty bound to confront the assessee with the information in his possession and thereafter reach a conclusion. This was completely overlooked by the AO. The assessee filed a copy of account of Shri Sambhaji S. Patil in the books of M/s. Karan cables, a concern of Shri P.S. Puslori wherein the transactions of loan have been reflected. It was submitted that the amount of ₹ 4 lakhs taken as loan has been returned to Shri Puslori by demand draft of ₹ 4 lakhs on 11-02-1998. Certificate from Shri Ganesh Bank of Kurundwad Ltd. Kothrud, Pune was also submitted by the assessee before the CIT(A). It was further submitted that when the AO was categorically stating in the assessment order that the assessee was not maintaining any books of account, then in such a situation it was not possible on his part to make addition u/s.68. 46. Based on the arguments advanced by the assessee the Ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) erred in restricting the addition made on loans taken and their repayments to ₹ 1,01,506/- as against the amount of ₹ 1,71,561/-. 5. On the facts and in the circumstances of the case and in law the Ld.CIT(A) was not justified in confirming the assessment of undisclosed income of ₹ 1,01,506/- against made by A.O. of ₹ 1,71,561/- on account of loan taken on pledging gold ornaments of the wife of the assessee and Ld.CIT(A) ought to have deleted the entire addition of ₹ 1,71,561/-. 50. Facts of the case, in brief, are that the AO based on the statement recorded u/s.132(4) on 17-02-1999 and statement recorded u/s.131 on 09-02-2001 made addition of ₹ 1,71,761/- on account of unexplained loan and repayment thereof. In appeal the Ld.CIT(A) based on the basis of submissions made and arguments advanced by the assessee directed the AO to delete the addition of ₹ 1,71,761/- made u/s.68. However, he directed the AO to make addition of ₹ 1,01,506/- u/s.69 of the Act in absence of any plausible explanation given by the assessee towards the repayment. The relevant observation of the CIT(A) at Para 14.1 and 14.2 of the order read as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before us. 52. We have considered the rival arguments made by both the sides. We find the Ld.CIT(A) after proper appreciation of the facts of the case directed the AO not to make any addition u/s.68 amounting to ₹ 1,71,761/-. However, he directed the AO to make addition of ₹ 1,01,506/- u/s.69 of the Act in absence of any plausible explanation given by the assessee towards the repayment of the above loan. The Ld. Counsel for the assessee before us also could not give any proper explanation nor he could explain how the order of the CIT(A) is erroneous. Since the Ld.CIT(A) on the basis of analysis of the seized document and on the basis of the various statements recorded from the assessee u/s.132(4) as well as u/s.131 has given valid reasons, therefore, in absence of any contrary material brought to our notice by either side we do not find any infirmity in the order of the CIT(A). Accordingly, the same is upheld and the ground raised by the assessee as well as the Revenue are dismissed. 53. Ground of appeal No.9 by the Revenue and ground of appeal No.6 by the assessee are as under : 9. On the facts and in the circumstances of the case, the Ld.CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply of the appellant to question nO.3 of the statement u/s.132(4) dated 19.02.1999. Furthermore, the cheque of ₹ 5 lacs belongs to the proprietary concern of M/s.Snehal Communication, a proprietary concern of Smt.S.S.Patil and therefore the addition on that account, irrespective of the admission of the appellant, is not justified in the hands of the appellant. No doubt the crucial piece of evidence in this case is the admission of the appellant u/s.132(4), the evasive reply of the appellant in the statement u/s.131 in question nos. 45 and 46 go against the appellant. After considering all the facts and circumstances of the case, in the light of the admission of the appellant in the statement u/s.132(4) and failure of the appellant to rebut the presumption against him by any credible evidence on this issue, the addition of ₹ 15,50,000/- is to be sustained out of ₹ 20,50,000/- (Relief of ₹ 5,00,000/-) on facts as well as in view of the legal position brought out in later paragraphs. 57. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 58. After considering the rival arguments made by both the sides, we do not find any infi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge the onus of substantiating the source of such money the AO made addition of ₹ 4,94,275/- to the total income of the assessee being the peak credit : Fin. Year Cash/Cheque Receipt Payment Balance 1996-97 Cash 2,25,000 76,000 1,49,000 1997-98 Cash 9,29,100 12,32,375 Cheque 37,000 50,000 (-)1,67,275 1998-99 Cash 7,27,500 5,65,000 (-)5,275 61. Before CIT(A) the assessee made elaborate submissions based on which the Ld.CIT(A) deleted the addition by observing as under : 18.2 I have gone through the submission of the appellant and the records available and it is found that computation made by the appellant reflected in the aforesaid reply is borne out by records. For example, an amount of ₹ 60,000/- is reflected in the diary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 15,33,292/- 11. Q.No.52 - Bundle No.43 -pg.63 - ₹ 20,40,000/- Consideration for sale of land 12. Q.No.55 - Bundle No.46 - Details of payment receipts. 13. Q.No.59 - pg.27 to 31 - Bundle No.2 - Toursafe account, 1,2 3 of Bundle No.5 14. Q.No.86 Bundle No.1 pg.no.58 Blank cheque of ₹ 3,50,000/-. 15. Q.No.88 pg.No.87 Bundle No.5 Transactions between S.R. Kulkarni assessee. On pg. No. 9 - A. O. observes that his attention was drawn to reply given on item No. 7 dt.07.02.2001 but at pg. No.5 he states no reply to this questionnaire and notice u/s.142(1) was received till 27.02.2001 On pg. 8 of assessment order, A.O. mentions, in pg.no.2,3,4 of Bundle No.6, the assessee stated that these were the loans raised against pledge of gold ornaments. On verification of pg. 2, 3, 4 of Bundle No.6 which are dated 18.10.1997 29.10.1997 are not related to any loans raised. Pg.no.2 of Bundle No. 12, there are figures of loans raised interest paid. The A.O. has made the total of ₹ 1, 71,561/- which includes the interest paid of ₹ 728 + ₹ 404 + ₹ 2753 + ₹ 3676 = ₹ 7,561/-. The earlier loans of ₹ 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 15,57,000/- - ₹ 3,26,000/-) Rs.15,57,000/- - accepting that it was consideration for payment of land purchase and with the A O's own admission available from the trading account in F. Y. 1993-94 addition is made in A. y. 1998-99. The addition of ₹ 15,57,000/- in A Y. 1994-95 is as unexplained cash loan while on pg.no.13 A.0. says it is an amount paid as for making unrecorded consideration. Ground no.28 is accordingly allowed in favour of the appellant. 62. Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 63. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the Ld.CIT(A) while deleting the addition made by the AO has closely and minutely examined the details furnished before him. The Ld. Departmental Representative could not point our any infirmity in the factual findings given by the CIT(A). In absence of any contrary material brought to our notice we find no infirmity in the order of the CIT(A) deleting the addition made by the AO. Accordingly, we uphold the order of the CIT(A) and the ground raised by the ..... 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