TMI Blog2007 (9) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's office and residential premises was amounts given to the Tamil Nadu Basket Ball Association? 3. Whether in the facts and circumstances of the case, the Tribunal was right in treating the huge investments made in the names of the assessee's mother and son as not that of the assessee on the ground that since the mother had filed a declaration under Kar Vivad Samadhan Scheme and since the son is a bank officer who has an independent source of income ? 4. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the amounts in deposits in the name of Dr. Dharmambal Namasivayam Trust cannot be included in the hands of the assessee under Chapter XIV-B in the absence of clear evidence found as a result of search? 5. Whether in the facts and circumstances of the case, the Tribunal had enough material to hold, and was right in accepting the assessee's explanation that the costly sarees worth Rs.10.20 lakhs found during the search were received as gifts at the time of marriage? 6. Whether in the facts and circumstances of the case, the Tribunal was right in deleting the addition on account of estimated marriage expenses of the assessee's son ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has two sons, A.D. Senthureswaran and A.D. Sugavaneswaran. Sri. Senthureswaran is a bank officer and married. Sri. Sugavaneswaran, at the relevant point of time, was a student. The assessee is the karta of his HUF with his two sons as co-parceners and claims to possess agricultural lands received on family partition. The assessee's father, late Namasivayam, had two wives, and the other wife, namely, Mrs. Ariapoo Ammal had six children. (iii) There was a search under Section 132 of the Income-tax Act ("Act" in short) in the case of the assessee, on 19th and 20th January 1996. As a result of search, substantial quantity of cash, jewellery and various other documents evidencing investment in movable and immovable properties and bank deposits in the name of the assessee, his mother, his children and some of his associates and also documents indicating his earnings from certain undisclosed sources, were found and seized. The search was spread over to different places where the assessee had interest, but the main places were:- (a) M-26, 10th Street, Anna Nagar, Madras and (b) Assessee's Official Chamber in TAMIN at No.31, Kamarajar Salai, Chepauk, Madras-5. 3. Sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions. Aggrieved by the order, the assessee filed an appeal to the Income-tax Appellate Tribunal ("the Tribunal" in short). The Tribunal deleted most of the additions made by the Assessing Officer and allowed the appeal partly. The dispute involved in the present appeal is related to the following additions. They are as under : Addition No.1 relating to Question No.1: Addition of Rs.38,95,74,550/- made in respect of collections from applicants for granting mining licence. Addition No.2 relating to Question Nos.2 and 7: Addition of the amount of Rs.1,64,24,550/- being cash found in the residence and office of the assessee accepting the assessee's contention that out of this money, Rs.152 lakhs belonged to Tamil Nadu Basket Ball Association and Rs.12 lakhs belonged to the assessee's son. Addition No.3 relating to Question No.3 : Addition made in respect of investments made by the assessee's mother and sons amounting to Rs.2,60,45,591/- on the ground that the assessee's mother had filed a declaration under Kar Vivad Samadhan Scheme and the son is a bank officer who has an independent source of income. Addition No.4 relating to Question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further a sum of Rs.1.49 Crores from the office of the assessee. The Assessing Officer rightly rejected the explanation that the money belonged to the Tamil Nadu Basket Ball Association. Actually the monies found in the assessee's residence as well as in the office room belongs to the assessee only. Hence, the Assessing Officer after making elaborate enquiry, rightly came to the conclusion that the entire cash amounting to Rs.1,64,24,550/- found at the assessee's residence as well as his office room represented the assessee's undisclosed income and is assessable under Section 69A of the Act for the assessment year 1996-97. (iii) In respect of third addition, it is submitted that the assessee's mother was a pensioner and no accumulated funds available in her bank account. It is also submitted that there is no evidence that it was used for purchase of property. Hence the Tribunal is wrong in deleting the addition. Further it is stated that the declaration filed by the mother of the assessee under Kar Vivad Samadhan Scheme was accepted by the Revenue and the same has become final. Hence the benefit of Kar Vivad Samadhan Scheme will not be extended to the assessee. Coming to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way be connected to sale invoices to those concerns. Hence the Tribunal is wrong in deleting this addition without any valid material. (vii) In respect of the seventh addition, it is submitted by the counsel appearing for the Revenue that the Tribunal is wrong in deleting the addition on the ground that the said foreign currencies belonged to Smt. Seethalakshmi and it is seen from the records that the said Smt.Seethalakshmi did not respond to the summons issued. It is also submitted that the Tribunal is wrong in merely relying on the statement of the assessee that the amount pertains to one Seethalakshmi, and the mere preliminary statement will not absolve the assessee of his onus. (viii) In respect of the eighth addition regarding the addition in the hands of the assessee, in respect of fixed deposits amounting to Rs.20,000/- in the name of Narayanan, the learned counsel for the Revenue submitted that the said Narayanan did not produce any material evidence to show that he has enough resources available to him to make the fixed deposits. The fixed deposit certificates relating to the fixed deposits were kept in the personal custody of the assessee and no proper reasons were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly with the Government. So, whatever additions made in the financial years 1992-93, 1993-94 and 1994-95 have to be deleted and additions concerned with financial year 1995-96 alone should be considered. Further it is emphasised by the counsel that the addition made for the assessment year 1996-97, there are no dates available in the seized material When the dates are not available in the seized material, the Assessing Officer was of the view that the amount will have to be assessed in the year of search, i.e., financial year 1995-96, relevant to the assessment year 1996-97. It is further submitted that in the Tabular Statement against each addition in the last column, it is given as amount D/L/P, but it was not indicated among which category this particular addition comes. It is also further submitted that there is no corroborative evidence except the slips of paper seized by the Department. Hence, the addition of Rs.38,95,74,550/- has been made without any basis and justification. (ii) In respect of the second addition, the learned Senior Counsel submitted that the assessee had already given explanation that the money seized from him belonged only to Tamil Nadu Basketbal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amadhan Scheme for the assessment year 1992-93 to 1996-97. Hence there cannot be any levy of tax on the very same income. Tax has already been accepted from the mother under the Samadhan Scheme. Hence it is wrong on the part of the Revenue in making addition of the same amount as undisclosed income in the hands of the assessee which amounts to double taxation. In respect of the amount assessed in the hands of the assessee's son on protective basis, it is wrong on the part of the Revenue to make the addition in the hands of the assessee. Further the assessee's son had sent a statement at the time of search that he received a cash gift of about Rs.9 to 10 lakhs. Hence the assessee as well as his son have explained the source and therefore the income already assessed in the hands of the assessee's son should not be assessed in the hands of the assessee. (iv) In respect of the fourth addition, there is no proof seized from the residence of the assessee or from office at the time of search, linking the assessee directly with any of the allegations made in the assessment order. There is no proof that it is the assessee's money which was given to the Trust. One Mr.Sampathkumar h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue failed to produce any evidence to show the assessee's own involvement in the transaction. There is no corroborative evidence to show that these secret commissions were made directly or indirectly to the assessee. There is also no evidence as to how and to whom the payments were made. Hence the Assessing Officer is wrong in making addition on account of the secret commission received from foreign companies for sale of granite and the Tribunal is right in rejecting the Revenue's stand. Hence the addition has been made without application of mind and the same cannot be sustained. Hence the Tribunal has rightly deleted the addition. (vii) In respect of the seventh addition made with regard to the foreign currency found in the assessee's house belonged to one Seethalakshmi, the assessee had given a detailed explanation to the Enforcement Officer on 27.03.1996 and also the said Seethalakshmi appeared before the Enforcement Directorate in person and recorded her statement confirming the whole issue. When the confirmation letter was filed, the source is explained without doubt. Hence the Tribunal is right in deleting the addition made by the Assessing Officer. (viii) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, name of the place, survey number and extent and the amount. Generally, this amount is shown in a coded form that too decimal places. Apparently, the whole number stood for lakhs and the decimals stood for thousands. Some of the entries have been rounded off and / or tick-marked. In respect of some others, another coded number is written below that, probably indicating the amount received or receivable. (c) The third set of documents are typed sheets with details of the name and brief address of the applicant, the details of the mine, viz., the village, taluk and survey number, the nature of granite and extent. These were probably prepared by the staff who prepared papers for consideration of the High Level Committee or those who prepared the minutes of the meetings of the High Level Committee. Against most of the times, in a coded form some handwritten numbers with two decimal places have been recorded. These handwritten numbers are prima-facie in the handwriting of Shri. Dyaneswaran. In fact, on some of the typed sheets where some columns are left blank, they are seen to have been filled up by him in his hand. The coded numbers in the last column in their list and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata available in respect of mines (995) for which licences were applied, details relating to 359 mines appear in more than one list. The internal consistency of the materials seized from the assessee also shows that the papers relate to grant of mining licences only and unless they had some significance the assessee would not have retained them. The amounts mentioned in coded decimal form is in lakhs and thousands as in many cases, the decoded amounts tally with the amounts mentioned in the slips in the handwriting of the parties and / or their representatives and in some of the cases even the denomination for the amount was recorded. The results of random verification carried out with the applicants who parted with money in favour of Shri Dyaneswaran for grant of licenses is given below. But one thing that needs to be pointed out here is that it is neither humanly possible nor is it required under the law that in respect of each and every person money has been paid and received as per details noted in the seized documents. All that one can and has to establish was that there was a practice of collection of money for grant of licenses and infact in many cases, the rates are also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the Revenue. In the same papers, another coded number is written below the first coded figures which, according to the Revenue, probably indicate the amount received or receivable and the third set of papers is said to be prepared by the staff who prepare such papers for the High Level Committee for its meeting. Again, in these papers there were coded hand-written number with decimals which again prima facie, according to the Revenue, is in the handwriting of the assessee. From the above, it is clear that that regarding the first set of papers, there is no claim even by the Revenue that it is written in the assessee's handwriting and only in some papers there is mention of some denominations of money. It is not clear how the Assessing Officer arrived at the conclusion that the coded figures are standing for lakhs and thousands. It is again not certain whether it is a receipt or payment. The Revenue was of the view that it stands for receipt. There is no corroborative evidence to hold that it is actually receipt. But in this case, the Assessing Officer, in the Assessment Order, gave illustrations that the slips for the summary of the statements recorded from 23 applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment to the assessee as for getting the quarry licence. The procedure followed is clear from the answer to question No.4. The application was made to the District Collector who in turn forwarded it to the concerned Tahasildar for inspection and to report to the Director of Mining Geology for recommendation for issuance of licence. It is again to be seen that the assessee was never afforded an opportunity to confront the deponent. Revenue says that all the papers were subsequently given to the assessee. It is also the case of the Revenue that it is not relying on these statements. If he is not relying on these statements, then there is no meaning in taking statements and putting them on record. Further, in the absence of any cross-examination of the deponents by the assessee, none of these statements could be used against the assessee. Therefore, we are of the view that the Revenue's case that the seized materials speak voluminously for the collection of illegal receipt by the assessee is not established. There is no corroborative evidence except the slips of papers seized. It is true, the assessee is neither denying or admitting receipt of payments in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is purported to have been written'." 14. Further, in the absence of any cross-examination of the deponents by the assessee, none of these statements could be used against the assessee. Therefore we are of the view that the Revenue's case that the seized materials speak voluminously for the collection of illegal receipt by the assessee, is not established. There is no corroborative evidence except the slips of papers seized. It is true that the assessee is neither denying or admitting receipt of payments in connection with the issuance of licence for quarrying. From a reading of the above, it is clear that the Assessing Officer had not given any opportunity to the assessee. In the assessment order, it is clearly stated that it is humanly impossible to correlate. It is further stated in Paragraph 3.61 as follows : "Otherwise if one were to concede the assessee's demand one should have gone about and examined the 1000 and odd parties, allowed opportunity of cross examination to the assessee and based on results of such examination and cross examination, reexamine all of them for completion of the exercise and add up such payments to arrive at the undisclosed income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer did not make any attempt to correlate or verify or try to obtain the statements from the other applicants, as has been done for 23 cases. On the basis of the statements given by the 23 persons, the Assessing Officer presumed that whatever figures appearing in the seized material would represent the undisclosed income of the assessee. Also, it is seen that for the seized materials relating to 345 applicants, no dates have been mentioned. In respect of the same, the Assessing Officer totalled the amount and made the addition of Rs.20,31,99,350/- in the year of search, i.e., for the assessment year 1996-97. The said huge addition is made without verification from the 345 persons. The fact whether really the amounts have been paid or not is not mentioned. Even if we assume that the said amounts were paid, the details regarding the dates of payment are also not mentioned. Without considering the above aspects, the Assessing Officer made this addition without basis and justification. There are procedural irregularities, defects and infirmities, which are as follows:- (a) No opportunity given to the assessee to cross-examine. (b) The Revenue obtained statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be about Rs.2 to 3 lakhs. When questioned about the cash found at his office, the assessee stated that about one crore of rupees in cash may be available and that the entire money belonged to TNBA. It was stated that the money was collected from TNBA enthusiasts as a stop gap arrangement till the money sanctioned by the Tamil Nadu Government was released. It was further stated that no receipts had been given to the persons who gave the money and also the receipts were also not recorded in the books of TNBA. The collections were done on a war-footing because the Government had not released the funds sanctioned. When questioned further, the assessee gave the names of some persons and they are as under : 1. Karthikeyan of Salem Basketball Association 2. Sivanadiyan of Madurai Basketball Association 3. Kalaiselvan of Trichy Basketball Association 4. Viswanathan of Karur Basketball Association 5. Shanmugasundaram of Periyar Dt. Basketball Association 19. It was stated that these persons had given loans from Association Funds or from private individuals. It was also stated that nobody other than the assessee was keeping the funds belonging to TNBA. It was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as substantive and the tax had been accepted. So, the assessee had discharged the preliminary onus by establishing the identity of the party, capacity of the party and genuineness of the transaction. The identified party, i.e., TNBA acknowledged their role and disclosed that nine persons who are mostly concerned with basketball activities, have advanced the money of Rs.170 lakhs. Out of nine persons, the revenue examined seven persons and all of them confirmed having advanced monies, i.e., Rs.120 lakhs for the purpose. Revenue had not examined two persons who gave Rs.50 lakhs though all details about them were furnished. The source of TNBA also have been proved. Hence the monies seized from the residence as well as the office of TAMIN belong to TNBA. The Government of Tamil Nadu hosted the SAF Games 1995, an International event at Chennai and the assessee was nominated as one of the three Joint Secretaries in charge of fund raising for infrastructure facilities for the stadium. The Government agreed to fund through TAMIN, to air condition the Indoor Stadium of TNBA. Anticipating delay in release of funds, the General Council of TNBA by a resolution, authorised the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-84 1,70,000 2. House site at Mogappair 1994-95 2,05,000 3. House constructed in Arasangudi 1996-97 6,31,000 4. Investment in M/s.Aahhaa Exports as a partner 1996-97 1,00,000 5. Investments in Shilpigrih Constructions 1995-96 and 1996-97 59,46,738 6. Investment in Sri Bala and Co. 1992-93 and 1995-96 68,46,000 7. Investment in Plutogranites 1996-97 11,05,000 8. Loan to Sri Arivazhagan 1996-97 10,00,000 9. Advance for purchase of 8, Waterworks Colony, Kilpauk, Madras-10 to Sri Marthandam 1996-97 13,00,000 10. Investment in INAS Benefit Fund 1996-97 1,00,000 11. Repayment of loan and interest to Indian Members Benefit Fund Principal Interest (in various years) 9,00,000 7,72,853 II. Sri Senthureswaran : 1. Half share in M-26, Anna Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computed on the basis of the evidence found as a result of search or requisition or other document found as a result of materials gathered or information received." 22. It is seen that the same amount was already declared under the Samadhan Scheme and was assessed. Also, if certain documents are found against a third party, then he should have completed the assessment against the third party under Section 158BD read with Section 158BC of the Act. Instead of doing that, it has been assessed as regular assessment. We do not find any error or illegality in the reasoning given by the Tribunal even though the assessments are protective assessments in the hands of the assessee's mother and the assesee's son. Also having accepted the declarations made under Kar Vivad Samadhan Scheme, the assessments were completed on a regular basis under Section 143(3) of the Act. Hence the Revenue is wrong in adding the amounts in the assessee's income as undisclosed income. Hence we are of the view that the deletion of addition made by the Tribunal is justified. In respect of the assessee's son, the Revenue made protective assessment in the hands of the assessee's son and the assessee's s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns from various persons and while completing the assessment, the Assessing Officer held that all these donations indicate that the claim of donations was false and he made the impugned addition of Rs.1,69,19,621/- and interest thereon of Rs.2,91,958/-. After considering the arguments advanced by the assessee as well as the written arguments by the Revenue, the Tribunal had given a factual finding as follows : "We are afraid, this alone is not sufficient to prove the assessee's involvement in the absence of direct payments by the assessee. It is also to be seen that the amount is going from the account of Shri Sampath Kumar to the trust. There may be shady deals which lead to strong suspicion, but suspicion will not take the place of evidence. It is to be seen that Shri Sampath Kumar is having financing business even according to the Revenue. As rightly contended by Mr.Ravi, if the trust violated the deed the consequences should visit the trust adversely. There is no evidence to show that assessee had repaid any money either to Sampathkumar or to Mr. Varadhan. It is the case of Revenue that inspite of giving opportunity, Shri Varadhan was not produced by assessee. To demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition in respect of the same had not been explained. There was a marriage function in which admittedly about 3000 guests participated. The assessee's son also in his preliminary statement, stated that most of these items were gifts received at the time of marriage. The Revenue cannot presume that the assessee had not received any gift at the time of marriage of his son and this explanation was not considered properly by the Assessing Officer and he simply rejected and no material evidence produced by the Revenue. In the absence of any evidence directly linked with the assessee, the addition made is without basis and justification. The explanation given by the assessee's son was accepted by the Tribunal and we do not find any error or infirmity in the order of the Tribunal. Also the facts given by the Tribunal are based on valid materials. Hence we are of the view that the Tribunal correctly deleted the addition on this count. Question No.6 - Estimated marriage expenses of the assessee's son 26. The addition in respect of the estimated expenses towards marriage of the assessee's son Sri.Senthureswaran is of Rs.7,50,000/-. The assessee's mother had filed an affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to this conclusion and further stated that the handwritings given at Page 102 and 103 in the Annexure-E of the Revenue's paper book, are of the same person. The Tribunal further held that copies of documents forwarded to TAMIN for comments were not placed before the Tribunal. TAMIN, in its reply by letter dated 27.11.1996, had stated that "a large number of these transactions mentioned in the document may be straightaway connected with this". This letter had also not been placed before the Tribunal as well as before us. The assessee specifically asked for the copy of the above reply of TAMIN, but the same was not given. Further, the Tribunal had given a finding in Paragraph 257 of its order, as under : "Finally, though the amount was treated as passed on to the assessee, there is no mention how this amount was received by the assessee except coming to a conclusion that these are the secret commission received by the assessee. Under these circumstances, we are unable to uphold any of these additions made by way of secret commission. The additions made on account of secret commission are deleted. We have to record one of the arguments of Mr. Ravi that assessee as Chair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave their currencies for safe custody. This fact was revealed by the Income-tax Department and also when the said Mrs.Seethalakshmi Nagaraj came to the assessee's house to get back her money, the fact of seizure was informed to her. She also made a claim to the Assistant Director of Income-tax (Inv.) at Madras by a letter and later explained the same when she was summoned. Therefore, it was stated that the foreign currencies seized from the assessee's premises belong to the said Mrs.Seethalakshmi Nagaraj, an NRI from U.S.A. It was also stated that the said Mrs.Seethalakshmi Nagaraj filed a letter on 06.02.1996 before the Assistant Director of Income-tax stating that the currency seized from M-26, Anna Nagar, Madras, belongs to her and her husband and they were legally brought into India during their trips from U.S.A. and that they are within the exemption / permissible limits under the FERA regulations. She was temporarily in India on some domestic assignment and the seized currencies were entrusted for temporary safe custody in the house of the assessee. In this case, the said Mrs.Seethalakshmi Nagaraj, had, in her sworn statement before the Enforcement Directorate, explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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