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Commissioner of Income Tax, Central, Patna, Asstt. Commissioner of Income Tax, Central Circle-2, Patna Versus Shri Harsh Kochar, Bharat Ice Factory, Karbigahia, Patna

2016 (5) TMI 727 - PATNA HIGH COURT

Search and seizure operation under Section 132 - addition on the basis of the notebook and the Bank passbook - validity of documents seized - addition to undisclosed income - Held that:- Section 158BB of the Act empowers the Assessing Officer to frame assessment of the block period on the basis of evidence found as a result of search. As discussed above, the diary, KPS-5 and undisclosed passbook of the S.B. A/C No.9266 though recovered from the survey of the premises of Sujata Hotel Pvt. Ltd., b .....

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en into consideration by the Assessing Officer. The documents taken into consideration are related to the search operation at the premises of the assessee on the own admission of the assessee while replying to the questionnaire to explain the basis of his undisclosed income declared by him. - Thus, we find that not only the survey was not illegal but also that the material collected was relied upon by the assessee himself to explain the basis of undisclosed income for assessment years 2001-0 .....

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additions made by the Assessing Officer on the basis of the notebook and the Bank passbook - Decided against assessee - Miscellaneous Appeal No. 224 of 2007 - Dated:- 28-4-2016 - Hemant Gupta And Ramesh Kumar Datta, JJ. For the Appellants : Mrs. Archana Sinha, Senior Standing Counsel Mr. Alok Kumar, Advocate Ms. Shalini Bihari, Advocate For the Respondent : Mr. Ajay Kumar Rastogi, Advocate Mr. Parijat Saurav, Advocate JUDGMENT ( Per: Honourable Mr. Justice Hemant Gupta ) The Revenue is in appeal .....

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f which the Respondent assessee was a Director, on the same day as the search u/s 132 in the residential premises of the Respondent assessee, namely 24.04.2003, could not be taken into consideration by the Assessing Officer while making the computation of the undisclosed income as held by the Tribunal, as the same did not amount to such other materials or information as are available with the Assessing Officer within the meaning of Section 158 BB(1) of the Act? 2. Whether the reliance placed by .....

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d. s case (269 ITR 268)? 3. The brief facts leading to the aforesaid questions is that search and seizure operation under Section 132 of the Act was carried out in the residential premises of the assessee along with his brothers and the other family members on 24th of April, 2003. On the same day, there was survey in the premises of Sujata Hotel Pvt. Ltd where the cabin of the assessee in the capacity of the Director of the said Company was located. From that premises, an undisclosed SB A/C No.9 .....

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arious dates between 04.09.2003 to 07.11.2003. The assessee was again asked to file the return vide letter dated 12th/13th February, 2004 followed by another notice under Section 142(1) of the Act on 04.08.2004. A show cause notice for initiating proceeding under Section 276CCC of the Act was also issued. Ultimately, the assessee filed return on 22nd February, 2005 declaring an undisclosed income of ₹ 7,02,100/-. 5. A questionnaire along with a notice under Section 142(1) and 143(2) of the .....

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02,100/- has been shown in the block return for the assessment years 2001-02 and 2002-03. On the basis of undisclosed SB A/C No.9266 and book KPS-5, the reply of the assessee is as under:- A. Y. Amount (Rs.) 1 2 3 1999-2000 190/- Due to short disclosure of income from other sources in regular return. 2000-01 230/- Due to short disclosure of income from other sources in regular return. 2001-02 2,00,470/- Deposit in Bank of India A/c No.9266 and peak credit in Harsh Kochar in KPS-5 ₹ 2,00,00 .....

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ssible for me to give true and correct accounting of then recorded amount with evidence. Therefore, I considered the total amount of receipts and payments are of my account and all the transactions are mine and I have offered ₹ 7.00 lakhs for taxation. Though the peak of this amount is hardly ₹ 3.90 lakhs and my unexplained bank depsit is ₹ 1.40 lakhs. I preferred to disclose 7.00 lakh with a caution for mistake and left out items if any. The detailed calculation is enclosed he .....

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statement on oath on 21st of April, 2005. He said to the following effect: Qus 2: During the course of search and survey on 24.04.2003 a diary KPS-5 was found from your premises, in which the account of receipt and payment of cash is recorded. What do you want to say? Answer: Captain Hardeo Singh used to write this diary. Whatever money he receive or paid he used to receive/pay on my instructions. 9. Hardeo Singh, who has written the notebook KPS-5, was produced by the assessee before the Assess .....

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yments is written by me on the instruction/orders of Shri Harsh Kochar. The names of persons who have deposited money with me are written by me on the basis of their introduction given to me. But at the time of payment, I used to obtain the instruction of Shri Harsh Kochar and used to write the names of person to whom money was paid. 10. In view of the above and other discussions, the Assessing Officer made addition of ₹ 1,59,40,263/- as undisclosed income of the assessee. However, in appe .....

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a person of the respondent, but the person of Sujata Hotel Pvt. Ltd., a separate assessee. The document KPS-5 was impounded from the premises of the Sujata Hotel Pvt. Ltd., therefore, the addition made by the Assessing Officer in block assessment in the hands of the respondent on the basis of KPS-5 is against the provision of law and against the normal presumption that the person from whose premises the paper is collected is to explain the contents of the paper and not the assessee. It was held .....

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at the premises of Sujata Hotel Pvt. Ltd. where the office cabin of the assessee is located. The note book has been written by Sri Hardeo Singh, but at the instance of the assessee. Not only the note book KPS-5 was recovered but undisclosed SB A/C No.9266 was also recovered during the survey conducted at the office cabin of the assessee in the premises of Sujata Hotel Pvt. Ltd. Thus, the office cabin of the assessee in the Sujata Hotel Pvt. Ltd. is not a premises of a different assessee, but of .....

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rn. Therefore, the learned CIT (A) as well as the Tribunal has gravely erred in law in holding that such document could not be taken into consideration by the Assessing Officer. 12. On the other hand, learned counsel for the assessee argued that Chapter XIV-B of the Act provides procedure for assessment of search cases. In terms of Section 158 BB of the Act, the undisclosed income of the block period shall be the aggregate of the total income of the previous years. Such undisclosed income is to .....

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on of the assessee in respect of KPS-5 or the undisclosed Saving Bank Account is contrary to the Statute and there cannot be any estoppel against the Statute. Therefore, the CIT (A) and the Tribunal rightly excluded the incriminating materials recovered during the survey operation from the premises of another assessee while framing block assessment of the assessee. 13. We have heard learned counsel for the parties and find that the learned CIT (A) and the Tribunal have gravely erred in excluding .....

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ssee though from the cabin of the assessee in such premises, the assessee is estopped to say that the documents cannot be referred to or relied upon for framing assessment. 15. There is no dispute that there cannot be any estoppel against the Statute, but once a provision is made for the benefit of an individual, such benefit can always be waived as there is no public interest involved in waiving such right. Even if, the documents were recovered from the premises of Sujata Hotel Pvt. Ltd., but t .....

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ublic interest and it being a prohibition based on public policy, it cannot be waived. It was held that if the privilege conferred or the right created by the statute is solely for the benefit of the individual, he can waive it. It was held that if a privilege was granted for the benefit of an individual, in the instant case for the benefit of voter, even if it was conferred to advance a principle enacted in public interest nonetheless the person for whose benefit the privilege was enacted has a .....

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ce of such notice would not render the suit bad in the eye of the law because such non-issuance of notice can be waived by the party concerned. In the said judgment, the Privy Council held that the protection provided under Section 80 is a protection given to the person concerned and if in a particular case that person does not require the protection he can lawfully waive his right. 10. In the case of Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300 : (1964) 6 SCR 1001, this Court .....

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In Martin & Harris Ltd. v. VIth ADJ, (1998) 1 SCC 732, this Court while considering the provision of Section 21(1)(a) first proviso of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 negatived a contention advanced on behalf of the appellant therein that the said provision was for public benefit and could not be waived. It held that it is true that such benefit enacted under the said proviso covered a class of tenants, still the said protection would be availabl .....

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if such provision is one which deals with the individual rights of the person concerned and is for his benefit, the said person can always waive such a right. 15. Bearing in mind the above-decided principle in law, if we consider the mandatory requirement of issuance of notice under Section 28 of the Act, it will be seen that that requirement is provided by the statute solely for the benefit of the individual concerned, therefore, he can waive that right. In other words, this section casts a du .....

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ot now be permitted to turn around and contend that the proceedings initiated against them are void for want of notice under Section 28 of the Act, so as to frustrate the statutory duty of the Revenue to demand and collect customs duty which M/s Virgo Steels had intentionally evaded. 17. In another judgment reported as Union of India v. Pramod Gupta, (2005) 12 SCC 1, the question examined was as to whether, the interest under the provisions of Land Acquisition Act, 1894 can be waived. The Court .....

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t be exercised where the right to claim interest has been waived expressly by the parties and/or their counsel. Even a mandatory provision of a statute can be waived. 111. It is, therefore, not correct to contend that there cannot be any waiver of the right to claim interest. Statutory provisions are made for payment of interest with a view to compensate a party which had suffered damages owing to a positive action or inaction of the other resulting in blockade of money which he would otherwise .....

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benefit meant for a party can be waived. The Court held as under:- 26. ……………… A procedural requirement imposed for the benefit or protection of one party alone has sometimes been construed as subject to implied exception that it can be waived by the party for whose benefit it is imposed. In that context, waive means that the party has chosen not to rely upon the non-compliance of the other party with the requirement, or has disentitled himself from relyi .....

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situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is inconsistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be legal consequence of what he did. He is sometimes said to have waived the alternative right, as for instance a right to forfeit a lease or to rescind a c .....

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of a statutory requirement or provision which goes to the jurisdiction of assessment. 19. The assessee when asked to explain as to why any passbook or cheque book was not recovered from the residential premises. The stand of the assessee is that all documents are lying in the Account Section of the Hotel premises. Therefore, the assessee has admitted that the passbook and the cheque book were kept by him in the premises of the Sujata Hotel Pvt. Ltd. 20. The document KPS-5 is in the handwriting .....

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, he stated that he used to write this diary whatever money he received or paid. He used to receive/pay on my instructions. Therefore, KPS-5 is a document maintained on the instructions of the assessee though written by Hardeo Singh and kept in the premises of the Sujata Hotal Pvt. Ltd. Therefore, the documents KPS-5 and S.B. A/C No.9266 were in the control of the assessee though physically they were in the premises of Sujata Hotel Pvt. Ltd. The diary KPS-5 and the passbook of S.B. A/C No.9266 f .....

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jata Hotel Pvt. Ltd but had also relied upon them while submitting his Block Return and had taken the said stand in his reply to the questionnaire. Still further, the Assessing Officer can take into consideration the other materials or information as are available with the Assessing Officer and relatable to such evidence recovered during the search operation. Therefore, such documents can be taken into consideration by the Assessing Officer. The documents taken into consideration are related to .....

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Enforcement and others v. Director of Enforcement and others, [1985] 155 ITR 166 where the Court has held that the Courts have refused to exclude relevant evidence merely on the ground that it was obtained by illegal search and seizure. The Court held to the following effect: This Court in Pooran Mal v. Director of Inspection (Investigation) of Income-tax [1974] 93 ITR 505 (SC) held that Courts in India and even in England have consistently refused to exclude relevant evidence merely on the grou .....

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Bench. It has been often held that the illegality in the method, minor or initiation of a search does not necessarily mean that anything seized during the search has to be returned. After all, in the course of a search, things or documents are required to be seized and such things and documents when seized may furnish evidence. Illegality of the search does not vitiate the evidence collected during such illegal search. The only requirement is that the Court or the authority before which such ma .....

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see himself to explain the basis of undisclosed income of ₹ 7,02,100/- for assessment years 2001-02 and 2002-03 shown in his block return, and therefore clearly relatable to evidence found as a result of search, etc. and, thus, was rightly made basis to frame block assessment by the Assessing Officer. 25. At this stage, several judgments referred to by the learned counsel for the assessee need to be noticed. One of the judgments referred to in this regard is in the case of Commissioner of .....

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