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2006 (4) TMI 530 - ITAT MUMBAI

2006 (4) TMI 530 - ITAT MUMBAI - TMI - I.T. (SS) APPEAL NO. 284 (MUM.) OF 2002 - Dated:- 26-4-2006 - SUNIL KUMAR YADAV, JUDICIAL MEMBER AND V.K. GUPTA, ACCOUNTANT MEMBER. B.V. Jhaveri and Sudhir Shah for the Appellant. R.N. Parbat for the Respondent. ORDER Sunil Kumar Yadav, Judicial Member - This appeal by the assessee is preferred against the Order of the CIT(A) pertaining to the block period w.e.f. 1-4-1989 to 16-6-1998 on various grounds which are revised vide letter dated 20-10-2005. We acc .....

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ent of ₹ 5,05,632 out of regular books of account, during the course of block assessment proceedings, on loans stated in ground No. 1 above as unexplained cash credit under section 68 is uncalled for being not on the basis of evidence found as a result of search or relatable to such evidence. 3.On facts and circumstances of the case, the learned Assessing Officer has failed to take the telescopic view of debit and credit entries in computation of "undisclosed income". 4.On facts .....

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documents placed on record. During the course of the search, assessee s regular books of accounts were found and from the ledger regularly maintained during the course of business it was noticed that there was a loan of ₹ 41,82,986 introduced in the name of various parties and an amount of ₹ 5,05,632 was paid as interest on the said loans. Assessee was asked to explain the genuineness of this cash credits and the creditworthiness of the creditors. Being not convinced with the Explana .....

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), the assessee, however, filed the confirmations and other relevant record to prove the genuineness of the credit transactions and the creditworthiness of the creditors. The CIT(A) was not convinced with the Explanations of the assessee and he confirmed the disallowance made by the Assessing Officer. 5. Now the assessee has preferred an appeal before the Tribunal with the submissions that the receipt of credits were duly disclosed in the books of account of the assessee regularly maintained for .....

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of business and in its ledger there are opening balance of the credits in the name of different parties. Only certain credits were introduced during the year. The credits introduced in the earlier year were duly disclosed to the department through regular return of income filed by the assessee. The learned counsel for the assessee further invited our attention to the definition of undisclosed income envisaged in section 158B(b) with the submissions that undisclosed income includes any money, bu .....

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ld find that whatever entries were noticed by the Revenue, they all were disclosed in the ledger regularly maintained for the purpose of Income-tax, Act and later on the return was prepared on the basis of these documents and were filed with the department. In support of his contention, the learned counsel for the assessee has relied upon the following Judgments : 1.B. Noorsingh v. Union of India [2001] 249 ITR 378 (Mad.) 2.Dy. CIT v. Damodardas Jairambhai Wadhwa [2005] 2 SOT 98 (Kol.) 3.Smt. Si .....

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lar books of account of the assessee and it reflects the closing balance of accounts as on 31-3-1996 which is an opening balance as on 1-4-1996. Out of 55 parties, 36 parties had given loans in the previous year relevant to assessment year 1996-97 and therefore the seized ledger showed the opening balance of the said 36 parties. Therefore, it cannot be said that the seized ledger disclosed undisclosed income of the transactions of the assessee which has not been disclosed or would not have been .....

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dings is, the undisclosed income of the assessee as per definition under section 158B(b) of the Act, and the ledger for the financial year 1996-97 found in the course of search does not record undisclosed income or transactions of the assessee. Hence, the Assessing Officer has no jurisdiction to verify the loans recorded in such ledger found in the course of search while framing the block assessment. 7. The learned counsel for the assessee further argued in the alternative and without prejudice .....

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ed DR on the other hand besides placing reliance upon the Order of the CIT(A), has invited our attention to the provisions of section 158BB which deals with the computation of undisclosed income for the block period, according to which, undisclosed income of the block period, shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of this Act, as reduced by the income declared and return filed before the due date .....

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its return of income. The return of income was filed on 31-3-1999 under section 139 (4) of the Income-tax Act. No doubt, the return was not filed before the due date of filing of return prescribed under section 139(1) of the Income-tax Act. But the return filed under section 139(4) cannot be called to be invalid return, as the Law permits to do so. The Act has provided an opportunity to the assessee to file a return of income under section 139(4) if it is not filed under section 139(1) and the r .....

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Act, the undisclosed income cannot be determined on the basis of the entries found in the books of account only for the reason that return was not filed before the due date. It is also evident from the record that the return filed under section 139(4) was prepared on the basis of the books of account found during the course of the search. 10. Now the solitary question before us is whether the income declared in the return of income which was filed under section 139(4) of the Act, forms part of .....

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er valuable articles which owned or any income based on any entry in the books of accounts or other documents or transactions where such money, bullion, jewellery, valuable articles needs entry in the books of account or other documents or transactions represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act. We have also carefully examined the Judgment of the Rajasthan High Court in the case of Ashok Taksali (supra) in which .....

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the Income-tax Act, income returned does not fall within the purview of undisclosed income. This Order of the Tribunal was later on upheld by the Madhya Pradesh High Court. Once, it is, established from the documents available on record that the books were maintained for the purpose of Income-tax Act, the income declared therein cannot be called as an income which would not have been disclosed for the purpose of the Act. The onus is upon the Revenue to bring some material on record to prove that .....

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nnot be treated as undisclosed income for the purpose of block assessment under Chapter XIVB. For the sake of reference, we extract the relevant portion of the Order : Section 158(b) defines undisclosed income to include income or property which has not been or would not have been disclosed for the purposes of this Act. In this connection, it is significant to note that a non-disclosure has been mentioned in a general way. It has nowhere been stated that the disclosure has to be seen with refere .....

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isclosed. Such a disclosure under section 206 also would constitute a disclosure for the purpose of the Act and treating salary of the assessee as if it has not been disclosed or would not have been disclosed for the purpose of the Act would be unjustified. In the context of the present case, the situation becomes more obvious only because salary is received from a public institution like RBI which is a semi-Government body. It cannot be said that in normal course, it would not have disclosed in .....

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been taken by the Assessing Officer from such record of the assessee only. Since the figures shown in the salary book of the assessee matched with the figures of salary shown in the certificate of tax deduction, the Assessing Officer also certified that the figures of salary in the earlier years would be reliable. Accordingly, there is no justification for treating the salary income for the block period 1987-88 to 1992-93 as undisclosed income of the assessee. As regards the contention of the De .....

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he Act and such income particularly when tax is deducted at source cannot constitute undisclosed income for the purpose of Chapter XIV-B. For the purpose of Chapter XIV-B reference to section 271(1)(c) is irrelevant as is clear from section 158BF. Similarly, Explanation 3 does not regard all cases of non-filing of return of cases of concealment. In the present case, tax was deducted at source adequately and being under a bona fide impression that no return is required to be filed, the assessee d .....

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ithout merit. It is true that there is no place for equitable principles in tax legislation, but it is also well known that tax and equity need not be sworn enemies. In a peculiar case like the present one, a clear and practical view has to be found out because it is nobody s case that income by way of salary received by the assessee from RBI has not been taxed or that there is any escapement of income in regard to that income. If basically there is no charge of escapement of income or tax, ques .....

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e course of business and the return of income could not be filed within the due date, the income declared would not be part of the undisclosed income for the block period. 12. Turning to the case in hand, we find that undisputedly, assessee had been maintaining the books of account for the purpose of Income-tax Act and during the course of the search certain entries of cash credit were found in the ledger maintained during the course of business for the purpose of this Act. The major portion of .....

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on the basis of these documents, cannot be termed to be undisclosed income for the block period as per the definition of undisclosed income envisaged under section 158B(b) of the Income-tax Act. 13. Now, the next question comes with regard to the computation of undisclosed income of the block period for which mode was given in section 158BB of the Income-tax Act in which clause (ca) of sub-section (1) deals with this type of situation whenever return was not filed before the due date of filing o .....

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the block period by adopting a mode of computation prescribed under section 158BB of the Income-tax Act. Clause (ca) does not deal all type of situations. There may be a situation where the assessee has not disclosed its income by any manner to the department and has also not filed the return of income before the due date of filing of return though time as per 139(4) is available. In this situation, the income of the assessee for that year would be a part of undisclosed income and the assessee c .....

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be a part of undisclosed income, as it has been disclosed, for the purpose of this Act. We, therefore, of the view that in order, to arrive undisclosed income for the block period we have to ignore all those incomes which do not fall within the definition of undisclosed income envisaged in section 158B(b) of the Act. Clause (ca) is applicable to the first situation, where income was not disclosed to the department by any mode. In the instant case, since, we have already held that assessee s inco .....

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regular return of income. Meaning thereby, the opening balance cannot be termed to be the undisclosed income for the block period. It is also noticed from the Order of the lower authorities that the assessee has filed the confirmations and the relevant evidence before the CIT(A) to prove the genuineness of the cash credits and the creditworthiness of the creditors. Since the assessee has already filed the regular return of income for this assessment year, these cash credits can only be examined .....

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on the basis of the ledger seized during the course of the search from the total undisclosed income for the block period. Accordingly, the additions made in this regard are hereby deleted. 15. The next ground relate to addition of ₹ 3,66,609 on account of unexplained investment in jewellery. In this regard, it is noticed that total jewellery of ₹ 14,16,738 was found from the premises of the assessee. The revenue authorities did not seize certain jewelleries worth ₹ 3,66,609 as .....

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women is having 500 grams of gold ornaments and unmarried women is having 250 grams of gold ornaments. If this criteria is applied, the Officers of the department ought not to have seized jewellery weighing up to 1500 grams. As such, the jewellery of 1153.750 grams was lesser than the 1500 grams and no portion of such jewellery could be added. The learned counsel for the assessee further contended that the jewellery weighing 1153.750 grams which was not seized by the Officers of the Department .....

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the Order of the CIT(A). 17. Having given a thoughtful consideration to the rival submissions and from careful perusal of the record, we find that during the course of the search, jewellery of ₹ 14,16,738 was found, out of which, ₹ 10,50,129 was seized. Being not convinced with the Explanations of the assessee, the Assessing Officer has made the addition of the entire jewellery found at ₹ 14,16,738, against which, an appeal was filed before the CIT(A), with the submissions that .....

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