9911796707
TMI Blog2017 (3) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thereafter, notice under section 158BC was issued to the Assessee on 7.03.1997 to file his return of income for the block period. The return was filed on 25.04.1997 declaring an undisclosed income of Rs. 27,65,528/-. The block assessment proceedings were carried out, after which various documents were taken into account. Based on these, the Assessee was asked to reply to several queries, which the Assessee complied with and furnished the relevant replies to the Assessing Officer (AO). After considering these, the assessment order for the block period was completed and assessment made at Rs. 2,68,80,387/-. Additions made in the order included the amounts of Rs. 1,72,000/- and Rs. 2,50,000/- on account of loan, Rs. 75,00,000/- on foreign trips, Rs. 9,50,000/- on account of professional receipts, Rs. 10,80,000/- on account of household expenses and an addition of Rs. 90,00,000/- on account of unexplained gifts received. The AO further made an addition of Rs. 5,00,000/- as undisclosed sources for the assessment year 1992-93 on account of alleged estimated income from M/s Triad Associates assuming it to be the proprietorship concern of Sangeeta Misra; and an addition of Rs. 6,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts; the ITAT held likewise even in the block assessment. Therefore, it deleted the addition of Rs. 2,50,000/-, holding that the same was made on insufficient and invalid grounds and in violation of relevant provisions of law. The ITAT had also deleted the additions to the tune of Rs. 9,90,000/-, made on account of household expenses for various assessment years comprising the block period, on its findings that the addition was disproportionately high, and based on estimates, and not facts. 5. With regard to the foreign trips alleged to have been incurred out of undisclosed sources, the AO concluded that the 22 foreign trips had been funded outside the books of account and since the Assessee had not furnished any details, the AO accordingly proceeded to estimate the expenditure on tickets at Rs. 50,00,000/- and thereon added a sum of Rs. 25,00,000/- towards expenditure on local conveyance, boarding and lodging etc. i.e., coming to a total of Rs. 75,00,000/-. The ITAT held that the AO did not make any detailed enquiries to ascertain the cost of the tickets for the various assessment years and directed the AO to re-compute the addition on account of foreign travel expenses in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1994-95, could not be held as an undisclosed item on the part of the Assessee and thus, not falling for consideration under Chapter- XIV-B of the Act. 7. The other ground deals with an addition of Rs. 10,00,000/- alleged to be an undisclosed professional fee received by the Assessee from M/s. Dhanraj Mills Pvt. Ltd. The main submission on behalf of the Assessee was to the effect that the letter of Shri T.B. Ruia (Director of the said company) dated 15.09.1997 was never confronted to the Assessee and there was nothing on record to suggest that on 20.06.1991 when the sum of Rs. 10,00,000/- was received, it was not an interest free loan. The counsel for the Revenue strongly supported the order passed by the AO. The ITAT set aside the order passed by the AO and restored the matter once again to his file asking him to confront the letter of Shri T. B. Ruia dated 15.09.1997 to the Assessee allowing him an opportunity to rebut the same. 8. The next set of grounds for disposal pertained to the addition on account of professional receipts in the assessment years 1994-95 to 1997-98. The arguments of the Assessee were twofold, namely, that there was no material found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & other was the correct view. 3. Whether on the facts and circumstances of the case and in law the view of the V.P. to hold that addition to the extent of Rs. 2 lacs out of the addition of Rs. 9.50 lacs made by the AO on account of professional receipts was to be sustained or the decision of the J.M. to hold that the matter required verification and re-adjudication on the part of the AO was the correct one. 4. Whether on the facts and circumstances of the case and in law the view of the V.P. to hold that the addition of Rs. 28,76,000 made by the AO towards 'suppressed rent' was required to be deleted on the decision of the J.M. to restore the matter back to the file of the AO with the direction to re-decide the same after ascertaining the fate of the block assessment in the case of M/s. Jupiter Estates was the correct one. 5. Whether on the facts and circumstances of the case and in law the view of the V.P. to hold that no addition could be made on account of the two gifts aggregating Rs. 90 lacs received from one Shri Jhanwar Lal Kothari was right or the view taken by the J.M. to uphold the addition was the correct one." 10. In the view expressed by the third member, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its determination and held as follows: "It is possible that in view of the other evidences found indicating unexplained expenses, such affidavit or receipts showing receipts of money by gifts or otherwise may be relatable to such unexplained expenses. Therefore sec. 158BC empowers and the Assessing Officer to make inquiries even about such evidences which are filed with the Income Tax Department and which were not earlier scrutinized, if this is relatable to other evidences found during the search. The word used is 'relatable' and not related'. A thing may be considered prima-facie relatable to other thing, and on further scrutiny it may be found that it is not related. Therefore, the scope of 'relatable' is much wider than that of 'related'. It cannot be said that the word 'found' mentioned in the section means that the evidence must have been found for the first time during search. No such limitation is provided in the section and 'on the basis of evidence found has to included all evidences found or filed earlier with the Department. Section 158BC has been amended w.e.f. 1-7-95 to include the clause "relatable to such evidence". Even bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation. 15. It is submitted that the finding of the ITAT that the order on the five points referred to, which were remitted to the decision of the AO, in the earlier order, is plainly erroneous. In this regard, it is submitted by counsel for the Revenue that when, in the first instance, two members differed on various issues and referred the matter for decision to a third member, it was not open to him, on such reference, to require a decision on the question of jurisdiction. In other words, the order referring to the five points conferred limited scope of inquiry into those matters and not on the issue of jurisdiction, in regard to which the two differing members did not entertain any doubt. In proceeding then to decide and pronounce upon the question of scope of provisions relating to block assessment, the Bench, in its order dated 05.04.2003, in effect reviewed its previous determination. This was sought to be pointed out to the ITAT, by the Revenue, but without avail. After the remit for decision on merits, in these circumstances, the order allowing the Assessee's appeals partly was erroneous. 16. Counsel for the Revenue also urged that the issues relating to foreign trav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d further, addition on account of undisclosed income could not be made by drawing any assumptions. Counsel highlights Section 158BB(1) of the Act to emphasize how the computation of the undisclosed income in a block assessment on the basis of post search enquiries mandatorily needs to be relatable to evidence found specifically from such search, and cannot rest solely on presumption and surmises of the AO. 19. It was submitted that in both cases, additions were made upon a fresh assessment or redetermination of all the issues. Not only did the income added not relate to any materials, documents or other thing recovered or seized during the search, the AO went out of his way to make fresh inquiries from unrelated sources. Even such inquiries were not warranted or did not emanate from any statement recorded during the search. Therefore, the additions- in respect of the gifts received and the sources of income disclosed or expenditure incurred, which had been subjected to previous assessments could not have been validly made. 20. Counsel further highlighted that there cannot be any controversy about the Tribunal's power to decide whether the Revenue could re-assess the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form1 and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter: Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 2[, section 144 and section 145] shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income would not have been disclosed. If a situation is covered by any one of the two, income would be undisclosed in the eyes of the Act and hence subject to the machinery provisions of Chapter XIVB. The second category, viz. where income would not have been disclosed, contemplates the likelihood of disclosure; it is a presumption of the intention of the Assessee since in concluding that an Assessee would or would not have disclosed income, one is ipso facto making a statement with respect to whether or not the Assessee possessed the intention to do the same. To gauge this, however, reliance must be placed on the surrounding facts and circumstances of the case." 25. A block assessment is to be carried out on the basis of the material found during the course of search and not as a result of other documents or material, which come to the possession of the AO subsequent to the conclusion of the search operation unless and until such material has a relationship or connection with certain material or evidence found during the course of search. It was highlighted in CIT v. Ravi Kant Jain (250 ITR 141- Delhi) how the procedure of Chapter -XIV-B is intended to provide a mode of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when a separate charging section is introduced specifically, to assess the undisclosed income, notwithstanding a provision in the nature of Section 4 already on the statute book, this move of the legislature has to be assigned some reason, otherwise, there was no necessity to make a provision in the form of 158BA (2). It could only be that for assessing undisclosed income, charging provision is 158BA (2) alone." 27. This court is also of the opinion that the proper approach, commended through the decision in Shailendra Mahto (supra) by the Revenue, is inapt. Where the law is clear that unless material extraneous to the returns and document are seized or discerned as relatable to statements made, etc. additions could not have been made, having regard to the state of law applicable to the facts of the case. Furthermore, Durga Prasad More (supra) undoubtedly propounds an important principle of law relating to evidence. Its application however is wherever there is material that can validly be used to complete an assessment (in this case a block assessment). Again, as in the case of Shailendra Mahto, that authority has no applicability for this case. 28. As far as the question reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isra's case, out of the18 heads of addition, 11 were restored for further inquiry and orders, of AO, on remand. The ITAT itself had deleted substantial income relating to three heads in the case of Mr. Misra. In the circumstances, the court proposes to discuss only the heads of income that were specifically addressed during arguments of counsel for the parties. 30. This court, therefore, would deal with the specific amounts brought to tax by the AO, but deleted by the ITAT. The first of these are addition of the amounts of Rs. 1,72,000/- and of Rs. 2,50,000/- in respect of Shri S.K. Chakraborty, (in Pinaki Misra's case) and the addition of Rs. 5,00,000/- made to the income of Sangeeta Misra, for the alleged income earned from Triad Associates. The AO made an addition of Rs. 1,72,000/- being the amount standing to the credit of Shri S.K. Chakraborty but the same was reflected in Mr. Misra's balance sheet, his bank account, duly supported by the confirmation of Shri S.K. Chakraborty; and an original amount was accepted in the original proceedings u/s 143(3) according to the assessment order for Assessment Year (hereinafter also referred to as "AY") 1989-90 dated 11.09.1990. In p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andraswamy. A statement of Shri Chandraswamy had been recorded, where he disclosed that the assessee had accompanied him. The addition was made primarily on the basis of the assessee's old passport, which was requisitioned from the passport office and which showed the numerous foreign trips undertaken by the assessee during the block period. This was done when the assessee was required to furnish copies of his passport, and he stated that he had surrendered his old passport to the issuing authority for issue of a fresh diplomatic passport. The foreign travels evidenced by the expired passport were by virtue of the requisition from the passport office, and not from the search. At the same time, the assessee's computation of expenditure on tickets (Rs.3,66,000/-) is on the lower side as against the figure of Rs. 50,00,000/- as worked out for by the Revenue. What is apparent is that the AO omitted the statement of Chandraswamy that the assessee's expenses were borne by his devotee. Yet, whether the requisition of the passport from the passport office falls squarely within section 158BC, requires examination. The additions made on the foreign trips incurred by Ms. Sangeeta Misra ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 9,50,000/- (in the case of Mr. Pinaki Misra and Rs. 6,00,000/- made (in the case of Ms. Sangeeta Misra) by the AO on account of professional receipts are to be now examined. The two grounds on which these additions were made and that too on estimate basis, were the nonproduction of books of account and the 23 foreign trips made by Mr. Misra allegedly for the professional services rendered to Shri Chadraswamy. In respect of assessment years 1994-95 to 1996-97, Rs. 2,50,000/- each was added whereas the figures for AY. 1997-1998 was Rs. 2,00,000/- i.e. totaling Rs. 9,50,000/-, and an aggregate of Rs. 6,00,000/- in case of Sangeeta Misra, allegedly on account of difference in professional receipts and cash in hand. However, there does not seem to be any observation on the assessee's arguments that no incriminating material had been found at the time of search pertaining to the suppression of professional receipts. The counsel for the Revenue, however, in the course of the present proceedings was unable to pinpoint any material, which had been found during the course of the search vis-a-vis the point at issue, thereby, the aforesaid figures arrived at cannot be brought to tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs the discussion to two gifts aggregating Rs. 90,00,000/- received by the assessee (Mr. Misra) from Shri Jhanwar Lal Kothari, and the gift to the Assessee's wife of an amount of Rs. 38,71,507/- by Shri R.K. Jatia. In the AY 1993-93, Mr. Misra received two NRI gifts aggregating Rs. 90,00,000/-from Shri J. L. Kothari to purchase a company by the name of White Lilly Estates Pvt. Ltd. which owns a property at 202- Golf Links, New Delhi. By his reply-dated 02.08.1997 (to a show cause notice) Mr. Misra contended that the said gifts were received out of NRE account of Shri Jhanwar Lal Kothari and accordingly they did not attract the provisions of the Gift Tax Act, 1958. He also furnished copies of the affidavit of Shri Kothari dated 30.04.1994 and the gift deed where it was stated that the gifts have been made out of natural love and affection. He also furnished copy of NRE account No. 5010009008 maintained with Sanwa Bank Ltd. in the name of Shri J.L. Kothari from where these gifts have been made. These gifts were duly reflected in this bank account. The assessee (Mr. Misra) also furnished a copy of the letter from Nakomthon Bank dated 26.05.1994 which stated that Shri Kothari was thei ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
