TMI Blog2021 (2) TMI 784X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] ,SMT. MUKTABEN J. PATIRA [ 2014 (11) TMI 803 - GUJARAT HIGH COURT] ,CALTRADECO STEEL SALES (P.) LTD. [ 1999 (8) TMI 18 - CALCUTTA HIGH COURT] we are of the considered opinion that the amounts already disclosed in such regular assessments are outside the purview of the definition of undisclosed income. The AO, in our opinion, has no jurisdiction to make the aforesaid additions u/s 158BC - Decided in favour of assessee. Penalty u/s 158BFA(2) being 100% of the tax leviable on the undisclosed income determined - HELD THAT:- As already decided the appeal filed by the assessee for the block period and the undisclosed income made by the AO and sustained by the CIT(A) has been deleted. Therefore, the very basis on which penalty was levied does not survive. Accordingly, the grounds raised by the assessee are allowed. - IT(SS)A No.40/Del/2009, IT(SS)A No.15/Del/2011, IT(SS)A No.35/Del/2008, ITA No.3845/Del/2009 - - - Dated:- 27-1-2021 - Shri R.K. Panda, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri I.P. Bansal, Advocate And Shri Vivek Bansal, Advocate For the Revenue : Smt. Sushma Singh, CIT-DR ORDER PER R.K. PANDA, AM: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome, but, it is income from property business of the group. He also referred to the decision of the Hon ble Rajasthan High Court reported in 259 ITR 240, according to which, the AO can make enquiry on the points which has already been decided in regular assessment. 3. The AO examined the assessment records of the assessee and observed that initially the income from agriculture was shown from M/s Agarwal Agro Industries, a proprietary concern of Shri D.D. Aggarwal, brother-in-law of Shri S.K. Gupta, who was actually a small shopkeeper as well as employee of one of the groups. Subsequently, he became the Director in some of the companies of the group, but, was stepping in and out at the behest of Shri S.K. Gupta. Subsequently, the group formed another company, namely, M/s Rohan Agro Private Ltd. with an initial investment of ₹ 2000/- only with an object of doing agricultural operations. According to the AO, this company was used as a conduit to launder the unaccounted money of the group. Again, during, F.Y. 1999-2000 M/s Rohan Agro Pvt. Ltd. became M/s Aerens Infrastructure Technology Ltd. with Shri S.K. Gupta, the real owner taking reins of the company. 4. He noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99 2,64,09,130/- 1,26,87,815/- 158,40,000/- 1999-00 4,47,59,735/- 1,52,57,762/- 2,68,55,835/- 2000-01 6,48,44,767/- 1,92,75,130/- 2,89,06,860/- 2001-02 8,68,96,983/- 1,83,05,130/- 5,21,38,190/- 2002-03 7,12,80,587/- 6. He, however, noted that out of the sales mentioned above, the same has been further bifurcated giving the information of cash sales, sales to group companies and group associates, the details of which are as under: Figures in lakhs 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 Cash sales. 77.61 146.28 204.26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g its application made u/s 154 of the I.T. Act, The Tribunal vide order dated 2.4.2008 condoned the delay of the assessee and directed the CIT(A) to dispose of the appeal on merits. Accordingly the case of the assessee was been restored to the file of the CIT(A). 9. During the course of proceedings before the CIT(A), it was submitted that the agricultural activities were closed on 31.3.2001 and the name of the company was changed from M/s Rohan Agro Pvt. Ltd. to M/s Arens Infrastructure Technology Ltd. and the main objects of the company were also changed from agricultural operations to real estate and development of business w.e.f. 13.9.2001. It was submitted that on the date of search, i.e., on 18.3.2002 the assessee company is engaged in the business of real-estate and related activities, builders and developers as well as infrastructure development, etc. It was submitted that During the block period agricultural operations were carried out at Vill. Bhondsi and Sohna which was owned by five HUFs and others. M/s Rohan Agro Pvt,Ltd. entered into joint venture with various land owners and carried out agricultural operations till 31.3.2001. Over the period of time land owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95-96, 97- 98 and 98-99. The full details of the amount spent were produced before the AO. The party who constructed the green house also got the subsidy from District Horticulture Officer. Copies of the bill of construction of the green house and confirmation from Distt. Horticulture Officer, Gurgaon, were submitted. ix) The details of the agricultural appliances purchased by the Assessee Company, It was submitted that the land owners had provided the basic infrastructure facilities. x) Assessee had also submitted- before the. A.O, the details of ownership of land, which were purchased in 1992. The land was developed by the owners for agricultural operations i.e. irrigation facilities, power connection, pipelines etc. xi) Regarding the irrigation, electricity expenses, it was explained to the A.O. that the assessee was running pumps on DG sets and also using the canal water supplied by Irrigation Department of Haryana Govt. xii) As on the date of search, some plants were still lying there which were owned by the other parties. A video film of the same was made by the assessee on 21.2.2002. 11. It was accordingly submitted that the evidences conclusively prove that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the same could not be reopened during assessment being made for the block assessment period. It was accordingly argued that the block assessment proceedings undertaken by the AO should be cancelled both on legal grounds as well as on merits. 13. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee and upheld the action of the AO. So far as the legal objection raised by the assessee challenging the 158BC proceedings are concerned, he held that due to extension of meaning of undisclosed income w.e.f. 01.07.1995, the scope of the word undisclosed income has been widened enormously. By amending the clause (b) of 158B the words any expenses, deduction or allowance claimed under this Act which is found to be false had been incorporated to widen the scope of undisclosed income. Therefore, although the assessee company was filing the return of income regularly disclosing agricultural income, the truth about the agricultural operations said to have been carried out by the assessee company came to notice only consequent to the action u/s 132 of the IT Act. According to the CIT(A), the assessee conveniently tried to project that it stopped the agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t facts and finding and that too without giving adequate opportunity of being heard. 5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 15. The ld. counsel for the assessee strongly challenged the order of the CIT(A) confirming the addition made by the AO in the block assessment order. Referring to various pages of the paper book, the ld. Counsel submitted that during the six assessment years relevant to the block period, the assessee has shown agricultural income on year to year. The assessment year-wise agricultural sale of the assessee as per regular books of account are as under:- Assessment Year Income assessed 1996-97 68,12,768/- 1997-98 1,58,70,648/- 1998-99 2,64,09,130/- 1999-2000 4,47,59,735/- 2000-01 6,48,44,767/- 2001-02 8,68,96,983/- Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (supra), on the ground that the income which is subject of regular assessment cannot be considered as undisclosed income of the block period. However, the contention of the assessee was rejected by the AO on the ground that after amendment to section 158B(b), the definition of undisclosed income was widened with retrospective effect to examine deduction/allowance/expenses if they are found to be false. He submitted that although similar argument was advanced before the CIT(A), he has also rejected the contention of the assessee on the ground that such claim of the assessee cannot be accepted in view of the evidence gathered during and after the search which revealed that the land does not suit for any agricultural activity. He submitted that the rejection of the contention is wrong since the agricultural activities were stopped a year ago from the date of search and ample evidence was submitted by the assessee to prove that in fact agricultural activities were carried out by the assessee during the block period and such fact was supported from the regular assessment orders by which agricultural income was accepted after making enquiries. The ld. Counsel, referring to pages 485 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held that those gift cheques were disclosed in the return submitted u/s 139. Therefore, the amount cannot be assessed in block proceedings u/s 158BC and the said amount could be added only in the proceedings u/s 147. Referring to the decision of the Hon ble Karnataka High Court in the case of CIT vs. N Leela Kumar, 224 Taxman 106, he submitted that the Hon ble High Court, after making reference to the provisions of section 158B(b) and also the provisions of section 139(1), held that even if the income was disclosed in the return filed u/s 139(4), the same cannot be considered to be undisclosed. Referring to the decision of the Delhi Bench of the Tribunal in the case of Promain Ltd. vs. DCIT, 170 ITD 188, he submitted that the coordinate Bench of the Tribunal has considered the impact of retrospective amendment made in section 158B(b) of the Act and held that even after amendment before coming to analyse what is undisclosed income, it is necessary to be seen that such income has not been or would not have been disclosed for the purpose of this Act. In a case where any such article or thing or income has already been disclosed to the Department prior to the search, it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. Accordingly 60% of receipts as lease rent received from M/s Aerens Infrastructure and Technology Ltd were taxed in hands of the assessee. Referring to the assessment order, she submitted that the AO has categorically held that there was no genuine lease agreement and rent received by it was not rent received from lease of agricultural land for agricultural operations. Referring to para 5 of the order of the CIT(A) she drew the attention of the Bench to the same and submitted that the ld.CIT(A) has discussed in detail as to how above income of the assessee constituted undisclosed income. The ld. CIT-DR, referred to the following decisions and submitted that where assessee failed to explain the source of agricultural income claimed to have been earned by it, no exemption could be allowed in respect of such income:- 1. CIT Vs Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC) 2. Bhairavnath Agrofin (P.) Ltd. Vs CIT (354 ITR 276)(Raj.) 3. H.H. Maharaja Vibhuti Narain Singh Vs State of Uttar Pradesh(65 ITR 364) (SC) 4. CIT Vs Ramakrishna Deo (35 ITR 312)(SC) 22. Referring to the following decisions, the ld. DR submitted that when the employees/directors and other pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has already been disclosed in the regular return, the same cannot be assessed as undisclosed income during the block period. According to the ld. Counsel for the assessee, addition, if any, can be made by the AO only in the regular return. 25. We find some force in the above argument of the ld. Counsel for the assessee. 26. A perusal of para 15 of the assessment order shows that the assessee had declared the following agricultural income:- Astt. Year Sales Security paid Lease money paid 1996-97 68,12,768 26,500 40,87,663/- 1997-98 1,58,70,648/- 57,28,250/- 95,22,790/- 1998-99 2,64,09,130/- 1,26,87,815/- 158,40,000/- 1999-00 4,47,59,735/- 1,52,57,762/- 2,68,55,835/- 2000-01 6,48,44,767/- 1,92,75,130/- 2,89,06,860/- 2001-02 8,68,96,983/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt u/s 10 of I.T. Act. Assessed. Issue necessary forms. 28.1 For A.Y. 1997-98, the AO, in the order passed u/s 143(3) has observed as under:- Return declaring agricultural income of ₹ 53,74,212/- filed. The case was selected for scrutiny. In response to notice u/s 143(2). Shri R.C. Gupta. CA. attended and Shri Rajesh Jain. Accountant attended from time to time and filed details. In the agricultural income there is substantial increase in comparison to A.Y. 1996-97 for which is started that additional land has been under taken in the cultivation, rates of plant have increased because on time factor, number of ornamental plants fetching higher value has been increased and modes of planting have been undertaken is more scientific and latest ways. Details of additional in the assets have also been filed along with other details. ---- examination of all the above facts and details furnished by the assessee the agricultural income of ₹ 53,74,222/- is accepted. Assessed. Issue necessary forms. 28.2 Similarly, for A.Y. 1998-99, the AO in the order passed u/s 143(3) has observed as under:- Return if income was filed on 30.11.1998 declaring of NI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., were found and seized. In response to notice u/s 158BC, the assessee filed the return declaring undisclosed income at ₹ 27,65,528/- . The AO completed the assessment for the block period determining the income at ₹ 2,68,80,387/-. In the said order, the AO made various additions which the Tribunal in some cases deleted and in some other cases, the matter was restored back to the file of the AO for further enquiries. On appeal by the Revenue, the Hon ble jurisdictional High Court has observed as under:- Analysis and Findings 22. On the question of law presently before the court, the primary consideration is whether the AO had the jurisdiction to make the additions to the assessment under section 158BC of the Act. To analyze this, it is necessary to address the grounds of each such addition made, and assess if the AO had jurisdiction in conducting the block assessment within the meaning of section 158BC, or if this was indeed not within the purview of the AO's jurisdiction. Section 158BC reads as follows: Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginally enacted w.e.f. 1st July, 1995 and as modified/changed through amendments, from time to time (in the relevant provisions), continues to retain its purpose, in that, a block assessment pertaining to a number of years remains distinct from an assessment under Section 143(3) pertaining to a single assessment year. Further, the amendment to section 158B(b) has enlarged the meaning of the term undisclosed income by including therein any expenses, deduction or allowance claimed under this Act, which is found to be false . However, this cannot be construed to mean that whatever has been left out in a regular assessment can be reassessed or re-examined with reference to those provisions which are relatable to an assessment u/s 143(3). This is evident from A.R. Enterprises (supra),where the court held as follows: ... Sections 158BD and 158BC, along with the rest of Chapter XIV-B, find application only in the event of discovery of undisclosed income of an Assessee. Undisclosed income is defined by Section 158B as that income which has not been or would not have been disclosed for the purposes of this Act . The legislature has chosen to define undisclosed income in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income was erroneous. 26. A larger, five member bench of the Supreme Court reiterated the distinctness of the procedure between normal assessments and block assessments, with specific reference to the charging section (of the Income tax), the reference to previous year as the income for which tax is levied and the special procedure for assessment of undisclosed income relatable to materials seized during a search, in Commissioner of Income Tax v Vatika Township [2014] 367 ITR 466 (SC) in the following terms: Undisclosed income referred to in Chapter XIVB is not relateable to the previous year. On the contrary, it is for the block period which may be 6 years or 10 years, as the case may be. Consequently, as already mentioned, while analyzing the scheme of Chapter XIVB, such Chapter is a complete code in respect of assessments of 'undisclosed income'. Not only it defines what is undisclosed income, it also lays down the block period for which undisclosed income can be taxed. Further, it also lays down the procedure for taxing that income. It is very pertinent to note at this stage that for this purpose, specific provision in the form of Section 158BA (2) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - the foremost of them being that the litigant would be driven to superior courts each time the issue crops up in the competent tribunal. Hardly any authority is required for this, but dicta abound on the subject (Ref. Smt Ujjambai v. State of UP AIR 1962 SC 1621; Hari Vishnu Kamath v. Ahmad Ishaque and Ors. AIR 1955 SC 233; T.C. Basappa v. T. Nagappa and Another AIR 1954 SC 215). Furthermore, there is statutory authority in the form of Section 254 (1) and (2) of the Income Tax Act read with Section 255 (4), which provides thus: Section 255(1)************* ****** (4) if the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not come across any material during the course of search and as is clear from the assessment order, the addition of ₹ 2,50,000/- was made on the basis of the statement made subsequent to the search and which even otherwise, was not presented to the assessee for rebuttal. The assessee did not make it during the search; it was disclosed and gone into during the regular assessment.Thus, this addition is based on a confirmation that was sought after the search, and hence, could not form part of the undisclosed income for the block period. 31. The amounts were already disclosed in the regular assessment of the assessee in 1989-90, and similarly even in the case Sangeeta Misra, and are thus, outside the purview of the definition of undisclosed income . Thus, the AO has no jurisdiction to make the aforementioned additions under section 158BC of the Act. Thus, the addition of ₹ 1,72,000/- by the AO has been made devoid of jurisdiction, since the same was already disclosed, and had not been unearthed during the search undertaken for the block assessment. 32. The next item of the addition of ₹ 50,00,000/- made by the AO on account of foreign travelling expenses. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or draw assumptions in regard to the undisclosed income. The AO can only proceed on the basis of material detected at the time of search and the evidence gathered under section 132(4) only, and not otherwise. If seen in this light, the estimates of costs on the foreign travels of the assessee and his wife were not made during the course of the search pertaining to the block assessment, but through surmises based on the details found in the passports of the two assessees after requisitioning them from the passport office. Thus, the inference of escaped income is based upon materials gathered from extraneous sources and not from search. Section 158BB (subsequent to amendment by the Finance Act, 2002 w.e.f. 01.07.1995) states how the undisclosed income of the block period needs to be computed on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence on the basis of evidence. In Assistant Commissioner of Income Tax and Anr. v. Hotel Blue Moon (2010) 229 CTR (SC) 219 held that block assessments are not intended to substitute regular asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , New Delhi is owned by a company named M/s. Jupiter Estates Pvt. Ltd. and the assessee along with his family were residing in this property since June, 1989. The tenancy was formally recognized by means of a lease deed between the parties dated 01.06.1989 entered into by the assessee and the said company. Additionally, the Assessee (Mr. Misra) had also made a security deposit and extended an interest free loan to the company of an aggregate amount of ₹ 58,00,000. What can be observed from the assessment order, is that the addition was made on a presumption that the rent charged (at the rate of ₹ 2500/- per month) was less than the fixed rent. However, this exercise of the AO ought to have been carried out within the meaning of regular assessment under section 143(3). When all material relating to the so called suppressed rent was available with the AO, in the first instance when the assessment for the relevant year was completed and no addition was made, the exercise by the AO, in deducing that the assessee must have earned some income (based on the expenditure estimated for his foreign travel and the estimate of his professional income) which was the suppressed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s duly disclosed in the return for AY 1992-93 and the gift had been accepted on scrutiny of the documents and evidence. As such, since the gifts have already been disclosed to the Revenue prior to the search, they cannot form part of the block assessment within the meaning of section 158BB(1), and cannot be thus, brought to tax as undisclosed income , as was reiterated in Hotel Blue Moon (supra) which held that the scope of block assessment is limited to material found during the search, and thereby, cannot include material already revealed. This was similarly highlighted in CIT v. Jupiter Builders P. Ltd. ((2006) 287 ITR 287 (Del)) and Commissioner of Income Tax v. Shri Vishal Aggarwal (2006 (283) ITR326(Del)) that where an income and assets are disclosed in the books of account and no incriminating material is found during search and seizure, addition in the block assessment is not valid. Therefore, the gifts received by the assessees from Jhanwar Lal Kothari, as well as the gift from Shri R. K. Jatia fell outside the purview of block assessment, and the AO has no jurisdiction to bring to tax the said sums. 37. In the light of the foregoing discussion and conclusions, the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undisclosed income in this proceeding which is the subject-matter of proceedings in pursuance of the notice under Section 158BC of the Act. 31. We find, the Hon ble Gujarat High Court in the case of ITO vs. Smt. Muktaben J. Patira (2015) 231 Taxman 502, after referring to the provisions of section 158BB has held that in a case where income received by the assessee was declared in the return filed before search and return was on the record of the department before the date of search then the income could not be considered as undisclosed in view of section 158BB. The relevant observations of the Hon ble High Court read as under:- 7.1 The Tribunal has observed that in the present case, the intention of the assessee is clearly reflected in so much as she had already filed the return before the date of search. In view of the aforesaid provisions of the Act, it is borne out that the respondents filed their returns, though beyond the due date specified u/s 139(1) of the Act, but before the date of search on 08.09.1995. The returns of the income of the assessee were already on the records of the department before the date of search and therefore it cannot be said that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe that income had escaped assessment and consequently, could issue a notice under Section 148 of the Act. Such notices so issued were perfectly justified and was within the powers of the Assessing Officer. The Supreme Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. case (supra) clearly held that the expression reason to believe in Section 147 of the Act would mean cause of justification to know that income had escaped assessment. At the stage of issue of notice, the only question is, whether there was relevant material on which a reasonable person could form the requisite belief that income had escaped assessment. We are of the opinion that in the given circumstances, the Assessing Officer was justified in forming an opinion, that income had escaped assessment and was, therefore, justified in issuing notice under Section 148 of the Act. 33. We find, the Hon ble Karnataka High Court in the case of CIT vs. N Leela Kumar, 224 Taxman 106, after making reference to the provision of section 158BB and also the provisions of section 139(1), held that even if the income was disclosed in the return filed u/s 139(4) the same cannot be considered to be undisclosed. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at even if there is an amendment in the above sections, the scheme or purpose of enacting Chapter XIV-B has not undergone a major change in the sense that the block assessment pertaining to a number of years remains distinct from assessment u/s 143(3) pertaining to a single AY. The block assessment could be made in respect of undisclosed income if during the block period undisclosed income is recovered as a result of evidence found during the course of search and not as a result of other documents or material which came to the possession of the AO subsequent to the conclusion of search operation unless and until such material or document is relatable to such evidence recovered during the course of the search. The amended definition of sec. 158BB as mentioned above clearly suggests that some evidence is to be found as a result of search operation and it is only thereafter that the remaining part of the provisions come into play and that too the remaining evidence must be relatable to the evidence recovered during the course of the search. The other amendment in sec. 158B(b) which is reproduced above has enlarged the meaning of the term undisclosed income by including therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. IT(SS)A No.35/Del/2008 38. The grounds raised by the assessee are as under:- 1. That the Ld. CIT (Appeal) has erred in holding that the amount of ₹ 1.55.67.215 should be assessed in the hands of the appellant as income from un-disclosed sources even though the same had been disclosed in the regular returns of income. 2. That the Ld. CIT (Appeal) has erred in holding that the agricultural income of M/s. Aerens Infrastructure and Technology Ltd. is not genuine. 3. That the Ld. CIT (Appeal) has erred in treating the agricultural income of ₹ 1.55.67.215 declared by the appellant as undisclosed income although it is income which is totally exempt under section 10(1) and could not have been assessed as income from undisclosed sources. 4. That the Ld. CIT (Appeal) has failed to appreciate that when the entire sale proceeds from agriculture have been treated as undisclosed income in the hands of M/s. Aerens Infrastructure and Technology Ltd., the share of the appellant received out of such income cannot again be included in the assessment of the appellant as it would amount to taxing the same income in the hands of two assessees. 5. That the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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