TMI Blog2002 (6) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 8-10-1995 recorded at Thana Itmad-ud-daula in Book No. 30534, it was claimed by Shri N.N. Mittal that a sum of Rs. 2.00 lakhs was looted from them. On 31-10-1995 both assessee and Shri N.N. Mittal addressed communications to S.O. Itmad-daula, wherein, it was pointed out that on 8-10-1995 actually the amount looted was about Rs. 1.00 crore, out of which Rs. 30.00 lakhs was claimed to be owned by Shri. N.N. Mittal and Rs. 70.00 lakhs was claimed by the assessee to be his property. On the basis of the F.I.R. lodged by Shri Mittal and information supplied to S.H.O. Itmad-daula, police authorities took action and recovered the amount aggregating to Rs. 72.60 lakhs from the alleged looters including Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi. However, in the meantime the Income-tax Department took search and seizure operation at the premises of the assessee on 26-10-1995 and thereafter on the following day i.e. 27-10-1995 warrant of authorisation under section 132A was also issued in favour of the police authorities to hand over the recovered amount of looting to the I.T. Department. Meanwhile the Department also moved a petition in the Court of IIIrd Additional District and Ses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by person. police in the records. ---------------------------------------------------------------------------------- Ashok Tyagi Rs. 10.00 Lakh Rs. 6.90 Lakh Devendra Tyagi Rs. 37.00 Lakh Rs. 27.00 Lakh Mukesh Tyagi Rs. 17.00 Lakh Rs. 15.00 Lakh ---------------------------------------------------------------------------------- 4. In view of the direction issued by the Court of IIIrd Additional District and Session Judge, Agra dated 8-7-1996 the cash was actually handed over by the police authorities to the Income Tax Department on 16-7-1996 . Meanwhile on 18-4-1996 notice under section 158BC was issued by the Assessing Officer to the assessee. It is also pertinent to note that the assessee was not sure that how much money was looted from him and Shri N.N. Mittal on 8-10-1995 . The different figures given about the looting amount is as under:-- (i) On 8-10-1995 Shri N.N. Mittal while travelling in the car along with the assessee lodged F.I.R. at Thana Itmad-daula that a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,000 Not claimed Om Prakash 70,000 Not claimed Satna Rly. Station 22,60,000 Not claimed --------- Total 72,60,000 ---------------------------------------------------------- (vii) In the, return filed on 12-8-1996 in response to notice under section 158BC, the total undisclosed income was declared from 1-4-1995 to 14-11-1995 i.e. from the date of accounting period for the assessment year 1996-97 w.e.f. 1-4-1995 to 14-11-1995 (the date on which search under section 132 concluded) Rs. 52,60,900. The above return filed for undisclosed income of Rs. 52,60,900 was subsequently revised on 27-9-1996, wherein, total undisclosed income has been brought down to Rs. 10,00,900 against the figure of Rs. 52,60,900 mentioned in the original return. (viii) This revised return was filed by taking plea that the notice under section 132A was not finally executed. Therefore, notice under section 158BC was pre-matured. However, the warrant of authorisation issued under section 132 was concluded on 14-11-1995 . Therefore, the revised return is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the said amount represented the part recovery of the amount looted from him and Shri N.N. Mittal when they were going in a car on 8-10-1995 . According to Assessing Officer since the matter is subjudice before the Hon'ble Court , no finding regarding the ownership of seized cash is given in the Assessment Order. It is also pertinent to note that substantive addition has also been made in the hands of Devendra Tyagi, Ashok Tyagi and Mukesh Tyagi on the ground that they have claimed before Court that Rs. 37.00 lakhs, Rs. 10.00 lakhs and Rs. 17.00 lakhs respectively as they earned from their independent sources. 7. Now we take up the grounds of appeal. The first two grounds of appeal are general in nature, therefore, the same are not discussed. 8. The ground Nos. 3, 4 and 13 to 15 are interlinked ground of appeal are as under:-- 3. "Because the notice under section 158BC of the I.T. Act dated 18-4-1996 was illegal and bad in law as the assets have not been finally requisitioned under section 132A as the same remains as not executed." 4. "Because no undisclosed income was found in Assessment Years 1986-87 to 199S-96 and as such the income of these years have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The above contention has also been brought to the notice of Commissioner of Income Tax, Agra by the assessee vide his letter dated 14-5-1996 . However, the CIT, Agra vide his letter F. No. 422/Release/CIT/95-96/AGR/1354 dated 4-6-1996 informed to the assessee that there is neither any infirmity in the notice under section 158BC issued by the Assessing Officer nor the notice is premature. Thereafter the return of income was filed under protest on 12-8-1996 for the block period from 1-4-1985 to 26-10-1995 declaring undisclosed income at Rs. 52,60,900. The return was subsequently revised on 27-9-1996 wherein total undisclosed income has been brought down to Rs. 10,00,900 against the figure of Rs. 52,60,900 mentioned in the original return. The reasons for filing revised return of income had been appended with the return. The relevant portion is reproduced as under:-- "In the notice dated 18-4-1996 issued under section 158BC, the Assessing Officer has not mentioned the date of execution of warrant under section 132A......... "The notice does not indicate date of requisition of cash under section 132A. The same merely mentions the block period 1985-86 to 1995 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proceedings under Income Tax Act but decided that the Income Tax Department is competent under the provisions of Income Tax Act to realise, collect and adjust against I.T. demand from the amount handed over to the Department. 13. As already stated above that the Assessing Officer has merged both the proceedings initiated under section 132 vide, search warrant dated 26-10-1995 and warrant issued for requisition of cash under section 132A on 27-10-1995 . This is evident from the Assessment Order passed on 31-10-1996 for the block period. At para 2.2 of page 4 of the Assessment Order the Assessing Officer has mentioned that--"As an amount of Rs. 72.60 lakhs had been recovered by the Police, a requisition under section 132A was also issued to S.H.O., Police Station, Etmad-daula on 27-10-1995. Besides the search of the assessee's premises, the lockers of Shri Davi Sarin, his wife and other family members were also searched on 14-11-1995 . 14. At para (h) and para 2.1 of page 4 of the Assessment Order, the Assessing Officer has further mentioned as under:-- (h) Without prejudice to the claims of S/Sh. Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi that sum of about Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f "block period" given in section 158B(a). But in this case, assessment has been made for the block period from 1-4-1985 to 14-11-1995 and the looted money was requisitioned on 16-7-1996 . Therefore, addition made on account of requisitioned money in block period assessment is illegal and bad in law. 17. The learned counsel also argued that the addition of Rs. 73.00 lakhs in regard to looted money was made in block period assessment under section 69A of the I.T. Act. Whereas, according to deeming provisions of section 69A, addition can only be made in the circumstances where assessee found to be owner of amount of Rs. 73.00 lakhs. But in the instant case the Assessing Officer himself mentioned in sub-para (h) of page 4 of the assessment order that since S/Sh. Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi (the alleged looters) had made claim in Court of Law that sum of Rs. 49.00 lakhs out of Rs. 72.60 lakhs seized by the Police belongs to them and thus the matter is sub-judice before the Hon'ble Court, no findings regarding ownership of seized cash is given. Accordingly the counsel forcefully contended that the findings given by the Assessing Officer in Assessment Order is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement recorded under section 132(4) and 131 of the I.T. Act. She further argued that return of income declaring undisclosed income of Rs. 52,60,900 was filed on 12-8-1996 . The said return was filed with the distinct knowledge that the ownership of the recovered cash by Police Authorities is disputed by the alleged looters. However, the recovered money of Rs. 42,60,000 shown as undisclosed income with the rider that if some one else is held to be the owner of the money the return may be treated as revised. According to learned D.R., subsequently revised return was filed reducing-undisclosed income from Rs. 52,60,900 to Rs. 10,00,900 by giving reason that as on the date of issue of notice under section 158BC the warrant under section 132A had not been executed since the recovered amount had not come into the Department's possession, therefore, two separate proceedings under section 158BC were warranted, one for the period up to the date of search and another for the period ending of execution of 132A order which is unwarranted as the undisclosed income of Rs. 73.00 lakhs was determined on the basis of statement given in Court and Police report. She further stated that the Deptt. re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rival submission. We have also gone through the voluminous paper books filed by both the sides. Now we dealt with first two grounds of appeal i.e. ground Nos. 3 and 4. The sum and substance of both the grounds in that notice dated 18-4-1996 issued under section 158BC was illegal and bad in law as the assets have not been finally requisitioned by that date and the authorisation under section 132A remained unexecuted, therefore, no undisclosed income was found and thus addition made in block assessment on this account was wrong and illegal. To see the legality of notice issued. determination of block period and undisclosed income, we have gone through the provisions of Chapter XIV-B of the I.T. Act, 1961 which is containing special procedure for assessment of a search initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A. Under section 158BC notice was issued on 18-4-1996 . That section as it stood between 1-7-1995 and 31-12-1996 is reproduced as under:-- "Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8B contains definitions of block period and undisclosed income which is reproduced as under: Section 158B. Definitions.--In this chapter, unless the context otherwise requires,-- (a) "Block period" means previous years relevant to ten assessment years (underlined substituted for the words "period of ten previous years" by the Finance (No. 2) Act, 1996 w.r.e.f. 1-7-1995) preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A, and includes, in the previous year in which such search was conducted or requisition made, the period up to the date of the commencement of such search or, as the case may be, the date of such requisition; (b) "Undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. 28. On a plain meaning of defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent of its recovery or enjoyment by the assessee. 30. We are unable to accept the view taken by the Assessing Officer. The Finance Act, 1995 inserted a new Chapter XIV-B in the Act. The Chapter provides a new concept for assessment in cases relating searches conducted under section 132 of the Act or requisitions made under section 132A of the Act after 30-6-1995 . The assessment relating to actions initiated under section 132 or 132A after 30th June, 1995 will be made under the new provisions. Prior to the insertion of Chapter XIV-B, estimation of the undisclosed income was made in summary manner under section 132(5) and 132(7). No doubt sub-section (3) of section 132A says that where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall apply as if such books of account, other documents or assets had been seized under sub-section (1), of section 132. But subsections (4A) to (14) of section 132 contain procedure to give treatment to the cases where search conducted. This procedure has entirely been changed by inserting special proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and found that there is neither any infirmity in the notice under section 158BC issued by the Assessing Officer nor the notice is premature and further advised to co-operate with the Assessing Officer. In view of these background the assessee filed a return of income for the block period in Form No. 2B on 128-1996 under protest declaring inter alia undisclosed income for assessment year 1996-97 at Rs. 52,60,900 which was subsequently brought down to Rs. 10,00,900 by filing revised return on 27-9-1996. The reasons given for filing revised return of income was that notice dated 18-4-1996 under section 158BC was issued without requisition of amount for which authorisation had been, issued under section 132A on 27-10-1995 of the Income-tax Act. The amount was actually received on 16-7-1996 by the Department from Police Authorities for which separate notice was required to be issued after the date of receipt of the looted amount from the Police Authorities. However, no such notice was issued by the Department and block assessment completed on 31-10-1996 for the block period 1-4-1985 to 14-11-1995 . It is-pertinent to note that the last date consider ed for assessment of the bloc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 132A means actual receipt by the authorised officer. 37. In view of above provisions of the Act, and facts and circumstances of the case, we have no hesitation in mentioning that in this case two separate assessments should have been made one for the block period up to date of search under section 132 concluded i.e. 14-11-1995 and another for the block period ending on requisition of amount of Rs. 72.60 lakhs from the custody of Police Authorities i.e. 16-7-1996. 38. However, in the instant case assessment for block period made on 31-10-1996 cover the block period from 1-4-1985 to 14-11-1995 while the amount of Rs. 72.60 lakhs was requisitioned under section 132A of the Income-tax Act from Police Authorities on 16-7-1996 which is outside the block period. Hence, any addition in this regard is illegal and bad in law which is not sustainable. 39. However, in the instant case requisitioned amount of Rs. 72.60 lakhs from police authorities was not considered for addition but in place of it amount of Rs. 1 crore 3 lakhs was considered. The reason for it was mentioned in assessment order that Rs. 72.60 lakhs had been requisitioned from S.H.O., Police Station Etmad-ud- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996 . The total amount requisitioned is Rs. 72.60 lakhs. Out of that Rs. 30.00 lakhs belong to Shri N.N. Mittal as accepted in the assessment order. We were informed during course of hearing that Rs. 30.00 lakhs has separately been taxed in the hands of Shri N.N. Mittal. Therefore, the balance amount is (72,60,000 (-) 30,00.000) Rs. 42,60,000 which has been requisitioned in the case of the appellant under section 132A fall beyond the scope of block period, hence addition of Rs. 42,60,000 is held as illegal and thus deleted. Acccordingly, ground No. 3 is allowed. 41. It may be seen that in the hands of the appellant total addition of Rs. 73,00,000 has been made on account of robbery and claimed to be earned from speculation business as we have seen in foregoing paragraphs. This amount of Rs. 73,00,000 includes the requisitioned amount of Rs. 42,60,000 under section 132A, therefore, the same is reduced (73,00,000 (-) 42,60,000) and thus remaining amount of Rs. 30,40,000 may be said as added under proceedings initiated under section 132 and this amount fall within block period for which assessment made on 31-10-1996. 42. We have gone through the statement recorded in Devnagri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of the Stock Exchange through which these transaction took place. I further state, that as on date i.e. 26-10-1995 , no records of this exist with me or with any other person. As stated earlier, in my statement on oath under section 131 of the Income-tax Act, 1961, this money was earned during the Financial Year 1-4-1995 till present on which I am ready to pay advance tax, and which I shall show in my returns for Financial Year 1995-96 in income-tax. 43.1 The learned D.R. vehemently argued that the undisclosed income of Rs. 73,00 lakhs has rightly been determined under section 69A in the assessment order passed for block period 1-4-1985 to 14-11-1995 as the same based on statement of assessee and his family members recorded under sections 134, 131 and F.I.R. and Police report. She further argued that Explanation to section 132(4) declares that the examination of any person under that subsection may be not merely in respect of any books of account, other documents or assets found as a result of the search but also in respect of all matters relevant for the purposes of any investigation connected with any proceedings under the Income-tax Act, 1961. Thus, the authorised off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant had not counted the cash before proceeding to Kanpur on 3-10-1995 . However, the companion of the appellant Shri N.N. Mittal has counted his money which was at Rs. 30.00 lakhs, therefore, there is no difference in quantum of amount admitted by him at different stages. The appellant had also deposed in his statement recorded under section 131 on 26-10- 1995 in reply to question No. 3 (reproduced in foregoing paragraphs) that he had not counted the money. 46. It is also an admitted fact that except statement recorded under sections 131 and 132(4) on 26-10-1995 and police report, the department does not have any evidence in form of books of account or document to prove about the quantum of amount of undisclosed income looted on 8-10-1995 though the premises owned by the appellant were searched under section 132 of the Income-tax Act. The Police could recover only amount of Rs. 42,60,000 belonged to the assessee which has already been discussed. But the balance amount of Rs. 30,40,000 which was made part of addition under section 69A of the Income-tax Act, 1961 does not appear justifiable for the reason that the deeming part of section 69A, dealing with unexplained money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir commitments. The assessee further stated that no investment is required in such a business and Rs. 5,000 was spent by him in incurring initial expenditure. The contention of the assessee was not accepted because according to the Assessing Officer, it is unbelievable that one can earn such huge amount of Rs. 73.00 lakhs from speculation of shares between period 1-4-1995 to 8-10-1995 with a meagre investment of Rs. 5,000 only. Hence, Assessing Officer estimated undisclosed initial investment at Rs. 5.00 lakhs for the Financial Year 1995-96 and made addition, accordingly. 50. We have heard rival contention in this regard. We noted during course of hearing that Department during course of search under section 132 of the Income-tax Act at the premises of the assessee could not get any evidence in form of entry in books of account or other documents or transaction about speculation business carried out by the assessee except the statement recorded under sections 131 and 132(4) on 26-10-1995 wherein the assessee admitted that he started speculation business from 1-4-1995. Subsequently, during course of assessment proceedings, the assessee vide his reply dated 18-9-1996 expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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