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TMI Blog2002 (6) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Session Judge, Agra requesting to direct the police authorities to hand over the recovered amount to I.T. Department. Vide, order dated 8-7-1996 the Hon'ble Additional District, and Sessio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; owned by the said recorded 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced as under:-- --------------------------------------------------------- Name of person Amount Amount recovered claimed --------------------------------------------------------- Ashok Kumar Tyagi 6,90,000 10,00,000 Mukesh Tyagi 15,00,000 17,00,000 Devendra Tyagi 27,00,000 37,00,000 --------------------------------------------------------- Bachchu Singh 10,000 &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee could not give exact quantum of amount looted from his possession. Anyhow, Shri N.N. Mittal was sure that his amount looted was Rs. 30.00 lakhs. The reason of this changed statement about quantum of looted money given by the assessee during the course of hearing before us was that the assessee has not counted the amount he carried for purchase of property at Kanpur. However, we find that from the Assessment Order that the Assessing Officer has considered in Assessment Order the total amount looted was at Rs. 1.03 crores wherein, Shri N.N. Mittal's claim was accepted at Rs. 30.00 lakhs as belongs to him and the balance amount of Rs. 73.00 lakhs was added in the hands of the assessee as his undisclosed income. 6. The assessee also pleaded before the Assessing Officer that the amount looted from him contained his identification marks on the first and last note of each bundle and the same was also handed over to the Court by the S.H.O., Itmad-daula before depositing in Treasury. The assessee vide his letter dated 19-7-1996 had also requested the Assessing Officer that for deciding ownership of Rs. 72.60 lakhs photocopy of the looted currency prepared on the direction of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is wrong and illegal. The amount as held to be owned by the appellant, by the competent Court can only be assessed in the appellant's hand. No addition can be made on the basis of mere statement." 14. "Because in the original return looted amount was shown as income from other sources and the amount of Rs. 73,00,000 has also been assessed under section 69A of the I.T. Act and as such question of addition of Rs. 5,00,000 as initial investment in speculation business is wrong and illegal." 15. "Because any view of the case unrecovered looted amount is trading loss." 9. Facts of the issue are that warrant of authorisation to search the premises of the assessee was issued on 26-10-1995. On the following date i.e. on 27-10-1995 warrant of authorisation for requisition of cash of looted money was issued to S.H.O., Police Station, Itmad-daula, Agra requiring him to handover the money to Income Tax Department. Therefore, on 23rd November, 1995 the Asstt. Director of Income Tax (Inv.) II, Agra made an application to Additional District Judge, Anti Dacoity Affected Area, Agra requesting him to issue necessary direction to handover the recovered cash of looted money to Income Tax Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther any infirmity in the notice nor the notice is premature. The assessee understands that consequent thereto, the Chief Commissioner of Income Tax, Kanpur is of the opinion that two separate block assessments have to be made namely:-- (a) "On consequent to search and seizure under section 132 of the I.T. Act, 1961." (b) 'and the other consequent to requisition under section 132A of the I.T. Act, 1961 dated 27-10-1995 to the S.H.O., Etmad-daula. Accordingly the directions have been issued to the Assessing Officer which are on Income Tax records." "........................................." "Therefore, the revised return is being filed showing computation of undisclosed income consequent to search and seizer operation under section 132(1) of the I.T. Act, 1961 on 26-27th October, 1995." "............................................" "As soon as notice under section 158BC of Income Tax Act, 1961, along with Form No. 2B in connection with requisition under section 132A issued S.H.O. Etmad-daula is received, the return of-income will be filed." 11. However, ignoring the above submission made by the assessee, the Assessing Officer merged both proceedings initiated under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter is subjudice before the Hon'ble Court, no findings regarding ownership of seized cash is given presently. 2.1 Keeping in view the factual position indicated above and considering admission/statements given by Shri Davi Sarin and Shri N.N. Mittal before various authorities a sum of Rs. 1.00 crore 3 lakhs which is said to be looted from the assessee and his companion Shri Mittal is required to be considered for computing the undisclosed income of the assessee and Shri N.N. Mittal. As Shri N.N. Mittal had claimed that sum of Rs. 30.00 lakhs belongs to him, the balance amount of Rs. 73.00 lakhs is required to be considered while computing the undisclosed income of the assessee for the block period 1-4-1985 to 14-11-1995. 15. From the above, it is seen that common order was passed for action under sections 132 and 132A of the I.T. Act by issuing single notice under section 158BC of the I.T. Act for filing return for the undisclosed income claimed to have been detected during course of search under section 132 at the premises of the assessee and bank lockers owned by him and his family members on 26-10-1995 and also for the amount requisitioned on 16-7-1996 from S.H.O., Police S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged looters S/Sh. Devendra Tyagi, Ashok Tyagi and Mukesh Tyagi. 18. It is further argued by the learned counsel of the appellant that no undisclosed income was found during course of search under section 132 at the premises of the assessee or from bank lockers owned by the assessee or his family members then how addition can be made for Rs. 73.00 lakhs in the assessment order for the block period 1-4-1985 to 14-11-1995. 19. The learned counsel in support of his above contention relied on following judgments: (i) Union of India v. Judicial Magistrate (Eastern Railway,) [1983] 140 ITR 553 (All.). (ii) CIT v. Tarsem Kumar [1986] 161 ITR 505 (SC) (iii) CBDT Circular No. 179 dated September 30th, 1975. 20. On the other hand, the learned Departmental Representative argued that during course of search under Section 132 at the premises of the assessee, statement of the assessee under section 132(4) of the I.T. Act was recorded wherein he admitted that he earned undisclosed income amounting to Rs. 70.00 lakhs to 90.00 lakhs for the financial year 1995-96. Therefore, as search had been conducted, assessment was to be framed under Chapter XIV-B of the Act and the said amount was liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cited various judgments of High Courts and Supreme Court. 23. Thereafter, the learned DR. contended in regard to plea taken by the learned counsel of the appellant about contradictory findings given by the Assessing Officer in regard to ownership of the looted money. The D.R. argued that issue of determination of ownership by the Criminal Court of the recovered cash is immaterial and inconsequential to the assessment framed in the case of the assessee. According to her, the income of Rs. 1.03 crore stood earned and quantified as on 7-10-1995 i.e. the eve of robbery. For the period 199495 this income had already been earned and it was being taken to Kanpur for some 'undisclosed purpose' and looting of the income by some miscreants amounts to a form of appropriation of income. She further contended that how the income/taxable income is utilised is of no significance to the determination of the 'income' as per Income Tax Law. The fact of income earned is separate, distinct and independent of the enjoyment, disposal or treatment of the income. The two issues cannot be confused and treated as one or interrelated. Therefore, if the assessee is declared to be owner of the recovered cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued for the purposes of proceeding under this Chapter; (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 and section 144 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; The assets seized under section 132 or requisitioned under section 132A shall be retained, to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the references to "regular assessment" or "reassessment" in section 132B shall be construed as references to "block assessment". 25. Section 158BC thus, in its main portion, contemplates a situation where- -- any search has been conducted under section 132 or -- books of account, other documents or assets are requisitioned under section 132A. 26. In such a situation, section 158BC in its clauses (a) and (a) requires the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of requisition of cash was issued on 27-10-1995. Therefore, two separate block proceedings should be initiated by issuing two different notices under section 158BC. The learned counsel further argued that in section 158BC the word used in "requisition" and the wording used in definition of "block period" is the "date of such requisition" which means that the date of looted cash actually received by the Department from tire Police Authorities. Therefore, on the date of issue of notice under section 158BC i.e. 18-4-1996, the warrant of authorisation under section 132A had not been executed since the assets had not come into the Department's possession. It came in possession of the Department in the succeeding year i.e. on 16-7-1996. Hence, the assessment for the block period from 1-4-1985 to 14-11-1995 made on 31-10-1996 is illegal and bad in law which includes the requisitioned cash from the Police Authorities on 16-7-1996. In other words the cash requisitioned is out of the scope of block period. 29. While according to Assessing Officer this is not a valid ground for the reason that the taxability of an income is not subject to its receivability or enjoyment. An income becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether block assessment subsumes the regular assessments or is independent of the latter. Finance (No. 2) Act, 1998 has inserted the clarificatory explanations with retrospective effect from 1-7-1995 after sub-section (2) of section 158BA of the Income-tax Act clarifying that assessments completed under Chapter XIV-B shall be in addition to regular assessments in respect of each previous year included in the block period. Further, undisclosed income relating to the block period shall not include the income assessed in regular assessment. Similarly, income in regular assessment shall not include the income of the block period assessed in block assessment. 32. Similarly, we noted that there was dispute in regard to notice issued under section 158BC on 18-4-1996. The assessee vide his letter dated 12-5-1996 addressed to Assessing Officer and thereafter vide letter dated 14-5-1996 addressed to Commissioner of Income-tax objected the notice dated 18-4-1996 for the reason that the authorisation issued under section 132A for requisition of looted money recovered by the police authorities has not by that time taken over in possession by the Department and without requisition. Notice un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nore the fact altogether that the original return was filed under protest for the reason that no notice under section 158BC was issued for the proceedings initiated under section 132A and hence, inclusion of requisitioned amount by the Department from police authorities on 16-7-1996 in block assessment for block period 1-4-1985 to 14-11-1995 is illegal and bad in law. 35. To settle the controversy regarding meaning of the words "execution" and "requisition' while calculating the period of limitation in section 158BE of the Income-tax Act, the Finance (No. 2) Act, 1998 has inserted a clarificatory explanation with retrospective effect from 1-7-1995. Explanation 2 to section 158BE enacts deeming provisions and provides that for the removal of doubts, it is hereby declared that the authorisation referred in section 158BE(1) shall be deemed to have been executed,-- (a) in case of search,-- --On the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; (b) in the case of requisition under section 132A,-- * On the actual receipt of the books of account or other documents or assets by the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Shri Davi Sarin. Para 5 of page 6 of the assessment order is reproduced for more clarification:-- "The assessee in his statement under section 132(4) has admitted that he was carrying cash to Kanpur to buy certain properties. The assessee during course of his statement under section 132(4) on 26-10-1995 was required to explain the source of the looted cash of Rs. 73.00 lakhs. The assessee has admitted that he earned the amount of Rs. 73.00 lakhs from speculation business done by him. Thus, the assessee has failed to explain the nature and source of Rs. 73.00 lakhs which was looted from him on 8-10-1995, the same will be added to the income of the assessee as undisclosed income for the period 1-4-1995 to 26-10-1995 under section 69A of the Income-tax Act, 1961." 40. From the above, it is clear that the Assessing Officer has accepted that Rs. 30.00 lakhs was owned by Shri N.N. Mittal, companion of the appellant. We have also seen that in the assessment order dated 31-10-1996 two separate proceedings have been merged, one initiated under section 132A and another under section 132. It is not in accordance with the provisions of Income-tax Act, particularly, addition made on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Nirankar Nath Mittal. Balance amount of Rs. 70.00 lakhs was my personal money. This money is not concerned in any manner with the firm M/s. Sarin and Sarin. In the said car there was total amount of Rupees 1 crore 10 lakhs to 1 crore 25 lakhs. The amount was not counted. Out of that Rs. 30.00 lakhs belonged to Shri Nirankar Nath Mittal and the balance amount entirely belonged to me. 43. On the same day i.e. on 26-10-1995 statement under section 132(4) was also recorded in English which is placed at record at pages 103 to 105 of Paper Book I filed by appellant. Reply to question Nos. 1 and 2 is reproduced as under:- Q.1 You are requested to explain the details of cash, stolen from the Maruti Car of Shri N.N. Mittal on 8-10-1995, for which FIR was lodged at Police Station Etmad-ud-daula on 8-10-1995 by Mr. N.N. Mittal. Ans. As stated earlier in my statement recorded under section 131 of Income-tax Act, 1961, I and Shri N.N. Mittal were carrying total cash of Rs. 1.25 crore approximately, out of which only Rs. 30.00 lakhs belonged to Shri N.N. Mittal and rest of the cash between Rs. 70.00 lakhs to Rs. 90.00 lakhs belonged to me, which I had put in 3 cartons and one small canva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on 31-10-1996 which based on the report of the same date (31-10-1996) from S.O. Police Station Rakabganj. It will be clear from para (g) of page 3 of the Assessment Order which is reproduced as under:-- "(g) The assessee produced a report from S.O. Rakabganj wherein it is mentioned that during the course of investigation carried out by the police, it has come to their knowledge that amount of money looted was Rs. 1.03 crore and not Rs. 2.00 lakhs which was indicated in the F.I.R. lodged on 8-10-1995. The assessee further concluded that in view of the clear indication regarding the quantum of money looted given in the latest report dated 31-10-1995 given by S.O. Rakabganj, the quantum of money indicated in the statement of the assessee under section 132(4) recorded on 26-10-1995 may be considered as modified to the extent indicated in the report of S.O. Rakabganj, Agra (an independent authority appointed for investigating robbery case)." 45. The above report of S.O. Rakabganj was accepted and after reducing the claim of Shri N.N. Mittal for Rs. 30.00 lakhs the balance amount of Rs. 73.00 lakhs was added in the hands of the appellant. Now the question is whether police report g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the Assessing Officer while making addition under section 69A of the Income-tax Act. In view of the above legal position and facts of the case the addition of Rs. 30,40,000 is also deleted, thus ground Nos. 4, 13 and 14 are allowed. 47. The 15th ground of appeal is that the unrecovered looted amount is trading loss. The addition on the amount concerned has already been deleted, therefore, this ground is not discussed as it would serve no purpose except academic discussion. Hence this ground is rejected. 48. The 16th ground of appeal is that addition of Rs. 5,00,000 as investment in speculation business is wrong and illegal. Neither there is proof of speculation business nor of any investment in the same. 49. Facts of the issue are that in assessment order it is mentioned that the assessee in his reply dated 18-9-1996 has stated that to earn Rs. 73.00 lakhs (as discussed in foregoing paragraphs) the initial investment was made of Rs. 5,000 only. The Assessing Officer is of the view that the initial investment cannot be said to be included in the amount of Rs. 73.00 lakhs as the same has specifically been stated as representing speculation income for the period from 1-4-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are requisitioned under section 132A. in the case of any person, then-- The Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B (containing sections 158B to 158BH). 52. Now we have to see what is "undisclosed income". Clause (b) of section 158B gives an inclusive definition of the expression "undisclosed income' so as to include- -- any money, bullion, jewellery or other article or thing or * any income based on any entry in books of account or other documents of transaction where - such money, bullion, jewellery, valuable article, thing, entry in 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 purpose of this Act. 53. It, therefore, follows that what the assessee had already disclosed or would have disclosed is not to be treated as undisclosed income N.R. Paper & Board Ltd. v. Dy. CIT [1998] 234 ITR 733 (Guj.). 54. The income from speculation business has never been disclosed nor any entry in books of account, document or transaction was found during course of search except the assessee admit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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