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TMI Blog1998 (11) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was seized. The assessee had declared the concealed income of Rs. 3,50,000 in the case of the firm, M/s Kamal Auto Consultant including the cash found at the time of search. Further it was also ascertained from the State Bank of India that the assessee had purchased travellers cheques as under: Rs. 12-5-1981 30,000 9-5-1981 30,000 13-6-1981 29,000 6-7-1981 30,000 21-7-1981 30,000 -------- Total 1,49,000 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought explanation from the assessee vide his letter dt. 19th Feb., 1990, and in response to the said notice the assessee had submitted his reply by way of a letter dt. 17th March, 1990. The CIT(A) further observed that the assessee had not adduced any evidence to prove that the travellers cheques in question were purchased out of funds of customers. Similarly, the assessee could not substantiate his claim that these travellers cheques were purchased by the firm M/s Kamal Auto Consultant. According to the CIT(A), no evidence was produced to show that these travelers cheques were recorded in the books of accounts of the firm M/s Kamal Auto Consultant. On the contrary, it was found by the AO that these travellers cheques were purchased by the assessee in his own name. The CIT(A), therefore, concluded that these travellers cheques were purchased by the assessee in his individual capacity and further he failed to explain the source of amount investment in these travellers cheques. According to the CIT(A), the AO was justified in treating the amount of Rs. 1,49,000 as unexplained and added the same to total income of the assessee. Consequently, the addition was confirmed by the CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; -------- 3,50,000 -------- According the learned counsel for the assessee the above disclosure has been accepted by the Department in the hands of firm after verification of seized materials. 6. The learned counsel for the assessee further submitted that the Appellate Authority below vide para 8 of the impugned order has categorically held that the only source of income of the assessee was share of profits from M/s KAC Shri Jain, further pointed out that vide order dt. 7th Feb., 1986, under s. 131(3) of the Act, all the relevant books of accounts of the firm for various years including the asst. yr. 1982-83, have been seized by the Department and the same are still lying with them. He, however, submitted that in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er obtaining section from the Chief CIT or the CIT who is to be satisfied on the reasons recorded by the AO. According to Shri Jain the assessee wrote a letter to the AO to know the above facts but there was no response from the AO. In such circumstances it can be presumed that the provisions of s. 151 have not been complied with and hence the entire proceedings will be void ab initio. He relied on the following decisions: (1) CIT vs. Maharaja Pratapsingh (1961) 41 ITR 421 (SC); (2) CIT vs. Dumraon Cold Storage & Refrigeration Service (1974) 97 ITR 137 (Pat); (3) Rasbihari Tobacco Processors Ltd. vs. Dy. CIT (1997) 57 TTJ (Ahd) 120 9. On the other hand Shri Rajiv Nabar, the learned Departmental Representative heavily relied on the orders of the authorities below. His further contention was that the assessee has miserably failed to show that the travellers cheques were purchased out of funds of customers. According to the learned Departmental Representative the assessee could not establish on record that these cheques were recorded in the books of M/s KAC. These cheques were purchased by the assessee in his name from the State Bank of India and, therefore, it can be said that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return? Ans: This firm started in the year 1980. I do not remember the capital investments made initially. The return of income of the firm is filed in Circle- V, Wd-E. The partners do not have taxable income. Hence, returns were not filed. Q. No. 3. Whether partners have any personal source of income? Whether the partners are filing WT Returns? Ans: Partners have no source of income other than the share income from the partnership. They are not filing WT Returns. Q. No. 21. In answer to question No. 8, you have stated that there is no investment in the names of your family members. But, in the course of search the following receipts are found which indicate that you had registered the Bajaj scooters in the names of your family members are follows:- ------------------------------------------------------------ Date Name Amount Dealer ------------------------------------------------------------ & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achumal 500 -do- -do- Chandar Sachumal 500 -do- -do- Vency Sachumal 500 -do- -do- -do- 500 -do- 30-11-1984 Jetu Sachumal 500 B'bay Motor Co., Jodhpur. -do- Vishali Sachumal 500 -do- ------------------------------------------------------------ Ans: The above scooter etc. were registered for and on behalf of and out of the income of Kamal Auto Consult. From the above questions and answers, it is abundantly clear that right from the start of the search operation, at the residential premises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tt. Director of Inspection (Inv.)-II, Ahmedabad, that the firm of M/s KAC was required to produce relevant books of accounts of the firm from the first accounting period from which the firm came into existence. The copy of the said summons is also available at p. 44 of the assessee's paper book. It is also worth noting that vide order dt. 7th Feb., 1986, under s. 131(3) entire accounts books pertaining to M/s KAC relating to various assessment year including the assessment year under consideration had been seized by the Department. The assessee from the date of search was stating that he had not done any personal business, all the transactions done pertained to the firm only. The books of accounts of the firm were lying with the Department since 1986. The assessee vide his reply dt. 17th March, 1990, had made a detailed reply to letter dt. 19th Feb., 1990 issued by the Asstt. CIT (Inv.) Cir. 1(1), Ahmedabad whereby the details for travelers cheques were asked for from the assessee. The assessee in his said reply submitted that the business transaction had been reflected in the books of accounts of the partnership firm, M/s KAC It was also submitted that the said fact may be verifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not assigned any cogent reason while making the addition of Rs. 1,49,000 in the assessment order dt. 3rd Dec, 1987 under s. 143(3) of the Act. In our opinion, the essential and material distinction between the provisions contained in s. 132(5) and s. 143(3) have gone unnoticed at the hands of AO. Sec. 132(5) concerns a situation where any money, bullion, jewellery or other valuable article or thing is seized under s. 132(1) or s. 132(1A). Sec. 132(5) empowers the ITO to estimate the undisclosed income of the person concerned in a summary manner to the best of his judgment and the action taken or orders made under s. 132(5) are really in the nature of interlocutory orders. On the other hand, there is specific procedure prescribed for the assessment to be made under s. 143(3) of the Act. In our view, the AO was not justified solely relying on the order passed under s. 132(5) of the Act. The AO has not discussed the other relevant objections raised by the assessee during the course of assessment proceedings, he has also not appreciated the fact that from the date of search it has been claimed by the assessee that he had not purchased any travellers cheque out of his own fund. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to a particular income.' 15. Shri P.F. Jain, the learned counsel for the assessee, also raised the contention that in the assessment order the AO has not recorded any reason for issuing notice under s. 148 of the Act. The AO had also not stated whether he had obtained the sanction from the competent authority as per requirement of law. We find that the assessee had not raised such objection before the authorities below. Even if it is assumed that this plea can be raised at the stage of second appeal then it would be relevant to state that it is well settled that s. 148 of the Act does not envisage the need to disclose reason(s) for the relief, nor it can be read into it as a requirement of natural justice. No adjudication of rights or determination resulting in consequence to the assessee is involved at the stage of issuing notice. The only requirement in law for initiating proceedings under s. 148 is that there must be reasons to justify the plea that there is escapement or suppression of income. In our considered opinion the requirement of recording of reasons for initiating action for reassessment are only administrative in character, and, therefore, it is not nec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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