9911796707
TMI Blog2000 (1) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 29th Aug., 1996, is without jurisdiction and hence it is a nullity in law, and (3) the order under s. 153BC(c) dt. 29th Aug., 1996, to the extent additions to the declared total incomes are based on DVO's report, is also without jurisdiction. On merits (4) The learned AO is not justified in making addition of Rs. 50,000 on account of construction and renovation of residential house basing the same merely on assessee's disclosure duly and validly retracted. (5) The learned AO is not justified in making additions of Rs. 50,975, Rs. 2,95,137 and Rs. 2,49,233 (total Rs. 5,95,345) on the basis of DVO's report. (6) The learned AO is not justified in making addition under s. 68 at Rs. 7,00,000 on substantive basis and Rs. 10,20,000 on protective basis (total Rs. 17,20,000). (7) On the facts and circumstances of the case and in law, the learned AO assumed jurisdiction under various statutory provisions and made various additions mentioned in the foregoing grounds without properly considering and appreciating the explanation and replies submitted by the assessee. (8) The learned AO is not justified in making the following additions: (i) Rs. 45,962 O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to us by the assessee at pp. 4 to 59 of the paper-book. From the statement it appears that it was recorded in two parts. From question No. 1 to question No. 34 and their answers were recorded during the survey operation and it appears that the survey was concluded after recording the answer to question No. 34. The relevant question and answer is reproduced hereunder: Q. 34. Taking into consideration the proceedings so far do you want to surrender the unaccounted income of your and your wife, if yes, furnish reply in detail. Ans. Yes sir, I, on behalf of my wife, who is the proprietor of Manali Restaurant and Hotel White Rose declare Rs. 1,55,000, as unaccounted income for the year 1994-95 and I agree to pay the tax on that income at the earliest. The above is free English translation given by the assessee of the statement. However, the assessee has also filed free English transaction of p. 9 of the above statement at p. 59 of the paper-book which reads as under: Ans. (34) Yes Sir, I on behalf of my wife who is proprietor of "Manali Restaurant" and "Hotel White Rose" declared unaccounted income of Rs. 1,55,000 for financial year 1994-95 and I agree to pay the tax thereon at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Total 25,00,000 5. However, it appears that the assessee subsequently vide letter dt. 4th Oct., 1995 addressed to the Asstt. CIT with copies to various authorities (viz. ADI, Bhavnagar, Dy. CIT, Bhavnagar Range, Bhavnagar, CIT Rajkot, Director of Income-tax, Ahmedabad and Director General (West) Ahmedabad, Chief CIT, Ahmedabad), retracted from the statement on the ground that the same was obtained under coercion and threats as the assessee as well as her husband were detained in the premises of Hotel Apollo from 11.30 AM on 3rd Aug., 1995 till 11AM 4th Aug., 1995. Copy of retraction letter given to us at pp. 1-3 of paper book I. The AO however rejected the retraction by observing that it is general in nature and an afterthought made after two months and he proceeded to make the assessment on the basis of statement as well as documents/loose papers found during the course of search and accordingly issued notice under s. 158BC to the assessee in response to which the assessee filed a return of undisclosed income declaring Nil undisclosed income. The AO however, completed the assessment under s. 158BC r/w s. 143(3) at a total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the body of the order 4,69,961 (3) Unexplained expenses as per Ann. A. 11 15,846 (4) On account of unexplained expenditure in construction of Hotel White Rose 2,49,233 9,35,040 -------- --------- Total undisclosed income......... 30,97,114 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced at 11.30 PM on 3rd Aug., 1995. In this connection pointed reference was made to the statement of Shri Rafiqbhai with regard to question No. 34 and its answer given at p. 59 of the paper book which has also been reproduced by us in para 3.2. This page, according to the authorised representative was inadvertently left by the survey/search party at the premises of the assessee. It was submitted that from the above it is clear that the survey was concluded on 3rd Aug., 1995 and subsequently when the survey was converted into search, nothing new was found which was not disclosed and/or known to the Department before the search and as such it is clear that the conditions necessary for initiating action under s. 132 have not been fulfilled. Reliance was placed on the decision of the Allahabad High Court in the case of Motilal vs. Preventive Intelligence Officer (1971) 80 ITR 418 (AM) which decision has subsequently been approved by the Hon'ble Supreme Court in the case of CIT vs. Tarsemkumar (1986) 58 CTR (SC) 129 : (1987) 161 ITR 505 (SC). Reliance was also placed on the following decisions: (i) L.R. Gupta vs. Union of India (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del); (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 4,000 (6) B/L difference personal cash of rafiqbhai 94,511 --------- Total 2,45,669 --------- The alleged expenditure of Rs. 50,000 on the renovation of house is without any basis as no renovation whatsoever was carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising the search for formation of reasonable belief, the Tribunal/Court cannot substitute their opinion to judge the validity of the action of the CIT/DIT. It was pleaded that the argument that search is invalid because nothing new was found during the search, is both misconceived and irrelevant because the validity of the search is not dependent on the results of the search. It was submitted that the validity of the search is dependent upon the existence of the conditions prescribed under s. 132(1) at the time of authorising the search and in the facts of this case such conditions existed when the warrant under s. 132 was issued. 8.1. During the course of hearing of this appeal, the Bench required the learned Departmental Representative to show the satisfaction note recorded by the CIT for authorising the search action but the same was not produced and in support of that, written explanation was filed by the CIT, Rajkot as well as the opinion of the standing counsel which are as under: "2. The "Satisfaction Note" recorded for authorising the search action in this case, is not in the custody of the AO or the CIT. Even otherwise, it cannot be produced before the Tribunal for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult of the survey, material information was found justifying search under s. 132. It is well established that satisfaction of the CIT/DIT in authorising a search is a subjective satisfaction, and so long as some relevant material existed before the CIT/DIT at the time of authorising the search for formation of a reasonable belief, the Courts cannot substitute their opinion to judge the validity of the action of the CIT/DIT. It is well settled that sufficiency of reasons recorded by CIT/DIT is not justiciable. In this case, it is not a dispute that such material came out as a result of the survey on 2nd Aug., 1995, and was before the CIT/DIT, when he authorised the search on 3rd Aug., 1995. The argument that search is invalid because nothing new was found during the search, is both misconceived and irrelevant because the validity of a search is not dependent on the results of the search. Instead, it is dependent on existence of the conditions prescribed under s. 132(1), at the time of authorising the search. In this case, it is obvious, ex facie, that such conditions existed when the warrant under s. 132 was issued. (6) Since the survey had brought out unaccounted assets and incri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions and have also gone through the order passed by the AO as well as the submissions made by the CIT as well as the opinion of the learned standing counsel. The Tribunal is an authority constituted under the IT Act and as such cannot question the validity of the vires of any provision of the Act. However, since by exercise of powers under s. 132 of the Act, a serious invasion is made upon the rights, privacy and the freedom of the taxpayer, the powers must be exercised strictly in accordance with law and only for the purpose for which the law authorise it to be exercised. If the action of the officer issuing authorisation is challenged, the officer concerned must satisfy the Court/Tribunal about the regularity of his action. Accordingly the Tribunal is competent to decide as to whether the conditions precedent for invoking powers given to the learned CIT under s. 132 are exercised in accordance with the provisions of s. 132. In accordance with the provisions of s. 132(13) the provisions of Cr. PC relating to search and seizure shall apply, so far as may be, to search and seizure under sub-s. (1) and s. (1A). In accordance with s. 165 of the Cr. PC a search can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; " 15. J.V. Joshi " 16. K.M. " From the above it is clear that on 2nd Aug., 1995, there was no information with the learned CIT warranting search and no informant as involved at whose instance or on the basis of whose information the Satisfaction Note authorising the search was recorded by the CIT. At the most it could be on the basis of a report given by the officer-in-charge of the survey on the basis of which the warrant was issued by the CIT and yet the Department has chosen to claim privilege in not disclosing the Satisfaction Note to the Tribunal. It is pertinent to note that in para 3 of the submissions sent by the learned CIT through the learned Departmental Representative, it is mentioned "if the Tribunal still insists production of satisfaction note, they may be requested to pass a formal order directing the DIT (Inv), Ahmedabad to produce the same." From the above it appears tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee by filing letter, dt. 4th Oct., 1995, addressed to the Asstt. CIT (Inv) Circle, Bhavnagar referred in para 5 above. A comparison of the list/inventory of account books, etc. found and not seized at the time of survey and these subsequently seized after the search, clearly indicates that some documents which were inventorised at the time of survey were subsequently seized. In this connection the assessee has furnished the details of books and documents found and inventorised during the survey on 2nd Aug., 1995 at pp. 1 to 8 of the paper-book No. 3 and the books and documents seized during the search on 3rd Aug., 1995 at pp. 9 to 16 of the paper-book. From the list of inventory prepared at the time of survey it is clear that the same was started on 2nd Aug., 1995, but the authorised officer signed it on 3rd Aug., 1995, Sr. No. 60 of the list prepared at the time of survey from pp. 6 to 8 is indentical with Sr. No. 1/60 to 1/85 of the list of account books seized given at pp. 14 and 15 of the paper book. The other documents seized mostly contains regular and rough account books of the Hotel White Rose, Hotel Apollo, Manila Restaurant. Thus, it is clear that as a result of search n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The matter can be looked from another angle. Chapter XIV-B is meant to tax undisclosed income unearthed as a result of search. In the case before us the assessee had disclosed the construction of Hotel White Rose in her books of account for the respective years. The alleged bogus gifts were received by the assessee, her son, and her husband by bank drafts through NRI accounts of the donors; these were credited into bank pass books of the assessee which are meant to be disclosed to the IT Department. During the course of assessment proceedings for the block year the assessee has given various explanations to the queries raised by the AO by producing the pass books and other documents indicating the cash in hand in respect of various concerns and has also tried to explain the various loose papers found during the survey. The estimation of undisclosed income by the AO is mainly on the basis of the statement of the assessee or her husband which was subsequently retracted and a reference even to the statement of the husband particularly question and answers Nos. 35, 38/39, 44, 45, 46 to 52, 89, 90 and 91 clearly indicates that so-called surrender of income of Rs. 25 lacs was through c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; --------- The aforesaid amount is paid in cash from my unaccounted income and I have received gift draft from Shri Manoj Patel and Nutan B. Patel, from NRI account I undertake to pay the taxes on unaccounted income of Rs. 17,20,000 at the earliest and I surrender this as un-accounted income during the year 1994-95. Q. 38/39.- Please explain for refusing to sign page Nos. 9, 7, 10 of the statement which is now being recorded. Ans. The amount received from NRI account has been correctly show on page Nos. 9 & 10 but the question No. 35 and the details of the reply to it written on pp. 9 & 10 are not correct. Q. 44.- You have received huge amount of Rs. 3,00,000 and Rs. 5,00,000 by way of gift. It is, therefore, but natural that you should know that person. You must be having good relationship. You are, therefore, requested to say since how long you know Manoj Patel & Nutan B. Patel. How do you know them? Please furnish in detail their full addresses. Ans. Shri Manoj Patel & Nutan B. Patel met me at Vadodara. I came to know them through my friend. I do not know the name of the said friend. I had asked for a gift and they have given me the gift. Q. 45. From your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at you are unaware of the name and address of the person giving the gift please explain. Ans. In reply to above question, I have to submit that, as stated earlier the names of the persons who have given the gift are correct but I have no addresses. I therefore, fail to understand as to why this question is asked to me repeatedly. Q. 51. You have been clearly explained the provisions of s. 131 of the IT Act (in the question No. 45) still however you have not been furnishing true and complete information in respect of gift received by you. And in addition you have been misguiding the IT Department and your behaviour is non-cooperative. In this connection you are clearly made to understand that if you do not make available proof/evidence in respect of gift received by you, then at the time of assessment the gift is liable to be considered as unaccounted income and tax, interest and penalty would be recovered on the same. Hence if you now desire to give proof/evidence in respect of gift received please give information. Ans. I do not have any proof other than the zeroxed of the draft. Q. 52. Please furnish information in respect of household expenditure. How do you meet with the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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