TMI Blog1999 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... d was closed temporarily at 1.15 a.m. on 13th Dec, 1995. Certain books of account, documents and other valuables, etc. were seized on this first day of the search as per the inventory made by the searching party. Certain other books of account and documents were also inventorised as found but not seized. A Prohibitory Order (P.O.) was issued under s. 132(3) of the Act in respect of the filing cabinet and Almirah in the inner-office of M/s Trishul Enterprises at the above-mentioned address. On the same date again (12th Dec, 1995 searches were commenced at 3.45 p.m. in the above-mentioned residential premises of the assessee, which was closed temporarily at 6 p.m. on the same day. Some cash and other valuables were seized whereas certain amount of cash as inventorised separately was found but not seized. A P.O. under s. 132(3) was put on one wardrobe in the bed-room of the assessee Search in the residential premises of the assessee was resumed on 13th Dec, 1995 at 12.30 p.m. and was finally concluded at 4 p.m on the same day without making any further seizure. However, some jewelleries, ornaments, etc found but not seized were inventorised. So far as the office premises of M/s Tris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot entertain them at all. The learned counsel argues that in the circumstances the approval given by the CIT to the addition of the loan amounts in the impugned assessment must be considered to be against the principles of natural justice and hence bad in law. 4. We are, however, of the view that even the decision taken by this Bench in the case of Microland at least is required to be followed. The question of not entertaining the valuable witnesses by the CIT will be taken up by us at appropriate place, when we would consider the issue relating to the addition of loan amounts. 5. Thereafter, Shri Venkatesan strongly contends that the assessment is barred by limitation. He argues that the search in the office premises of the assessee should be considered as having been concluded on 13th Dec, 1995 itself and that the further operations carried on by the searching party were merely farces and had no real bearing. He thus strongly argues that the assessment completed on 28th Feb., 1997 being more than one year after the date of completion of the search should be considered as barred by limitation and hence invalid. The first argument advanced by Shri Venkatesan, in support of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fit for being seized were put in the filing cabinet and the almirah in the office of M/s Trishul Enterprises and the P.O. was issued thereon merely for continuing the search, not from the point of view of practical considerations relating to the search, but for collateral purposes. In support of this contention, Shri Venkatesan draws our attention to the Panchnamas prepared by the searching party on all the following days and points out that neither any books of account/documents and also valuables were at all seized on any of those following days of search operations but even they were not considered as "found but not seized". Shri Venkatesan thus strongly contends that even on the first day of the search itself, the searching party had made up its mind as to what books of account, documents, etc. were to be seized and the P.O. was put simply without any purpose. Shri Venkatesan relies on the judgment of the Tribunal, Bangalore Bench, in the case of Kirloskar Investments Finance Ltd. in support of his argument that in such a case the search should be considered as having been concluded on the very first day itself. He has placed on our record similar judgments of the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided that the one year period starts from the end of the month of execution of the authorisation i.e., after completion of search or implementation of search order. The learned Departmental Representative strongly argues that this particular decision being the only decision of a High Court on this issue should be followed in deciding the present issue. In support of this contention that when there is only one decision of a High Court, the same will be binding on the Tribunal. The learned Departmental Representative places reliance on an order of the Tribunal, Ahmedabad Bench (Third Member) in the case of ITO vs. P.M. Suthar (1995) 52 TTJ (Ahd) 260 (TM) : (1995) 53 ITD 1 (Ahd) (TM). Lastly, the learned Departmental Representative also brings our notice to the retrospective amendment brought to s. 158BE relating to time-limit for completion of block assessment by the Finance (No. 2) Act, 1998 with retrospective effect from 1st July, 1995. Actually, a new Explanation was introduced to the aforesaid section in this matter which reads as follows: "Explanation 2.- Fox removal of doubts, it is hereby declared that the authorisation referred to in sub-s. (1) shall be deemed to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded from the assessee. Certain other facts relating to the search, as have been discussed by us above, are also affirmed in the said affidavit. 9. Shri Venkatesan points out that the PO dt. 12th Dec, 1995 was not renewed. He argues that hence the said P.O. lapsed after 60 days i.e. on 10th Feb., 1996, and, therefore, on 12th Dec, 1996, no PO was in operation. He thus argues that there was no scope for the searching party to visit the premises of the assessee on 12th Feb., 1996. Thereafter, Shri Venkatesan has relied on a judgment of the Karnataka High Court in the case of Patil Vijay Kumar Ors. vs. Union of India Anr. (1985) 48 CTR (Kar) 41 : (1985) 151 ITR 48 (Kar) in which the Karnataka High Court held that the decision of one High Court is not binding on the Tribunals in other States. 10. In this connection, it may be mentioned that the learned Departmental Representative takes objection to the version of the affidavit filed by the assessee challenging the Departmental version with regard to some matters. He relies on a judgment of the Tribunal Mumbai Bench 'C (Third Member) in the case of Dy. CIT vs. Vila Construction Co. (1997) 61 ITD 33 (Mumbai)(TM) to argue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. However, this point was not much stressed in that particular judgment of the Tribunal inasmuch as the question of invalidity of the search on the subsequent days was decided easily in that case by taking into consideration the fact that the PO for the subsequent occasions was not issued in the name of that particular assessee at all. In this connection, we may examine the decisions tried to be relied upon by Shri Venkatesan, some of which were already examined in the case of Microland Ltd. 1. Sriram Jaiswal vs. Union of India Ors. (1988) 75 CTR (All) 41 : (1989) 176 ITR 261 (All). In this case it was held that no order under s. 132(3) can be passed when the authorised officer is in doubt as to whether the assets are disclosed or not. 2. B.K. Nowlakha Ors. vs. Union of India Ors. (1992) 101 CTR (Del) 73 : (1991) 192 ITR 436 (Del). In this case it was held that the provisions of s. 132(3) could be resorted to only when there was any practical difficulty in seizing the item which was liable to be seized. The High Court furthermore stated that there was no practical difficulty then the authorised officer has the jurisdiction and duty to seize the books of account, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original search operation started on 12th Dec, 1995 in the premises of M/s Trishul Enterprises and also in the residential premises of the assessee is, therefore, concerned, we are of the opinion that the search must be considered to have been concluded at least on 19th Jan., 1996. The retrospective amendment by way of insertion of Expln. 2 to s. 158BE does not help the Department at all. If the search has got to be treated as having been continued, the same should be done in a valid manner and without offending the provisions of ss. 132(1) and 132(3), as has been discussed by the Allahabad and Delhi High Courts in the above-mentioned cases of Sriram Jaiswal and B.K Nowlakha Ors. The judgment of the Kerala High Court in (1999) 154 CTR (Ker) 523 : (1999) 237 ITR 70 (Ker) confirms this decision further. We fell that the new Expln. 2, as inserted with retrospective effect, should be considered to be applicable to cases where a number of warrants of authorisation have been issued simultaneously and the reference to recording conclusion of search in the last Panchnama drawn must refer to a search continued in a valid manner, as discussed by us above. Otherwise, if the search is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook filed by the wife of the assessee, Smt. Annapoornamma shows the credit balance of the assessee to be Rs. 70,000 only. Shri Venkatesan, the learned counsel for the assessee, tries to reply in this connection that besides the personal account of Smt. Annapoornamma as shown in her paper-book the assessee's balance with a proprietary concern of Smt. Annapoornamma viz. M/s Annapoornamma Construction is also required to be taken into consideration. It is argued that, in any case, the opening capital of the assessee stands explained by the various investments made by the assessee, of which detailed list has been furnished, as on the relevant date. We find ample force in this last argument of Shri Venkatesan. The capital of a person in his balance sheet must be reflected by way of presence of a number of assets in different forms. The assessee has given details of such assets, which are easily verifiable. We are, therefore, of the opinion that this matter requires thorough examination at the end of the AO and that the AO, without conducting such examination, has wrongly treated the entire opening capital as disclosed by the assessee to be bogus and has thus misdirected himself in add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . An amount of Rs. 1 lakh shown as liability as on 31st March, 1995, from Shri Hariram Alidas has also been added back by the AO as undisclosed income of the assessee for the asst. yr. 1995-96. Again, the AO also added back the following liabilities shown as on 12th Dec, 1995 as unproved credit items: Rs. (i) Madhav Das Aildas (M/s Sripriya Advance a/c) 3,35,500 (ii) N. Ravi (M/s Sripriya Advance a/c) 1,52,500 (iii) H. Vijeyandra (M/s Sripriya advance a/c) 1,52,000 -------- 6,40,500 -------- With regard to the above items also, the learned Departmental Representative relied on the above-mentioned decisions of different High Courts to contend that since no confirmation letters were filed in support of those loans, the loan amounts are required to be added back as income of the assessee. Shri Venkatesan, on other hand, contends that a letter dt. 15th Feb., 1997, being confirmation certificate from Shri Hariram Aildas was filed with the AO at the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. The AO discusses that SD was to do some more development on the same land and then would sell the land to other private parties. Although the AO mentions that a sale deed was executed, from an examination of the papers filed before us and also from the oral submission of both the sides, it is clear that no proper sale deed was actually executed; but only an agreement for sale was arrived at. The AO makes a mention to similar operations done by the members of the assessee group with M/s Ramanashree Comforts (RC). He also refers to the deposition given by the assessee on 9th Oct., 1996 admitting, in response to question No. 2, that he had received the entire consideration on or before 12th Dec, 1995. He also refers to other answers given by the assessee during the course of the said interrogation to the effect that the sale had been outfight and that the money received was not refundable. The assessee also admitted that he did not have the right over the land. The AO discusses thereafter that although the assessee has been admitting the amount received by him as advance only, the facts of the case would clearly show that the assessee had actually sold the land to SD. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Without prejudice to the above argument another contention has also been raised by the assessee. Shri Venkatesan contends in this connection that the assessee along with others had taken the entire plots of land as a whole and wanted to dispose of the same also in a lump manner. It is furthermore contended that the assessee follows the method of completed contract with reference to this particular operation. It was stated by Shri Venkatesan that the price fixed was for a large extent of property measuring about 25 acres of land and that out of the same, litigation was continued in respect of some of the plots included therein. Shri Venkatesan strongly argues in this connection that the rate fixed for sale is lump price for the whole property. He contends that it will not be proper to isolate the profit in respect of earlier part of the operation and to allow the remaining difficult part to be taken into consideration at a later point of time. Shri Venkatesan, finally argued that the contract as a whole has to be validated for proper determination of income. At the time of hearing of the appeal before us, the learned Departmental Representative tried to argue first b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. The learned Departmental Representative also relies on the order of the Tribunal, Cochin Bench, dt. 23rd Dec, 1997, in IT(SS)A No. 4/Cochin/1997, in the case of Dr. M.V. Raman to argue that undisclosed income till the date of search is required to be taken into consideration in the block assessment. Thereafter, the learned Departmental Representative has argued that the assessee has obtained consideration for sale of land acquired and developed by him and that the onus would lie on him to prove that the profit arising out of the transaction shall not be subjected to tax. In support of this contention, the learned Departmental Representative relied on a judgment of the Supreme Court in the case of Novopan India Ltd. (1994) 73 ELT 769 (SC). We, however, find that in that particular case, it was held by the Supreme Court that a person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision and that in case of doubt or ambiguity, benefit of it must go to the state. We, however, are of the opinion that this is not the case where the assessee is seeking exemption from the tax liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be assessed in the asst. yr. 1987-88 and Rs. 40 lakhs in the asst. yr. 1988-89. Thereafter, the issue was whether the rate of profit at 25 per cent was correctly applied on total receipts and not on receipts after deducting profits. The particular assessee, however, after the search, had itself admitted having earned 'on money' during the year under consideration. So far as the present case before us is concerned, there is nothing on record to show that the assessee earned any 'on money'. The assessee also did not admit any income during any part of the block period. Hence, in our view this particular judgment would also not be applicable to the present case. 20. We have examined the copies of documents furnished in the paper-book filed by both the sides. We have also thoroughly gone through the written submission made by the learned Departmental Representative. He has mentioned a number of case laws in support of the proposition that the assessee purchasing land, carrying out some development activities on the same, converting the land to non-agricultural land and selling the same thereafter earns income out of business transactions. So far as the present case is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformance of the contract cannot be said to give rise to profit in partial manner, when the assessee follows the method of 'completed contract'. This particular method of accounting is a recognised method in the field of development of land and building. There is no doubt about the fact that some portion of the land was under litigation and the assessee could not complete the contract to that extent. So far as some other portions of the land are concerned, the assessee was yet to make purchase of those portions of land. Taking into considerations all these facts, we must come to the conclusion that the entire contract as a whole is required to be considered for arriving at the ultimate profit/loss, out of the transaction as a whole. The transaction was certainly not completed till the date of search and hence it would not be proper to slice off a portion of the net profit which would ultimately result as pertaining to the block period. We are, therefore, of the opinion that the profit arising our of transaction will have to be considered as a whole at the end of completion of the contract. Hence, in our view, the assessment of the amount of Rs. 10,39,950 as undisclosed income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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