TMI Blog1994 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... 97,79,038 processed in respect of loose papers filed A-34, page 18, represents the undisclosed income from the concealed business activities. Taking into consideration the seized materials, an order under section 132(5) of the Income-tax Act, 1961 came to be passed determined the total income at Rs. 1,01,00,000. Determining the tax liability at Rs. 52,80,713 and the liability towards penalty under section 271(1)(c) to the extent of Rs. 1,05,00,000, it was ordered that the entire seized assets would be retained [The order of the Assistant Commissioner of Income-tax (Inv.), Circle 19(1), Bombay, is at pages 25 to 30 in the paper book filed]. 3. Aggrieved by the aforesaid order passed under section 132(5) of the Income-tax Act, 1961, the assessee filed an appeal to the Commissioner of Income-tax, City VII, Bombay, praying, among other things : (1) the addition to be made under section 132(4) may be taken at Rs. 46 lakhs for the assessment year 1988-89 ; (2) the assessee may be granted all immunities from penalty under Explanation 5 to section 271(1)(c) ; (3) accounted stock belonging to Niki Diamonds of 263.77 carats be released ; (4) all valuables seized to be released. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax, additions were made by the Assessing Officer by making the following observations in the assessment order :--- " Income from commission business as per CIT order dated . . . . . . . . . . under section 132(12) of the Income-tax Act, 1961. " The Assessing Officer, while making these additions in the assessment year 1987-88, made the following observations :--- " In the order under section 132(12) of the I.T.Act 1961 dated 28-7-1989, the CIT Bombay City VII Bombay has determined the concealed income at Rs. 50 lakhs and spread over was given from the asst. year 1975-76 to the assessment year 1988-89. While determining the income, the learned CIT was of the opinion that the assets were acquired out of unaccounted income generated from the commission income from jewellery business which was not disclosed to the Department previously. The transactions as appearing in the seized diaries were treated as turnover of the assessee and approximately net profit at 2.5% was calculated on the turnover. It was also held by the CIT vide his Miscellaneous order dated 1-11-1989, that no penalty under section 271(1)(c) of the I.T.Act, 1961 will be imposed in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders totally cancelled and directing fresh assessments. (3) In response to the notice Shri H.S. Parikh, C.A. attended and was heard. Shri Parikh has also submitted written submissions by his letter dated 25th March, 1992 which have been duly considered by me. (4) The main submission but forwarded by Shri Parikh was an error in issuing one notice under section 263 for the all the A.Y. 1977-78 to 1989-90 since the proceedings for each asst. year is separate and independent. It was also submitted that the notice was bad and invalid since the assessment orders had been passed pursuant to the directions given by the then CIT in his order under section 132(12) dated 20th July, 1989 and therefore the present CIT would have no jurisdiction power or authority to review the order under section 263. It was pointed out that the Assessing Officer was justified in not initiating penalty proceedings in view of the aforementioned order under section 132(12). It was stressed that the said assessment orders were passed after directions were given by the CIT. In the order under section 132(12) it was also pointed out that the said orders were passed after due and proper enquiry and cannot be er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The issues involved are not decided finally but only in a summary manner in order to arrive at the conclusion whether or not the seized assets are to be released. While passing the assessment orders the Assessing Officer has essentially to consider all material facts including the seized material and then pass a speaking order computing the total income of the assessee. In this connection it is instructive to note that the assessee had himself admitted that the Assessing Officer has passed the assessment order only after following the directions given by the CIT in his order under section 132(12). Such directions and findings ever if given in the order under section 132(12) by the CIT would be applicable for releasing or not realising of the seized materials in a summary manner. The Assessing Officer at the time of regular assessment to consider the issues independently on the basis of all available evidence before him including the seized documents. Similarly, the question of initiation of non-initiation of the penalty proceedings or concealment has to be decided on the facts of the case in the course of assessment proceedings only. Therefore, it is only the Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that he independently considered the matter and arrived at a certain conclusion. The Assessing Officer has also not given any reasons for deviation from the findings given by the DDIT (Inv.) in his appraisal report. (12) In view of the above discussion I am of the opinion that the orders framed by the Assessing Officer for A.Y. 1977-78 to 1989-90 are erroneous in so far as they are prejudicial to the interests of revenue. I therefore set aside all these assessments with a direction to the Assessing Officer to re-do the same after independently valuation all the available evidence on record including the seized material and also after giving the assessee a reasonable opportunity of being heard. Sd/- (B.D. Roy) Commissioner of Income-tax, Bombay City VII, B'bay." 5. The assessee is aggrieved. The assesee's learned counsel reiterated the contentions that were raised before the learned Commissioner of Income-tax in the proceedings under section 263 and also the grounds of appeal raised in the memorandum of appeal. It was argued the Commissioner of Income-tax has not come to a definite conclusion that the order passed by the Assessing Officer is erroneous. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h order cannot be termed as erroneous and prejudicial to the interest of the revenue. The learned counsel for the assessee further argued even on merits the assessee is bound to succeed inasmuch as the order passed by the Commissioner under section 132(12) is after appreciating the facts and circumstances of the case and after the scrutiny of the seized material. 6. The departmental representative, on the other hand, strongly supported the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act. The learned departmental representative submitted the whole scheme of section 132 relates to search and seizure action by the department. The provisions of section 132 make an inroad into the privacy of the citizens. Section 132 is essentially a procedural section and it is a comprehensive code in itself. When the assets are seized in an action under section 132, it is incumbent upon the authorities to determine in a summary manner the likely concealed income and to calculate the amount of tax, interest and penalty that may arise due to the concealment of income and to retain that part of the assets and to release the remaining portion. This is a safeguard i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the Commissioner of Income-tax under section 132(12) of the Act, without any application of the mind. The learned departmental representative argued that the ratio laid down by the Bombay High Court in Gabriel India Ltd.'s case is distinguishable on facts. The learned departmental representative further argued the Commissioner of Income-tax, acting under section 132(12), has gone beyond the prayer made by the assessee when he granted the spreading of the income. According to the learned departmental representative, the Assessing Officer has gone on record to say " that I am following the directions of the CIT ". In the facts and circumstances of the case, the Assessing Officer has not applied his mind. That itself is sufficient to render his order erroneous and prejudicial to the interest of the revenue. 7. In reply, the learned counsel for the assessee submitted that when the assessee made the statement under section 132(4), he was under tension. Immediately thereafter, it was clarified that the concealed income was not to the extent of Rs. one crore and odd. Further it was replied that the order under section 132(12) is binding on the Assessing Officer and it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rously wide and even drastic in nature, but the safeguards are inbuilt in the section itself. There are detailed rules setting out the procedure for making the search and seizure and for the custody of what has been seized. Sub-section (5) of section 132 deals with the special cases where, on search, money, bullion, jewellery and other valuables believed to be undisclosed income or property are seized. What is seized cannot be kept by the departmental authorities with them indefinitely. Sub-section (5) requires that a summary enquiry must be made by the Income-tax Officer with a view to ascertain how much of the seized valuables should be retained against the concealed tax dues. The balance must be forthwith released. The second proviso to sub-section (5) also provides that where a person concerned has paid or made satisfactory arrangements for payment all the Income-tax dues, which are summarily estimated under sub-section (5), the seized assets shall be released. The provisions of section 132(5) may conveniently be reproduced :--- " (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case." It is clear from the above that under section 132(5), the Assessing Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiries as may be prescribed, shall, within specified days of the seizure, make an order estimating the undisclosed income in a summary manner and also calculate the amount of tax, interest and penalty imposable in accordance with the provisions of the Income-tax Act. Such determination shall be made as if the order had been made the order of regular assessment and, thereafter, retain in his custody such assets or part thereof as are in his opinion sufficient to discharge the assessee's liabilities and forthwith release the remaining portion of the seized valuables. The entire scheme of section 132(5) does not substitute the assessment of income to be made under the provisions of section 143 of the Act. But it is more concerned with the retention and/or release of the valuables seized. The failure to proceed under section 132(5) renders the seizure invalid. The order under section 132(5) should be passed within the prescribed period from the date of the seizure. All these are the safeguards pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 132(5) or the provisions of section 132(12) are not concerned with the assessment of income but are mainly concerned with the retention or release of the seized valuables. For that purpose, such authorities may be required to estimate the income, which was not disclosed to the department, the tax due thereon and the interest and the penalty due thereon. The whole exercise, which is a summary determination, does not in any way whittle down the duty of the Assessing Officer to make a fair estimate of the income under the provisions of section 143 of the Act. The Assessing Officer must assess the income not being solely guided by the order passed by him either under section 132(5) or by the Chief Commissioner/Commissioner passed under section 132(12) of the Act. The proceedings of assessment are described as quasi-judicial because they have certain, though not all, attributes of a judicial proceeding and the conclusions or decisions taken by the Officers have some attributes of a judicial decisions. One such attribute is that the Officer should act independently and arrive at his own conclusions. The Bombay High Court, in Dinshaw Darabshaw Shroff v. CIT [1943] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. In the facts before us, the Assessing Officer has simply followed the order of the Commissioner passed under section 132(12) without independently examining. The failure on the part of the Assessing Officer to make proper enquiries about the correct assessable income in the case of the assessee has caused prejudice to the interest of the revenue. The learned Commissioner, acting under section 263, has only set aside the assessment with a direction to re-do the same after examination of all the available evidence on record, including the seized material. Such order of the learned Commissioner passed under section 263 cannot be found fault with. In the light of the above discussion, we uphold the order of the Commissioner of Income-tax. 9. Before parting with this order, we may briefly discuss the ratio of the decisions relied upon by the learned counsel for the assessee. In the case of Gabriel India Ltd. cited, an issue before the Tribunal related to a deduction of a sum of Rs. 99,326 described as plant re-lay out expenses. A query was made by the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted his duty to assess proper income, after the study of the seized material and other relevant information. In the case of Ratlam Coal Ash Co. cited, it was found by the Commissioner of Income-tax that the Income-tax Officer framed an assessment on a total income of Rs. 35,000, as against the returned income of Rs. 26,324, just two days after the return was filed, without ascertaining as to how the amount of total income was arrived. The Hon'ble Madhya Pradesh High Court had observed that where the Income-tax Officer made the assessment in undue hurry accepting what the assessee stated in the return without making any enquiries, the Commissioner would be justified in holding the order of the Income-tax Officer to be erroneous. But in that case, the Tribunal found that the assessee had furnished all the requisite information and the Income-tax Officer considered all the facts and completed the assessment. The Tribunal also came to a finding that the assessment was made after making proper enquiries. On those facts, it was held by the Hon'ble High Court that the order of revision was not valid. In the facts of this case, we have already observed that the Assessing Officer has not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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