https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=68215 https://www.taxtmi.com/caselaws?id=68215 Unexplained investment - Block assessment in search cases - Levy of surcharge @ 10 per cent on tax on undisclosed income - Opening cash in hand - Agriculture income - Determination of purchase of vehicle - Undisclosed investment in purchase of vehicle - Profit on sales of vehicles. HELD THAT:- In the case of the appellant the search was conducted on 25th Feb., 2000 and the prohibitory order was also imposed on the same date. From the perusal of the list of the items mentioned in prohibitory order u/s 132(3), it is evident that it was not practicable to seize the vehicles documents of which required verification on subsequent dates. Therefore, the prohibitory order had rightly been issued as there was practical difficulty before the AO and subsequently the prohibitory order was lifted by drawing last panchnama on 25th April, 2000. It is also pertinent to mention that prohibitory order was lifted in respect of vehicles and incriminating documents were seized by the authorised officer PB 13. Thus, the limitation will be considered from the date of last panchnama drawn i.e. on 25th April, 2000. Therefore, we conclude that the learned CIT(A) had rightly held that the completion of assessment was not barred by limitation as per Expln. 2 u/s 158BE of the Act. Our views are fortified by the judgment in the case of C. Ramaiah Reddy vs. Asstt. CIT [ 2003 (7) TMI 260 - ITAT BANGALORE] whereby it was held that the Tribunal had no jurisdiction to adjudicate upon the validity of prohibitory order issued u/s 132(3) and the limitation is to be counted from the date of last Panchnama drawn irrespective of the fact whether any seizure was made or not. Therefore, we decline to interfere with the order of the learned CIT(A). Levy of surcharge @ 10 per cent on tax on undisclosed income - We find that proviso to s. 113 had been inserted w.e.f. 1st June, 2002 for levying surcharge on undisclosed income. Prior to this date, no surcharge is leviable in view of proviso to s. 113 of the Act. The proviso of s. 113 is not clarificatory since it has increased the tax liability of the assessee. It cannot, therefore, have retrospective operation. This Bench of the Tribunal in the case of Mantri Katta Co., dt. 17th Oct., 2003, held that amendment in s. 113 is not applicable retrospectively. Therefore, no surcharge is leviable where search was carried out prior to 1st June, 2002. In this case, search was conducted on 25th Feb., 2000. Therefore, we hold that the surcharge is not leviable. Hence, we set aside both the orders of the lower authorities and direct the AO not to levy surcharge in this case. Opening cash in hand - We find that the learned CIT(A) has given detailed reasons in deleting this addition as discussed above in his order. We also agree with the contention of the learned AR that the finding of the AO is not in right perspective. Adequate cash was not found during the course of search as the assessee had made investment in construction of house and also incurred expenses in marriages. So, this cannot be the reason for not accepting the opening cash balance. As regards the measurement of agricultural land at 48 bhigha, this fact is evident from the record filed before us and also from the submissions of the learned AR as has been reproduced in this order. The sale of vehicles yielding sale proceed of Rs. 4,06,400 as per details given in Annex. A-16 had also not been disputed and the assessee was dealing in purchase and sale and other transactions in respect of vehicle before the block period. The possession of agricultural land at 48 bhigha and the income arising out of it had also not been disputed by the AO. The AO himself had accepted the opening cash balance in cash flow statement during the financial years 1990-91 to 1998-99. We also agree with the view of the learned AR that the opening cash in hand cannot be taken as income of the block period as opening cash means closing of cash balance as on 31st March, 1998 which is out of the purview of the block period. Thus, the order of the learned CIT(A) is not lacnonic in any manner. Therefore, we decline to interfere in his order. Agriculture income - The agricultural land owned by the assessee is irrigated land, yielding good quantum of agricultural income. Eight bigha of agricultural land situated in Mukundpura was given by the assessee on contract/lease basis on 23rd Oct., 1993 for five years at Rs. 40,000 per year. This shows that net agricultural income from lease was Rs. 5,000 per bigha. The computation of agricultural income in all the assessment years relating to block period had been estimated on the basis of Girdawari report, crop area and average market rate of the crop. CIT(A) had given details reasons for estimation of income by the assessee and for deletion of addition of Rs. 7.65 lakhs made by the AO. Therefore, we decline to interfere with the order of the learned CIT(A) on this ground and the same is hereby sustained. Determination of purchase of vehicle - The learned CIT(A) found that no purchase consideration had been found entered anywhere in the documents seized during the course of search in respect of 14 vehicles. The assessee is also doing the business of brokerage as it is evident from the seized records. Therefore, in all likelihood, the papers relating to vehicles in respect of which no purchase consideration had been mentioned anywhere in the seized documents, it would be proper to take them as vehicles dealt in by the assessee in brokerage business and not purchases in outright basis. Therefore, the learned CIT(A) has rightly agreed with the arguments of the learned AR and directed the AO to adopt the purchase amount of vehicles at (Rs. 58,37,693 minus Rs. 1,36,000) = Rs. 57,01,693 only in the block period instead of Rs. 72,00,000 taken by the AO. We are convinced with the reasons given by the learned CIT(A). Therefore, we decline to interfere with the order of the learned CIT(A) on this ground. Undisclosed investment in purchase of vehicle - The assessee computed investment in purchases of vehicles by considering the total purchases for the block period at Rs. 58,37,693 and the yearwise investment has been shown in cash flow statement on this total purchases of Rs. 58,37,693. As per the assessee, he was selling the self-owned vehicles as well as on brokerage basis. He sold self-owned vehicles of Rs. 58,37,693 and the rest of the sales represent on brokerage basis. The CIT(A) considering the search statement and seized documents, held that without any evidence on records it cannot be considered that the appellant in all the transactions of the sales recorded in Annex. A-16 involved purchase as well. Further, in any case, if the transactions increase in a particular year, the rotation becomes faster and the transaction time might take less than three months. We are convinced with the reasons given by the learned CIT(A). Therefore, we decline to interfere with the order of the learned CIT(A). Profit on sales of vehicles - In view of the fact that the assessee was able to co-relate ten of the purchases amongst purchases of Rs. 58,37,639 in the sales computed on the basis of Annex. A-16 to the extent of Rs. 1,37,40,107, it is established that purchases and sales cannot be in isolation to each other. However, gross profit of purchase and sales has been computed at 6.70 per cent. Similarly, on brokerage business, the profit has been stated by the assessee at about Rs. 4,000. This is approximately 4 per cent of the sale consideration. There are always certain expenses relating to purchase and sales of vehicles and also in brokerage business. Therefore, the learned CIT(A) appropriately applied the net profit rate of 4 per cent on total sales of Rs. 1,37,40,107. Thus, the net income from purchase and sales of vehicles and brokerage business was estimated at Rs. 5,49,604 as against Rs. 10,58,038 computed by the AO. After going through the order of the learned CIT(A), we are of the opinion that the order of the learned CIT(A) is not laconic in any manner. Therefore, we decline to interfere with the order of the learned CIT(A). In the result, the appeal filed by the assessee is partly allowed and the appeal filed by the Department is dismissed. Case-Laws Income Tax Mon, 05 Jan 2004 00:00:00 +0530