TaxTMI 
TaxTMI 
2000 (2) TMI 194
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..... The AO issued detailed questionnaire based on the seized material which was also served and assessee filed reply thereto. During assessment proceedings it was noted by the AO that seized material and books of account were of complex nature. He after seeking permission from CIT, Delhi-H, New Delhi, appointed M/s Dinesh Mehta & Co. Chartered Accountants, Daryaganj, New Delhi as special auditors by passing an order under s. 142(2A) of the Act. The said firm of Chartered Accountants completed the special audit and submitted their report on14th May, 1998. The assessee was given show-cause notice based upon the scrutiny of seized material and also on the report of auditors to show as to why additions should not be made on the issues referred to by the special auditors as well as on seized material. The assessee filed written reply thereto and preliminary point was that Special Auditors were supposed to file report by31st March, 1998, which was illegally extended by the AO on15th May, 1998. This objection of the assessee was rejected by the AO who noted that he was appointed as observer by the Election Commission of India and was out ofDelhifor almost 40 days and Chartered Accountants c....
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....ity of the assessee can only be described as a business venture. The AO did not find the ratio of Madras High Court in the case of CIT vs. Kasturi Estates (P) Ltd. (1966) 62 ITR 578 (Mad) applicable to the facts of the case. He also noted that Madras High Court has not discussed the ratio of Hon'ble Supreme Court in the case of Raja Jai Rajeshwar Rao. 2.2. The AO further noted in the assessment order that in the return of income filed by the assessee it was specifically mentioned by him that he was engaged in the business of sale and purchase of properties on commission basis and otherwise. In assessment proceedings for asst. yr. 1991-92 it was communicated by the assessee to AO that his main business was sale/purchase/renting of property. The AO on the basis of these facts was of the opinion that income of the assessee was to be treated as "business income" from asst. yr. 1990-91 onwards and the factum that such income was not treated as business income in the earlier years will not stop him from assessing-the income under the correct head. According to AO the assessee had wrongly shown the long-term and short-term capital gain of such transactions and assessment made as such o....
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....her income which had been returned under particular section of the Act could be brought to tax under different heads of income during the block assessment period or not. He referred to the provisions of s. 14 of the Act which provides heads of the income and further provide that all incomes shall for the purpose of charge of income-tax and computation of total income be classified under the head "A" to "F". According to AO the assessee was carrying on the business of purchase and sale of immovable property and his income was to be assessed under the head "business income". He again took into consideration the decision of the apex Court in the case of New Jahangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR 137 (SC) and noted that if assessing authorities are in possession of additional facts then they will be justified to reach a different conclusion in subsequent proceedings. The AO was of the opinion that in the case in hand facts go to prove that assessee was engaged in the business of sale and purchase of lands and his income was to be assessed under the head "business income" which was wrongly assessed as capital gains and thus irrespective of earlier assessments which were fin....
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....ource of income was from the commission earned on making arrangement for hiring out, letting out of properties and also dealing in purchase of land and sale thereof. The contention of the learned counsel was that as and when assessee earned short-term or long-term capital gain on sale of agricultural land, the same was shown by the assessee in its income-tax return and Department accepted the same. In this connection our attention was drawn by the learned counsel for the assessee to paper Nos. 115 to 118 of his paper-book which contain the details of profit/gains made on sale of land/property transacted by the assessee from the asst. yr. 1991-92 till the date of search. The learned counsel pointed out that in asst. yr. 1991-92 assessee had shown short-term capital gain and Department accepted the same. In subsequent year the assessee had shown short-term and long-term gains and likewise in all the assessment years. Not only this the learned counsel also took us to the statement of assessable income for asst. yr. 1991-92 as appearing at pp. 186 to 188 of his paper-book giving out the details of short-term capital gains also and duly supported with copy of balance sheet and P&L a/c. ....
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....ed during the search operation but on the facts and figures which were already noted in the account books of the assessee as well as on the facts which were noted in the assessment proceedings of the earlier years. The learned counsel also placed reliance on the decision of different Benches of the Tribunal and first case referred to was Sunder Agencies vs. Dy. CIT in which scope of Chapter XIV-B relating to block assessment period was defined and it was made clear that block assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search. Explaining the very purpose of s. 158BA the Bench has concluded that it does not provide a licence to Revenue for making roving enquiry connected with completed assessment and it was beyond power of AO to review assessment completed unless some direct evidence comes to the knowledge of the Department as a result of search which indicates clearly the factum of undisclosed income. The plea of the learned counsel was that said reasoning is fully applicable to the facts of the present case as AO was not justified to make enquiries in respect of completed assessments and admittedly there is no....
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....assessee had spent more than that he had shown or that he had received more perquisite than he had shown, then no addition in block assessment is warranted. 2.12. So far as decision of High Court is concerned, reliance was placed on the decision of Gujarat High Court in the case of N.R. Papers & Boards Ltd. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 101 Taxman 525 (Guj) in which their Lordships have defined the scope of s. 158BA(1) which provides that AO can proceed to assess the undisclosed income only if a search is initiated. Their Lordships further laid down that undisclosed income is classified separately for the purpose of assessment and is required to be worked out in the manner prescribed therein and treated to a higher rate of tax. But this process did not disturb the assessments already made of the previous years and was only intended to sniff out what had remained hidden and would not have been disclosed by the assessee. The learned counsel stressed that Hon'ble High Court has specifically prohibited the AO not to disturb the already completed assessments. In the present case, the AO admittedly had disturbed the earlier assessments as on facts and figures of the ea....
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.... learned Departmental Representative was that order of AO deserves to be confirmed. 2.16. We have considered the rival submissions and perused the record carefully. Undisputed facts are that assessee is an old income-tax assessee. He had filed return of income from asst. yr. 1991-92 onwards. A perusal of statement of income for asst. yr. 1991-92 shall show that assessee had shown short-term capital gain of Rs. 8,390 arising out of two transactions of sale and purchase of different plots. The assessee filed balance sheet as well as P&L a/c and Department accepted the income shown by the assessee under s. 143(3) of the Act, copy of which is appearing at p. 191 of the paper-book. In subsequent two years the assessment was completed under s. 143(1) but fact remains that whatever the assessee had shown stands assessed as such and result of the same is that assessee who had shown short-term/long-term capital gain arising out of different types of transactions stand assessed as such by the Department till the date of search i.e. 30th Nov., 1997. It is also admitted fact that all these transactions did find place in the books of account in the same manner the assessee had shown in his r....
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.... XIV-B of the Act and if we apply the above analogy of different Benches of the Tribunal to the facts of the case the only conclusion shall be that AO who made the addition on the basis of reopening of earlier assessment but AO is not justified in making such move and addition so made are not to be sustained. Accordingly, ground stands allowed and the additions of Rs. 36,15,441 and Rs. 7,41,531 made by the AO as undisclosed income of the assessee are deleted. 3. The next substantial ground of the assessee is relating to addition of Rs. 22,18,744 made by the AO as undisclosed income on the basis of surrender made by the assessee. During search operations, statement of the assessee was recorded and after post search operation, the assessee was examined at so many times to elicit information and to confront with the seized material. Copies of statements recorded in between2nd Jan., 1997to13th Feb., 1997are appearing at pp. 1 to 66 of the paper-book. It appears from the perusal of different answers given by the assessee on different dates that assessee when cornered by the authorities, surrendered Rs. 20 lakhs as undisclosed income and whenever he was confronted with any seized mate....
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....e must be independent evidence to support the entries recorded in the diary or book but in the case in hand the assessee himself had admitted in his statement about incurring of such expenses or investment thereof out of undisclosed income. The AO also relied upon the decision of Tribunal Madras Bench in the case of T.S. Krishna Swami vs. Asstt. CIT (1998) 65 ITD 188 (Mad) in which the Tribunal has concluded that admission made on oath under s. 132(4) though retracted later on will be sufficient if it is proved that such statement was voluntarily given and not under any coercion or duress. The AO concluded that assessee made the admission in view of the documentary evidence and admitted about undisclosed income. The AO distinguished the case of CIT vs. Soorji Vallabdass & Co. (1962) 46 ITR 144 (SC) and other cases relied upon by the assessee and concluded that Rs. 22,18,744 based on the annexure "C" of auditor's report was to be treated as undisclosed income and he made the addition thereof. 3.2. The learned counsel for the assessee challenging the addition submitted that assessee was forced to make surrender of Rs. 20 lakhs otherwise when there was no penalty or interest then w....
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....ssessment and assessee was not given opportunity by AO to explain each and every document on the basis of which alleged surrender was made by him. It was pleaded that matter may be restored back to the file of AO who may give an opportunity to the assessee to explain each and every paper. Again it was contended that surrender alone is not to be made basis for making addition unless the same stands corroborated by material evidence and in the case in hand no such corroborative evidence has been brought by the Department particularly when surrender stands retracted by the assessee subsequently. The plea is that the amount of addition be deleted and in alternative the matter may be restored back to the file of AO. 3.4. As against it the learned Departmental Representative pointed out that amount of surrender has rightly been made the basis for making the addition of undisclosed income by the AO as each and every amount mentioned in Annexure "C" of auditor's report stands corroborated by admission of assessee made during statement recorded from time to time and for that he has invited our attention to the different admissions made by assessee in the statement recorded during 2nd Jan....
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....nbsp; (Rs. 34,000 + 4,000 + 8,500). A-4 21 03-01-1997 8,397.00 Back side of p. 21 certain expenses incurred out of undisclosed income (Rs. 6,412 + 1,985 + 8,500). A-4 55 03-01-1997 2,000.00 Investment in shares of R-1 &....
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....nbsp; declared a sum of Rs. 6,00,000.00 as my undisclosed income not reflected in my books". I admit this as my additional income and offer &nb....
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....00.00 Source of cash receipts could not be explained. To be taken as part of total disclosure of Rs. 20 lakhs. A-46 32 18-02-1997 1,000,000.00 Page of a diary where number of figures mentioned. One &n....
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.... Hence surrendered. A-50 22 12-02-1997 267,592.00 Two entries of the sum of Rs. 1,21,000.00 on 30-094996 and Rs. 1,46,592.00. ------------ Total 2,218,744.00 ------------ 3.6. We have gone through the statement of the assessee which was a....