2003 (1) TMI 267
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...., recording the statement under section 131 in post search investigation and while passing the order under section 158BC of the Income-tax Act, 1961. 5. That the post search statement recorded by the Deputy Director of Income-tax (Investigation) being illegal and void ab initio, the addition made on the basis of such statement can't be sustained in the eyes of law without recording of statement by the Assessing Officer who is a Quasi-Judicial Authority. 6. That the CIT (Appeals) was not correct in law in not appreciating that the gifts received by the assessee amounting to Rs.50 lakhs and Rs.10 lakhs received by M.S. Gupta & Sons HUF were not the undisclosed income in view of the provisions of the section 158B(b) of the Income-tax Act, 1961 as these gifts, were duly disclosed by the assessee and assessee's HUF by advancing them to M/s. Haryana Acrylic Mfg. Co. (P.) Ltd. Rs.27 lakhs as Share Application Money & Rs.5 lakhs as Loan and Advancing to M/s. Mono Acrylic Mfg. Co. (P.) Ltd. Rs.28 lakhs as Loan and all these were duly accepted in the regular assessment of these concerns. 7. That the gifts have been illegally taken as cash credit and added under section 68 merely on the ba....
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....nsel dated 19-8-2003 contained, inter, alia, copies of various Tribunal decisions relied upon as well as statement of audited accounts of the sister concern, namely, Monoacrylic Manufacturing Company Private Limited, New Delhi regarding the profit rate in the business of trading of acrylic sheets, etc. 4. On the other hand, Mr. Peeyush Jain, ld.Sr. DRon behalf of the revenue, filed a paper book running into 81 pages containing, inter alia, copies of the statements of the assessee recorded on25-11-1999as well as29-11-1999and thereafter on various dates as part of post search enquiry by the DDI (Investigation),New Delhi. We have also heard the ld. Representatives at great length. 5. At the outset, we may notice relevant facts having a bearing on the points in issue involved before us. Search and seizure operations were conducted by the income-tax authorities under section 132 of the Income-tax Act, 1961 on25-11-1999at the residence as well as business premises of the assessee resulting in seizure of documents and records. The Assessing Officer issued notice under section 158BC under Chapter XIV-B of the Income-tax Act on20-11-2001for the aforementioned block period. The assessee fi....
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....in my family in respect of 4 children of my younger brothers. A large number of relatives and family friends (approx. 400 persons) were invited to grace this occasion. I, being the eldest member of the family, was the chief host of the function. Many of our relations had come from outsideDelhito attend the ceremony. Some of our guests had come even fromAmericato attend the ceremony. Some of the relatives were staying at my residence. All of a sudden when search party came to my house, I requested them to free me immediately to enable me to ensure the final arrangements of the function and also to attend the same. I was told that if I sign the statement I can be freed within 2 hours for attending the function. However, I was not freed by the search party to attend the function in my family due to which I became mentally upset and lost control of my senses. The lunch for the whole family was also arranged in the 'Parojan Ceremony' function. I and my family members including relatives staying with us were not permitted to go to attend the function, even the clothes of some of my relatives were snatched which they were to wear for going to attend the function, although initially I was ....
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....anpur. Copies of income-tax and wealth-tax assessment orders of Shri Rampati Singhania, the donor made by the JC, Central Circle under section 143(3) of the Income-tax Act and section 16(3) of the Wealth-tax Act respectively for the assessment year 2000-2001 in which the gifts in question have been made to the assessee were filed before the Assessing Officer and these are available in the first paper book at pages 102 to 105. These assessments have been made in theCentral Circle,Kanpurin the month of July, 2001 much after the search carried out by the income-tax authorities at the premises of the assessee on25-11-1999. Regarding the source of the gift, the assessee explained before the Assessing Officer that the donor issued the account payee cheques to the assessee and his HUF drawn on theHong Kongand Shanghai Banking Corporation which are placed in the first paper book at pages 94 to 96. Shri Rampati Singhania sold his property being Flat Nos.123-124 on the 12th Floor in theSarnathBuildingatBhoorabhai Desai Road,Bombayfor a sum of Rs.2,75,00,000. Photocopies of Form No.34A as well as certificate under section 269UL(3) of the Income-tax Act obtained by the donor for the sale of t....
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....r: (i) Shri Rampati Singhania is the key figure of well-known industrial group, namely, Juggi Lal Kamlapat ofKanpurknown as J.K. Group. He is a regular income-tax and wealth-tax assessee with Joint Commissioner of Income-tax, Central Circle-1,Kanpur. His affidavit dated 30th May, 1999 affirming the gift have been filed before the Assessing Officer and the same is placed in the first paper book at page 86. In this affidavit, he has deposed that gifts have been made by him by account payee cheques drawn on his bank account No.051194116CO6 with the Hong Kong Shanghai Banking Corporation Limited, K.G. Marg,New Delhi. He further deposed that sale proceeds of his self acquired immovable property have been deposited in the aforesaid bank account on which cheques have been issued to the assessee as well as his HUF. (ii) Gift deeds have been executed on30-5-1999and20-6-1999placed in the first paper book at pages 87 to 89. The genuineness of the gift deeds have not been questioned by the revenue authorities. (iii) Photocopy of bank account of the donor with Hong Kong Shanghai Banking Corporation Limited from where payment of gifts have been made has been filed at pages 94 to 96 of the fir....
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.... Kelkar Committee's Report, wherein the Committee has made a critical reference to the practice adopted by the Departmental Officers obtaining forced confession from the assessees during the course of search operations. The Finance Minister in his Budget Speech for the financial year 2003-2004 observed that in view of the recommendations of the Kelkar Committee, it has been decided that no confession shall be obtained during search and seizure operations. Ld. counsel filed a copy of the letter issued by Central Board of Direct Taxes from the file F. No. 286/ 2/2003-IT (Inv.) on 10th March, 2003 pointing out that instances have come to the notice of the Board where assessees have been forced to confess undisclosed income during the course of search and seizure and such confessions, if not based upon credible evidence, are later retracted by the concerned assessees. The Board, therefore, advised the Field Officers that no attempt should be made to obtain confession as to the undisclosed income. The Board further advised that in respect of pending assessment proceedings, Assessing Officer should rely upon the evidences gathered during the course of search or thereafter while framing t....
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....me meaning as applicable for the purposes of section 132(l)(c) would be attached to these words under Chapter XIV-B: (i) Sunder Agencies v. Dy. CIT [1997] 63 ITD 245 (Mum.) (ii) Parakh Foods Ltd. v. Dy. CIT [1998] 64 ITD 396 (Pune). 15. Relying upon the aforesaid decisions, ld. Counsel argued that since the gifts transactions in question are disclosed and properly accounted for in the accounts of the donor as well as the donee, these transactions are not covered under section 158B(b). According to the ld. Counsel, these gifts were received in May 1999, vide Gifts Deeds dated30-5-1999and20-6-1999and the search took place on25-11-1999. The gifts, therefore, fall in the assessment year 2000-2001 and the due date for filing the return was30th June 2000. The amounts received by the assessee and his HUF as gifts were disclosed in the return which became due after the date of search. The amounts received were deposited in the regular bank accounts of the assessee and his HUF as appearing at pages 109 and 111 of the first paper book. Before search, the amounts received were advanced to the following two companies: (i) Haryana Acrylic Manufacturing Co.(P.) Ltd. - PAN: AACH01716K Assesse....
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....uring search. The evidence found during search would obviously be some documents, papers, slips, books of account or other such tangible material which may confer jurisdiction on the Assessing Officer for the purposes of block assessment. In support of his contention, reliance has been placed on the following decisions of the Tribunal: (i) Chitra Devi v. Asstt. CIT [2002] 77 TTJ (Jodh.) 640 (ii) Davi Sarin v. Asstt. CIT [2003] 79 TTJ (Agra) 39. 17. Ld. Counsel submitted that since the gift transactions in question are disclosed and accounted for and duly acknowledged by the donee who is a leading Industrialist belonging to well-known J.K. Group of Kanpur, the addition of Rs.61,80,000 as undisclosed income is factually and legally unjustified and without jurisdiction. 18. Ld. Counsel next referred to the alternative basis adopted by the Assessing Officer whereby income from the following six benami concerns has been estimated at Rs. 1,31,76,257: (a) M/s. Universal Enterprises, B-23,South Extn., New Delhi-49 (b) M/s. Vishal Vyapar, Khasra No. 32, Siraspur, Delhi-42 (c) M/s. Kumar Traders, 2/80, Roop Nagar,Delhi. (d) M/s. Nutan Enterprises, 332,Siraspur Gurudwara Rd.,Delhi-42 ....
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....de number of deposits which are not for turnover like advances received and later on returned, loans taken and returned, deposits of personal transactions not relating to business. However in the absence of detail it is not possible to compute such amount, hence we request you to reduce at least 10% of above amount i.e. Rs. 1,88,07,183 from above figure on this account. (b) As already submitted, the assessee has done many transactions of purchases/sales/discounting of hundi/cheque/draft etc. on a commission of as small as 0.25 per cent to 0.50 per cent. Such transactions cannot be equated with normal trading transactions, hence need to be separated and small rate of profit has to be applied on them. However in the absence of detail it is not possible to compute such amount, hence we request you to consider at least 20 per cent of above amount i.e. Rs. 3,38,52,930 (20 per cent of total - 10 per cent) on account of such turnover and apply lower net profit rate. According to the assessee, the figure of turnover based on banks should be Rs. 16,92,64,650 and out of this Rs. 3,38,92,930 would involve lower net profit rate. 21. With regard to cash sales, the assessee pointed out various....
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....lied to ICI only on 'A' class material, while profit rate for substandard material is much lower and that is some time sold even on loss. (d) As mentioned in our earlier submissions, the entire turnover of the assessee is not by way of normal trading but include some turnover of drafts / cheques / hundies discounted on a commission of as small as 0.25 per cent to 0.50 per cent, accordingly uniform profit rate cannot be applied. (e) The Net Profit earned by the assessee has ultimately to be correlated with his unexplained investment/expenses. When the assessee has already declared his undisclosed income on the basis of undisclosed income on the basis of undisclosed investments/ expenses, the question of estimation of profit rate does not apply. 24. Ld. Counsel reiterated the submissions as made before the Assessing Officer as above and separately furnished written submissions on the issue vide pages 1 to 4 of the paper book No. 4. In the said paper book, return of income, assessment order as well as audited statement of accounts of Mono Acrylic for assessment years 1998-99 to 2001-2002 have been enclosed at pages 5 to 130. Ld. Counsel argued that the sister concern of the assesse....
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....he first paper book by the assessee, have been made by the Joint Commissioner, Central Circle, Kanpur subsequent to the search operations accepting the declared version. However, he strongly emphasized that since the admission made by the assessee that he has paid cash amount back to the donor in lieu of cheques received from Shri Singhania, the impugned addition sustained by that ld. CIT(A) is fully justified and deserves to be upheld. 27. Regarding the alternative computation of business income made by the Assessing Officer and sustained by the CIT(A), Ld. DR invited our attention to page 1 of the paper book filed by him wherein while sending a quotation for acron sheets, profit @ 5 per cent has been adopted.Ld. DRsubmitted that net profit rate of 5 per cent, adopted on the basis of the seized document, is fair and reasonable and deserves to be sustained. Regarding the comparable results of the sister concern, namely Mono Acrylic wherein much lower profits ranging from 1 per cent to 2.67 per cent have been shown in similar line of business and accepted by the Assessing Officer.Ld. DRhas not offered any comments and submitted that the seized paper containing quotation for acron s....
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....nt of each other and they are not mutually exclusive. Block assessment under Chapter XIV-B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to regular assessment already made or to be made. Clause (b) of section 158B contains inclusive definition of undisclosed income and reads as under: "(b) "undisclosed income" includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act [or any expense, deduction or allowance claimed under this Act which is found to be false]." If we analyse the aforesaid definition, it provides that undisclosed income includes - (i) Any money, bullion, jewellery or other valuable article or thing or; (ii) any income based on any entry in the books of account or other documents or transactions; ....
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....ded after the commencement of the search proceeding inasmuch as prior to recording Question No. 20, the authorized officer has recorded the title "statement taken during the course of search." In fact, the Assessing Officer has referred to the statement as preliminary statement at page 5 of the block assessment order. From these facts, it is amply evident that the statement of the assessee admitting the gifts to be non-genuine has been recorded before the commencement of the search and cannot conceivably be construed as a statement under section 132(4) of the Income-tax Act. The decision of Bombay High Court in R.R. Gavit v.Smt. Sherbanoo Hasan Daya [1986] 161 ITR 793 support the view taken by us. The statement of admission dated 25-11-1999, which is the sole basis adopted by the Assessing Officer for bringing the gifts within the purview of undisclosed income under section 158BB for the purposes of block assessment cannot thus be treated as evidence found as a result of search. We are, therefore, of the view that the genuineness of the gifts cannot possibly be treated as covered within the limited scope and purview of undisclosed income under the block assessment. On this legal gr....
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....uestion have been made, have been completed after scrutiny inCentral Circle,Kanpurby the Officer of the rank of the joint Commissioner of Income-tax. All such documents were provided to the Assessing Officer during the block assessment proceeding and also form part of the paper book filed before us. Ld. counsel has drawn our attention to gift deed dated20-6-1999as well as30-5-1999, which were executed by the donor as well as the donee and produced during the assessment proceedings before the Assessing Officer. Shri Rampati Singhania has sworn affidavits dated 13-5-999 and20-6-1999much before the search and these affidavits have been filed during the block assessment proceedings and are placed in the first paper book filed before us. From these facts, it is amply evident that the gift transactions are duly disclosed and accounted for in the books of account of the donor as well as the donees. These transactions cannot be considered as secret, hidden or concealed. The surrounding facts and circumstances like routing the transactions through regular banking channels by the donor and the donees and accounting for all the amounts in their respective books of account and further gifts be....
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....lhi High Court in S. Arjan Singh's case, cited by the ld. counsel where a similar proposition has been laid down. The Punjab & Haryana High Court in Kishan Lal Shiv Chand Rai's case have taken the same view and observed, "it is an established principle of law that a party is entitled to show and prove that admission made by him is in fact not correct and true. Such admission raise a presumption against the persons making the admission but such presumption is rebuttable". 36. A very heavy onus lay upon the assessee to refute and controvert the admission made at the time of search operation. In the instant case before us, documents and evidence filed by the assessee during the course of assessment proceedings before the Assessing Officer to which reference has been made hereinbefore by us amply established that the gifts in question have been made by Shri Rampati Singhania, a leading industrialist of Kanpur belonging to J.K. Group and such gifts are evidenced by gift deeds duly executed before the date of the search. Source of the gift, creditworthiness of the donor as well as genuineness of the transactions have been established by filing the copies of the bank account of the donor....
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....nder the Gift-tax Act. The view taken by us is amply reinforced by the decision of Chandigarh Bench of the Tribunal in the case of R.K. Syal v. Asstt. CIT [2000] 66 TTJ (Chd.) 656 by the ld. Counsel. In this decision, the Chandigarh Bench held as under: "The gifts made cannot be rejected merely on the ground that there was no occasion or relationship for making the same. The element close relationship or occasion for making gift do not flow from the definition of gift as given in section 2(xii) of the Gift-tax Act. The conditions laid down there are there should be transfer by one person to another of any existing movable or immovable property, the transfer should be voluntary and should be made without consideration of any money." 39. At this stage, we may also refer to the observations of the Delhi High Court in the case of CIT v. Mrs. Sunita Vachani [1990] 184 ITR 121 as referred by the ld. counsel. The Hon'ble High Court observed, "The Tribunal has examined the evidence which was available on the record and has arrived at the aforesaid findings. Even though it may be surprising as to how large sums of money are received by a family inIndiaby way of gifts from strangers from a....
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....considered. The sister concern of the assessee, namely, Mono Acrylic Manufacturing Co. Pvt. Ltd. has carried out similar business of trading of acrylic sheets, etc., as carried out by the assessee before us. The working results of the said company for the four assessment years being assessment years 1996-97 to 1999-2000 have been furnished by the assessee before the Assessing Officer vide his letter dated 7-3-2002, copy of which has been filed before us. These results are briefly reproduced hereunder: ---------------------------------------------------------------------------- Particulars Financial Year ---------------------------------------------------------------------------- 1999-2000 1998-1999 1997-1998 1996-1997 ---------------------------------------------------------------------------- Sales  ....
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....ed by the Bench to offer his counter comment on these submissions could not explain as to why similar profit rate as disclosed by the sister concern of the assessee in similar line of business be not adopted in assessee's own case particularly when the results have been accepted after scrutiny of accounts in the case of the sister concern. Even if contentions raised by the ld. counsel against adopting the quantum of total turnover at Rs.26.35 crores are to be ignored yet the fact remains that undisclosed income worked out by adopting the net profit rate of 2.67 per cent, which is the maximum rate as reflected in the aforesaid chart, undisclosed income would work out to Rs.70.35 lakhs as against Rs. 86,82,110 returned by the assessee in the block return. Regarding the net profit rate of 5 per cent adopted by the revenue on the basis of seized paper placed in page 1 of the revenue's paper book, we find that the said paper appears to be merely a quotation and not the actual sale transaction. No verification has been done by the revenue with the ICI Limited to ascertain whether any transaction took place at such a price. Moreover, the rate of 5 per cent is not apparently net profit rat....