TaxTMI 
TaxTMI 
2004 (10) TMI 316
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....d parties have explained the sources of investment. 4 The first appellate authority failed to consider that the appellant had offered to produce all the creditors in support of his claim of investment and, therefore, the first appellate authority is not justified in doubting the genuineness of the loan transactions. 5. The first appellate authority is not justified in sustaining the addition of Rs. 36,07,720 being the investment in M/s Visakha Precious Stones (P) Ltd. 6. The first appellate authority, in the alternative, should have restricted the additions to Rs. 18,69,000 being amount declared by the appellant under s. 132(4). 7. The first appellate authority failed to consider that income from Liquor Syndicate treated as share of profit is exempt from tax. 8. The first appellate authority is not justified in sustaining the addition of Rs. 2 lakhs being the share of income from Liquor Syndicate. 9. The first appellate authority is not justified in sustaining the levy of surcharge. 10. The appellant craves leave to add, amend or alter any of the above grounds at the time of hearing of the appeal" 3. During the course of hearing before us, the learned Authorised Representat....
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.... made in the names of various persons including myself. However, some of the investments made in certain persons' names belongs to me only. Such investments are as detailed below: Name Unsecured Share Loan capital Rs. Rs. 1.Myself 4,49,820 87,500 2.B. Satyanarayana 1,28,520 25,000 3.Y. Suri Babu 2,57,040 50,000 4.Smt. B. Subhadramma 2,57,040 50,000 5.Smt. D. Bhulokamma 2,57,040 50,000 6.Sri M. Sriramulu 2,57,040 --- ---------- ---------- Total 16,06,500 2,62,500 ---------- ---------- Grand Total 18,69,000 18. Q. To which period do the above investment, in M/s Visakha Precious (P) Ltd. pertains to? A. The above investment of Rs. 18.69 lakhs pertains to the year ended 31st March, 1997. 19. Q. Please explain the source for the above investment and also state whether these investments are reflected in the books of account of the return of income? A. The investment of Rs. 18.69 lakhs discussed above was not reflected in our books of account are in returns of income filed by us. I cannot explain the sources for this investment. I am disclosing this amount of Rs. 18.69 lakhs as my unaccounted income invested as unsecured loans and share capital in M/s Visakha ....
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....erations on 21st Dec., 1999. These operations conducted continuously at lengthy time and because of these operation I was mentally shocked and in fact I became demoralised from this shock, and I also became mentally depressed. Because ours is a middle-class family and we are not so much financially rich as alleged by the search party. However, subsequently on 10th Feb., 2000, some disclosures were taken from me under the influence of pressure exerted by the search party. These disclosures were not given by me voluntarily and I had to give them only to get over the then situation and to avoid mounting mental tension. The disclosures were given towards certain alleged undisclosed incomes which are never earned by me and in fact major part of the admissions never related or belonged to me. So, in view of the above facts and circumstances, it can be appreciated that the admissions given by me were not voluntary and not given with free will and sound mind and hence I pray your honour not to take such admissions into consideration while finalising the block assessment. Moreover, I have received notice under s. 158BC of the IT Act, 1961, for filing the block return and hence I have duly....
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....Apparao was available in the same house it cannot be said to be the investment made by the assessee. Thus, the CIT(A) also did not accept the statement of the assessee, dt. 10th Feb., 2000 in toto. 11. Being aggrieved, the assessee came in appeal before us. The main issue in the present appeal centers around the legal and factual merits of the impugned additions of Rs. 36,07,720 and Rs. 2,00,000 from the liquor syndicate confirmed by the CIT(A). 12. In respect of grounds NO.1 to 6 which relate to the addition of Rs. 36,07,720, the assessee contended that the statement of the assessee was recorded after the conclusion of the search. The search was concluded on 4th Feb, 2000, when the prohibitory order was lifted, therefore, the statement recorded after the search cannot be regarded to be statement recorded under s. 132(4) during the course of search proceedings. The assessee was compelled under coercion to make such statement by the ADI while there is no power under s. 132 for calling the assessee after the conclusion of the search and recording of his statement. The statement so recorded cannot be used as a piece of evidence against the assessee. Even, confessional statement reco....
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.... 10th Feb., 2000, i.e., after the completion of the search. Statement recorded after the completion of the search cannot be considered as statement under s. 132(4) of the IT Act. 13. Our attention was drawn towards the statements of the assessee recorded on 21st Dec., 1999, 5th Feb., 2000 and 10th Feb., 2000, and it was vehemently submitted that it is only the statement dt. 10th Feb., 2000, on which the Revenue compelled the assessee, to agree that the amount of investments in the company" belonged to him and it represented undisclosed income of the assessee. Prior to that, no such question or answer relating to these investments was ever asked. Thus, the Authorised Representative also referred to the affidavit of the assessee retracting the disclosure made in statement dt. 10th Feb., 2000, stating that the admission has been procured under coercion and pressure. Kelkar Committee report reported in (2002) 258 ITR (St) 40 was also referred wherein the committee has made critical practices adopted by the Departmental officers in obtaining post confession from the assessee during the course of search operation. Finance Minister has also observed in the Budget Speech for the financial....
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....ch. No documents or evidence or record have been found by the IT authorities during the course of search which impeach the genuineness of the investments made in M/s VPSP and also that these investments belong to the assessee. The investments were duly entered in the books of account of the company, M/s VPSP, and this fact has not been disputed by the AO. The assessment under this chapter is not in substitution of a regular assessment the additions were already made in the hands of the company under s. 68 of the IT Act and it cannot be added again treating it to be the undisclosed income of the assessee. Thus, it was vehemently submitted that the additions made must be deleted. Even on merit, the assessee has discharged his burden of proof by adducing evidence about the identity, capacity and genuineness of the transaction. The AO did not bother to call any of the parties whose confirmations were filed by the assessee. No addition can be made merely on suspicion however strong it may be. 15. In respect of ground Nos. 7 and 8 which relate to the additions of Rs. 2,00,000 in wine business, it was submitted that the assessee has already returned a sum of Rs. 2,00,000 and this income ....
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....ishing genuineness of the investments in question? Chapter XIV-B consisting of s. 158B to s. 158BH was introduced by the Finance Act, 1995, w.e.f. 1st July, 1995, to make procedure of assessment of search cases more effective. The chapter is titled "Special procedure for assessment of search cases." The scheme of block assessment enacted under this chapter laying down procedure for block assessment proceedings is intended by the legislature to operate simultaneously with the normal and regular scheme of assessment indicated under Chapter XIV of the IT Act. Both the tax schemes are independent 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 s. 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 mon....
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....d other persons in the company, M/s VPSP. No documents or papers have been found during search proving that the investments made by the assessee in VPSP were not genuine and the investments made by the other persons in VPSP were representing the income of the assessee. 21. The main basis on which the additions have been made in the case of the assessee is the statement of the assessee recorded on 10th Feb., 2000, admitting Rs. 30.29 lakhs as the unaccounted income for the block period which consists of Rs. 6.6 lakhs invested in the names of family members Rs. 18.69 lakhs in various names in the form of unsecured loans and share capital in VPSP, and Rs. 05 lakhs from liquor business being run in the name, Pendurthi Wine Syndicate. This statement was also recorded subsequent to the conclusion of the search. This is an undisputed fact that the search in this case concluded on 4th Feb., 2000, when the Panchnama was executed. The AO referred to the statement as if the statement has been recorded during the course of the search. For the applicability of s. 132(4), it is essential that the statement must be recorded during the course of the search. The statement of admission dt. 10th Feb....
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.... LR. Gupta vs. Union of India (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del), the Delhi High Court while constituting the expression undisclosed income as used under s. 132(1) has held that income which is hidden from the Department is undisclosed income. In this case, the assessee and various persons invested the money in the form of unsecured loans and share capital in M/s VPSP which were duly deposited in the account of the company and were duly considered in the regular assessment of the company. This is undisputed that these investments were duly disclosed in the books of account of VPSP regularly maintained, which was a regular assessee and the assessee is a director therein. Even these deposits were duly considered in the hands of the company, which is apparent from the copy of the assessment order passed under S. 143(3) on 31st March, 2000, after the search operation has taken place in the case of the assessee. Confirmations from all the persons on unsecured loans and share capital invested in M/s VPSP were duly filed before the AO in the case of the assessee. Their evidence of their holding and the source of the amount were also filed. The assessee has invested only a ....
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....apital in M/s VPSP which not reflected in his books of account or in the returned income filed by him. The learned Authorised Representative was at pain in emphasising that the statement has been procured from the assessee under the coercion and pressure and is contrary to the CBDT's instructions issued in March, 2003, pursuant to Kelkar Committee's report, wherein the committee acknowledged the prevalence of the practice amongst the search parties to obtain forced confession of undisclosed income from the assessee. The proposition is well-settled that the admission made by the assessee during the course of search operation constitutes substantiated evidence in view of ss. 17 to 21 of the Evidence Act, but such admission cannot be considered to be the conclusive evidence against the assessee. It has been held by the apex Court in the Pullangode Rubber Produce Company Ltd., relied upon by the Authorised Representative that, "an admission is extremely important piece of evidence, but cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect." 26. Preferring further the decision made by the Delhi High Court in the case of Sa....
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....,720 in this regard. 29. Thus, in view of the aforesaid discussion and the totality of facts, we set aside the order of CIT(A) on this account and delete the addition of Rs. 36,07,720. 30. Now, coming to ground Nos. 7 and 8, the facts relating to these grounds are that the assessee's father in his statement dt. 21st Dec., 1979, stated that he and his sons are having shares in certain wine shops which formed a syndicate. There are 12 shops under the control of this syndicate. During the course of search certain documents giving the vouching of combined sales and purchases . relating to 12 liquor shops were seized. The assessee offered in his statement dt. 10th Feb., 2000, Rs. 5 lakhs to be his share income from such syndicate but in the return the income was not shown but the statements were retracted. It was also submitted that this represented regular income and the syndicate represents a number of firms and the income had been admitted in the hands of respective firms. The share income so received be exempt from tax. The AO made the addition of Rs. 5 lakhs. The CIT(A) reduced the income on the basis of actual profit and sale account for 4 months by estimating for 9 1/2 months t....