TaxTMI 
TaxTMI 
2005 (2) TMI 490
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....daughter of Sri B.V.B.S. Prasad, and on the steel almirah in the bedroom of Smt. B. Surya Prabha. As per the Panchnama neither any cash nor jewellery assets were found or seized. Only following books of account were found and seized: (i) One note book (Vidya Super Delux) cattle computers consisting of 13 pages. (ii) One account book (Kesava) consisting of pp. 1 to 19 and 71 to 173, and (iii) One bundle of loose sheets serially numbered from 1 to 53. 3. The AO issued notice under s. 158BC in the case of Smt. B. Surya Prabha, dt. 11th Nov., 1996, and while in other cases notices were issued as under: ITA No. 177, Authorised Representative, Late B.V.B.S. Prasad, dt. 11th Nov., 1996 ITA No. 180, Smt. B. Madhavi, dt. 11th Nov., 1996 ITA No. 175, Madhavi Finvest (P) Ltd., dt. 17th Jan., 1997 4. As mentioned in the assessment order, notice in the case of Madhavi Finvest (P) Ltd. was issued under s. 158BD while in other appeals it was issued under s. 158BC. After completion of the assessment, the AO vide letter dt. 26th May, 1998 clarified in respect of the group as under: "To be more specific block assessment orders in whose case warrant was issued during search....
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....bsp; 1994-95 IT 87 30-12-94 3/Kakinada B. Madhavi 1991-92 WT 452 17-6-92 1/Kakinada Devi -do- 1992-93 WT 453 17-6-92 1/Kakinada -do- 1992-93 IT 445 17-6-92 1/Kakinada -do- 1993-94 IT 5105 31-3-94 1/Kakinada -do- 1994-95 IT 85 30-12-94 3/Kakinada B. Surya 1991-92 WT 451 17-6-92 1/Kakinada Prabha -do- 1992-93 WT 450 17 -6-92 1/Kakinada -do- 1992-93 IT 444 17 -6-92 1/Kakinada -do- 1993-94 IT 5113 31-3-94 1/Kakinada -do- 1994-95 IT 88 30-12-94 3/Kakinada B.V.B.S. 1991-92 WT&nb....
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....es: "In the absence of any material throwing light on the undisclosed income of the appellant found in the course of search and seizure operations, the initiation of the block assessment proceedings under s. 158BC/158BD is without jurisdiction and the assessment so framed is liable to be annulled." 9. The learned Authorised Representative contended that the said additional ground should be admitted to do substantial justice to the assessee. The additional ground is a legal ground and does not require any determination and investigation of the facts already on record of the assessee with the Revenue. The reliance was placed on the decision of the Hon'ble apex Court in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) and thus it was vehemently contended that the assessee be permitted to argue the same prior to the other grounds of appeals already taken. If this ground was not admitted, the assessee would be put to irreparable loss and hardship. The learned Departmental Representative, on the other hand, was fair enough to concede the position that the additional ground is a legal ground and he did not put any objection to the....
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....he company carry out any business in purchase and sales of shares or not? If so, the details of the same, the income generated out of this activity and so as to why IT return were not filed. The above information should reach this office on or before 10th Feb., 1997 on which date the case is posted for hearing at 3 p.m." 13. From the aforesaid letter, on the basis of which the proceedings were initiated, proves that there was no material for arriving at the satisfaction for initiating proceedings under s. 158BD and, therefore, in the absence of initiation of the valid proceedings, the assessment so framed must be annulled. For this proposition reliance was placed on the decision of the Hon'ble Delhi High Court in the case of Amity Hotel (P) Ltd. & Ors. vs. CIT & Ors. (2004) 192 CTR (Del) 607 : (2005) 272 ITR 75 (Del) in which it was held: "That, in the present case, there was nothing to indicate that the AO could have formed an opinion and arrived at a satisfaction that the petitioner had not truly disclosed its income. The appreciation report clearly revealed that the AO was called upon to look into it with regard to several entries and the AO in his noting had clearly in....
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....atement, the provision of s. 68 will not apply and for this, reliance was placed on the decision of the, Tribunal, Pune Bench, in the case of Kantdal & Bros. vs. Asstt. CIT (1995) 51 TTJ (Pune) 513 : (1995) 52 ITD 412 (Pune). Our attention was invited to p. 37 of paper book which consists of the letter of the AO, dt. 11th Feb., 1997, showing the details of Rs. 35.5 lakhs from the bank account of the assessee. The reply for the same was filed vide letter dt. 10th March, 1997. For the sum of Rs. 13 lakhs and Rs. 8 lakhs, the confirmations were duly filed which are available from pp. 43 to 65 of the paper book. These confirmations were before the AO and the AO has not gone to the merit of the confirmations. For a sum of Rs. 4 lakhs, our attention was drawn to p. 67 of the paper book, which is the statement of account with Vsya Bank Ltd., and it was submitted that this amount was credited on 16th Feb., 1996 and not on 6th Feb., 1996 and was transferred through cheque No. 229467 on Andhra Bank from the account of Smt. B. Surya Prabha managing director of the assessee-company. The copy of bank account No. 27410 with Andhra Bank belonging to Smt. Surya Prabha is available at p. 89, which ....
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....er Investment Ltd. (2000) 164 CTR (SC) 287 which is squarely applicable to the impugned case as the money received by the company represents share application money, not the deposit or loan from any party. If any addition is to be made, it can be made only in the hands of the shareholders, not in the hand of the assessee-company. 19. For the next ground relating to the addition of presumptive interest on funds diverted by the directors amounting to Rs. 1,62,575, it was contended that no income has either accrued or received by the assessee. The AO from the bank statement, the copy of which was filed by the assessee, noted that the assessee has used a sum of Rs. 10,06,591 for the following purposes: (a) Flat No. 103, Amerpet Hyd. held in the name of Late Shri B.V.B.S. Prasad amounting to Rs. 3,70,000. (b) Tata Estate car in the name of Smt. B. Surya Prakash amounting to Rs. 4,71,591. (c) GPR Chit Nos. GL 2 and 46 in the name of Smt. B. Surya Prabha amounting to Rs. 85,000. (d) Margdarshi Chit LT 013 TA 3839 in the name of Smt. B. Surya Prabha amounting to Rs. 80,000. 20. The AO took the view that these funds of the company were diverted and, therefore, he computed ....
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....epartmental Representative. We have also looked into the case laws relied upon by both the sides. First we would like to deal with the additional ground relating to the validity of the assessment made by the AO. This is an undisputed fact that there was no search initiated under s. 132 in the case of the assessee and neither any books of account or the documents or any assets were requisitioned under s. 132A in the case of the assessee-company. The assessment was completed under s. 158BA(1) of the IT Act as is apparent from the assessment order. The notice in this case was issued for the first time under s. 158BD vide office noting on the order-sheet of the file dt. 17th Jan., 1997. The order-sheet of the assessment file does not state that any notice under s. 158BD was issued or the block assessment proceedings were initiated in the case of the assessee under s. 158BD. The order-sheet upto the date of the assessment order, i.e., 20th March, 1997 is reproduced as under: "17-1-1997. This case is notified to this circle vide CIT's Notification No. CC Tech/5 (544) 96-97, dt. 18-9-1996. The A has not filed ROI. Notice under s. 158BC put up. Sd/- Illegible 17-1-1997 24-1-1997 A....
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....sessment of search cases'. The scheme of block assessment enacted under this chapter laying down procedure for the 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 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 material unearthed during search. Therefore if the search action does not disclose undisclosed income, the question of any assessment being framed under that chapter is simply improper and outside the purview of that chapter. Different provisions are made for making assessments on the person who had been searched and on the persons who had not been searched but in respect of which undisclosed income is unearthed from the person who has been searched under s. 158BA r/w s. 158BC while in the case of the person who had not been searched the assessment has to be framed under s. 158BA r/w s. 158BD. From the evidence on record, we do not have any hitch in holding that the asse....
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....ssee. Since there was no material whatsoever detected during the course of the search, in our opinion, the proceedings without any material for demonstrating the satisfaction of the AO is void ab initio because valid initiation of assessment proceedings is the foundation for a valid assessment. It appears in this case that the AO although issued notice without any material, but went on making roving inquiries so that the material could be collected from the assessee, which is not permitted under the law. Material should precede the investigation not that the investigation should precede the material. The AO tried to put cart before the horses to validate his action. We, therefore, are of the firm view that entire proceedings framed with the issue of the notice by the AO should go and, therefore, we cancel the assessment framed by the AO against the assessee for whom the AO had no jurisdiction. 29. Now, we may deal with the case laws relied on by the learned Departmental Representative. The case of Digvijay Cements Ltd. vs. Asstt. CIT will not assist the Revenue. In this case, during the course of search in the premises of BIC and RDB, certain documents relating to assessee were ....
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....able to the facts of the case before us. 31. Now corning to the last case relied by the learned Departmental Representative which relates to the case of Subbaraju & Co. & Ors. vs. Asstt. CIT decided by the Special Bench of Tribunal, Bangalore, this case in our opinion supports the case of the assessee rather than assisting the Revenue. From the headnote of this case, we found that in this case it has been held: "Chapter XIV-B provides for a special procedure for assessment of cases in which search is initiated under s. 132 where books of account, other documents or any assets are requisitioned under s. 132A. If the search action does not disclose undisclosed income, the question of any assessment being framed under that chapter is simply improper and outside the purview of the chapter. Similarly, it is basically the person searched who is subject to assessment under that chapter. The provisions of s. 158BD, however, extend the operation of those provisions to the person who is not searched. The essential ingredients of s. 158BD are: (i) The AO of a person searched should be satisfied, (ii) That undisclosed income belongs to person other than person in respect of whom....
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....aterial, then of course, it would be better if the AO demonstrates that he is satisfied about there being some undisclosed income belonging to a person who was not searched. In all the instant cases, the assessment were not based on a search action or supported by any material found during the course of search but were the result of reappraisal of facts that were already within the knowledge of the Department (para 10). However, in a given case, where there is sufficient material to take action under s. 158BD, and the AO has not ,specifically recorded satisfaction, it is not a lapse which would vitiate the proceedings. The main thing to be kept in mind is that proceedings under s. 158BD cannot be a fancy or ipse dixit of the AO but it should be based upon some material evidence found in the course of search. By invoking the provisions of s. 158BD, a stranger to the search proceedings is being implicated for a liability higher than normal rates of tax. Therefore, it would be in the fitness of things that the AO demonstrates in some way his satisfaction about there being undisclosed income hidden in the search material, which as per the provision, has to be handed over to the AO havi....
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....) 112 CTR (Bom) 356 : (1994) 206 ITR 727 (Bom). The decision of the Special Bench is squarely applicable to the facts of the case before us, and, therefore, in our opinion the assessment framed by the AO is not justified. 34. We therefore, on the basis of the aforesaid discussion quash the block assessment order passed in the case of the assessee. 35. Since it was vehemently contended that this Bench should give finding on merits also in view of the fact that in case the order of this Tribunal is set aside on the legality issue, the assessee may have not to come to this Court again to decide the issue on merit. We, therefore, give our finding on the issue relating to the additions made on merits for the complete disposal of the grounds of appeal. 36. The first issue relates to the addition of Rs. 35,50,000. From the record we find that the AO made the said addition on the basis that the assessee through the letter dt. 10th March, 1997 simply stated cash credit received Rs. 35,50,000 represents the repayment of the loans given earlier. However, no details were submitted as to the names and addresses of the persons to whom loans were given earlier, how these repayments were ....
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....ed to be the material found as a result of search and cannot be evidence relatable to such material. Therefore, no income can be computed under this chapter on the basis of the bank statement filed in the course of block assessment as it cannot be considered either as evidence found as a result of the search or as a material or information relatable to any evidence found as a result of the search and, therefore, addition of Rs. 35,50,000 cannot be sustained in the block assessment. The bank statement can also not be regarded to be the books of account of the assessee. The addition so made stands deleted. 37. Coming to the next issue, which relates to the addition of Rs. 1,62,575 being interest on funds diverted by the directors. We find force in the submission made by the learned Authorised Representative that no income can be charged to tax until and unless it is not accrued or received by the assessee. The interest income has been added by the AO, merely on presumption that the assessee has diverted the funds for non-business purposes. In our opinion, the onus is on the Revenue to prove that the assessee has earned the income. No cogent material or evidence has been brought on....
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.... search. Additions in the asst. yr. 1986-87 to asst. yr. 1994-95 were made ignoring the provisions of ss. 158B(b) and 158BB(1), therefore, the block assessment framed is invalid and illegal. Reliance was heavily placed on the judgment of Hon'ble Delhi High Court in the case of CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del). In respect of additional ground filed on 22nd Nov., 2004, for the proposition that in the absence of any material found during the course of search and seizure operations throwing light on undisclosed income, additions on presumptions, conjectures and surmises are not permissible, reliance was placed on the following decisions: 1. Patel Rajeshkumar Kantilal & CO. vs. Asstt. CIT (1998) 62 TTJ (Ahd) 189 2. General Exporters vs. Asstt. CIT (2000) 67 TTJ (Del) 119 3. Smt. Rajrani Gupta vs. Dy. CIT (2000) 66 TTJ (Mumbai) 582 : (2000) 72 ITD 155 (Mumbai) 4. Smt. Sheela Aggarwal vs. Dy. CIT (1999) 106 Taxman 227 (Del)(Mag) 5. CIT vs. C.J. Shah & Co. (2000) 246 ITR 671 (Bom) 6. CIT vs. Rajendra Prasad Gupta (2001) 166 CTR (Raj) 83 : (2001) 248 ITR 350 (Raj) 7. CIT vs. Smt. Usha Tripathi (2001) 166 CTR (All) 77 : (2001) 24....
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....ome from money-lending activity and income from agriculture. The income in these years was below the maximum income chargeable to tax and the agricultural income was not taxable, therefore, no return for these years was filed. Provision of s. 158BB(1)(ca) was clearly applicable and this income cannot be regarded to be undisclosed income. For the asst. yrs. 1991-92 to 1994-95, it was contended, the interest income and agricultural income were duly disclosed in the IT returns filed as per the details given at p. 227 of paper book. Sec. 158B(b) is a charging provision and the AO does not have any jurisdiction to review such income. There was no material found in search, which empowers the AO to treat such income to be undisclosed income. Chapter XIV-B cannot be applied in substitution of Chapter XIV. For the additions made in asst. yrs. 1995-96 and 1996-97, it was stated that the additions for agricultural income in both the years were not made on the basis of the material found during search but on the basis of the returns filed by the assessee. The interest and agricultural income being derived by the assessee regularly is on record in the earlier years. The return/information filed....
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.... from Palacherle Venkataramna and Palacherle Brahmaji, respectively. This fact was also duly shown in the receipt and payment account but no query was asked for. Attention was invited to the copies of letters issued by AO. No material for the same was found during search; therefore no addition under this chapter can be made. The reliance was placed strongly on the judgment of Dr. (Mrs.) Surjit Tosaria vs. Jt. CIT (2005) 92 TTJ (Del) 338. The copy of the bank account and receipt and payment account were filed in the. course of block assessment and, therefore, these cannot be considered either as evidence found as a result of the search and, therefore, addition in respect thereof should not be sustained. Further it was submitted that no addition under s. 68 on the basis of bank statement could be made, as bank statement cannot be construed as books of account. Reliance was placed in the case of S.P. Goe1 vs. Dy. CIT (2002) 77 TTJ (Bom)(TM) 1 : (2002) 82 ITD 85 (Bom)(TM). Thus it was prayed to delete the addition of Rs. 4,50,000 and Rs. 1,50,000 made in the asst. yr. 1996-97. 47. For the last addition of Rs. 36,655 as unexplained cash it was contended by referring to p. 253 that th....
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....consist of note book wherein entries relating to money-lending activity and income from agriculture were noted upto the asst. yr. 199495. The assessee has shown the interest income and agricultural income in the regular returns filed for the asst. yrs. 1991-92 to 1994-95. The copy of the returns with the computation statement and balance sheet were filed before us from pp. 228 to 252. The particulars of the date of filing and the receipt number of the return are available at p. 227 of the paper book. The note book also shows the income of the assessee from interest and agriculture w.e.f. 1st April, 1984 to 31st March, 1994. The income upto the asst. yr. 1990-91 as shown is less than the maximum income chargeable to tax. No addition on the basis of the seized material documents/papers were made by the AO in the block assessment year. Upto asst. yr. 1994-95 the same income as was shown in the regular returns as well as in the regular books, i.e., note book were treated as the undisclosed income of the assessee and the assessment was completed without any evidence or material being seized which may prove that the entries in the note book were bogus. The additions made in the asst. yr.....
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....t 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)". 50. If we analyze 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; (iii) such money, bullion, jewellery, valuable article, thing, entry in the books of account or other documents or transactions represent wholly or partly income or property; (iv) which has not been or would not have been disclosed for the purposes of this Act. 51. From the aforesaid analysis of the definition, it clearly emerges that if any asset or any income as recorded in the books or documents has been disclosed or intended to be disclosed to the IT authorities, this would be outside the pale of undisclosed income as defined under cl. (b) as above. 52. We may next refer to s. 158BB, which provides for computation of undisclosed income of block period. The section expressly and unequivocally provides that the undisclosed income has to be comput....
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....ll the grounds, we give our finding on the various additions made on merit also. 55. In respect of the issue relating to the interest income from money-lending activity and agriculture income being added in each of the assessment year as under: Asst. yr. Interest income Agriculture income (Amount Rs.) (Amount Rs.) 1986-87 12,180 16,700 1987-88 16,790 19,125 1988-89 17,020 23,850 1989-90 17,640 22,000 1990-91 16,560 56,315 19....
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....ed to be the undisclosed income of the assessee. This was the income, which was disclosed in the regular return and was subject-matter of the regular assessment. No material was pointed out by the learned Departmental Representative, which may point out that this income was based on the bogus transactions. This income may be a part of regular assessment but cannot form part of the undisclosed income. The income was duly disclosed in the return filed although subsequent to the search as the due date of filing the return had not expired. There is, no whisper or evidence, which may suggest that the assessee would not have disclosed this income for income-tax purposes. Rather by filing the return, the intention of assessee of disclosing this income is proved. The provision of S. 158B(b) which defines the 'undisclosed income' in our opinion is also a charging provision as any income which can be assessed under Chapter XIV-B have to be first 'undisclosed income'. Sec. 158BB deals with the computation of undisclosed income of the block period but it cannot override the s. 158B(b). First, any income to be computed under Chapter XIV-B under s. 158BB has to be an undisclosed income as define....
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....assessee to explain the sources for the cash credited in his account with Andhra Bank and the assessee in reply thereto submitted that most of the credits in the said account is received on account of realization and compensations received on account of death claims of my late husband and also amount received from M/s GATIL by way of salary, car hire, etc. She further stated that she had applied to the bank to supply her account copy and soon after the transactions with the said bank. The AO carne to know about the loan from Smt. P. Vankayamma and Shri P. Brahmaji only through the receipt and payment account filed by the assessee showing the purchase of the property as well as the source of the investment. There is realization from the debtors to the extent of Rs. 1,26,500 and the interest amounting to Rs. 25,000. This receipt and payment account was filed with the AO on 10th March, 1997 along with the return for the asst. yr. 1995-96 and which was not at all seems to have been considered by the AO. The addition of Rs. 4,50,000 and Rs. 1,50,000 in our opinion does not satisfy the conditions laid down in s. 158BB(1) that the undisclosed income should be assessed on the basis of evid....
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....s putting up together, where the search has taken place and out of the cash in hand shown by the assessee on 31st March, 1996 only Rs. 7,028 belong to the assessee, Rs. 14,729 relate to the HUF and Rs. 19,950 relate to Shri B. Ravi Prasad son of the assessee, in whose case proceedings for block assessment were dropped by the Department keeping in view of the quantum of cash, status of the assessee and the fact that no wealth-tax is payable on the cash upto Rs. 50,000. In our opinion the AO was not correct in law in making this addition merely on presumption without bringing any evidence contrary to the explanation given by the assessee. We have gone through the balance sheet of the assessee filed along with the return for asst. yr. 1996-97 and that of HUF. In the case of the assessee there was a cash balance of Rs. 7,028 while at the end of the asst. yr. 1995-96 the cash balance was Rs. 72,654 and as per the last day of the period for which the books of account maintained by the assessee were found, i.e., 31st March, 1994 the cash balance was Rs. 16,919. Under these facts, the plea of the AO that there was no cash in hand with the assessee and also that the total cash found relates....
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....ssessee which is reproduced as under: "The following amount are credited to the account of Madhavi Finvest (P) Ltd. with SBI account No. 091/5238 Date Amount 4-11-1995 Rs. 1,20,000 4-11-1995 Rs. 80,000 20-12-1995 Rs. 50,000 Please explain the source for the credit reflected in the account of Madhavi Finvest (P) Ltd. and also in your personal account. You may please note that in the absence of satisfactory explanation these cash deposits are liable to taxed as per the provisions of s. 68 of the IT Act." 65. The learned Authorised Representative carried us to the paper book of the assessee and submitted that there was no material which were seized during the course of the search carried out at (the premises of) Smt. B. Surya Prabha, which would have been found and formed the basis for taking action under s. 158BD. From the copy of the assessment it is apparent that the AO has completed the assessment under s. 158BC not under s. 158BD. It is only by way of his letter, dt. 26th May, 1998 (reproduced hereinabove....
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.... copy of which was filed before us in the paper book from pp. 69 to 164. For a sum of Rs. 2,50,000 it was submitted that the AO made the double addition on the one side, the AO added investment of Rs. 8,50,000 for which the source was explained to be of Rs. 2,50,000 - Rs. 1,50,000 as loan from the mother and Rs. 1.00,000 as loan from her brother. The AO made the addition of Rs. 8,50,000 as well as for Rs. 2,50,000 Le., both investment and source of the investment. The AO has wrongly observed that the assessee has not filed any IT return, the assessee even filed block return also, the copy of which was filed at p. 13 of the paper book in which the undisclosed income was shown at nil. The AO completed the assessment without considering the block return as well as the regular return of the assessee. The assessment was completed in haste so that the huge demand may be created against the assessee by making addition in respect of the income and investment shown in the regular assessment, not on the basis of the evidence found as a result of the search or as material or information relatable to any evidence found as a result of the search. This income cannot be added in the block assessm....
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.... which would have been found during the course of the search on the basis of which the AO would have formed the prima facie satisfaction for initiating action under s. 158BD. The order-sheet upto the date of the assessment order is reproduced as under: "11-11-1996 The case is notified under s. 127 of the IT Act. Search was conducted on Golden Agro Tech Ind. Ltd., on 22nd March, 1996. Notice under s. 158BC put up Sd/ - Illegible Sd/ - Illegible 2-1-1997 Letter to the A put up. Sd/- Illegible Sd/- Illegible 16-1-1997 As Authorised Representative Sri V.V. Sundaram, chartered accountant, along with Sri Ramprasad appeared and the case is heard. Sd/ - Illegible Sd/ - Illegible 17 - 1- 1997 Reminder to the A put up Sd/ - Illegible Sd/ - Illegible 24-1-1997 Sri V.V. Sundaram appeared. Details called for is submitted. Sd/ - Illegible Sd/ - Illegible 27-1-1997 Questionnaires are typed as dictated and put up Sd/ - Illegible Sd/ - Illegible 11-2-1997 Sri V.v. Sundaram, chartered accountant, Authorised Representative appeared. Details filed are placed below. Sd/ - Illegible Sd/ - Illegible 3-3-1997 Sri V.V. Sundaram, chartered accountant, Authoris....
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....ur finding on the issue relating to the grounds taken on merits also for the disposal of all the grounds of appeal. 72. The assessee was a regular assessee and investment of shares in GATIL were duly disclosed during the asst. yr. 1993-94 amounting to Rs. 2,00,000 in the regular return of the assessee, a copy of which was filed before us. In our opinion, this income, which has already been disclosed in the regular assessment, cannot be regarded to be the undisclosed income under Chapter XIV-B in view of the definition under s. 158B(b). We therefore, delete the addition of Rs. 2,00,000 made in the asst. yr. 1993-94 by adopting the reasoning given in paras 55, 56 and 57 hereinabove. Similarly, the addition of Rs. 1,00,000 made in the asst. yr. 1994-95 in respect of investment made in the shares of GATIL is also deleted as it is also out of scope of Chapter XIV-B of the IT Act as this investment was duly disclosed by the assessee in the regular assessment. 73. Coming to the addition of Rs. 1,50,000 and Rs. 2,10,000 made in the asst. yr. 1995-96, we find that the assessee has filed the return for the aforesaid assessment year on 10th March, 1997 before the same AO, and before the....
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....ther Rs. 1,00,000 (e) Marriage gifts received Rs. 5,26,112 75. The AO made separate addition for a sum of Rs. 2,50,000 in respect of the loan from the mother and the brother, which have been made under s. 68 of the IT Act. So far the gifts are concerned, we find that the assessee has filed the details of list showing the names of the donors and the details of the gifts received by the assessee. The copy of such details of the gifts, are given from p. 149 onwards. Some of the gifts consisting of Rs. 20,000, Rs. 20,000, Rs. 25,000, Rs. 25,000, Rs. 30,000, Rs. 30,000, Rs. 30,000 and Rs. 20,000 were received by the assessee through demand drafts from her close relatives. The relation has also been mentioned at p. 149 of the paper book. The AO mentioned in the assessment order that the assessee has not given addresses of the donors, but from the paper book, we find that the addresses of the donors are duly given in the details. The details excluding relatives are of 79 persons. It is customary to receive gifts by a girl at the time of her marriage; the quantum of gifts will depend on the status of the family. Rs. 2,00,000 are the gifts received through demand drafts and the balanc....
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....on, the AO has made this addition twice, once while considering addition of Rs. 8,50,000 as undisclosed investment and the other when the assessee received loan as source of Rs. 8,50,000, thus the addition has to be considered only once, we, therefore, delete the addition of Rs. 2,50,000. 77. Thus, the appeal of the assessee is allowed. IT(SS)A No. 177/Hyd/1997 78. In this case also in respect of the additional ground, the learned Authorised Representative relied on the submissions already made in ITA No. 175/H/1997 and ITA No. 180/H/1997, as the facts in this case, relating to the issue of the notice under s. 158BC without issue of search warrant and without invoking provisions of s. 158BD, are similar as were in those cases. The learned Authorised Representative in addition to the reliance of the arguments advanced in those cases, further submitted that the notice has been issued in this case to the Authorised Representative of Smt. B. Surya Prabha in the status of HUF as is apparent from first page of the paper book consisting of the copy of the notice issued by the AO by which the block assessment proceedings against the assessee were initiated. The proceedings cannot ....
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....vi Prasad. The assessment has been framed by the AO in the name of Sri (late) B.V.B.S. Prasad through legal representative, Smt. B. Surya Prabha, mentioning the status as HUF by issuing the notice under s. 158BC addressed to "Authorised Representative" of late Shri B.V.B.S. Prasad. The notice issued itself is illegal as in the case of the HUF, the notice has to be issued as per s. 282(2) on the Karta or the adult member of the family. The proceedings cannot be initiated by issuing the notice on the Authorized Representative. Thus, the block assessment proceedings in our view are illegal and void ab initio in the absence of valid notice and valid service thereof. After the death of Sh. B.V.B.S. Prasad, his eldest son, Sh. B. Ravi Prasad became the Karta of the HUF and therefore, framing an assessment in the name of Sri (late) B.V.B.S. Prasad through legal representative Smt. B. Surya Prabha, in the status of HUF is void ab initio. The assessment can be framed through the legal representative as per the provision of s. 159 which is applicable in the case of individual assessee. The HUF did not die only a member thereof can die. The provisions of s. 159 are not applicable in the case ....
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....en found in the suitcase in a flat belonging to Shri Ramakrishna at Hyderabad on 22nd March, 1996. Mr. Ramakrishna was not a family member of the assessee. The assessee used to live in Kakinada and not at Hyderabad where the said share certificates had been found in a flat belonging to a very distant relative of the assessee. In a deposition taken by the search officials at the time of search operations from Smt. Hymavathi, wife of Sri Ramakrishna at Hyderabad, there was no allegation that the said suitcases had been given to her by the assessee. She also stated that Mr. B. Ravi Prasad had given the suitcases for safe custody. Neither Shri Ramakrishna nor his wife Smt. Hymavathi had deposed that it was the assessee who had given the said suitcase for safe custody. The allegation of the learned Asstt. CIT, that most of the promoter-shareholders of the said company had explained their sources for their investment in the said company was agricultural and such assertion was not verifiable, was not correct for the reasons that all the promoter -shareholders did not have only fertile agricultural lands in their own names but other family members also had fertile agricultural lands. Pooli....
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..... Sri P.S. Prabhakara Rao 5. Sri M. Bramhaji 6. Sri P.S. Prabhakara Rao 7. Smt. A. Surya Prabhavati 8. Smt. M. Papa 9. Smt. M. Nagamani 10. Sri Y. Macharrarao 11. Sri Y. Ramarao 12. Sri Y. China Krishnammurthy 13. Sri B. Veera Venkata Rao 14. Sri I. Subbarao 15. Smt. Y.V.V. Lakshmi 16. Sri M. Butchiraju 17. Smt. R. Satyavathi 18. Smt. P. Papayamma 19. Smt. V. Veerayamma 20. Kum. V. Usha Anantha Padamavathi 21. Sri B. Venkateshwara Rao 22. Sri B. Veera Raghavulu 23. Sri P. Venkata Rao 86. The learned Authorised Representative also stated that the rest of the promoters could not personally attend to Hyderabad due to travelling from their own villages in East Godavari District in response to the summons issued by the learned Asstt. CIT/ADI as in most of the cases the summons had been served one or two days prior to the date of hearing and in some cases summons had been received after the date of hearing. Also that most of the promoters were agriculturists and due to rains/cyclones that had affected their agriculture for more than two times in April, 1996 to February, 1997, they had remained busy in salvaging the damaged crop ....
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....were not aware of the fact that the share certificates had been pledged. The learned Authorised Representative submitted that it was not correct, as all the promoters had claimed their right to their share certificates in the said company. The promoters had given the share certificates to the officials of the company for the sake of pledging their certificates for obtaining loans for the business of the company and also to sell their shares if there has been an increase in the market rate of shares of the company as per the statements given by them to the IT Inspector of the office of the Asstt. CIT when he had examined them in the premises of the shareholders. 89. Regarding the allegation of the learned Asstt. CIT that there were variations in the signatures of the promoter-shareholders, it was contended that none of the promoters had denied that the signatures in various forms were not theirs. Since they were not accustomed to sign regularly on forms, documents, naturally their signatures had changed from time-to-time. Further, two persons named, Sri V.V.G. Chowdary and Sri Y. Venkata Rao also attended the office of the ADI in response to the summons issued to them and affirme....
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.... they only told us that the two cases contain some papers relating to the factory Golden Agro- Tech. We do not know about the share certificates. Since he is our relative, we allowed him in keeping the share certificates in our flat. Mr. B.V.B.S. Prasad has expired since two months back because of some medical problem. After that nobody came to take the share certificates from us. The share certificates are lying here since last two months." 92. On this, the statement of Shri B. Ravi Prasad was recorded under s. 131. The relevant portion of his statement is reproduced as under: Statement of B.B. Ravi Prasad recorded on 25th March, 1996 under s. 131 of the IT Act, 1961 "Q. NO.5 Under what circumstances shares of Golden Agro-Tech Ind. Ltd. was kept by you at the residence of Mr. K. Ramakrishna and whether they were aware of the contents of the suitcase? Ans. My father involved Mr. R.Y. Ramana Chowdary for mobilizing shares and people invested on the faith of my father. After his sudden demise investors were worried about the future of the company so they asked Mr. Y. Ramana Chowdary to dispose their shares in the open market. So he brought these shares to Hyderabad by car....
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....nbsp; 5,000 Shares ------------------------------------------------- 3. Y. Ramana Chowdary 12,000 Shares ------------------------------------------------- 4. V.V.V.N. Mohan Rao 6,500 Shares ------------------------------------------------- 5. Y. Surya Kumari 10,000 Shares ------------------------------------------------- 6. V. Trimuruthulu 4,500 Shares ------------------------------------------------- 7. P. Abbulu 2,650 Shares ------------------------------------------------- 8. S. Subba Rao 4....
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....---------------------------------- 21. A. Surya Kumari 2,700 Shares ------------------------------------------------- 22. G. Padmavathi 3,000 Shares ------------------------------------------------- 23. P. Ramakrishna 10,000 Shares ------------------------------------------------- 24. M. Satyaveni 10,000 Shares ------------------------------------------------- 25. C. Adinarayana 2,600 Shares ------------------------------------------------- 26. M. Dhanraju 10,000 Shares ------------------------------------------------- 27. A. Srini....
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....; 15,000 Shares ------------------------------------------------- 41. E. Veeraraju 10,000 Shares ------------------------------------------------- 42. V. Pattabi Rama Rao 1,000 Shares ------------------------------------------------- 43. E. Ananthalaxmi 10, 000 Shares ------------------------------------------------- 44. E. Janakiratnam 5,000 Shares ------------------------------------------------- 45. V. Subrahmanyam 10,000 Shares ------------------------------------------------- 46. Y. Satyavathi 5,100 Shares ------------------------------------------------- ....
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....sp; 5,000 Shares ------------------------------------------------- 60. V. Satyanarayana 10,000 Shares ------------------------------------------------- 61. Y. Subrahmanyam 10,000 Shares ------------------------------------------------- 62. Y. Suryavathi 10,000 Shares ------------------------------------------------- 63. C. Sathyawati 10,000 Shares ------------------------------------------------- 64. C. Satyanarayana 10,000 Shares ------------------------------------------------- 65. Y. Veeraraj Chowdary 10,000 Shares ------------------------------------------------- 66....
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....--------------------------------------- 79. P. Mahalaxmi 10,000 Shares ------------------------------------------------- 80. B. Madhavi Devi 7,000 Shares ------------------------------------------------- 81. B.V.B.S. Prasad 8,010 Shares ------------------------------------------------- 82. Madhvi Finvest 1,30,000 Shares ------------------------------------------------- 83. B.B. Ravi Prasad 6,200 Shares ------------------------------------------------- 84. B. Surya Prabha 19,090 Shares ------------------------------------------------- &nb....
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.... when reached his flat with one suitcase along with the auto drivers. Further, he was not aware of the fact that I am bringing the share certificates. I waited for about one hour before he came alone. The second suitcase was brought by the driver and we waited outside the flat for one hour. Q. NO.8 Are you sure that these suitcases did not contain any other material other than those specified by you in response to Q. NO.5? Ans. Yes. I am sure that these suitcases did not contain anything else. I had locked these suitcases and retained the keys with me when I handed over these suitcases to Mr. K. Ramakrishna." 94. We find again the statement of Ramana Chowdary was recorded, the relevant portion of the same is reproduced herewith: Statement of Mr. Y. Ramanna Chowdary recorded on 29th March, 1996 under s. 131 of the IT Act, 1961 "Q. NO.8 Under what circumstances the share certificates, books and documents and the mini cassette came to your possession? Ans. One week after the demise of Mr. B.V.B.S. Prasad, managing director, these shareholders approached me at different times upto 12th Nov., 1995 and asked me to sell these shares and handed over the share certificates....
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....learned Departmental Representative was also not able to produce any letter calling (for) explanation from the assessee during the course of lengthy hearing. Sworn statements of 12 persons were filed before the AO but he did not bother to counter those persons by cross-examining, in their sworn statements they have stated that they have invested the money. In our view, if the AO wanted to reject the sworn statement/affidavit, he must have cross-examine these parties. Our said view is supported by the decision of Hon'ble apex Court in the case of Mehta Parikh & CO. vs. CIT (1956) 30 ITR 181 (SC). We are also of the view that no addition can be made in the hands of the assessee without giving him the opportunity. From para 3.8 of the assessment order also it is explicitly clear that the AO computed the income in the hands of the legal representative of the assessee ignoring that the assessee-HUF cannot have legal representative and on this ground itself the additions made are liable to be deleted. These certificates were not found from the possession of the assessee-HUF, therefore, it cannot be deemed that they belong to the HUF. The provisions of s. 158BD were also not invoked by th....
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.... the said company and no opportunity was given to the assessee to explain these additions. The reliance was vehemently placed in the case of V.L. Dutt vs. CIT 1976 CTR (Mad) 210: (1976) 103 ITR 634 (Mad) at p. 648. The reliance was also placed on the cases as relied in the case of Smt. Surya Prabha. The reliance was also placed strongly on the judgment of Dr. (Mrs.) Surjit Tosaria vs. Jt. CIT. The copy of the bank account and the IT returns were tiled in the course of block assessment and, therefore, cannot be considered either as evidence found as a result of the search and, therefore, addition in respect thereof should not be sustained. The learned Departmental Representative relied on the order of the AO. 97. We have considered rival submissions in respect of the issue relating to the interest income from money-lending activity and agriculture income being added in each of the assessment year as under: Asst. yr. Interest income Agriculture income (Amount Rs.) (Amount Rs.) 1986-87 11,400&nb....
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....imum chargeable to tax, therefore, cannot be regarded to be the undisclosed income in view of cl. (ca) of sub-s. (1) of S. 158BB. Therefore, the addition made for the interest income and agricultural income for the asst. yrs. 1986-87 to 1994-95 stand deleted. For the asst. yrs. 1995-96 and 1996-97, since the income was earned from the same source, i.e., the interest from money-lending business, the return for the asst. yr. 1996-97 was not due till 22nd March, 1996 when the search took place, the source of such income was already disclosed in the earlier assessment years. This income on the basis of the return filed by the assessee after the search cannot be regarded to be the undisclosed income of the assessee. This was the income, which was disclosed in the regular return and was subject-matter of the regular assessment [refer to S. 158BB(1)(d)]. No material was pointed out by the learned Departmental Representative, which may point out that this income was, based on the bogus transactions. This income may be a part of regular assessment but cannot form part of the undisclosed income. The income was duly disclosed in the return filed although subsequent to the search as the due....