TaxTMI 
TaxTMI 
2010 (4) TMI 445
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....of the search operation made under section 132(1) of the Act, which was carried on at the premises on November 3, 1996. On examination of the books of account and other records the regular assessment order was passed on February 15, 1999. For the assessment year 1997-98, the return was filed on October 9, 1997. The said return was also originally processed under section 143(1)(a) of the Act and there- after the case was picked up for scrutiny and, later on, regular assessment order was passed under section 143(3) on December 29, 1999, after scrutiny of the books of account and other documents. 3. On the basis of various seized documents, bullion, jewellery, etc., the block assessment was made on November 27, 1997, under section 158BC of the Act for the period commencing from April 1, 1987, to November 3, 1996, relevant to the assessment years 1987-88 to 1997-98 (part) and undisclosed income was determined at Rs. 29,92,950 for the assessment years 1996-97 and 1997-98 (part). Against the block assessment order dated November 27, 1997, the petitioner preferred an appeal before the Income-tax Appellate Tribunal (called "the Tribunal" for brevity). The Tribunal, vide order dated Augu....
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....In view of the above fact, I have reason to believe that the income of Rs. 1,02,300 chargeable to tax in the firm M/s. Vishwanath Prasad Ashok Kumar Sarraf has escaped assessment and to assess the same the assessment has to be reopened under section 147 of the Income- tax Act, 1961. The approval accorded by hon'ble CIT (Central), Kanpur, vide his satisfaction dated March 17, 2003 as per letter dated March 17, 2003. Date : 20-3-2003 (Sd.) . . . . . . . . . . . . . (K. K. Upadhyay) Asst. Commissioner of Income-tax, Central Circle-II, Varanasi." "Assessment year 1997-98 Reason of reopening assessment under section 147 The return of income for the assessment year 1997-98 showing income at nil was filed on October 9, 1997. The assessment was completed under section 143(3) on the income of Rs. 1,35,000 vide order dated December 29, 1999. The order book was found during the course of search proceedings at the business premises on November 3, 1996, revealed that total of 5090.110 grams gold ornaments appearing in the name of total 17 persons details of which is as under : S. No. Name and address of the assessee Date of receipt of old ornaments W....
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.... of the partner of the firm Sri Ashok Kumar is also ambiguous and deviate from the facts. For example, in his statement in respect making the entries in the books of account he stated step by step procedure which leave many facts unanswered. In view of the above facts the entry found recorded in the order book for 5090.110 grams of gold ornaments not explained satisfactorily by the assessee in post-search enquiries so the total value worked out at Rs. 500 per gram for 5090.110 grams comes to Rs.25,45,055 which is nothing but undisclosed investment in the purchase of gold ornaments and entry in the order book is unexplained purchases in the form of stock is liable to be added under section 69 of the Income-tax Act. 2. During the course of search proceedings cash amounting to Rs.3,16,400 was found from the business premises of the assessee and Rs. 18,150 found from the residential premises. Out of these only Rs. 1,06,520 explained leaving Rs. 2,28,030 unexplained, so the amount of Rs. 2,28,030 is unexplained cash found lying with the assessee which is not properly explained in the post-search enquiries so it is liable to be treated income of the assessee in the assessment year....
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.... the petitioner. The relevant paragraph of the Tribunal's order reads as follows : "1996-97 31. The Assessing Officer made the addition of Rs. 1,02,300 in the block assessment year 1996-97 on substantive basis in the hands of the assessee. This income was shown by Smt. Ambika Devi in her return in the assessment year 1996-97 as income from the saree business. The Assessing Officer disbelieved and made the addition on substantive basis in the hands of the assessee-firm and on protective basis in the hands of Smt. Ambika Devi. We are unable to agree with the view of the Assessing Officer. Once Smt. Ambika Devi had shown income from the saree business in her return for the assessment year 1996-97, prior to the search, the same cannot be termed as 'undisclosed income'. We are repeating again that for undisclosed income, the Assessing Officer will have to establish that the assessee would not show the same income in his hands for the purpose of this Act. However, in this case, Smt. Ambika Devi has already shown the same income in her hands prior to the search in the assessment year 1996-97. The search party did not find any evidence during the search that the assessee-firm was do....
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....contained like roznamcha, rokar bahi ledger, karigar bahi, order book, stock register for gold ornaments, sales tax register, gold purchase voucher and sale vouchers, silver jewellery purchase vouchers and silver purchase vouchers. Shri Ashok Kumar, partner, also narrated the procedure for making entries in the books of account in his statement. However, the Assessing Officer did not believe the affidavits and statement of the customers as he found discrepancy in their statements. The Assessing Officer also did not believe the statement of Ashok Kumar as he found discrepancies in the statement of Ashok Kumar, therefore, made the addition of value of 5090.110 gms. of the jewellery at Rs. 500 per grams in a sum of Rs. 25,45,055 and treated the same as unaccounted stock of the assessee. The Assessing Officer noticed that the aforesaid persons have made incoherent statements and also did not know English. The Assessing Officer also objected to their dealings as the ornaments were kept for long time and while delivery was not taken at the earliest and that the customers have not specified special occasions for remaking of their gold jewellery and also the signature did not tally with t....
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....seized and also found mentioning the dealings of these customers with the assessee. All these records were seized by the search party. The assessee was maintaining the registers of the customers giving their articles for remaking as per the Gold (Control) Act, which was previously applicable. All these details of the customers were recorded in the books of account and documents seized by the search party. The learned Departmental representative argued that the nature of the transaction was different. However, it is admitted that the same are purchase vouchers entered in the books of account. His only objection is that the same are not the dealings for the purpose of remaking of the gold jewellery. It is not a case made out by the Assessing Officer. The Assessing Officer made the addition as he found discrepancy in the statement of the witness and Ashok Kumar. The learned Departmental representative admitted all vouchers pertaining to 17 customers have been entered into the records and documents which were seized by the search party. Everything is disclosed in the books of account and documents maintained by the assessee in the normal course relating to the previous year. The same c....
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....ee. The assessee has been able to prove that the gold jewellery entered in the books of account or other documents maintained in the normal course relating to the previous year. The Assessing Officer has tried to make out a case of undisclosed income on presumption and discrepancies only but he has failed to satisfy the requirement of the definition of the undisclosed income as provided under section 158B(b) of the Income-tax Act. The case of the assessee is squarely covered by section 158BA(3) of the Income-tax Act and the Central Board of Direct Taxes Circular No. 717(supra) and as such, the said income cannot be included in the block period." "27. During the search and seizure operation, Rs. 3,16,400 was found from the business premises of the assessee. In the initial statement of Shri Ashok Kumar recorded on date of the search, i.e., November 3, 1996, he has surrendered Rs. 1,89,880 voluntarily, but he did not include the same in the return filed subsequently. The Assessing Officer found mentioning of reconciliation of the cash on November 3, 1996, and as per the pukki rokar annexure 'A' written up to October 17, 1996, cash balance of Rs. 57,960 was found. In the kachi rokar....
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....he cash in flow and out flow are not supported by documentary evidence is itself contradictory from the above facts. The assessee has given all the details of the reconciliation and given the details from where cash came into but the Assessing Officer has failed to make out any investigation on this issue and rejected the case of the assessee without assigning any reasons. The argument of the learned Departmental representative had been that Ashok Kumar partner has surrendered cash of Rs. 1,89,880 at the time of statement on November 3, 1996, therefore, the same cannot be reconciled now. The learned Departmental representative argued that the same statement would be the basis of addition in the hands of the assessee in the block period. The learned Departmental representative relied upon the judgment of Allahabad High Court in the case of Dr. S. C. Gupta v. CIT [2001] 248 ITR 782 (All), in which it was held : 'Held, that a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statem....
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.... the discrepancy in the cash from the reconciliation, which is supported by the documents and as such in our considered view, no addition could be made on the basis of the statement of Ashok Kumar by which he has surrendered cash of Rs. 1,89,880. The assessee has been able to prove the reasons for retractions from the earlier statement, which is also found supported from the explanation given by Ashok Kumar in his initial statement as well as from the explanation given in the reconciliation before the Assessing Officer. The Assessing Officer has also made addition of Rs. 18,150 in respect of unaccounted cash recovered and seized from the residential premises of Ashok Kumar. The Department itself has admitted that Rs. 18,150 was recovered from the residential premises of Ashok Kumar, as such, the same cannot be connected with the transaction of the business activity of the assessee-firm and as such cannot be made the basis for making addition in the hands of the assessee-firm. The recovery from the residence of Ashok Kumar cannot be treated as undisclosed income of the assessee. As a result, we find that the entire addition in respect of the unexplained cash deserves to be deleted,....
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..... The assessment is framed after the end of the previous year, i.e., the end of March, 1997 at the time everything was available with the Assessing Officer, therefore, the Assessing Officer should have made enquiry into the evidences filed by the assessee instead of rejecting the explanation of the assessee summarily. Similarly, for silver coins bill was produced, details were furnished before the Assessing Officer but he did not make any enquiry about the purchases, rather he has disbelieved the purchases as no payment was made. There is no bar to purchase the goods on credit. As far as the silver brick and silver utensils are concerned, the Assessing Officer has disbelieved as no evidence of loan was found at the time of search. The assessee has filed all the details before the Assessing Officer. We have already taken up this point at the stage of the decision in respect of gold jewellery and we were of the view that, according to section 158BA(3), if the transaction relates to such income recorded on or before the date of the search in the books of account or documents maintained in the normal course relating to such previous year then such income cannot be included in the block....
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....he case of Smt. Vimla Devi and Gajendra Kumar. The entire addition is made without any basis and is liable to be deleted. We accordingly delete the addition in the hands of the assessee-firm. This issue is also decided in favour of the assessee against the Department." 6. Heard Sri S. K. Garg, learned counsel for the petitioner and Sri Shambhu Chopra, learned standing counsel. 7. Learned counsel for the petitioner submitted that action can be taken under section 147 of the Act after expiry of four years from the end of the relevant assessment years only in case the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 of the Act or in response to a notice issued under sub-section (1) of section 142 of the Act or section 148 of the Act or to disclose fully and truly all material facts necessary for his assessment for that assessment year as contemplated under the first proviso to section 147 of the Act. He submitted that in the present case the notices have been issued after expiry of four years from the end of the relevant assessment years. Therefore, the assessing aut....
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....s such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (here after in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year : Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appea....
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....tion 139 of the Act or in response to a notice issued under sub-section (1) of section 142 or section 148 of the Act, or to disclose fully and truly all material facts necessary for his assessment. In the present case, neither any finding in this regard has been recorded in the reasons recorded nor any such case has been made out. Therefore, on the facts and circumstances, we are of the view that the initiation of proceeding under section 148 read with section 147 of the Act for the assessment years 1996-97 and 1997-98 were barred. 11. In the case of Fenner (India) Ltd. [2000] 241 ITR 672 the Madras High Court has held that in case where the initiation of proceeding is beyond the period of four years from the end of the assessment year, the assessing authority must necessarily record not only his reasonable belief that the income has escaped assessment, but also the default or failure committed by the assessee and failure to do so would vitiate the notice and the entire proceeding. 12. Further, under section 147 of the Act the assessing authority can assess or reassess only that income which has escaped assessment, inasmuch as for taking the action there must be a reason to b....