TaxTMI 
TaxTMI 
2011 (9) TMI 50
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....rconnected and the arguments are also more or less similar and hence, all these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. It was also agreed by all the sides that the facts discussed in the case of Sibu Soren may be considered and on this basis, all the four appeals of 4 individuals can be decided of course after considering the arguments of different advocates appearing on behalf of the respective assessees whereas from the side of the department, Ms. Rashmi Chopra, Standing Counsel, Advocate is arguing for the Department in all these five cases. We, therefore, note down the facts from the case of Shri Sibu Soren, which are as under: 3. It is noted by the Assessing Officer in the assessment order that a search warrant under section 132(1) of the Income-tax Act, 1961 was issued and executed on 26-4-1996 at the Punjab National Bank, Noroji Nagar, New Delhi (hereinafter referred to as 'PNB'), in respect of FDR 195/Spl/FDR 2000 and FDR 194 and also S/B A/c 18914 and 19100 held by the assessee individually and jointly. It is further noted by the Assessing Officer that the amount of all these bank accounts were place....
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....a, CA obtained photocopy of JMM bank account and assessee's bank accounts on 5-3-1997. It is also noted by the Assessing Officer that a letter dated 3-3-1997 asking the assessee to contact ADI Unit 1, New Delhi for inspection of the search documents, was served on the Ld. A.R. of the assessee on 5-3-1997. The matter was adjourned to 14-3-1997. On that date, i.e. on 14-3-1997, the assessee did not file any details and asked for adjournment. Final adjournment was granted by the Assessing Officer and the hearing was fixed for 26-3-1997. It is noted by the Assessing Officer that a letter was issued to the assessee on 14-3-1997 and it was served on the assessee on 15-3-1997 in which assessee was informed that opportunity for the cross examination of witnesses and the statements recorded in Bihar is being provided at the office of ADI, Ranchi Shri A K Pandey on 19-3-1997 at 11.00 AM and he may use this opportunity for cross examination of the witnesses. Thereafter, on 17-3-1997 Ld. A.R., Shri R. Gupta appeared and filed a letter dated 17-3-1997 in which he submitted that it would not be possible for his client to go to Ranchi for the purpose of cross examination of witnesses and requeste....
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....support of the submissions and the case was adjourned to 21-4-1997 and it was pointed out to him that this is the last opportunity for the assessee to file evidence and explanation. The Assessing Officer also noted that the assessee was also served with copy of statement of Shri Shailendra Mahto recorded by Metropolitan Magistrate, Shri Rakesh Dadani on 22-3-1997 and was asked to explain why in view of the statement, the amount deposited in PNB should not be held as amount belonging to person in whose account it was deposited. Copy of the order under section 132(3) signed and served by ADI, Unit 1, New Delhi on 26-4-1996 was also given. On 21-4-1997, the assessee filed a letter dated 21-4-1997 but no information was filed and the case was again adjourned for 22-4-1997. On this date also, the assessee did not file the remaining information in support of his investment and other points and only a letter was filed on this date. Thereafter, the Assessing Officer completed the assessment on 29-4-1997. In the assessment order, the Assessing Officer also discussed the natural justice aspect and stated that it was fully complied with and various opportunities were provided to the assess....
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....ly relied on the statement of Sri Shailendra Mahto in rejecting the claim of the assessee that the amount deposited in these bank accounts belongs to JMM. The Assessing Officer also further noted that the resolution for authorizing all these four MPs to deposit the cash in their personal name is said to be passed on 11-7-1993 but the same is written on a plain paper and the attestation of this document is only done on 29-3-1996. The Assessing Officer has also noted that the use of money for personal need of the account holder is sought to be explained by the plea of personal loan. The Assessing Officer has further noted that the provision of personal loan to the members at the rate of interest of 2 per cent p.a. was added after the closing of the meeting and moreover, no interest was paid by these MPs on these loans. Various other discrepancies are noted by the Assessing Officer in the assessment order with regard to entry in the books of account of JMM of these loans said to be granted to various MPs. It is also noted by the Assessing Officer that the return of income of JMM for the assessment year 1994-95 was filed on 31-3-1996 after recording of statement by IT Department but in....
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....ons printed in the year 1995 of Rs. 100.50 lakhs which bear the marking of SAP which denoted Seth Art Printers. The Assessing Officer also noted that as per M/s. Seth Art Printers, these coupons were printed in January 1995 and hence, the same could not have been used for raising donation in the relevant period. Some other aspects were also discussed by the Assessing Officer in the assessment order and finally, it is held by him that this claim of the assessee is not acceptable that the amounts deposited in his bank accounts were belonging to JMM and he held that these are the amounts of respective account holders. Out of the account No. 195/Spl/FDR 2000 which is standing in the joint name of Suraj Mandal, Shibu Soren, Simon Marandi and Shailendra Mahto in which an amount of Rs. 30 lakhs was deposited on 1-8-1993, the Assessing Officer distributed the amount in the hands of these four persons and made addition of Rs. 7.50 lakhs in each case. Regarding the other bank account No. 194, which is in the name of Shri Shibu Soren, Rupi, Hemant & Basant in which Rs. 30 lakhs was deposited on 1-8-1993, the entire amount was added in the hands of Shri Shibu Soren. An amount of Rs. 2,000 was ....
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....nding in the name of Shri Shailendra Mahto and Abha Mahto being the amount deposited of Rs. 39.80 lakhs on 1-8-1993. There was no cash deposit in the S/b account No. 18983 standing in the joint name of Shri Shailendra Mahto and Abha Mahto except transfer from account No. 196 and hence no addition was made on account of deposits in this bank account. Addition on account of interest income was also made. The total addition made in the hands of Shri Shailendra Mahto is of Rs. 84,12,349 which includes addition on account of deposits in the bank account with PNB and interest income as under: Financial year Deposits (Rs.) Interest (Rs.) 1993-94 50,00,000 41,323 1994-95 - 2,39,581 1995-96 - 87,944 April 1996 - - 6. Although, the amount deposited in the bank account No. 196 in the name of Shri Shailendra Mahto and Abha Mahto was only Rs. 39.80 lakhs but addition was made to the extent of Rs. 50 lakhs as has been admitted by him in his statement that the amount received by him on account of voting against No Confidence Motion was Rs. 50 lakhs. 7. Similarly, in the case of Shri Suraj Mandal, total addition made by the Assessing Officer is of....
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....o panchnama has been drawn and served upon the assessee till date. It is submitted that in case a search is initiated, the same has to be concluded by preparing a panchnama but in the present case, only prohibitory order under section 132(3) of the Income-tax Act, 1961 were passed on 26-4-1996 and a copy of one such prohibitory orders were provided to the assessee that too on 17-4-1997 i.e. after a period of almost one year. It is further submitted that none of the residential premises or office premises of the assessee was ever searched under section 132(1) of the Income-tax Act, 1961 and no incriminating documents or material has been brought on record so as to enable the department to assume jurisdiction under section 158BC of the Income-tax Act, 1961. It is also submitted that search of bank of the assessee is not a search on the assessee. Arguments were raised regarding validity of search also by contending that there was no reason for the department to search the assessee but we are not dealing with these arguments because the Tribunal cannot go into the question of validity of search. Further contention was raised that the opportunity was not provided to the assessee and hen....
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.... (e) CIT v. V.B. Aggarwal [2007] 158 Taxman 357 (Delhi) (f) CIT v. Aggarwal Developers (P.) Ltd. [2007] 163 Taxman 699 (Delhi) (g) CIT v. G. K. Senniapan [2006] 284 ITR 220/155 Taxman 118 (Mad.) (h) N.R. Paper & Board Ltd. v. Dy. CIT [1998] 234 ITR 733/101 Taxman 525 (Guj.) (i) CIT v. M.S. Aggrawal (HUF) 207 Taxation 691 (HC) MP. 14. It was further submitted that under the provisions of Chapter XIVB of the Income-tax Act, 1961, an assessment of an undisclosed income can be made only in respect of an undisclosed income as per the evidence found as a result of search or other material or information relatable to such evidence found in the course of search but the same cannot be invoked to assess an income or reassess where there is escapement. In support of this contention, reliance was placed on the following judicial pronouncements: (a) L.R. Gupta case (supra) (b) Ravi Kant Jain case (supra) (c) CIT v. Shambhulal C Bachkaniwala [2000] 108 Taxman 515 (Guj.) (d) CIT v. Vikram A Doshi, Ms. Leena V Doshi [2002] 256 ....
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....udicated on the same factual matrix by the Hon'ble Apex Court in P.V. Narsimha Rao v. State (CBI/SPE) AIR 1998 SC 2120 regarding the same bank deposits. It was alleged that these four MPs i.e. Shri Shibu Soren, Shri Suraj Mandal, Shri Simon Marandi and Shri Shailendra Mahto belonging to JMM party had received consideration from Congress party for voting against No Confidence Motion against P V Narsimha Rao Government. It is also submitted that the cases lodged by CBI against these MPs under the Prevention of Corruption Act was found unjustified and wrong. It is further submitted that it is also known fact that different parties many a time come closure, form alliance, agree to cooperate with each other in and outside the Parliament. It is further submitted that JMM party and Congress party have agreed to cooperate each other. He further submitted that at this juncture of history of the country, the congress party approached the JMM party to help in notional interest and not to vote against the P V Narsimha Rao Government in the Parliament. He further submitted that JMM party rightly thought that voting out congress party at that critical juncture when the country was facing economi....
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....n which has not been done by the assessee in the present case. 19. Regarding the 2nd contention that search was never conducted on the assessee, it is submitted that in the facts of the case, it is clearly recorded in the satisfaction note that there are reasons to believe the existence of undisclosed income in the hands of these assessees and other incriminating circumstances/non-explanation, which justifies the action for initiation of search of these assessees. She submitted that copy of this satisfaction note along with copy of warrant of authorization and copy of search manual is already submitted. It is further submitted by her that bank is the place where the undisclosed income of the assessee (undisclosed cash) was kept and thus, as per the provisions of section 132(1) read with section 158BC/158BD of the Income-tax Act, 1961, search is to be conducted in the place where there is reason to believe that such undisclosed income is lying. She further submitted that the warrant of authorization clearly provides that the place to be searched is where the undisclosed income is lying. She further submitted that search is "assessee based" and "premises based". When the authoriza....
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....quate opportunity to the assessee but in fact, the boot is on the other leg as the assessee refused to file details despite a number of adjournments/accommodation by the Assessing Officer. 20. Regarding this contention that no notice under section 143(2) of the Income-tax Act, 1961 was issued after filing the return, it was submitted that detailed questionnaire and notice under sections 142(1) and 143(2) of the Income-tax Act, 1961 were issued to the assessee on 11-2-1997 asking exhaustive information and the same was replied by the assessee. She submitted a copy of these notices and questionnaire along with reply of the assessee. She submitted that the return was filed on 20-3-1997 and the assessees' AR continued to appear before the Assessing Officer and non appearing or withdrawal of attorney by C.A. on 2-4-1997 compelled the Assessing Officer to issue notice under section 144 of the Income-tax Act, 1961 which is detailed and exhaustive. She submitted a copy of this notice also. She further submitted that the proceedings for the best judgment assessment was never continued as assessee subsequently appeared and the Assessing Officer allowed the assessee fair and reasonable opp....
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....ion or any other Article or section of Income-tax Act, 1961 does not grant immunity to the assessee against the true and complete disclosure of income chargeable to tax and the non-taxability of the undisclosed income. 24. Regarding this contention that the income as already disclosed under section 131 on 14-3-1996 and hence there is no undisclosed income, it was submitted by her that statement made under section 131 of the Income-tax Act, 1961 during pre-search inquiry which resulted in issuance of search warrant cannot be deemed to be true and full disclosure of undisclosed income and the same in any case is not true and full disclosure. She submitted that as per section 158B(b), undisclosed income is gold, bullion, money etc., or income which has not been or would have not been disclosed for the purpose of this act. She submitted that admittedly, no return has ever been filed by these assessees and thus, there is no question of anything was lying disclosed in the present cases. She submitted that mere statement as a part of pre-search inquiry cannot amount to disclosure of income possessed by the assessee chargeable to tax. She submitted that the main issue is whether such in....
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....f books of account or other material and such other material or information which are available with the Assessing Officer and are relatable to such evidence found as a result of search. This is also a settled position by now that for the purpose of addition in the block assessment under chapter XIV-B, which will result into levy of higher rate of tax of 60 per cent, incriminating material found in course of search is to be considered and not each and every thing found in course of search. For example, regular books of account maintained by a businessman are also found in course of search but those books are not considered to be incriminating material because existence of regular books is in the knowledge of the revenue although its contents are not known to the revenue. But still, in relation to entries in those books, no addition is to be made in block assessment and addition, if any, is to be made in regular assessment only. This is also a settled position that whether regular assessment is actually made or not or whether any addition in regular assessment is actually made or not is also not relevant and if any addition is required to be made in regular assessment, it cannot be ....
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....ion should have been discovered during the search operation which would indicate that the gifts were bogus or represent the concealed income of the assessee and since no such material/document/information was found, post search inquiry conducted by the Assessing Officer during the block assessment proceedings could not form basis for making addition and since the post search inquiry was unconnected with the information/material recovered during the search, it was held that the Assessing Officer could reopen the assessment under section 147 of the Income-tax Act, 1961 but could not add the income under section 158BC of the Income-tax Act, 1961. On further appeal, the Tribunal upheld the order of the Ld. CIT(A) on this basis that there was nothing in the assessment order to show that any evidence was found during the search to suggest that gifts were bogus. Against this order of the Tribunal in that case, the revenue preferred an appeal before the Hon'ble High Court of Delhi and under these facts, it was held by the Hon'ble High Court of Delhi that since no incriminating material was found in the course of search, the Assessing Officer could not take resort to the provisions of Chapt....
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....e, whether such income can be added in the block assessment. Regarding the first aspect, this is the explanation given by the Ld. A.R. on merits of this addition that the amounts deposited in these bank accounts is the money of the party i.e. Jharkhand Mukti Morcha (JMM) and not of the assessee and hence, no addition is called for on account of these deposits in PNB, Noroji Nagar, New Delhi also. Before deciding this aspect, we feel that second aspect is needed to be decided first and the first aspect will be required to be decided only if it is found that addition can be made in the block assessment in respect of these deposits in the bank even if it is accepted that it is an income of the assessee. Hence, we proceed to decide the second aspect first and for doing so, we assume that the money deposited in the Noroji Nagar branch of PNB represents income of the assessee. 33. Regarding this aspect that no addition can be made in block assessment with respect to various deposits in Noroji Nagar branch of PNB even if it is an income of the assessee, we first take note of facts of the present case, which are relevant for deciding this aspect. It was submitted by the learned AR of th....
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....persons. In reply, it was submitted that these are the money of JMM party which are lying in the joint saving bank account and joint FDRs in the name of four MPs and also the FD in his personal name. 34. When this query was raised as to why the amount in question was not deposited in the bank account in the account of the party JMM, it was submitted in reply that it was done as per the decision of the party which was taken prior to 1-8-1993. This query was also raised as to from where the money came with the party and in reply, it was submitted that they are running agitation for separate Jharkhand state and for this purpose, they are getting donation in this respect and as per the decision of the party, the money was deposited in their personal accounts. This query was also raised as to whether they have names and addresses of the persons who have given the donation to the party and in reply, it was submitted that there are coupons and receipts and they have the names of MLAs, MPs etc. who collected these donations from the general public but they do not have individual names of the public. 35. Statement of Shri Shailendra Mahto was also recorded by ADI (Investigation) under....
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....n the joint name of himself and other three JMM MPs. When the question was raised regarding balance in various bank accounts, it was stated by him regarding SBI Karmatand, SBI Vidhan Sabha Branch and SBI Godda and SBI Sansad Bhavan. Regarding PNB, Noroji Nagar, New Delhi, it was submitted that in that account, Rs. 46 lakhs was deposited in the year 1993 which may be around Rs. 52 lakhs on the date of statement after including interest and this money is belonging to the party i.e. JMM party. It was also stated that there is one joint account with the same branch of PNB in the joint name of 4 MPs and Rs. 10,000 was deposited in the bank account in the beginning. 37. From the above narration of these four statements recorded by ADI(Investigation) in March, 1996, i.e. prior to the date of search, it is clear that all these four MPs have clearly brought out relevant facts and they have duly disclosed the fact of various bank accounts with PNB, Noroji Nagar, New Delhi and from some of the statements, it is also coming out that even before the statements were recorded, concrete information was available with the department regarding the existence of these bank accounts, amounts and mon....
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.... department prior to the date of search and even after search, there was no seizure also and merely a prohibitory order under section 132(3) was placed. Under these facts, in our considered opinion, this is not an incriminating material found as a result of search because complete details were already available with the department even prior to the date of search. For the purpose of ready reference, we would like to reproduce the provisions of the relevant section of Chapter XIV-B, i.e. section 158B(b) and 158BB(1): CHAPTER XIV-B: SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES "Section 158B(b) : Definitions - In this chapter, unless the context otherwise requires,- (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 whic....
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....e search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. Explanation.-For the purposes of determination of undisclosed income,- (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of "[this Act] without giving effect to set-off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32: '"[Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set-off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32;J (b) of a firm, returned income and total income assessed for each of the previous years f....
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.... these persons have duly accepted and given details of these deposits in these bank accounts including the date and amount of deposits and hence, the question is whether these bank accounts can be said to comply with the requirement of the provisions of section 158B(b) that this would not have been disclosed for the purpose of this Act. In addition to this, as per the provisions of section 158BB, an addition in the block assessment can be made only on the basis of evidence found as a result of search. It is by now a settled position of law that only that evidence found as a result of search will be relevant for making any addition in the block assessment which is considered an incriminating material because the regular books may also be found in course of search but the entries in regular books cannot be considered in block assessment. The reason is this that the existence of regular books is in the knowledge of the department. 40. In the present case, there is no requisition of books of account and hence, the only basis on which any addition can be made in the block assessment with respect to these bank accounts can be that it is on the basis of incriminating material found as ....
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....which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, the existence of the money or asset is known to the Income-tax Department and where the case of the assessee is that the said money or valuable asset is not liable to be taxed, then, in our opinion, the provisions of sub-clause (c) of section 132(1) would not be attracted. An assessee is under no obligation to disclose in his return of income all the moneys which are received by him which do not partake of the character of income or income liable to tax. If an assessee receives, admittedly, a gift from a relation or earns agricultural income which is not subject to tax, then he would not be liable to show receipt of that money in his income-tax return, Non-disclosure of the same would not attract the provisions of section 132(1)(c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable but where the department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Department may be fully ....
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....When a query is raised, that person also accepts that he is having an amount of Rs. 1 lakh in his briefcase lying with "A" and later on, only that briefcase is searched and it is found that his briefcase was having an amount of Rs.l lakh only. Before searching the briefcase, it was known to the department that this briefcase is belonging to "Mr. B" and the same is containing an amount of Rs.l lakh and after the action of the search, it has merely confirmed such knowledge of this fact that the brief case of "Mr. B" is having an amount of Rs.l lakh but this is not an new evidence found in the course of search. In our considered opinion, the search under these facts merely confirmed the knowledge which was available prior to the action of the search and hence, it is not new evidence found in the course of search but it is a confirmation of knowledge about the existence of an asset by way of verification in the course of search. In our considered opinion, there is a difference between evidence found in the course of search and confirmation of concrete information available before the search. The conclusion will be different if the information or knowledge before search is vague. In tha....
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....ed judgment of Hon'ble High Court of Delhi, this can be a subject-matter of regular assessment, by way of issuing notice under section 148 and hence, it is implied that this cannot be a subject matter of block assessment under Chapter XIV-B. Whether the department has taken action for regular assessment or not, is not relevant for the purpose of deciding the issue as to whether any addition can be made in the case of block assessment. What is relevant is this that whether the amount in question for which the addition is proposed by the Assessing Officer is based on any evidence found as a result of search or not. In our considered opinion, in the present case, the amount which has been added by the Assessing Officer in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi is not on the basis of any evidence found in the course of search and hence, no such addition can be made in the block assessment proceedings. In her written submissions, on this aspect, learned counsel for the revenue has merely submitted that Statements made under section 131 cannot be deemed to be "true and full disclosure of disclosed income" and hence addition can be made in block. Her....