TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 755
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.... iv) The enhancement of assessment of undisclosed income of assessee of Rs. 25,00,000/- on account of payment allegedly received from Jeetu Virmani on the basis of notings in page 21 of Annexure A-1 of the seized documents. v) The enhancement of assessment of an alleged undisclosed income of assessee of Rs.1,05,00,000/- on account of an alleged payment received back in respect of transactions of Chellegata property on the basis of notings in page 21 of Annexure A-1 of the seized documents. 2. Whether the Income Tax Appellate Tribunal has failed to appreciate that in view of the judgment of this Hon‟ble Court in the case of Commissioner of Income Tax Vs. Sardari Lal & Co., reported in 251 ITR 864 (Delhi) [FB], the Commissioner of Income Tax (Appeals) could not have enhanced the income not considered by the Assessing Officer? 3. Whether the order of the Income Tax Appellate Tribunal is not vitiated for non-consideration of evidence and in disregard of the law that burden to establish that there was an undisclosed income of the assessee was on the revenue?" It would be imperative to take stock of the facts and events which have given rise to the a....
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.... block period." The Assessing Officer made an addition of Rs.2,42,698/- as undisclosed income on account of dividend received on canshares. We are not concerned with this addition in the present appeal. Further the Assessing Officer made an addition of Rs. 10,00,000/- on account of amount allegedly paid to Mr. Jitu Virmani as undisclosed income by holding as under:- "11.The seized documents throws light on the fact that GMS construction Co; in which the assessee is a Director is into the business of Real Estate i.e. purchase, development and sale of property. Properties as appearing on the seized documents in Annexure A-1 have been purchased in Bangalore such as Rajaji nagar property as appearing on page No. 54 and 27 of the seized documents. They have been purchased through a person named Mr. Jitu Virman. The identity of Mr. Jitu Virmani was revealed by the assessee in his statement recorded on oath during the search. "he is a builder stationed at Banglore with whom various joint ventures are under consideration". During the assessment proceedings it further came to light that Mr. Jitu Virmani was closely associated with the Real Estate business of the assessee and....
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....f the agreement which states that Rs. 10 lakhs was to be paid on MOU and Rs. 25 lakhs on final agreement. The assessee replied that there was no agreement and the said paper is a part of their verbal discussion prior to entering into a joint venture. The above explanations of the assessee is not tenable given the fact that no satisfactory evidences have been furnished by the assessee so as to rebut that Rs.10 lakhs as mentioned as 10 C was not given to Mr. Jitu Virmani. Furthermore, page No.27 corroborates the fact that cash money indeed formed part of the business transactions and the same was received back by the assessee from Mr. Jitu Virmani. The assessee‟s explanations that he had omitted to write CH is only an afterthought and an attempt to evade and conceal the amount of Rs.10 lakhs which he had paid to Mr. Jitu Virmani. In view of the above observations, Rs.10 lakhs as appearing on page No.54 written as 10 C is added to the undisclosed income of the assessee as representing is concealed income for the block period." The Assessing Officer made an addition of Rs.20,00,000/- on account of amount received from Mr. Jitu Virmani as undisclosed income, by holding as under:-....
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....o Chellagatta properties. iii. It was also confirmed by him that Rs.1,35,80,000 was invested in Chellagatta properties which were received back. iv. On 8.2.02 Sh. G.M. Singh said that Rs. 1.35 crores was paid to various individuals on behalf of Soloman David by him and his wife (Sh.G.M. Singh Rs.67.81 lacs, Mrs. Praveen Nindrajog Rs.67,86 lacs). In this reply he also mentioned that these amounts were subsequently received by him. The statement of accounts reproduced above show that these amounts were advanced to different persons on 30.3.96, i.e., after 4.9.95, the date recorded in the seized document. The statements of accounts further show that some of the amounts were received back much after 4.9.95 as follows: 22.1.99 Rs. 9 lacs 24.1.99 Rs. 1 lac 23.5.2000 Rs. 5 lacs 23.6.2000 Rs. 19,64,218 4.2.2002 Rs.,29,255 23.5.2000 Rs. 5 lacs 23.6.2000 &....
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....erthought. Accordingly Rs.1.05 crores will be treated as income of Sh. G.M. Singh." 4. The CIT (A) further enhanced the assessment of the undisclosed income of the appellant by Rs.25,00,000/- on account of amount allegedly received separately in respect of R.T. Nagar Property, by holding as under: "14.1 In his reply before the AO given on 8.2.02 he mentioned that the balance amount of Rs.25 lacs was not received and this amount had been adjusted against the amount due to Sh. G.M. Singh and his wife from Soloman David Holdings P. Ltd. I wanted to know how the balance amount had been adjusted and in response to this query the appellant‟s AR replied on 17.3.2003 that the assumption that Mr. Jeetu paid the remaining balance of Rs.25 lacs was not correct at all. On the basis of nothings in the seized documents and his reply given before the AO I am unable to agree with the changed stand of the appellant because of the following reasons: 1. On page 21 it has been clearly mentioned that the amount receivable was Rs.50 lacs. 2. On 8.2.2002 it was again clearly explained that "this amount (the balance amount of Rs.25 lakhs) had been adjusted against the....
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....seized at the time of search at the premises of the assessee. Indisputably, a sum of Rs.10 lacs, as per these documents were received by him from Mr. Roop Chand Indermal Singhi was utilized for making unaccounted expenses which explanation was found to be totally untenable. The assessee had relied upon the entries appearing on pages 20,24 and 60 as well as Rs.2,50,000/- of cash seized from the premises of the appellant and cost of jewellery found at Rs.2,59,000/- and misc. items valued at Rs.1,35,000/-. However, a definite finding is arrived at by all the authorities below that those are distinct and separate entities and items from Rs.10 lacs received by the assessee as per the agreement entered into with Mr. Roop Chand Indermal Singhi. The Tribunal has further recorded that the assessee has been taking different stand at different times to explain pages 16 & 17 of Annexure A-1 and he should have come out with a definite stand while explaining the amount of Rs. 10 lacs. We may reiterate that no serious attempt was made to challenge or shake the aforesaid finding. We, thus, are of the opinion that this addition was rightly made. Question No. 1(ii) Addition of Rs.10,00,000/-....
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....eived as a part of the agreement between the assessee and Jitu Virmani regarding the development of property at Rajaji Nagar. Therefore, for the same reasons given in respect of an addition of Rs. 20 lacs based on page -54 this addition is also perfectly justified. 11. In fact, we may state at this stage that the entire thrust of argument of Mr. C.S. Aggarwal learned Senior Counsel appearing for the appellant/assessee pertain to the addition of Rs. 25 lacs and Rs.1,05,00,000/- made by the CIT (A) thereby enhancing the amount of undisclosed income. It is these two additions which were not only decided on merits but main focus of the submission of Mr. Aggarwal was that the CIT (A) had no power to enhance the income not considered by the Assessing Officer. On this aspect Question of law no.2 is framed. Therefore, before dealing with the merits of the two additions, it would be appropriate to answer Question no.2. For the sake of convenience this question is reproduced again:- "Whether the Income Tax Appellate Tribunal has failed to appreciate that in view of the judgment of this Hon‟ble Court in the case of Commissioner of Income Tax Vs. Sardari Lal & Co., report....
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....h has dealt the same in the course of assessment proceeding, same cannot be subject matter of power of enhancement by CIT (A). It was further argued that in the instant case since the Assessing Officer had not dealt with the aforesaid sums, the exclusive jurisdiction to enhance the said assessment, if it was so justified, was with the Commissioner of Income Tax who could have exercised his powers under Explanation (c) to section 263 (1) of the Act. It was further argued that the reasons given by the CIT (A) or ITAT in assessing the addition and holding that CIT (A) had such powers were totally untenable. According the learned Senior Counsel, the subject matter of appeal before the CIT (A) was not in respect of the source by which income has been enhanced by the CIT (A). In the instant case, every source of addition though may be falling under one head of income, would still remain a different source of income and hence it is submitted that since the said sums of Rs. 25,00,000/- and of Rs. 1,05,00,000/- were thus not a subject matter of appeal, the CIT (A) could not have enhanced the income by invoking his powers under Section 251 (2), as the power to do so could be stated to be ava....
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....h ought to have been taxed and remained untaxed, the legislature has provided different remedial measures as are contained in section 251 (1)(a), 263, 154 and 147 of the Act. In the category stated in (a), obviously if an income escapes an assessment, the provisions of Section 147 of the Act can be invoked, subject to the condition stated in the proviso of the said section. In the category of cases falling in category (b), section 251 (1)(a) provides the CIT (A) could enhance such an assessment qua the under-assessed sum i.e. where the AO had dealt the issue in the assessment and was the subject matter of appeal. In category falling in (c) & (e), the CIT has been empowered to take an appropriate action under section 263 of the Act In category of cases falling under clause (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the CIT (A) against the said addition and disallowance, the sa....
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....ed and the assessee had even furnished the specific reply thereto before the Assessing Officer. However, it is also a matter of record that in the final assessment order passed, there is no mention about the aforesaid two items. According to the assessee the CIT (A) had discovered a new source of income not considered by the AO in his order and, therefore, the CIT (A) had no such power under Section 251(a) (a) of the Act. The case of the Revenue, on the other hand is that the AO had already considered the seized document and had asked for the explanation of the assessee and found the explanation to be acceptable because of which the AO did not mention anything in the assessment order regarding the two items. On the other hand, the CIT (A) found some factual error in the explanation of the assessee and in these circumstances, he made the enhancement of income. It was, therefore, not a case of the discovery of new source of income which was not considered by the Assessing Officer. To appreciate the rival contentions, we reproduce the provisions of Section 251(1)(a) of the Act:- "251. Powers of the Commissioner (Appeals) (1) In disposing of an appeal, the Commissioner (Appeals....
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....remittance of Rs. 5,85,000 from a different aspect, namely, the point of view of its taxability. but since the Income-tax Officer has not applied his mind to the question of the taxability or non-taxability of the amount of Rs. 5,85,000 the Appellate Assistant Commissioner had not jurisdiction, in the circumstances of the present case, to enhance the taxable income of the assessee on the basis of this amount of Rs. 5,85,000 or of any portion thereof. As we have already stated, it is not open to the Appellate Assistant Commissioner to travel outside the record i.e. the return made by the assessee or the assessment order of the Income-tax Officer with a view to find out new sources of income and the power of enhancement under s. 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the proves of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter o....
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....) Calcutta Vs . Rai Bahadur Hardutory Motilal Chamaria [1967] 66 ITR 443(SC) . It was held that the power of enhancement under Section 31(3) of the 1922 Act was restricted to the Subject-matter of the assessment or the source of income which had been considered expressly or by clear implication by the ITO form the point of view of taxability and that the Appellate Commissioner had no power to assess a source of income which had been processed by the Assessing Officer." At the same time, the Court also clarified that the power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Officer not only with regard to the matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. This principle can be traced to the following discussion in the said judgment. "Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first Appellate Authority is invested with very wide powers....
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....at the document contains various notings of cash payments, advances etc. made through Mr. Tameez. The assessee was asked to furnish complete explanation thereof with sources for the same and was asked to explain with documentary evidences where it was accounted for. It was also mentioned that the document pertains to the property at Bangalore and the assessee was required to furnish full and complete details thereof. Page no. 21 reads as under:- "i. R.T. Nagar That GMS Construction Co. Pvt. Wanted to start the development of some properties at R.T. Nagar, Bangalore alongwith Mr. Jeetu on joint venture basis. As per their verbal understanding 60% of built up area would go to Mr. Jeetu and the balance 40% to GMS Construction Co. Pvt. Ltd. In consideration of this understanding Mr. Jeetu was to pay Rs. 50 lacs as nonadjustable deposit. That initially a deposit of Rs. 25 lacs was received from Mr. Jeetu and the same was deposited with Canara Bank Bangalore on 16-10-1995. The copy of Bank statement is enclosed herewith. The balance amount of Rs. 25 lacs was not received as the joint development could not be carried on due to depression in the real estate business and fall in the....
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.... by deciding not to make any addition. 23. In the case of Commissioner of Income-Tax, Bombay Vs. Shapporji Pallonji Mistry 34 ITR 342 (which has been affirmed by the Supreme Court), the Bombay High Court clarified that "source" of income would not mean source in the sense of head of income as used in the Income-Tax Act but would mean a specific source from which a particular income spank or arose. It was clarified that:- ".......If a particular source or item of income had been considered by the Income-tax Officer and had been subjected to the process of assessment, then even though the assessee may not have appealed against that particular source or item, one once the appeal was before the Appellate Assistant Commissioner his power extended not merely to the subject-matter of the appeal, but to the whole subject-matter of assessment. What gave the power to the Appellate Assistant Commissioner was the fact that a particular item or source had been subjected to the process of assessment. Now, the process of assessment would include, not only the subjecting of an item or source to tax, but equally holding that the particular source or item was not subjected to tax.." ....
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....rrect and thus, according to the CIT (A), this was not only a change of stand but not acceptable either because of the following reasons:- "1. On page 21 it has been clearly mentioned that the amount receivable was Rs.50 lacs. 2. On 8.2.02 it was again clearly explained that "this amount (the balance amount of Rs. 25 lakhs) had been adjusted against the amount due to Mr/Mrs. G.M. Singh from Soloman David Holding P. Ltd." In view of this the stand of the appellant now that the additional amount of Rs.25 lacs was neither received nor adjusted cannot be accepted. Therefore the only conclusion possible from these facts is that Rs. 25 lacs was received separately and has not been reflected in the regular books of accounts. Accordingly, Rs. 25 lacs is treated as unaccounted income of the appellant." 27. The learned Tribunal revisited the issue again discussing the contents of the seized documents at page 21 of the AnnexureA-1,statement of Mr. G.M. Singh and also the explanation of the assessee. Before the ITAT, the assessee had reiterated his contention that Mr. Jitu Virmani paid the remaining balance amount of Rs. 25 lacs in cash and was not correct and dealt wit....
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....in Section 260A of the Act." 30. In a recent judgment pronounced by the Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohanakala, [2007] 291 ITR 278 (SC) this well established principle is reiterated and affirmed by making following pertinent observations:- "The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed error in disturbing the concurrent findings of facts." 31. It cannot be said that the findings are in any way perverse or based upon no evidence This addition is, t....
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....already invested, it is logical to believe the writings on page 21 that the same amount was received back on 4.9.95, after the deal was not finalized. 13.6 On the basis of above mentioned facts and analysis of the same the conclusion that can be arrived at is that the deal in this property was made in the year 1995 and approximately Rs. 1.35 crores were paid to different persons through Sh. Jeetu Virmani. The deal did not materialize subsequently and the amount given was received back on 4.9.95 Rs. 35 lacs were received in cheque and Rs.105 crores were received back in cash which was not accounted for. All explanations offered subsequently are afterthought. Accordingly Rs. 1.05 crores will be treated as income of Sh. G.M. Singh." 33. The ITAT thoroughly reconsidered this matter as well in the light of explanation of the assessee. The Tribunal has reproduced the discrepancy pointed out by the CIT (A) in the explanation furnished by the assessee before the Assessing Officer vide his show cause notice and the reply thereto by the assessee as well as the findings of the CIT (A). The Tribunal further pointed out that notings at page 21 were in the hand writing of the assessee. I....