TaxTMI 
TaxTMI 
2013 (10) TMI 609
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....dated order. 3.1 It would be relevant to outline the facts of the case before we proceed to deliberate on the different issue/s arising for our adjudication per the instant appeals. Assessments in the first instance were framed u/s. 158BC in September, 2000, consequent to a search u/s. 132 of the Act on the assessees. The assessee/s securing part relief, the matter was carried before the tribunal, both by the assessees and the Revenue, which, vide its order dated 11.02.2005 (in IT(SS) Appeal Nos. 657 & 703/Mumbai/2003 and 656/Mum/2003) set aside the assessment/s, restoring the matter back to the file of the Assessing Officer (AO) for fresh adjudication (pgs. 1 & 2 of the assessment order). The principal issue in these appeals is in respect of assessment of undisclosed income. The assessee-appellants, who are brothers, engaged in construction business, developed a Shopping Complex by the name 'Shivam Shopping Centre' at Malad, Mumbai during the relevant (block) period, on behalf of M/s. Jimet Enterprises Ltd. (JEL) and Shivam Shopping Centre Ltd. (SSCL). In both these companies, the assessees, along with their family members, were share-holders. Power of attorney/s was executed i....
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....of the two assessees was, accordingly, computed as under, taking the same as the income for A.Y.1998-99: Unaccounted Receipts Rs. 1,07,08,423 Less: Expenditure allowed Rs. 70,91,899 Income Rs. 36,16,524 Share of Sharad Ruia @ 2/3 Rs. 24,11,016/- Share of Kamal Ruia @ 1/3 Rs. 12,05,508/- 3.2 Shri Sharad S. Ruia was also found to be engaged in extending cash loans (out side books of account) for interest. A total of Rs. 39.50 lacs was found to have been given as cash loan/s on interest on the basis of seized material, the details of which, as stated, appear at Ann. A to the original assessment order. The source thereof was stated to be the receipt from construction. Interest arising on the loans was, as per the practice, deducted upfront. The same worked to Rs.6,18,960/-. As such, the amount of loan actually given is only Rs.33,31,40 (39,50,000 - 6,18,960). The assessee, though not denying the fact that the said loans were given out of his unaccounted income, claims that only the peak amount (net of interest of Rs.3,81,060/-) of the said loans, i.e., Rs.27,68,940/-, could be added. The AO was, however, of the view that entire advanced amount of Rs.33,....
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....t inasmuch as the tribunal in that case accepted the net profit rate of 10% in respect of unaccounted receipts. As such, it cannot be said as a thumb rule that every addition of undisclosed income is necessarily to be based on some seized material. 4.2 The ld. DR, on the other hand, would place reliance of a host of decisions (also briefing their facts), as under, to the effect that undisclosed income, which is the subject matter of assessment for the block period under Chapter XIV-B of the Act, could only be on the basis of evidence found as a result of search, or other documents or materials or information relatable to the such evidence as available with the AO: a) D D Gears Limited [25 taxman.com 562 (Del)] b) Bansal Strip (P) Limited, 99 ITD 177 (Del) c) Jyotichand Bhaichand Saraf and Sons (P) Limited [26 Taxman.com 239] d) Surjit Tosaria [146 Taxman 32 (Del)] e) Gorakh Petro Oils Limited, 3 SOT 661 (All.) f) Vengat Bava, 6 SOT 434 (Coc.) g) Maladyanti, 92 TTJ 270 (Bang) In the instant case, the Revenue has finally allowed credit of Rs.75.93 lacs to the assessee....
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....s examine the facts of the case in light of the law as enunciated and explained by the hon'ble courts. As seen, the law in the matter is well-settled, with it in fact having witnessed amendment to section 158B, which defines 'undisclosed income', by Finance Act, 2001 w.e.f. 01.06.2001, and to section 158BB, laying down the manner of computation of the undisclosed income, vide Finance Act, 2002 with retrospective effect from 01.07.1995. We are, therefore, unable to comprehend the assessee's case. There has been no addition qua the cost of the construction of the project - which in fact is not the subject matter of dispute - in which case, the assessee could be considered to have been called upon to adduce evidence to substantiate its claim. The reliance on the valuation report is, thus, of little moment. Could, one may ask, the Revenue assess 'undisclosed income' on the basis of valuation report consequent upon a search, case law on which is legion. The valuation report could be sought by the Revenue, in satisfying itself with regard to the construction cost as debited or claimed by the assessee per its regular books of account, or verifying the assessee's claim with regard thereto,....
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.... discovered (which though is neither necessary nor essential for the assessment of the undisclosed income, as of any other income for that matter), with the difference, perhaps, being on account of interest, which is stated to be at Rs.3.81 lakhs (on the peak advance). In fact, the assessee itself explains the source of advances as being the unaccounted construction receipt, accepting which, no separate addition towards the same has been made by the Revenue. We are, therefore, at loss to understand the basis of the assessee's claim for being liable to be assessed at a percentage (10%) of the unaccounted construction receipt, i.e., in view of the corresponding assets in the form of cash loans having been substantially, if not fully, also found. We are conscious that it is so only in the case of one of the brothers, Sharad Ruia, and not the other and, besides, there could be a difference in dates. The absence of corresponding assets in the case of Sh. Kamal S. Ruia, the other brother, is immaterial inasmuch as if the veracity of the undisclosed income as determined for one of the assessee is validated with reference to the seized material, it by itself validates that for the other; t....
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....g that the assessee is not aggrieved by the finding of the AO in holding that it is the principal amount of loans (Rs.33.31 lakhs) that needs to be added instead of the peak amount of Rs.27.69 lakhs and, further, that the cash advanced had been made out of profit of the construction activity, rather than out of the receipt of the construction activity. To begin with, the first thing that the asssessee, impugning the said finding, was required to show is the basis of its case, i.e., as to how it is indeed aggrieved. Further, even so, it would, as a second step, be required to show as to how the said finding is not correct, i.e., dislodge it on merits, for us to vacate, reverse or modify the same, directing for consequential relief to the assessee, who did not make out any such case before us. In fact, we are unable to comprehend the basis of the assessee's case. The simple reason is that the only addition that stands made qua the interest bearing cash advances is for the interest income earned during the block period, i.e., Rs.6.19 lakhs, and which is undisputed. That being the case, the merit of the assessee's ground no. 2 is not understood. The same is in any case rendered academi....