TaxTMI 
TaxTMI 
2012 (3) TMI 433
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.... in his grounds of appeal, had objected to the impugned order in an illustrative and narrative manner running into 21 grounds. In this connection, the assessee's specific attention is invited to the rule 8 of the Income-tax (Appellate Tribunal) Rules, 1963 wherein it has been prescribed under the caption 'Contents of Memorandum of appeal' that - "8. Every memorandum of appeal shall be written in English and shall set forth, concisely and under distinct heads, the grounds of appeal without any argument or narrative; and such grounds shall be numbered consecutively." 2.1. Turning to the issues on hand, to be precise, the grievances of the assessee are reformulated, in a concise manner, as under: Gr. No.1 - (Ground Nos.1 to 4, 17 & 18) the CIT (A) erred in upholding the proceedings initiated by the AO u/s 158BC of the Act and the assessment concluded u/s 158BC r.w.s. 143(3) of the Act; Gr. No.2 - (Ground Nos.5 to 9) that the CIT (A) had erred in confirming the addition of Rs. 15,00,000/- substantive basis; Gr. No.3 - (Ground Nos.10 to 16) that the CIT (A) had erred in confirming the additions of Rs,4,35,000/-, Rs. 81,850/- and Rs. 8 lakhs being unaccounted money advanced and int....
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....ought the permission of this Bench to place additional grounds of appeal vide his application dated 24.11.2011 on which, the assessee raised the following grounds: "1. that the validity of search is a sine qua non for initiating block assessment and though the appellant cannot prefer an appeal against the authorization of search and seizure, once unauthorized or illegal search and seizure culminates in assessment order, the appellant has a right to challenged assessment on several grounds including the validity of authorization and initiation and search seizure; 2. that the appellant has raised legal grounds regarding validity of search for initiating of proceedings u/s 158BC which is not in accordance with the law and without any material or information as contemplated u/s 132 and 132(1) and, therefore, whole proceedings are ab initio void and illegal; 3. that the appellant has raised ground Nos.4 to 6 before learned CIT (A has decided these grounds holding it as not in accordance with law and therefore rejected; 4. these grounds goes to the root of the initiation of proceedings and assessment which need not require any material facts for disposal and considering thes....
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....n the basis of which subsequent proceedings have been continued. It was, further, submitted that the fundamental proceedings were, itself, not in accordance with the law and as such, the assessment deserves to be cancelled etc., However, the AO in his report dated 31.12.2004 had clarified that in the case of assessee, a warrant was executed on the locker No.422 A class at Central Bank of India, Kankarla Branch, Maninagar, Ahmedabad in the names of Sitaben M Vyas and Manubhai P Viyas, that the fact was evident from the panchnama which was prepared on 8.3.2002 (copy of which was enclosed) and, thus, the assessee's submission does not survive etc., 6.2. On a careful consideration of the contention of the assessee as well as the reasoning of the AO, the CIT (A) had observed thus: "2.1(on page 4).........On a careful consideration of above report, I am of the view that notice u/s 158BC was justified and no reasons were to be recorded for satisfaction of AO u/s 158BD of the I.T. Act, 1961. Further, I find that the notice issued by the AO on 20.2.2004 was specifically issued u/s 158BC. The mention of section 158BD in the first line of the said notice is merely an error which does....
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.... of land to new power of attorney holder. These submissions of appellant, in fact, support the AO's views and my findings for grounds of appeal Nos. 4-6, where I have sustained the addition made for purchase of Tragad land on substantive basis. These grounds of appeal are also rejected and addition made is upheld." 7. Agitated, the assessee has come up with the present appeal. During the course of hearing, the submissions made by the Ld. A R are, for appreciation of facts, summarized as under: - that the CIT (A) had relied on the report of the AO, but, failed to consider the fact that no addition whatsoever has been made by the AO in connection with the content of the locker and, therefore, the proceedings initiated in the hands of the appellant was not legal, valid and in accordance with law and, hence, proceedings were ab initio void, illegal and contrary to the provisions of the Act; and that the proceedings initiated u/s 158BC and the assessment made u/s 158 BC r.w.s. 143(3) be held as illegal and without jurisdiction; . - the assessee relies on the ruling of the Hon'ble Karnataka High Court in the case of C Ramaiah Reddy v ACIT reported in 61 DTR 82 with regard to the lega....
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.... that the search was valid and legal and only thereafter it could go into the correctness of the block assessment order etc., the Ld D R countered the assessee's assertion by quoting the ruling of the ITAT, Madhya Preadesh (sic) Hon'ble High Court of Madhya Pradesh in the case of Gaya Prasad Pathak v. ACIT reported in 290 ITR 128 (MP)/(2007) 209 CTR 74 (MP) wherein it was held that "The validity of search and seizure is neither jurisdictional fact nor adjudicatory fact and, therefore, the same cannot be dwelled upon or delved into in an appeal". And also taking cue from the ruling of the Hon'ble Delhi High Court in the case of S.K. Industries v. DGIT (Inv) reported in (2007) 290 ITR 359 (Del), the Ld. D R argued that in the present case also, if the assessee was of the view that the search was invalid, then the assessee should have filed a writ petition before the High Court, challenging the validity of the search conducted on 26.2.2002; that the assessee did not challenge the validity at that time of the search was important and just because there was a decision of the Hon'ble Karnataka High Court, the assessee cannot challenge the validity of the search after a lapse of nine year....
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....llegal, invalid which requires to be cancelled. However, the CIT (A) took a stand that issuance of notice u/s 158BC of the Act was justified and no reasons were to be recorded for satisfaction of AO u/s 158BD of the Act and that the notice issued by the AO on 20.2.2004 was specifically u/s 158BC of the Act and also the mentioning of s.158BD in the first line of the said notice was merely an error which does not vitiate, anyway, the process, in view of the provisions of s.292B of the Act. 7.3.1. However, the legal heir of the assessee (Shri Rajendra M Vyas) had raised objection through additional ground that the validity of search for initiating of proceedings u/s 158BC was not in accordance with the law and without any material or information as contemplated u/s 132 and 132(1) of the Act. 7.3.2. At this juncture, we would like to recall that the initiation of search and seizure operation was carried out NOT by the assessing officer, but, by the Investigation Wing in consequence to information in its possession etc. In this connection, this Bench would like to reiterate that it is not within the purview of the Tribunal to unearth the justifiability or otherwise of an action enacte....
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.... in law and if the information or reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, action taken under section 132 would be bad in law. If reasons have been recorded and the concerned officer is satisfied that there is reason to believe, the Court cannot sit in appeal over the decision of the said officer regarding the existence of the reason to believe nor can the Court examine the adequacy of the grounds on which the reason to believe entertained by such officer can be scrutinized by the Court. If the grounds on which 'reason to believe' is founded are not relevant to the subject-matter of inquiry or are extraneous to the scope and purpose of the statute or are such as no rational human being can consider connected with the fact in respect of which the belief is to be entertained so that no reasonable man can come to such a belief, the exercise of the power would be bad. In appropriate cases a writ petition may lie challenging the validity of the action on the ground of absence of power or on a plea that proceedings were taken maliciously or for a collateral purpose." 7.3.4. As rightly ruled by the Hon'ble Court....
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..../-. Likewise, the AO had added Rs. 69125/- and interest thereon Rs. 11925/- aggregating to Rs. 81,150/- on the premise that the assessee had unaccounted investment and interest thereon. With regard to the addition of Rs. 8 lakhs as unaccounted receipts, it was contended that on perusal of Page 36 of Annexure A-3, it exhibits that there was no evidence that the assessee had received alleged unaccounted money of Rs. 1 lakh on 27.9.97 and Rs. 7 lakhs on 28.12.97. It was clearly stated that the assessee was only a power of attorney holder of Tragad property and that only on assumption, the AO held that the assessee was in receipt of unaccounted money which was against the documentary evidence on record. It was, further, claimed that the power of attorney given to him was cancelled and the owner of the land had sold a portion of land to other party by appointing another PAH which proves that the addition made was not tenable in law. It was, further, argued that even on page 36, there was no name of Manubhai Vyas paid Rs. 1 lakh on 27.9.97 and Rs. 7 lakhs on 28.12.97 as alleged by the AO. 9.2. We have duly considered the submission of the assessee and also reasoning of the authorities b....
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....the assessee during the appellate proceedings, the Ld. CIT (A) had deleted the addition for the reasoning that: "6.1. I have in this matter found that in appeal of Shri Manubhai P Vyas, father of the appellant where addition was made of the same amount on 'protective basis'. I have upheld that addition on 'substantive basis' holding that shri Manubhai P Vyas who was power of attorney holder of the Tragad land was the actual owner of the land which was purchased on power of attorney basis and subsequently further transferred the same land on power of attorney basis. Since the same addition have been confirmed on 'substantive basis' in the hands of the appellant's father, addition made here is found to be not justified and the same is directed to be deleted." 10.2. The submission of the Revenue, during the course of hearing, was merely that the CIT (A) had erred in law and on facts in directing to delete the addition made on account of unaccounted investment in the property at Tragad. 10.2.1. However, on a perusal of the relevant case records as well as the reasoning of the CIT (A) in deleting the addition, we find that an addition of Rs. 15 lakhs made in the hands of the assesse....
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....of the entire 1st floor taken by AMCO Bank Ltd is made by the AO on account of no entry made in the books of accounts for the entire sum of Rs. 17,83,600/- (sic) Rs. 17,85.630/- received by cheques, a sum of Rs. 6,00,000/- out of the same falling prior the block period. It is argued by the appellant that the bank is currently running the business and entries were made in the books of the society for the sums received and, therefore, the addition was not justified. These arguments given are found to be acceptable. The payment is received by way of cheques which been duly accounted for in the books of the society and this payment by cheque received from bank cannot be termed as 'on money' for sale of office space. The adverse comments made for this transaction are, therefore, directed to be deleted." 10.3.2. The brief submission of the Revenue during the course of hearing before this Bench was that the CIT (A) had erred in law and on facts in directing to delete the addition made on account of unaccounted receipts from AMCO Bank. 10.3.3. We have duly considered the submissions of either party and also carefully perused the relevant records. It is an undisputed fact that the amount....
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....round of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the Commissioner (Appeals) records in writing the reasons for its admission. (3) The Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the assessing officer has been allowed a reasonable opportunity- ...................................................................................." 11.1.3. Reverting back to the issue on hand, the CIT (A) in her findings had vouched that "4.1.2. During the course of appeal proceedings, the appellant had submitted written submissions on 27.4.04, 19.10.04 and later on 5.11.04. The matter has been discussed at great length and report of the AO has also been obtained on the various submissions made....." This assertion of the CIT (A) makes it unambiguously exhibits that the AO has been facilitated to have a say on the submissions advanced by the assessee at the time of appellate proceedings. Therefore, the action of the CIT (A) cannot be termed that she had violated the provisions of rule 46A of I.T. Rules as alleged by the Revenue. 11.1.4. As could be seen from the findings of the CIT (A) that she had not deleted the ad....
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...., the CIT (A) had erred in simultaneously not reducing from the investment. 13.1. This issue has been considered by the CIT (A) in her impugned order under consideration. The observations of the CIT (A) are extracted as under: "4.1. This matter has been discussed at length by the AO in pages 1 to 7 of the assessment order. The AO has held the Manasi Scheme developed for Dhaval Co-op Housing Society and Nandan Co-op. Housing Society to be run in an 'exclusively personal format' by the appellant who was both the Principal Officer and Chairman for the societies and their developer though the firm of M/s. Sunita Construction. The AO held that although the claim was of earning only 3.5% of the cost of scheme, it was the appellant who as the developer was liable to earn the profit and loss from the scheme and so was to be assessed as such. The AO has pointed out the receipts of Rs. 19,95,890/- from sale of shops, Rs. 11,66,101/- from sale of flats of Tower A of Scheme and Rs. 27,97,069/- from sale of flats in Tower B to be 'on money' received in the bookings of the shops and flats. After giving detailed show-cause notice and considering the simple explanation that payments for shops ....
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....wise for AY 96-97, return was filed showing similar gross earning of 3.5% of value of work done at Rs. 46,73,323/- and, further, return was filed for AY 97-98 which was assessed and wherein also gross receipts were shown at 3.5% of value of work done at Rs. 23,89,387/- which had been assessed instead at 8% of gross receipts in view of provisions of section 44AD of I T Act, 1961. Further detailed explanation for each entry has also been given. 4.2. I have carefully considered the facts of the case and the submissions made. At the outset, I am of the opinion that the appellant need have no grievance regarding finding of AO to the extent that no addition has been made specifically for the sum held to be undisclosed receipts earned as a developer of Manasi Scheme. Yet in view of the adverse findings recorded by the AO, specific decisions are being given by me in the following paras with regard to each addition made." 13.1.1. We have duly considered the contentions of the assessee as well as the reasoning of the CIT (A) referred supra. After taking into account the apprehensions expressed by the assessee, the CIT (A) had made it clear that no addition has been made specifically for ....
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....zed materials which were the flats handed over to the members prior to 1.4.1995 and, accordingly, reduce such receipts of 'on-money' from the addition of Rs. 27,97,069/-. When such exercise takes place at the AO's end, the receipts of such 'on money' from the flat owners who have been given possession prior to 1.4.1995 get reduced from the addition of Rs. 27.97 lakhs which will simultaneously have an impact on the total addition also. To makes it explicit, the AO is directed to reduce such addition from the total addition too. It is ordered accordingly. 13.3. Gr. No.4: It was the contention of the assessee that the CIT (A) erred in confirming the additions of Rs. 30,30,000/- and Rs. 9,65,000/- being alleged investments in the land bearing Survey No.164/5 of Jamnagar. It was contended that the confirmatory letter of Shri Bhikhubhai of Jamnagar would confirm that the land bearing Survey No.164/5 of Jamnagar was standing in Government account and being Government land, it could not have been transferred to any other party. 13.3.1. During the course of appellant proceedings before the first appellate authority, the assessee had furnished a Photostat copy of the land certificate issue....
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............................................................................................... 5.4.1. As regards the addition made at Rs. 9,65,000/- and discussed by the AO in para 5, it is claimed that appellant did not have necessary money and had been borrowing funds after mortgaging his jewellery. 5.5. I have considered the facts of the case and the submissions made and find that as regards the Annexures X-1, page 29, showing transactions on various dates totaling Rs. 30,30,000/- and Annexure A-3, page 33 thereof showing receipt of Rs. 6,50,000/- for proposed sale of land and the Annexure X-1, page 31 thereof showing transactions of Rs. 9,65,000/-, I find that the appellant has not been above to satisfactorily explain these documents. Firstly, the survey No. relating to transactions of Rs. 30,30,000/- is 164/5 which is not the land covered in the hak patrak for survey No. 51 which land is stated to be in Government name. as regards the receipt of Rs. 6,50,000/- the non -mention of the actual location of land is not relevant to the extent that it is the receipt for payment on agreement of sale and purchase for 40 bighas of land, the final transactions of which may yet be pendin....
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....e AO considered this amount represents the assessee's undisclosed expenditure and, accordingly, brought under the tax net. 13.4.1. During the appellate proceedings, it was contested that the said Bengali was an Advocate of Mansi Hotel Pvt. Ltd in which the assessee was one of the directors and on account of nonpayment of installments to GSFC, the possession was taken over by the GSFC and the assessee was advised to make payment of Rs. 3 lakhs and then only the Corporation will fix the installment for payment of balance, but, due to non-availability of liquid funds, no installments could be paid and, therefore, the Advocate's name was appearing in the diary etc., He had vehemently contested the theory of the AO that the alleged sum of Rs. 3 lakhs represents his undisclosed expenditure. 13.4.2. However, the CIT (A) took a stand that the entry of Rs. 3 lakhs to Shri I. M. Bengali as per document seized was dated 10.5.1996 whereas the explanation given by the assessee doesn't fit in to the payments purported to have been made to GSFC much later and, accordingly, sustained the addition. 13.4.3. It was pleaded during the course of hearing that the CIT (A) erred in confirming the amoun....
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....king of the dwelling units which were received by that date. However, on perusal of the account of Sunita Construction [A/c No.243], it was noticed by the AO that the assessee was receiving the payments towards selling of flats even after 31.3.1997 and the total credits were to the tune of Rs. 24,07,923/-. 13.5.1. It was the case of the assessee that he was not in a position to find out the documentary evidences and to buy peace, he had offered income at the rate of 3.5% on total credits in the bank account which has been turned down by the CIT (A) who went ahead in confirming the AO's stand. 13.5.2. It was, further, submitted by the assessee during the appellate proceedings that the Manasi Project had not been completed in March, 1997, but, several receipts from members in cash as well as by cheques had been credited in the Bank account for the same project and several payments had been made to the creditors for goods, labour, maintenance, common amenities, legal and drainage charges, etc., which resulted in very nominal balance remaining in the bank account at Rs. 4329/- as on 31.7.1998. It was also submitted that the credits in the bank account were payments of installments by....
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....idered the submissions made before this Bench as well as during the course of appellate proceedings before the first appellate authority and meticulously perused the relevant case records and the documentary evidences advanced by the Ld. AR during the course of hearing in the shape of voluminous paper books as well. 13.5.5. When the assessee's statement was recorded on oath on 7.5.2002, he had given a categorical that the Mansi Project Scheme got over in March, 1997 and that all the receipts related to the booking of the dwelling units were received by that date. However, scrutinizing the accounts of Sunita Construction [A/c No.243], it was noticed by the AO that the assessee was in receipt of the payments towards the selling of flats even after 31.3.1997 and the total credits of which was aggregating to Rs. 24.07 lakhs. Contrary to his initial admission on oath, the assessee, during the course of appellate proceedings, averred that the credits in the bank account were payments of installments by the members who have not paid the amounts in due date. At this juncture, it is pertinent to mention that any prudent developer like that of the assessee would not have handed over the pos....
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....ciety and sundry creditors for the supply of materials, labour etc., which worked out to Rs. 2,55,49,898/- and, thus, there was loss of Rs. 15.18 lakhs; 13.6.1. Rebutting the assessee's contentions, the AO had observed thus: - that the assessee's appeal for the AY 1997-98 was dismissed as ex-parte by the CIT (A) as none had represented; - that no books of account was produced for re-conciliation; - that the assessee had himself admitted on oath that the Scheme was completed by March 1997 and all the receipts related to the booking of the dwelling units were received by that date which means that all the dwelling units have been sold by that date and the scheme was complete by that date - that since no books of account, booking registers or any other information were made available, the receipts of the assessee have been worked out at 8% on gross receipts; - brushing aside the assessee's objection of invoking the provisions of s. 44AD of the Act in the block assessment, the AO took a stand that no separate trading account or the details with regard to the method of accounting or the audited account were made available and held that had there been no search operation, the evasi....
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....sions of ITAT, Bangalore Bench B reported in 84 TTJ 165 is found to be made applicable in as much as estimate of income is not arbitrary and is based on receipts falling within the block period after removing earlier receipts as verifiable from the records of the Income-tax Department. Regarding appellant's reliance on the decisions of Hon'ble Gujarat High Court reported in 258 ITR page 654 and M.P High Court reported in 263 ITR page 610, I find that the decision relates to finding that the addition cannot be of entire sale proceeds but of profits incorporated in the sale proceeds. It is, however, quite clear in the present case that this Manasi Scheme having been completed by March, 1997 and appellant having no evidence to the contrary and also appellant having no details from the bank of the nature of the credit entries in this bank account, and further appellant having no evidence from members of the scheme that they made payments to the extent of Rs. 24,97,923/- credited in this bank account towards purchase of flats/shops etc., there is no manner in which AO can exclude this amount from inclusion in the total undisclosed income for the block period. The addition is, therefore,....