TaxTMI 
TaxTMI 
2007 (9) TMI 129
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....ht in treating the huge investments made in the names of the assessee's mother and son as not that of the assessee on the ground that since the mother had filed a declaration under Kar Vivad Samadhan Scheme and since the son is a bank officer who has an independent source of income ? 4. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the amounts in deposits in the name of Dr. Dharmambal Namasivayam Trust cannot be included in the hands of the assessee under Chapter XIV-B in the absence of clear evidence found as a result of search? 5. Whether in the facts and circumstances of the case, the Tribunal had enough material to hold, and was right in accepting the assessee's explanation that the costly sarees worth Rs.10.20 lakhs found during the search were received as gifts at the time of marriage? 6. Whether in the facts and circumstances of the case, the Tribunal was right in deleting the addition on account of estimated marriage expenses of the assessee's son ? 7. Whether in the facts and circumstances of the case, the Tribunal had enough material to hold and was right in holding that the advance given to the Tamil Nadu Basket Ba....
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.... Sri. Sugavaneswaran, at the relevant point of time, was a student. The assessee is the karta of his HUF with his two sons as co-parceners and claims to possess agricultural lands received on family partition. The assessee's father, late Namasivayam, had two wives, and the other wife, namely, Mrs. Ariapoo Ammal had six children. (iii) There was a search under Section 132 of the Income-tax Act ("Act" in short) in the case of the assessee, on 19th and 20th January 1996. As a result of search, substantial quantity of cash, jewellery and various other documents evidencing investment in movable and immovable properties and bank deposits in the name of the assessee, his mother, his children and some of his associates and also documents indicating his earnings from certain undisclosed sources, were found and seized. The search was spread over to different places where the assessee had interest, but the main places were:- (a) M-26, 10th Street, Anna Nagar, Madras and (b) Assessee's Official Chamber in TAMIN at No.31, Kamarajar Salai, Chepauk, Madras-5. 3. Subsequently, notice under Section 158BC of the Act was issued to the assessee on 26.06.1996. Since ....
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....wed the appeal partly. The dispute involved in the present appeal is related to the following additions. They are as under : Addition No.1 relating to Question No.1: Addition of Rs.38,95,74,550/- made in respect of collections from applicants for granting mining licence. Addition No.2 relating to Question Nos.2 and 7: Addition of the amount of Rs.1,64,24,550/- being cash found in the residence and office of the assessee accepting the assessee's contention that out of this money, Rs.152 lakhs belonged to Tamil Nadu Basket Ball Association and Rs.12 lakhs belonged to the assessee's son. Addition No.3 relating to Question No.3 : Addition made in respect of investments made by the assessee's mother and sons amounting to Rs.2,60,45,591/- on the ground that the assessee's mother had filed a declaration under Kar Vivad Samadhan Scheme and the son is a bank officer who has an independent source of income. Addition No.4 relating to Question No.4 : Addition of Rs.1,69,19,621/- being donations received by Dr. Dharmambal Namasivayam Trust and interest on donation of Rs.2,91,958/- on the ground that the Trust is an independent en....
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....e Tamil Nadu Basket Ball Association. Actually the monies found in the assessee's residence as well as in the office room belongs to the assessee only. Hence, the Assessing Officer after making elaborate enquiry, rightly came to the conclusion that the entire cash amounting to Rs.1,64,24,550/- found at the assessee's residence as well as his office room represented the assessee's undisclosed income and is assessable under Section 69A of the Act for the assessment year 1996-97. (iii) In respect of third addition, it is submitted that the assessee's mother was a pensioner and no accumulated funds available in her bank account. It is also submitted that there is no evidence that it was used for purchase of property. Hence the Tribunal is wrong in deleting the addition. Further it is stated that the declaration filed by the mother of the assessee under Kar Vivad Samadhan Scheme was accepted by the Revenue and the same has become final. Hence the benefit of Kar Vivad Samadhan Scheme will not be extended to the assessee. Coming to the other part, the assessee's son did not state how the properties were purchased, but subsequently he stated tha....
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....voices to those concerns. Hence the Tribunal is wrong in deleting this addition without any valid material. (vii) In respect of the seventh addition, it is submitted by the counsel appearing for the Revenue that the Tribunal is wrong in deleting the addition on the ground that the said foreign currencies belonged to Smt. Seethalakshmi and it is seen from the records that the said Smt.Seethalakshmi did not respond to the summons issued. It is also submitted that the Tribunal is wrong in merely relying on the statement of the assessee that the amount pertains to one Seethalakshmi, and the mere preliminary statement will not absolve the assessee of his onus. (viii) In respect of the eighth addition regarding the addition in the hands of the assessee, in respect of fixed deposits amounting to Rs.20,000/- in the name of Narayanan, the learned counsel for the Revenue submitted that the said Narayanan did not produce any material evidence to show that he has enough resources available to him to make the fixed deposits. The fixed deposit certificates relating to the fixed deposits were kept in the personal custody of the assessee and no proper reasons were given by the sa....
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....wer to grant or reject the licences is only with the Government. So, whatever additions made in the financial years 1992-93, 1993-94 and 1994-95 have to be deleted and additions concerned with financial year 1995-96 alone should be considered. Further it is emphasised by the counsel that the addition made for the assessment year 1996-97, there are no dates available in the seized material When the dates are not available in the seized material, the Assessing Officer was of the view that the amount will have to be assessed in the year of search, i.e., financial year 1995-96, relevant to the assessment year 1996-97. It is further submitted that in the Tabular Statement against each addition in the last column, it is given as amount D/L/P, but it was not indicated among which category this particular addition comes. It is also further submitted that there is no corroborative evidence except the slips of paper seized by the Department. Hence, the addition of Rs.38,95,74,550/- has been made without any basis and justification. (ii) In respect of the second addition, the learned Senior Counsel submitted that the assessee had already given expl....
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.... assessee's mother availed declaration under KVSS but also the assessee's son who is a bank officer, also availed the declaration under Kar Vivad Samadhan Scheme for the assessment year 1992-93 to 1996-97. Hence there cannot be any levy of tax on the very same income. Tax has already been accepted from the mother under the Samadhan Scheme. Hence it is wrong on the part of the Revenue in making addition of the same amount as undisclosed income in the hands of the assessee which amounts to double taxation. In respect of the amount assessed in the hands of the assessee's son on protective basis, it is wrong on the part of the Revenue to make the addition in the hands of the assessee. Further the assessee's son had sent a statement at the time of search that he received a cash gift of about Rs.9 to 10 lakhs. Hence the assessee as well as his son have explained the source and therefore the income already assessed in the hands of the assessee's son should not be assessed in the hands of the assessee. (iv) In respect of the fourth addition, there is no proof seized from the residence of the assessee or from office at the time of search, linking the a....
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....ge expenses. Hence the addition made by the Revenue is without basis and justification. (vi) In respect of the sixth addition made in connection with the secret commission received from foreign companies, it has been made without basis and justification and the Revenue failed to produce any evidence to show the assessee's own involvement in the transaction. There is no corroborative evidence to show that these secret commissions were made directly or indirectly to the assessee. There is also no evidence as to how and to whom the payments were made. Hence the Assessing Officer is wrong in making addition on account of the secret commission received from foreign companies for sale of granite and the Tribunal is right in rejecting the Revenue's stand. Hence the addition has been made without application of mind and the same cannot be sustained. Hence the Tribunal has rightly deleted the addition. (vii) In respect of the seventh addition made with regard to the foreign currency found in the assessee's house belonged to one Seethalakshmi, the assessee had given a detailed explanation to the Enforcement Officer on 27.03.1996 and also the sa....
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....in denominations of money. (b) The second category of data is hand written notes, prima-facie, in the handwriting of Shri Dyaneswaran on his own letter heads and the letter heads of the TAMIN (confirmed to be his hand writing by the Govt. Examiner of Questioned Documents). Each of the entries contain details such as Sl.No., name of the applicant, name of the place, survey number and extent and the amount. Generally, this amount is shown in a coded form that too decimal places. Apparently, the whole number stood for lakhs and the decimals stood for thousands. Some of the entries have been rounded off and / or tick-marked. In respect of some others, another coded number is written below that, probably indicating the amount received or receivable. (c) The third set of documents are typed sheets with details of the name and brief address of the applicant, the details of the mine, viz., the village, taluk and survey number, the nature of granite and extent. These were probably prepared by the staff who prepared papers for consideration of the High Level Committee or those who prepared the minutes of the meetings of the High Level Committee....
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....hese details relating to the mines mentioned in 125 records have corresponding matching entries in one or both of the other two categories described above and details relating to mines mentioned in 70 records appear in all the three categories listed. Of the total data available in respect of mines (995) for which licences were applied, details relating to 359 mines appear in more than one list. The internal consistency of the materials seized from the assessee also shows that the papers relate to grant of mining licences only and unless they had some significance the assessee would not have retained them. The amounts mentioned in coded decimal form is in lakhs and thousands as in many cases, the decoded amounts tally with the amounts mentioned in the slips in the handwriting of the parties and / or their representatives and in some of the cases even the denomination for the amount was recorded. The results of random verification carried out with the applicants who parted with money in favour of Shri Dyaneswaran for grant of licenses is given below. But one thing that needs to be pointed out here is that it is neither humanly possible nor is it required under the ....
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....andwriting. The second category are written notes, which according to the Revenue, prima facie, by the assessee in his letter head or that of TAMIN, which is in the handwriting of the assessee, which fact had been confirmed by the handwriting expert. These papers contain coded numbers with two decimals which apparently stand for lakhs and thousands, according to the Revenue. In the same papers, another coded number is written below the first coded figures which, according to the Revenue, probably indicate the amount received or receivable and the third set of papers is said to be prepared by the staff who prepare such papers for the High Level Committee for its meeting. Again, in these papers there were coded hand-written number with decimals which again prima facie, according to the Revenue, is in the handwriting of the assessee. From the above, it is clear that that regarding the first set of papers, there is no claim even by the Revenue that it is written in the assessee's handwriting and only in some papers there is mention of some denominations of money. It is not clear how the Assessing Officer arrived at the conclusion that the coded figures are....
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..... When the deponent was confronted by the seized material from the assessee's brief case, ultimately he agrees he made some payments in addition to this. Answering question No.15, he says that he made the payment to the assessee about two months prior to the issuance of the licence. At the end, he expressed his regret for the mistake by not telling the truth first. We are unable to take this statement also at its face value. It is very difficult to attribute the payment to the assessee as for getting the quarry licence. The procedure followed is clear from the answer to question No.4. The application was made to the District Collector who in turn forwarded it to the concerned Tahasildar for inspection and to report to the Director of Mining & Geology for recommendation for issuance of licence. It is again to be seen that the assessee was never afforded an opportunity to confront the deponent. Revenue says that all the papers were subsequently given to the assessee. It is also the case of the Revenue that it is not relying on these statements. If he is not relying on these statements, then there is no meaning in taking stat....
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....vided under section 132(4A) that the books of accounts, other documents, money, bullion, jewellery or other valuable articles seized from the possession of the assessee shall be presumed to belong to the assessee if they are found in the possession or control of the assessee in the course of the search. A similar presumption may also be made as to the correctness of the contents of the books of account so seized. So also the signature and every other part of the books of account may be assumed to be in the handwriting of the person by whom it is purported to have been written'." 14. Further, in the absence of any cross-examination of the deponents by the assessee, none of these statements could be used against the assessee. Therefore we are of the view that the Revenue's case that the seized materials speak voluminously for the collection of illegal receipt by the assessee, is not established. There is no corroborative evidence except the slips of papers seized. It is true that the assessee is neither denying or admitting receipt of payments in connection with the issuance of licence for quarrying. From a reading of the above, it is clear that....
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.... or for requisition under Section 132A, as the case may be. One of the main reason given by the Tribunal for disregarding the statements and documents relied on by the Revenue is that, no opportunity given by the Assessing Officer to the assessee to cross-examine the same. Taking into consideration all the above factors, we are of the view that the assessments were completed without giving proper opportunity to the assessee to cross-examine the applicants. In this case, the Assessing Officer has called only 23 persons and obtained the statements. The balance of the seized materials related to several applicants and the Assessing Officer did not make any attempt to correlate or verify or try to obtain the statements from the other applicants, as has been done for 23 cases. On the basis of the statements given by the 23 persons, the Assessing Officer presumed that whatever figures appearing in the seized material would represent the undisclosed income of the assessee. Also, it is seen that for the seized materials relating to 345 applicants, no dates have been mentioned. In respect of the same, the Assessing Officer totalled the amount and ma....
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....the Tribunal and remit the matter to the Assessing Officer with a direction to consider the matter afresh, keeping in view of the discussions made above, and pass orders after giving opportunity to the assessee in accordance with law. Question Nos.2 and 7 - Cash found in the assessee's office and residential premises 18. During the search a cash amount of Rs.15,58,900/- was found in the assessee's bed room. Out of it, Rs.15,50,000/- was seized. Apart from this, cash to the extent of Rs.1,48,65,650/- was found and seized from the assessee's official chamber at TAMIN. The assessee stated that he had kept the cash belonging to the TNBA, of which he is the Chairman-cum-Chief Patron, with him and such cash would be about Rs.2 to 3 lakhs. When questioned about the cash found at his office, the assessee stated that about one crore of rupees in cash may be available and that the entire money belonged to TNBA. It was stated that the money was collected from TNBA enthusiasts as a stop gap arrangement till the money sanctioned by the Tamil Nadu Government was released. It was further stated that no receipts had been given to the persons who gave the money a....
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....y not be in a legally accepted way. It was not denied that there were some attempts to air-condition the entire stadium and also there were works undertaken in anticipation of funds from the Government. So, the money collected for the above purpose, though not in a legally accepted way, cannot be treated as the assessee's personal asset. It is seen that, subsequently TNBA had filed its Return and the same has been accepted with the condition that this would not preclude the Revenue from contesting the issue in higher forums. In the hands of the TNBA, the assessee had been denied the benefit of exemption and an amount of Rs.152 lakhs had been brought to tax. Assessment had been completed under section 144 read with Section 143(3) and penalty had also been levied which means that the Revenue had treated this assessment as substantive and the tax had been accepted. So, the assessee had discharged the preliminary onus by establishing the identity of the party, capacity of the party and genuineness of the transaction. The identified party, i.e., TNBA acknowledged their role and disclosed that nine persons who are mostly concerned with basketball....
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....e same, the Tribunal has correctly come to the conclusion that these monies should not be included in the hands of the assessee, and rightly deleted the addition. Hence we are of the view that the deletion of addition made by the Tribunal is justified. Question No.3 - Investments made in the names of assesses's mother and the assessee's son 20. In respect of the investments made in the names of assessee's mother and the assessee's son, in the course of search it was found that there are various movable and immovable properties in the names of assessee's mother Dr. Dharmambal and the assessee's son Sri Senthureswaran, as follows : "I. Dr. Dharmambal : Sl. No. Name of investment Period Assessment year Amount Rs. 1. No.9, Waterworks Colony, Kilpauk, Madras-10. 1983-84 2,30,000 Additional Construction 1983-84 1,70,000 2. House site at Mogappair 1994-95 2,05,000 3. House constructed in Arasangudi 1996-97 6,31,000 4. Investment in M/s.Aahhaa Exports as a partner 1996-97 1,00,000 5. Investments in Shilpigrih Constructions 1995-96 and 1996-97 59,46,7....
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.... treated the protective assessment made in the hands of Dr. Dharmambal as substantive assessment. Another important factor in the assessment of Dr. Dharmambal is that it is a regular assessment. Normally, if any undisclosed income belonging to any person has been detected during the search and seizure action under section.132 or requisition under section.132A, the assessment would have been done under section.158BD read with section.158BC. As against this, it has been assessed as a regular assessment. In the light of the above fact, we are of the view that the addition made in the hands of the assessee on substantive basis with reference to Dr. Dharmambal cannot be confirmed. Under section.158BB(1), the undisclosed income of the block period shall be the aggregate of the total income computed on the basis of the evidence found as a result of search or requisition or other document found as a result of materials gathered or information received." 22. It is seen that the same amount was already declared under the Samadhan Scheme and was assessed. Also, if certain documents are found against a third party, then he should have completed the assess....
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....ments. The said Nadalur Vardhan is said to be a cousin of Sampathkumar. From the papers seized from the brief case of Sampathkumar and on subsequent enquiries, it came to light that the State Bank of India of India, N.R.I. Branch Madras had sanctioned loans to Sri Vardhan on various dates amounting to Rs.1,33,49,000/- which was credited in the account of the Trust by way of donation. Subsequently, repayments were made by Sampathkumar amounting to Rs.1,03,49,000/- to the bank account and the balance of Rs.30 lakhs was adjusted out of the maturity of one of the deposits. The Assessing Officer was of the view that it is very unnatural for a distant acquaintance or a close relative or friend to donate to the tune of Rs.1.34 crores and hence disbelieved the theory of donation and treated the amount as undisclosed income of the assessee. It is also seen from the records that there were various donations from various persons and while completing the assessment, the Assessing Officer held that all these donations indicate that the claim of donations was false and he made the impugned addition of Rs.1,69,19,621/- and interest thereon of Rs.2,91,958/-. Aft....
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....een correctly deleted by the Tribunal on the ground that the Trust is a separate juristic person and also the same is assessed under the Income-tax Act. The Income-tax Department have also made a separate assessment n the case of Dr. Dharmambal Namasivayam Trust for the assessment years 1994-95, 1995-96 and 1996-97 for the entire amount of Rs.1.69 Crores. Further some assessments are also pending before the Tribunal. In view of the above reasons, we are of the view that the deletions made by the Tribunal are in accordance with law. Question No.5 - Costly sarees worth Rs.10.20 lakhs found during the search 25. In respect of this addition, the Department found and listed number of costly sarees at the time of search. Such list forms part of the Panchanama. The total cost had been estimated at Rs.10,12,000/- (Mysore silk sarees 26 at Rs.2,000/- + silk sarees 192 at Rs.5,000/- average). The Assessing Officer made the addition of the amount for the assessment year 1996-97 on the ground that the acquisition in respect of the same had not been explained. There was a marriage function in which admittedly about 3000 guests participated.&....
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....nts were forwarded to TAMIN for their comments regarding the relevance of their contents and TAMIN also by letter dated 27.11.1996, replied that a large number of these transactions mentioned in the documents could be straightaway connected with sale invoices to these concerns. Some of the documents contained certain notings obviously in the handwriting of the assessee. On the basis of the same, the Assessing Officer relied on Section 132(4A) on the presumption that these documents were seized from the assessee's possession. Then, the Assessing Officer came to the conclusion that the amounts mentioned in the seized documents represented payments to the assessee from these companies. Hence the Assessing Officer included these amounts in the assessee's undisclosed income. The Tribunal considered the details of these documents and found out that in most of these papers it was mentioned as "not shipped" which indicates that it has not been exported so far. The Assessing Officer himself recorded that these writings are in the handwriting of the assessee. The Tribunal had given a finding as to how the Assessing Officer came to this conclusion and furth....
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....y friend of the assessee came to see his mother Mrs.A.Dharmambal, who was not well before Pongal in the month of January 1996, and requested her permission to leave the foreign currencies U.S. $ 5111, Singapore $ 527 and Malaysian Ringet 210 for safe custody in the assessee's house at M-26, Anna Nagar, Madras-102. Since she had to go away on a short tour, the assessee's mother gave permission and the above said foreign currencies, which was kept in a hand bag with marking, was kept at the above Anna Nagar house of the assessee. The said Mrs.Seethalakshmi Nagaraj is a green card holder of U.S.A. and her husband Mr.Nagaraj is an Engineer and now working in an American Company at U.S.A. Since he was deputed to work "Enron Project" at Maharashtra, they both came to India. They both bought U.S. Dollars and other currencies in permitted level when they came to India. Since there was a problem in "Enron Project", the said Mrs.Seethalakshmi Nagaraj came to live at Madras with her two minor sons. Since she was alone, the assessee used to be their custodian and when she wanted to go away, she came to the assessee's Anna Nagar house to leave their currencies for ....