TaxTMI 
TaxTMI 
TaxTMI 
1999 (8) TMI 104
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....rt adjournment be allowed since the second paper book filed by the learned counsel was not available in his records. Since the said paper book merely contained the written submissions of the learned counsel, Shri Singh was asked to argue the matter in the light of the oral submissions made by the counsel and written submissions would be excluded. However, this did not satisfy the learned Departmental Representative and he requested for a short adjournment which was allowed by the Bench adjourning the appeals to 7th July, 1999. On 7th July, 1999 Shri Singh again came up with a request for adjournment. This time on the pretext that case records and appraisal report has not been received from the AO. On his request being declined by the Bench Shri Singh was visibly annoyed and left the Court in a huff. The matter did not end here. On 8th July, 1999 Shri Singh filed two letters in succession with the Registry. In the first letter Shri Singh requested for short adjournment of 'one month' and in the other letter Shri Singh has, in gross misrepresentation of the facts unfortunately made observations which are untrue. Shri Singh states: "Despite the request the Bench unilaterally heard th....
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....bove, all the three brothers and their father Shri Ishwarlal Khushaldas Jariwala have interest in the construction activity. They have constructed building known as Shreeram Market in the name of M/s Bharat Enterprises. 6. During the search operations the three brothers and their father surrendered on 17th Nov., 1995, concealed income under s. 132(4) amounting to Rs. 75 lakhs as under: ------------------------------------------------------------ Sl. Name Status Unaccounted income No. admitted under s. 132 (Rs. in lakhs) ------------------------------------------------------------ (1) M/s B.M. Silk Mills R.F. 41.00 (2) M/s Akshay Fabrics R.F. 3.00 (3) M/s M. Rajendra & Co. R.F. 27.218 (4) Shri Ishwarlal K. Jariwala Indl 3.781 ------ 75.00 ------------------------------------------------------------ On 14th Dec, 1995, while the authorised officers lifted the prohibitory orders under s. 132(3) of the Act, the aforementioned members of the group filed a letter before the ADI., Surat giving the bifurcation of the disclosed amount of Rs. 75 lakhs, which is placed on pages 11 to 13 of the paper book. The bifurcation of the disclosed amount have also been detailed in the assessment or....
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....ct as we have to go through voluminous seized materials. Moreover, books of accounts are also not with us. The bifurcation given below is subject to change after detailed verification with the books of accounts." The assessees of the group filed their returns of income disclosing the same amount of unaccounted income as indicated above and paid taxes thereon as under: Name Unaccounted income (Rs.) (1) M/s B.M. Silk Mills 41,00,000 (2) M. Rajendra & Co. 27,21,838 (3) M/s Akshay Fabrics 3,00,000 (4) Shri Ishwarlal Khushaldas Jariwala (father of partners) 3,78,162 --------- 75,00,000 --------- 6.1. Subsequently during the course of assessment proceedings the AO pointed out certain discrepancies in respect of the figures of excessive stock disclosed by the group as well as investments made in the purchase of shops in the Shriram Market etc. Thereupon the assessees of the group filed a letter dt. 18th Oct., 1996, pointing out that the earlier disclosure has been made subject to verification with the books of accounts lying seized with the Department and the final figure of disclosure was indicated in the letter at Rs. 75,39,027. The reconciliation of the disclosed amounts is c....
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.... purchase of jewellery, etc. (357.60 gms. x Rs. 442.59) 1,58,270 E. Shop at Sriram Market in the hands of Shri Bharatbhai, Maheshbhai, Rajendrabhai and Ishwarbhai 1,40,000 --------- Grand total : A+B+C+D+E 75,39,027 --------- 7. The impugned block assessments have been made by the AO broadly keeping in view the disclosure made by the group. The disputes which are being agitated in the present appeals mainly pertained to the grievance of the assessees that double additions have been made by the AO in the cases of the three firms as well as the three partners involved in the present batch of appeals. 8. First we take up the grounds of appeal in the cases of the three firms, viz. B.M. Silk Mills. M. Rajendra & Co. and Akshay Fabrics and deal with the issue of double additions. In the identically worded grounds of appeal in the cases of the three firms it is stated that the AO has made additions: (a) which have already been shown as part of returned income; (b) on account of further excess in stock when there was no such excess stock as per final bifurcation of the disclosure amount given during the assessment proceedings. 9. As per the revised disclosure vide assessees' letter....
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....r: Rs. Excess stock of yarn at the 42,08,462 rate of 190 per kg. Excess stock of cloth 3,00,874 --------- Total 45,09,336 --------- The above excess stock was surrendered in the hands of two firms as under: Excess yarn 22,149 kgs. Excess stock of cloth 10,745 mtrs. The above excess stock was offered for taxation by the two firms in their returns. Now at this stage it is relevant to mention that with regard to the third concern viz. M/s Akshay Fabrics no excess stock was allocated even though the said firm carried out its business at the same premises and its stock was also included in the total stock of yarn and cloth found at the premises. In the details of the original disclosure made on 14th Dec, 1995, it would be seen that the third concern, M/s Akshay Fabrics disclosed an amount of Rs. 3,00,000 under the ad hoc category viz., 'misc. receivable/liquid assets, misc. investments etc.". Subsequently during the assessment proceedings the AO observed that while working out the excess stock, the excess yarn has been valued at the rate of 190 per kg. whereas the average purchase price of yarn works out to Rs. 200 per kg. Similarly the AO observed that the excess stock of....
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....of the stock the figure has been worked out at Rs. 51,55,037. According to the learned counsel there is no valid reason why no portion of the unaccounted stock is to be allocated to M/s Akshay Fabrics. The learned counsel submitted that in the original disclosure the balancing item of Rs. 3,00,000 in respect of Akshay Fabrics in fact represents the excess stock and should have been accepted by the AO. 12. We have carefully considered the submissions of the learned counsel, and perused the orders of the AO, in the cases of the firms. The papers and documents furnished in the compilation by the learned counsel for the assessee has also been perused by us. The dispute before us lies in a very narrow compass. The figure of excess stock Rs. 51,55,037 is not disputed by the Revenue as well as by the counsel for the assessees. The excess stock has been found at the combined premises of the three firms of the group in fact the working of the excess stock has been made on the basis of the books of account of the three firms including M/s Akshay Fabrics. In the circumstances we see no valid reasons as to why the entire unaccounted stock has been allocated on an ad hoc basis by the AO betwee....
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.... (2) The above retraction was made after 11 months from the date of search without any substance. (3) The retraction was made only when the excess stock worth Rs. 6.4 lakhs was determined during the assessment proceedings. (4) The assessee did not furnish the details of parties from whom the amounts are receivable. Particulars of liquid assets included in the miscellaneous items have also not been furnished. Such miscellaneous assets have been admitted at the time of the first disclosure and no retraction can be allowed at a later date. 15. The learned counsel drew our attention to the observations made by the representatives of the group while filing the original disclosure of Rs. 75,00,000 vide letter dt. 16th Dec, 1995. "Bifurcation given below is broadly outline and not exact as we have to go through voluminous seized materials. Moreover, books of accounts are also not with us. The bifurcation given below is subject to change after detailed verification with the books of accounts which are at present seized by the Department." The learned counsel further submitted that since the books of accounts were lying with the IT authorities, the disclosure of Rs. 75,00,000 was made....
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....pecifically indicated that the amounts disclosed were subject to verification from the books of accounts lying with the IT authorities, the ad hoc figures have been rightly excluded in the revised disclosure furnished on 18th Oct., 1996. 17. Apart from the dispute with respect to the above mentioned miscellaneous items as well as the allocation of excess stock, the AO has accepted other modifications made in the final disclosure as compared with the original disclosure. Thus, if we reconcile the original disclosure made on 16th Dec, 1995 with the figures reflected in the final disclosure made on 18th Oct., 1996 we find that the following modifications have been made: (1) Miscellaneous items of Rs. 4,48,391 have been excluded from the final disclosure. We have already discussed above the exclusion of these items. (2) With regard to jewellery owned by various members of the group, the figures in the two disclosures show variations. There is a decrease in the value of unaccounted jewellery in the following cases: .M. Silk Mills 90,048 Ishwarlal K. Jariwala (father of the 2,90,892 three brothers) -------- Total 3,09,940 (3,80,940) -------- The unaccounted jewellery in the follow....
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....esh I. Jariwala 3,27,000 Rajendra I. Jariwala 3,80,319 Bharat I. Jariwala 8,63,400 --------- 15,70,719 --------- The AO has included the value of the aforesaid undisclosed assets again in the hands of the partners on the ground that these unexplained assets are owned by the firm but these were being used by the partners for their individual benefits. On these basis the AO invoked the provisions of s. 28(iv) and proceeded to make the additions again in the hands of the partners. The AO has placed reliance on the decision of Madhya Pradesh High Court in the case of V.P. Warner vs. CIT (1989) 80 CTR (MP) 126 : (1990) 181 ITR 303 (MP). The learned counsel, strongly assailed these additions and argued that double additions have been made first in the hands of the firm and then the same assets have been included in the partners cases by taking resort to s. 28(iv). According to the learned counsel the assets belonged to the partners and have been acquired by the partners after making withdrawals from the firm out of the undisclosed income of the firm. The learned counsel further added that entries have actually been passed in the books of the firm crediting capital accounts of the par....
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....does not constitute benefit or perquisite as envisaged under s. 28(iv). These assets or investments which are held by the partners like household valuables or Dumas property do not represent business assets of the assessee-firms. These are the assets of the partners and there is no question of applying s. 28(iv). The decision in V.P. Warner's case cited supra by the AO renders no assistance to the case of the Revenue. In the said case a partner of the firm was using the residential premises, car and telephone belonging to the firm and a sum of Rs. 3,600 only was included in the income of the partner under s. 28(iv). In the instant case the facts are entirely different inasmuch as the assets in question have been acquired after making withdrawals from the firm and belonged to the partners; In any case there is no justification whatsoever for the AO to proceed to include the entire value of the assets on the basis of the slim thread of personal user by invoking s. 28(iv). Sec. 28(iv) in our opinion does not apply. The double additions made in the cases of the aforesaid three partners are therefore deleted. 21. The addition of Rs. 11,657 made by the AO in the case of the firm M/s M. ....
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....ns aggregating to Rs. 1,13,000 in the block assessment: -------------------------------------------------------- Asst. yr. Shown in the books Estimated Shortfall -------------------------------------------------------- Rs. Rs. Rs. 1995-96 2,20,000 2,20,000 - 1994-95 89,000 1,20,000 31,000 1993-94 38,000 1,20,000 82,000 -------------------------------------------------------- Looking to the facts and circumstances of the case the addition on account of household expenses made by the AO appears to be fair and reasonable. No interference in the case of Shri Bharat I. Jariwala is in our opinion called for. 24. Now coming to the cases of other two brothers viz. S/Shri Mahesh and Rajendra, living jointly with their father Shri Ishwarlal Jariwala, the break-up of withdrawals made by each member and the estimates of household expenses made by the AO are reflected in the following chart: -------------------------------------------------------- Asst. yr. 1993-94 Drawings Estimates Addition -------------------------------------------------------- Rs. Rs. Rs. (1) Ishwarlal Jariwala 53,000 60,000 7,000 (2) Mahesh I. Jariwala 51,400 1,20,000 68,600 (3) Rajendra I. Jariwala 58,000 1,20,000 ....
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.... silver found: 26. The AO has made further additions of Rs. 6,700 and Rs. 20,000 in the cases of Shri Rajendrabhai and Ishwarlal respectively in respect of silver utensils found during search. Looking to the status of the family as well as the old family traditions, we feel that the silver utensils as found during the search cannot be treated as unexplained. These additions are accordingly deleted. Additions on account of unexplained cash: 27. The next dispute pertains to the additions on account of unexplained cash made in the cases of Bharatbhai and Ishwarlal amounting to Rs. 14,750 and 13,408. From the residence of Shri Bharatbhai cash amount of Rs. 3,14,750 was found by the search party, out of which an amount of Rs. 3,00,000 was seized. M/s B.M. Silk Mills in which Shri Bharatbhai was a partner included the above-mentioned seized cash of Rs. 3,00,000 in the disclosure of the group. Regarding the balance of Rs. 14,750 it was stated by the assessee that it represents savings from the past withdrawals for household expenses and gifts from relatives on the occasions of various festivals. The explanation offered by the assessee appears to be fair and reasonable and, therefore, t....
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....was actually started on the land of the assessee even before he was inducted as a partner in the firm. According to the AO the land has been transferred at the market price and no capital gain in respect of the transfer has been declared by the assessee in his personal assessment for asst. yr. 1987-88. The AO therefore, computed the capital gain at Rs. 7,48,766 by invoking the provisions of s. 45(2) of the IT Act, 1961, and made the addition towards the undisclosed income in the block assessment. 31. The contentions made by the learned counsel before us in fact reiterate the points which were raised before the AO during the assessment proceedings. The AO has pressed into service the judgment of the apex Court in McDowell & Co. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) and observed that the introduction of the land at market rate in the books of the firm is in fact a non-genuine devise resorted to with the purposes of evading capital gains. 32. The contentions raised by the learned counsel against the aforesaid addition may be briefly enumerated as under: (1) The issue of assessing the capital gain for asst. yr. 1987-88 does not spring from the seized material and ....
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....rson to a firm in which he becomes a partner. This section has been introduced w.e.f. 1st April, 1988 and would therefore, not be applicable for asst. yr. 1987-88. 33. After careful consideration of the facts and circumstances of the case as well as the submissions made by the learned counsel as above we are inclined to delete the addition of Rs. 7,27,125 made in the case of Ishwarlal Jariwala. The issue of capital gains on the transfer of land by Shri Ishwarlal Jariwala to the firm M/s Bharat Enterprise was outside the purview of the definition of undisclosed income as contained in s. 158B(b). The various decisions of the Tribunal relied upon by the learned counsel fully support the view taken by us here. We are therefore, fortified in our view by the decisions of the Delhi High Court in the case of L.R. Gupta vs. Union of India and Gujarat High Court in the case of N.R. Paper & Board Ltd. & Ors. vs. Dy. CIT (1998) 146 CTR (Guj) 612 : (1998) 234 ITR 733 (Guj) Shri Ishwarlal Jariwala is an existing assessee and has filed the return for asst. yr. 1987-88 disclosing the facts regarding the transfer of land to the firm. Any capital gains liable to be assessed in his hands could possi....