TaxTMI 
TaxTMI 
1999 (5) TMI 54
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....arch started ax 3.30 p.m. on 12th Dec, 1995 and was closed temporarily at 1.15 a.m. on 13th Dec, 1995. Certain books of account, documents and other valuables, etc. were seized on this first day of the search as per the inventory made by the searching party. Certain other books of account and documents were also inventorised as found but not seized. A Prohibitory Order (P.O.) was issued under s. 132(3) of the Act in respect of the filing cabinet and Almirah in the inner-office of M/s Trishul Enterprises at the above-mentioned address. On the same date again (12th Dec, 1995 searches were commenced at 3.45 p.m. in the above-mentioned residential premises of the assessee, which was closed temporarily at 6 p.m. on the same day. Some cash and other valuables were seized whereas certain amount of cash as inventorised separately was found but not seized. A P.O. under s. 132(3) was put on one wardrobe in the bed-room of the assessee Search in the residential premises of the assessee was resumed on 13th Dec, 1995 at 12.30 p.m. and was finally concluded at 4 p.m on the same day without making any further seizure. However, some jewelleries, ornaments, etc found but not seized were inventorise....
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....ting the genuineness of the credits, the CIT did not entertain them at all. The learned counsel argues that in the circumstances the approval given by the CIT to the addition of the loan amounts in the impugned assessment must be considered to be against the principles of natural justice and hence bad in law. 4. We are, however, of the view that even the decision taken by this Bench in the case of Microland at least is required to be followed. The question of not entertaining the valuable witnesses by the CIT will be taken up by us at appropriate place, when we would consider the issue relating to the addition of loan amounts. 5. Thereafter, Shri Venkatesan strongly contends that the assessment is barred by limitation. He argues that the search in the office premises of the assessee should be considered as having been concluded on 13th Dec, 1995 itself and that the further operations carried on by the searching party were merely farces and had no real bearing. He thus strongly argues that the assessment completed on 28th Feb., 1997 being more than one year after the date of completion of the search should be considered as barred by limitation and hence invalid. The first a....
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....nts which had already been examined and considered to be not fit for being seized were put in the filing cabinet and the almirah in the office of M/s Trishul Enterprises and the P.O. was issued thereon merely for continuing the search, not from the point of view of practical considerations relating to the search, but for collateral purposes. In support of this contention, Shri Venkatesan draws our attention to the Panchnamas prepared by the searching party on all the following days and points out that neither any books of account/documents and also valuables were at all seized on any of those following days of search operations but even they were not considered as "found but not seized". Shri Venkatesan thus strongly contends that even on the first day of the search itself, the searching party had made up its mind as to what books of account, documents, etc. were to be seized and the P.O. was put simply without any purpose. Shri Venkatesan relies on the judgment of the Tribunal, Bangalore Bench, in the case of Kirloskar Investments & Finance Ltd. in support of his argument that in such a case the search should be considered as having been concluded on the very first day itself. He ....
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....rs. (1998) 149 CTR (Ker) 207. In this particular case, it was decided that the one year period starts from the end of the month of execution of the authorisation i.e., after completion of search or implementation of search order. The learned Departmental Representative strongly argues that this particular decision being the only decision of a High Court on this issue should be followed in deciding the present issue. In support of this contention that when there is only one decision of a High Court, the same will be binding on the Tribunal. The learned Departmental Representative places reliance on an order of the Tribunal, Ahmedabad Bench (Third Member) in the case of ITO vs. P.M. Suthar (1995) 52 TTJ (Ahd) 260 (TM) : (1995) 53 ITD 1 (Ahd) (TM). Lastly, the learned Departmental Representative also brings our notice to the retrospective amendment brought to s. 158BE relating to time-limit for completion of block assessment by the Finance (No. 2) Act, 1998 with retrospective effect from 1st July, 1995. Actually, a new Explanation was introduced to the aforesaid section in this matter which reads as follows: "Explanation 2.- Fox removal of doubts, it is hereby declared that the aut....
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.... stating that on 19th Jan., 1996 a statement under s. 132(4) was recorded from the assessee. Certain other facts relating to the search, as have been discussed by us above, are also affirmed in the said affidavit. 9. Shri Venkatesan points out that the PO dt. 12th Dec, 1995 was not renewed. He argues that hence the said P.O. lapsed after 60 days i.e. on 10th Feb., 1996, and, therefore, on 12th Dec, 1996, no PO was in operation. He thus argues that there was no scope for the searching party to visit the premises of the assessee on 12th Feb., 1996. Thereafter, Shri Venkatesan has relied on a judgment of the Karnataka High Court in the case of Patil Vijay Kumar & Ors. vs. Union of India & Anr. (1985) 48 CTR (Kar) 41 : (1985) 151 ITR 48 (Kar) in which the Karnataka High Court held that the decision of one High Court is not binding on the Tribunals in other States. 10. In this connection, it may be mentioned that the learned Departmental Representative takes objection to the version of the affidavit filed by the assessee challenging the Departmental version with regard to some matters. He relies on a judgment of the Tribunal Mumbai Bench 'C (Third Member) in the case of Dy. CIT vs....
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....e search should be considered as having been concluded on the first day itself. However, this point was not much stressed in that particular judgment of the Tribunal inasmuch as the question of invalidity of the search on the subsequent days was decided easily in that case by taking into consideration the fact that the PO for the subsequent occasions was not issued in the name of that particular assessee at all. In this connection, we may examine the decisions tried to be relied upon by Shri Venkatesan, some of which were already examined in the case of Microland Ltd. 1. Sriram Jaiswal vs. Union of India & Ors. (1988) 75 CTR (All) 41 : (1989) 176 ITR 261 (All). In this case it was held that no order under s. 132(3) can be passed when the authorised officer is in doubt as to whether the assets are disclosed or not. 2. B.K. Nowlakha & Ors. vs. Union of India & Ors. (1992) 101 CTR (Del) 73 : (1991) 192 ITR 436 (Del). In this case it was held that the provisions of s. 132(3) could be resorted to only when there was any practical difficulty in seizing the item which was liable to be seized. The High Court furthermore stated that there was no practical difficulty then the author....
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....tion on the subsequent days under a new warrant of authorisation. So far as the original search operation started on 12th Dec, 1995 in the premises of M/s Trishul Enterprises and also in the residential premises of the assessee is, therefore, concerned, we are of the opinion that the search must be considered to have been concluded at least on 19th Jan., 1996. The retrospective amendment by way of insertion of Expln. 2 to s. 158BE does not help the Department at all. If the search has got to be treated as having been continued, the same should be done in a valid manner and without offending the provisions of ss. 132(1) and 132(3), as has been discussed by the Allahabad and Delhi High Courts in the above-mentioned cases of Sriram Jaiswal and B.K Nowlakha & Ors. The judgment of the Kerala High Court in (1999) 154 CTR (Ker) 523 : (1999) 237 ITR 70 (Ker) confirms this decision further. We fell that the new Expln. 2, as inserted with retrospective effect, should be considered to be applicable to cases where a number of warrants of authorisation have been issued simultaneously and the reference to recording conclusion of search in the last Panchnama drawn must refer to a search continued....
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....l, 1985, was shown by the assessee. He furthermore points out that the paper-book filed by the wife of the assessee, Smt. Annapoornamma shows the credit balance of the assessee to be Rs. 70,000 only. Shri Venkatesan, the learned counsel for the assessee, tries to reply in this connection that besides the personal account of Smt. Annapoornamma as shown in her paper-book the assessee's balance with a proprietary concern of Smt. Annapoornamma viz. M/s Annapoornamma Construction is also required to be taken into consideration. It is argued that, in any case, the opening capital of the assessee stands explained by the various investments made by the assessee, of which detailed list has been furnished, as on the relevant date. We find ample force in this last argument of Shri Venkatesan. The capital of a person in his balance sheet must be reflected by way of presence of a number of assets in different forms. The assessee has given details of such assets, which are easily verifiable. We are, therefore, of the opinion that this matter requires thorough examination at the end of the AO and that the AO, without conducting such examination, has wrongly treated the entire opening capital a....
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....cision thereon. The matter is, therefore, being set aside with the above direction. 16. An amount of Rs. 1 lakh shown as liability as on 31st March, 1995, from Shri Hariram Alidas has also been added back by the AO as undisclosed income of the assessee for the asst. yr. 1995-96. Again, the AO also added back the following liabilities shown as on 12th Dec, 1995 as unproved credit items: Rs. (i) Madhav Das Aildas (M/s Sripriya Advance a/c) 3,35,500 (ii) N. Ravi (M/s Sripriya Advance a/c) 1,52,500 (iii) H. Vijeyandra (M/s Sripriya advance a/c) 1,52,000 &n....
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.... these loan amounts have been made without making proper enquiries. The statement of Shri Venkatesan about the parties waiting outside the chamber of the CIT is borne out by the affidavit filed by the assessee. In any case, we are of the opinion that the matter relating to these credit entries requires further examination at the end of the AO and proper opportunity should be allowed to the assessee to establish his case. For this purpose, therefore, the above two matters are being restored back to the file of the AO. 17. The AO has also added back an amount of Rs. 10,39,950 being undisclosed income arising out of the activities undertaken by the assessee in purchasing and developing certain plots of land at Kammannahalli. The AO refers to a memorandum of agreement, dt. 8th Sept., 1995, between the assessee and M/s Sripriya Developers (hereinafter referred to as 'SD') in which the assessee was shown as vendor and the other party as purchaser. An agreement for sale was also entered into between the parties on the same day, It is the contention of the AO that the assessee did actually sell the land to SD after getting the agricultural land converted for non-agricultural purposes an....
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.... before him that his method of accounting was mercantile. Finally, the AO took into consideration the amount of sale receipt of Rs. 17,53,750 and deducting therefrom the amount of expenses of Rs. 7,13,770 towards the cost of the land and also the development expenses, he considered the balance amount of Rs. 10,39,950 as net profit and included the same as undisclosed income of the assessee for the asst. yr. 1996-97 (upto the date of search). 18. The assessee strongly objects to the action taken by the AO in this regard. Firstly, it is contended that although proper books of account were not being maintained by the assessee, yet all the transactions were through bank accounts and hence it cannot be inferred that the assessee had any intention of not disclosing the transactions before the Department. Shri Venkatesan strongly contended in this connection that the relevant accounting year having not at all by then ended and the due date for filing of the return for the relevant year having not expired, it would not be proper to say that the income arising out of those transactions were meant to keep out of the knowledge of the Department and hence the same represented the undisclose....
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....ent of sale had been executed in favour of that assessee by the vendor. However, so far as the present case before us is concerned, there is nothing on record to show that any registered sale documents were at all executed by the assessee in favour of the purchaser. Hence, we are of the view that this particular decision will not be applicable to the present case. The learned Departmental Representative has also relied on a judgment of the Supreme Court in the case of P.M. Mohammed Meerakhan vs. CIT (1969) 73 ITR 735 (SC). In that particular case, that assessee had divided the entire area purchased by him into 23 plots out of which 22 plots had been sold to others and the last one was retained by that assessee. The Supreme Court held that the transaction was in the nature of trade and profits from the transactions were to be taken into consideration by holding the last plot to represent stock-in-trade. It may be noted in this connection that in that particular case the operations had substantially been concluded by way of sale of 22 plots out of 23. In the present case, it is not the fact that major portion of the operation, in which the assessee was involved, was over by the da....
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....aluation of stock-in-trade. (2) CIT vs. U.P. State Industrial Development Corpn. (1997) 139 CTR (SC) 267 : (1997) 225 ITR 703 (SC). In this case, it was held that principles of commercial accounting should ordinarily be applied in ascertaining profits and gains. (3) Tirathram Ahuja (P) Ltd. vs. CIT (1990) 186 ITR 428 (SC). In this case, it was held that in case of incomplete construction contract, no reference would lie out of the finding that neither profit nor loss for the work can be taken into account. The learned Departmental Representative also relies on an order of the Tribunal, Mumbai Bench, in the case of Param Anand Builders (P) Ltd. vs. ITO (1996) 56 TTJ (Mumbai) 21 : (1996) 59 ITD 29 (Mumbai). In that particular case also that assessee was engaged in construction work and it took a huge project in 1980 which had to take several years to complete. It adopted "Project completion method" as its method of accounting and contended that it should be treated to have earned no profit till the asst. yr. 1985-86. During a search on 11th May, 1987, the Department found some incriminating materials. The assessee declared unaccounted profit of Rs. 66 lakhs as 'on money' and....
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....ed more easily. The AO as also the learned Departmental Representative have mentioned some admissions made by the assessee during the course of search about land having been purchased and sale consideration having been received. From a close study of the deposition of assessee, however, it appears that the said portions of the deposition of the assessee relate to the transaction with RC entered into by Smt. Annapuma, Ravishnakar and Girish. The AO also mentions in the assessment order that with regard to the transaction with RC, the transactions were completed. That may be the case. But so far as the present assessee is concerned, the transactions relating to him are required to be examined separately. There is no doubt about the fact that no sale deed was executed in the present case, not to speak of getting the same registered. The only materials on which the Departmental authorities relied are the MoU and the agreement for sale. It is an undisputed fact that the assessee received some amount of money from the ultimate purchasers and some portions of the land have also been handed over after development. However, the entire MoU and also the agreement related to the whole block of....