2003 (12) TMI 633 - AT - Income Tax

Summary

Issues Involved:
1. Use of materials found during investigation and enquiries following a search.
2. Alleged use of third-degree methods by Investigating Officers.
3. Difference in the amount seized and deposited in the Reserve Bank of India.
4. Validity of block assessment period and its conclusion.
5. Application of mind by the Assessing Officer and approval by the Commissioner.
6. Addition of income based on documents found during the search.
7. Ownership and explanation of cash found during the search.
8. Ownership and explanation of investments made by family members.
9. Ownership and explanation of jewellery and silverware found during the search.
10. Donations made to Dr. Dharmambal Namasivayam Trust.
11. Various other investments and expenditures.
12. Deposits in the foreign bank account of a relative.
13. Addition of secret commission.
14. Foreign currency found during the search.
15. Fixed deposits and interest accrued thereon.

Detailed Analysis:

1. Use of Materials Found During Investigation and Enquiries Following a Search:
The Tribunal held that the materials found during the investigation and enquiries following the search could be used, distinguishing the case from P.K. Ganeshwar's case where materials were independent and not a result of the search. In this case, certain papers or materials were found, and enquiries were conducted regarding such seized materials. Thus, this point was held against the assessee.

2. Alleged Use of Third-Degree Methods by Investigating Officers:
The assessee argued that third-degree methods were used by Investigating Officers, which vitiated the assessment proceedings. The Tribunal noted that the Notary Public who attested the affidavit was questioned without the presence of the assessee or his representative. However, since the assessee had an opportunity to cross-examine the Notary Public later, the absence of the assessee or his representative at the time of questioning did not vitiate the entire proceedings. Thus, this preliminary legal objection was overruled.

3. Difference in the Amount Seized and Deposited in the Reserve Bank of India:
The Tribunal observed that there was a discrepancy in the amount seized from the assessee's residence and office and the amount deposited in the Reserve Bank of India. The cash deposited was more than the cash seized by Rs. 4,65,650. The Tribunal noted that the assessee was given an opportunity to be present during the deposit of the cash but did not comply. Thus, the plea of manipulation was rejected, and this legal ground of the assessee was overruled.

4. Validity of Block Assessment Period and Its Conclusion:
The Tribunal held that merely mentioning "search continues" in one paper (panchnama) was not sufficient to hold that the entire block assessment had to go. It was clear from other documents that the search had concluded. Thus, this infirmity alone did not vitiate the entire proceedings.

5. Application of Mind by the Assessing Officer and Approval by the Commissioner:
The Tribunal rejected the assessee's contention that the approval by the Commissioner was not valid due to lack of time for application of mind. It was held that the approval of the Commissioner under section 158BG is an administrative matter, and it is not necessary to give a hearing to the parties. Thus, this plea of the assessee was also rejected.

6. Addition of Income Based on Documents Found During the Search:
The Tribunal examined the addition of Rs. 38,95,74,550 based on documents found during the search. The assessee argued that the Assessing Officer relied on certain paper slips without corroborative evidence. The Tribunal noted that the Assessing Officer failed to provide the assessee with an opportunity to cross-examine the parties from whom statements were recorded. It was held that the addition could not be sustained without proper evidence and cross-examination. Thus, the addition was deleted.

7. Ownership and Explanation of Cash Found During the Search:
The Tribunal examined the cash found at the assessee's residence and office. The assessee claimed that the cash belonged to Tamil Nadu Basketball Association (TNBA). The Tribunal noted that the assessee provided names of persons who allegedly advanced money to TNBA, but the Assessing Officer disbelieved the explanation. However, the Tribunal held that the assessee had discharged the primary onus of explaining the source, and the addition could not be sustained. Thus, the addition was deleted.

8. Ownership and Explanation of Investments Made by Family Members:
The Tribunal examined the investments made in the names of the assessee's mother and sons. It was noted that the assessments were completed on a regular basis under section 143(3) and the declarations under KVSS were accepted. Thus, the additions made in the hands of the assessee were deleted.

9. Ownership and Explanation of Jewellery and Silverware Found During the Search:
The Tribunal examined the addition of Rs. 1,15,41,900 for jewellery and silverware found during the search. It was noted that the assessee provided explanations for the jewellery, including gifts received during marriage. The Tribunal held that the explanations were reasonable and the addition could not be sustained. Thus, the addition was deleted.

10. Donations Made to Dr. Dharmambal Namasivayam Trust:
The Tribunal examined the addition of Rs. 1,69,19,621 and Rs. 2,91,958 for donations made to Dr. Dharmambal Namasivayam Trust. It was noted that the trust was registered and given exemption under section 80G. The Tribunal held that the addition could not be sustained without proper evidence linking the donations to the assessee. Thus, the addition was deleted.

11. Various Other Investments and Expenditures:
The Tribunal examined various other investments and expenditures, including investments in M/s. Shilpi Grih Constructions, purchase of property, and household expenses. It was noted that the assessments were completed on a regular basis and the declarations under KVSS were accepted. Thus, the additions made in the hands of the assessee were deleted.

12. Deposits in the Foreign Bank Account of a Relative:
The Tribunal examined the addition of Rs. 25,87,343 for deposits in the foreign bank account of a relative. It was noted that the pass-book and fax message were found in the assessee's bedroom. However, the Tribunal held that the addition could not be sustained without proper evidence linking the deposits to the assessee. Thus, the addition was deleted.

13. Addition of Secret Commission:
The Tribunal examined the addition of Rs. 1,34,46,588 for secret commission. It was noted that the documents found during the search did not provide clear evidence of receipt of secret commission by the assessee. Thus, the addition was deleted.

14. Foreign Currency Found During the Search:
The Tribunal examined the addition of Rs. 1,93,040 for foreign currency found during the search. It was noted that the assessee provided a plausible explanation for the foreign currency, and the addition could not be sustained. Thus, the addition was deleted.

15. Fixed Deposits and Interest Accrued Thereon:
The Tribunal examined the addition of fixed deposits and interest accrued thereon. It was noted that the assessments were completed on a regular basis and the declarations under KVSS were accepted. Thus, the additions made in the hands of the assessee were deleted.

Conclusion:
The Tribunal allowed the appeal of the assessee partly, deleting most of the additions made by the Assessing Officer due to lack of proper evidence and procedural infirmities. The Tribunal emphasized the importance of providing the assessee with an opportunity for cross-examination and the need for corroborative evidence to sustain additions under Chapter XIV-B.