2016 (1) TMI 981 - AT - Income Tax

Addition u/s 69B as unexplained investment - validity of assessment u/s 158BC(c) - arguments on behalf of the Assessee is that the document found in the course of search namely Sanchakar Patrika is unsigned by the Assessee and thus just a mundane and extraneous piece of paper not intended to be acted upon - as per assessee the statement recorded under S. 132(4) during the course of search has been retracted. Notwithstanding, the evidentiary value of the statement stands rebutted by the valuation report of the deptt. valuer itself - Held that - We do not find force in any of the arguments canvassed by assessee. We notice that impugned Sanchakar Patrika/ Agreement of sale/ MOU for sale/ Karar Patra; as may be called, is handwritten with rate @ 65 per sq.ft. is written in unequivocal terms in figure and words. The contents are handwritten in unambiguous terms. The impugned document is also signed by the sellers and witnessed. It is true that the Assessee has not signed the impugned document. But this fact can not be seen to be overriding. The overwhelming fact is that document itself has been found in the custody of the Assessee at the time of search. Thus, the Assessee is deemed to be a party to such deal on stipulated terms unless shown otherwise. There is another aspect of the matter. The same plot which is subject matter of impugned agreement was finally sold to the Assessee albeit in the name of minor son purportedly through a regular agreement. Thus, the deal understandably entered into by this MOU finally went through albeit with a lower price. Thus in our considered view, the evidentiary value of impugned MOU cannot be ignored as irrelevant or extraneous. We also notice that the statement was recorded on oath under S. 132(4) in the course of search wherein undisputedly, the contents of the MOU were endorsed. As a corollary, the statement is presumably true and voluntary since the statement was not withdrawn till the block assessment was taken up. No evidence has been placed before us to demonstrate that statement under section 132(4) given during the course of search has been successfully withdrawn. We do not find any material on record to show that there was any kind of duress or intimidation or coercion which forced the assessee to give any untrue declaration of such kind. The provision of S. 132(4) is plain and simple. The authorized Income Tax official is entitled to examine any person on oath who is found to be in possession or control of such documents etc. and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act. We do not find anything to show that the Assessee had successfully withdrawn the original statement and in view of the seized document noted above there is no merit in the stand of the assessee. The question of adoption of rate estimated by an approved valuer or department valuer will come into play only when the valuation of a given asset is not discernible or determinable from the underlying documents. When the plot was agreed to have been purchased at a given rate, it is for nobody else to estimate a different rate dehors the mutually consented document. It is common knowledge that there is rampant deployment of unaccounted money in land transactions. Coupled with this, there is no whisper about the occasion as to why the parties prepared such allegedly weird document at the allegedly exorbitant and non prevalent rate. Once, the confessional statement under S. 132(4) itself has been found to be admissible on facts and raised estoppel against the assessee and consequent burden not found to have been discharged by the Assessee, the subsequent valuation indicating plausible and rational price is of no relevance. There is no scope for assumption and presumption when speaking evidence for a given price has been found in search proceedings. Hence, the question of applicability of S. 142A with retrospective effect or otherwise is only academic in the present case. We have also weighed the fact that the sellers in its Statement in survey proceedings under S. 133A of the Act have endorsed the version of the Assessee. The statement of seller is not before us. Nevertheless, we do not find any substance in such purported statement which is contrary to written document signed by them. Also, the statement recorded under S. 133A does not have the same legal sanctity qua the statement recorded under S. 132(4). - Decided against assessee Addition towards estimated 25% initial investments by AO on unaccounted sales as per seized diary - Held that - We find that there is no cogent evidence available to support estimation @ 25% of sale as initial investment. On consideration and facts and circumstances and in the light of the decision of the coordinate bench, We are of the view that estimation @ 10% as pleaded by the Assessee would balance equities and would be a fair estimate. Addition towards sale proceeds received on sale of silver articles and estimated 5% commission thereon treated as unexplained receipt and thus undisclosed income - Held that - It is admitted position that no incriminating document showing any unaccounted sale or investment has been found. The entries already recorded in the books cannot be source of addition / disallowance in block assessment. Some flippant or sweeping statement covering such larger block period by other members of the family without anything more cannot, in our view, override tangible book entry and grant jurisdiction to the AO under block assessment. The addition made on this score by the AO is therefore not sustainable. Estimation @ 10% of the unaccounted sale towards purchases as proper and justified. Addition towards unaccounted household expenses - Held that - Estimation confirmed by the CIT(A) is on the basis of seized material only for Nov. 1993 to March 1994. Since, there is no incriminating documents are available on record in respect of balance period, no liability arises to the Assessee for estimation in respect of the rest of the period. Therefore, AO is directed to restrict the disallowance amount in conformity with seized material only. Addition on treating M/s D.R. Textiles, a partnership firm as benami firm of the Assessee - Held that - It is admitted position that wife of the Assessee has contributed initial capital and the firm is backed by partnership deed in writing. The return of income of the partnership firm has been filed and has been assessed. Mere absence of personal knowledge of the business in which a person is a partner cannot make him or her a benami of the person doing the business for the firm. There is nothing to prevent a person to contribute capital and carry on business with the help of others. In our view, the finding of benami is based on irrelevant considerations and thus vitiated.

Summary

Issues Involved:
1. Addition of Rs. 7,44,000/- as unexplained investment in Plot No.194/8.
2. Addition of Rs. 1,25,000/- as unexplained investment in barracks at C.S. No.2904.
3. Addition of Rs. 2,86,656/- as undisclosed income from assumed transactions.
4. Addition of Rs. 1,76,000/- as unexplained investment in Plot No.194/9.
5. Addition of Rs. 1,09,764/- as unexplained receipt from the sale of silver articles.
6. Addition of Rs. 25,000/- as unexplained deposit given to M/s Kathade Collections.
7. Addition of Rs. 50,000/- as undisclosed investment given to Kathade Collections.
8. Addition of Rs. 1,08,157/- from unaccounted sales.
9. Addition for estimated undisclosed household expenses for FY 1993-94.
10. Treating D.R. Textiles as a benami firm and adding Rs. 1,70,066/-.
11. Treating Banti Garments as a benami firm and adding Rs. 14,145/-.
12. Addition of Rs. 12,09,000/- as unexplained cash credit.
13. Levy of interest u/s 158BFA(1).

Issue-wise Detailed Analysis:

1. Addition of Rs. 7,44,000/- as Unexplained Investment in Plot No.194/8:
The assessee was subjected to a search and seizure operation, during which an agreement was found indicating the purchase of Plot No.194/8 at Rs. 65 per sq. ft., with an advance of Rs. 2,00,000/- paid in cash. The Assessing Officer (AO) added Rs. 7,44,000/- as unexplained investment based on this agreement and the assessee's admission under section 132(4). The assessee contended that the agreement was unsigned and the valuation report should be binding. However, the CIT(A) upheld the AO's decision, stating that the seized document and the statement under section 132(4) were valid evidence. The Tribunal confirmed the addition, emphasizing that the document found in the assessee's custody and the statement under oath were significant evidence.

2. Addition of Rs. 1,25,000/- as Unexplained Investment in Barracks at C.S. No.2904:
This ground was not pressed by the assessee during the hearing and was dismissed as "Not Pressed."

3. Addition of Rs. 2,86,656/- as Undisclosed Income from Assumed Transactions:
A seized diary indicated unaccounted sales of Rs. 9,09,949/-. The AO estimated 25% of these sales as initial investment, adding Rs. 2,07,764/-. The Tribunal, considering similar cases, reduced the estimation to 10%, granting partial relief to the assessee.

4. Addition of Rs. 1,76,000/- as Unexplained Investment in Plot No.194/9:
The AO added Rs. 1,76,000/- as unexplained investment based on the same agreement used for Plot No.194/8. The CIT(A) confirmed this addition. The Tribunal upheld the CIT(A)'s decision, applying the same rationale as for Plot No.194/8.

5. Addition of Rs. 1,09,764/- as Unexplained Receipt from Sale of Silver Articles:
The assessee credited Rs. 1,04,538/- in its capital account from the sale of silver articles, which was accounted for in the books. The CIT(A) upheld the AO's addition based on a family member's statement. The Tribunal disagreed, stating that no incriminating document was found, and the addition was not sustainable.

6. Addition of Rs. 25,000/- as Unexplained Deposit Given to M/s Kathade Collections:
This ground was not pressed by the assessee during the hearing and was dismissed as "Not Pressed."

7. Addition of Rs. 50,000/- as Undisclosed Investment Given to Kathade Collections:
This ground was not pressed by the assessee during the hearing and was dismissed as "Not Pressed."

8. Addition of Rs. 1,08,157/- from Unaccounted Sales:
A seized bill book indicated unrecorded sales of Rs. 3,40,654/-. The AO estimated 25% as initial investment, adding Rs. 85,163/-, and gross profit of Rs. 22,994/-. The Tribunal reduced the estimation to 10%, granting partial relief to the assessee.

9. Addition for Estimated Undisclosed Household Expenses for FY 1993-94:
The CIT(A) restricted the addition to Rs. 7,000/- per month for FY 1993-94 based on seized material. The Tribunal upheld this decision, directing the AO to limit the disallowance to the period for which evidence was available.

10. Treating D.R. Textiles as a Benami Firm and Adding Rs. 1,70,066/-:
The CIT(A) upheld the AO's decision to treat D.R. Textiles as a benami firm. The Tribunal disagreed, stating that mere absence of personal knowledge by the wife, who was a partner, did not make the firm benami. The addition was deleted.

11. Treating Banti Garments as a Benami Firm and Adding Rs. 14,145/-:
This ground was not pressed by the assessee during the hearing and was dismissed as "Not Pressed."

12. Addition of Rs. 12,09,000/- as Unexplained Cash Credit:
The CIT(A) did not adjudicate this issue, stating that protective assessments are not appealable. The Tribunal directed the CIT(A) to examine the issue afresh and decide in accordance with the law.

13. Levy of Interest u/s 158BFA(1):
This issue was not specifically addressed in the provided judgment.

Separate Judgments Delivered:
The appeals of other parties involved similar issues and were decided based on the reasoning applied in the case of the primary assessee. The Tribunal upheld or dismissed the grounds based on the same rationale and evidence.