2004 (8) TMI 337 - AT - Income Tax

Validity of action u/s 132 and assessment barred by time - Interest levied u/s 158BFA(1) - limitation for completion of block assessment - Interest - Investment under FDR - Undisclosed income - Non-furnishing of evidence for filing income-tax returns - HELD THAT - In the case of the assessee a Panchnama has been drawn on 15th Sept., 1999 with reference to pending proceedings dt. 28th Aug., 1999. The sealing of the locker No. 85/5 held with United Bank of India, Swaminagar, New Delhi, in the name of Puppy and Kamal was a consequence of authorisation for search u/S 132 on the assessee. It is in continuance of these proceedings the locker has been drilled open on 15th Sept., 1999 where the warrant is stated to be in the case of Puppy and Kamal and Shri N.K. Malhan. Under such circumstances, we are not inclined to agree with the assessee that there was no warrant in the case of the assessee on 15th Sept., 1999 when the locker came to be operated by the authorised officer. Under such circumstances the assessment cannot be held as barred by the limitation. Ground of the assessee, therefore, stands rejected. Interest - As regards interest, from mere jottings or calculations it cannot be said that there was any liability incurred by the assessee as he is also not found to have paid the amount from his resources nor utilised the amount for his individual benefits. The Revenue did not examine these parties though the complete identity and particulars thereof were available before them. Proof of payment has also not been found. In case the calculations were made for interest, they were merely the cost estimates but cannot be said as a payment in reality or a liability incurred by the assessee. In any event the burden was on the Revenue to show that the documents represented undisclosed income of the assessee. Without bringing any corroboratory evidence by the Revenue, this burden cannot be held to have been discharged. Under such peculiar circumstances and the facts as emerging from record, the entries of Rs. 1,65,000 could not have been treated as undisclosed income of the assessee for the block period. The addition so made is, therefore, directed to be deleted. Investment under FDR - The assessee has appended a copy of the balance sheet as on31st March, 1989 which is placed at its paper book p. 46. Explanation has been tendered that the assessee had cash in hand of Rs. 56,500 as on closing of 31st March, 1989 this balance sheet stood enclosed with the return for the asst. yr. 1989-90 of the assets including cash in hand stood accepted in the assessment of that year. Even after carrying out extensive search at business as well as residential premises of the assessee, the Department has not been able to find utilisation of the aforesaid closing cash on 31st March, 1989to the date of search for any other purpose. Availability of cash as on 31st March, 1989 is not in doubt. The application of the said amount into FDR essentially has, therefore, to be accepted as the FDR has been purchased out of such opening cash-in-hand of Rs. 56,500 which was available with the assessee prior to commencement of block period. No addition was thus warranted. The same is, therefore, directed to be deleted. Undisclosed income - The document found and seized might raise strong suspicion, but it could not be held as a conclusive evidence without bringing some corroborative material on record. The document contained only the rough calculations and was silent about any investment. On the basis of such a dumb document, it cannot be said that there were investments made in fact by the assessee. Heavy onus lay upon the Revenue to prove that the document gives rise to undisclosed investment by the assessee. This onus has not been discharged. Accordingly no addition of undisclosed income could be made on the basis of such a document. The addition so made, therefore, is directed to be deleted. Non-furnishing of evidence for filing income-tax returns - The AO did not verify this fact from the demand and collection register or from any other control register. Without doing that it cannot conclusively be held that the assessee was not assessed to tax or did not file return for these two years, i.e., asst. yrs. 1992-93 and 1993-94. We, therefore, set aside the addition and remand it back to the AO to verify the fact from the Departmental record. The AO shall give a conclusive finding with reference to such record maintained with the Revenue before coming to conclusion in accordance with the law. In the result, assessee s appeal stands partly allowed and that of Revenue stands dismissed.

Issues Involved:
1. Validity of action u/s 132 and assessment barred by time.
2. Addition of Rs. 1,65,000 on account of interest.
3. Addition of Rs. 50,000 on account of unexplained FDR.
4. Addition of Rs. 14,31,900 as undisclosed income u/s 69.
5. Addition of Rs. 1,19,948 as undisclosed income for non-filing of IT returns.
6. Addition of Rs. 2,37,643 as undisclosed income due to differences in returns.
7. Levy of Rs. 9,32,537 on account of interest u/s 158BFA(1).
8. Deletion of addition of Rs. 40.85 lakhs by CIT(A).
9. Deletion of addition of Rs. 32.5 lakhs as sale consideration of property.

Summary:

1. Validity of action u/s 132 and assessment barred by time:
The assessee contended that the assessment for the block period was completed after the limitation period prescribed u/s 158BE. The Tribunal held that the assessment was not barred by limitation as the Panchnama drawn on 15th Sept., 1999, was in continuance of the proceedings initiated on 28th Aug., 1999. Thus, the ground was rejected.

2. Addition of Rs. 1,65,000 on account of interest:
The AO made an addition based on seized documents, presuming interest payments. The Tribunal found no corroborative evidence of actual payment or liability incurred by the assessee. The addition was directed to be deleted.

3. Addition of Rs. 50,000 on account of unexplained FDR:
The assessee provided a balance sheet showing cash in hand as on 31st March, 1989, which was accepted in the assessment of that year. The Tribunal accepted the explanation that the FDR was purchased out of this cash and directed the deletion of the addition.

4. Addition of Rs. 14,31,900 as undisclosed income u/s 69:
The AO added the amount based on seized documents presumed to be undisclosed investments. The Tribunal found the documents to be "dumb" with no corroborative evidence of actual investments. The addition was directed to be deleted.

5. Addition of Rs. 1,19,948 as undisclosed income for non-filing of IT returns:
The Tribunal noted that the assessee had paid advance tax and derived income from a partnership firm. The AO was directed to verify the Departmental records to conclusively determine if returns were filed. The addition was set aside and remanded back to the AO.

6. Addition of Rs. 2,37,643 as undisclosed income due to differences in returns:
This ground was not pressed by the assessee and was dismissed as 'not pressed'.

7. Levy of Rs. 9,32,537 on account of interest u/s 158BFA(1):
The AO did not pass a specific order for charging interest u/s 158BFA(1). The Tribunal directed the deletion of the interest demand as no specific order was made.

8. Deletion of addition of Rs. 40.85 lakhs by CIT(A):
The CIT(A) deleted the addition, holding that the gifts were disclosed in regular returns prior to the search and the identity and capacity of the donors were proved. The Tribunal upheld this decision, finding no merit in the Revenue's ground.

9. Deletion of addition of Rs. 32.5 lakhs as sale consideration of property:
The CIT(A) found no evidence that the entire property was sold or that the actual sale consideration was different from what was disclosed. The Tribunal upheld the deletion of the addition, finding no merit in the Revenue's ground.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed.

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