2002 (2) TMI 352 - AT - Income Tax

Summary

Issues Involved:

1. Justification of Assessing Officer in assessing Rs.10,65,000 as undisclosed income.
2. Whether the back side of the loose paper was shown to the assessee and its admissibility as evidence.
3. Validity of invoking provisions of Chapter XIV-B of the Act.

Summary:

1. Justification of Assessing Officer in assessing Rs.10,65,000 as undisclosed income:

The assessee, a firm of builders, was assessed Rs.10,65,000 as undisclosed income for the block period 1986-87 to 1996-97. The case arose from a search at Dr. Tanna's premises where a loose paper indicated a cash payment of Rs.10.65 lakhs for a flat purchased from the assessee. Dr. Tanna admitted to this payment u/s 132(4) and surrendered the amount in his block assessment. The Assessing Officer, relying on this admission and the seized paper, concluded the amount was assessable as undisclosed income of the assessee. The assessee denied receiving any cash payment and argued the transaction was recorded at Rs.6.55 lakhs as per the agreement, all payments made through the bank. The CIT upheld the Assessing Officer's decision, distinguishing the case from precedents cited by the assessee, including Miss Lata Mangeshkar's case.

2. Whether the back side of the loose paper was shown to the assessee and its admissibility as evidence:

The Judicial Member noted there was no evidence in the assessment order or CIT's note indicating the back side of the loose paper was shown to the assessee. He concluded it was not admissible evidence due to a lack of opportunity for the assessee to respond, citing the principles of natural justice and the Supreme Court's ruling in Kishinchand Chellaram. Conversely, the Accountant Member believed the back side was shown to the assessee, arguing the paper was central to the case and must have been confronted. The Third Member agreed with the Accountant Member, stating the paper was likely within the assessee's knowledge based on the surrounding circumstances and Dr. Tanna's statement. Consequently, the back side of the loose paper was deemed admissible.

3. Validity of invoking provisions of Chapter XIV-B of the Act:

The assessee argued that u/s 158BD, undisclosed income should belong to a person other than the one searched, and since Dr. Tanna had already been assessed for the amount, it should not be reassessed in the assessee's hands. The Assessing Officer and CIT held that the amount could be taxed in both hands if it represented undisclosed income of one and receipt of another. The Accountant Member upheld this view, noting that the provisions of Chapter XIV-B were correctly invoked, as the transaction involved undisclosed income for both parties.

Conclusion:

The appeal was dismissed, upholding the addition of Rs.10.65 lakhs as undisclosed income in the hands of the assessee, with the Third Member concurring with the Accountant Member's view on the admissibility of the back side of the loose paper and the justification for the addition.