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TMI Blog2010 (4) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order of the Tribunal and to take a different view. The order of the Tribunal was binding on the assessing authority. Therefore, initiation of proceedings u/s 14 read with section 148 of the Act for the assessment year 1996-97 and 1997-98 was barred, erroneous and bad in law. - 51 (Tax) of 2004 - - - Dated:- 5-4-2010 - RAJES KUMAR and S.C. NIGAM JJ. S. K. Garg for the petitioner. Shambhu Chopra for the respondent. JUDGMENT The judgment of the court was delivered by 1. Rajes Kumar J.-By means of the present writ petition the petitioner is challenging the validity of the notices dated March 20, 2003, issued under section 148 of the Income-tax Act, 1961 (called "the Act" for short) for the assessment years 1996-97 and 1997-98. 2. The brief facts giving rise to the present writ petition are that the petitioner is a partnership firm, having its place of business at Varanasi and engaged in the business of gold and silver ornaments. Apart from trading business the petitioner was also doing the job work. For the assessment year 1996-97, the petitioner filed the return on August 22, 1996. The return was initially processed under section 143(1)(a) and, later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily, so the income shown from the saree business is virtually not her income and thus not acceptable, in the case of Smt. Ambika Devi. Same has to be taxed as the income of M/s. Vishwanath Prasad Ashok Kumar Sarraf in the assessment year 1996-97 from the jewellery business in which the concern was dealing being only business unit and income earning business of the family. The above amount was treated as unexplained income in the block assessment proceedings for the period from 1987-88 to 1997-98. The hon'ble Income-tax Appellate Tribunal, vide its order No. I. T. A. No. 1574 Alld. of 1997 dated August 29, 2002, has held that such amounts are not assessable in block proceeding as they are not undisclosed income under section 158BA(3). Regular assessment of this firm, i.e., M/s. Vishwanath Prasad Ashok Kumar Sarraf for the assessment year 1996-97 was completed on February 15, 1999. In this assessment the above mentioned amount were not considered as these amounts already brought to tax in the proceeding of block year, now, vide order dated August 29, 2002, the hon'ble Income-tax Appellate Tribunal has held that these amount are not to be assessed in the block, thus, these amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gms. 13. Shri Umesh Singh, Gilat Bazar, Varanasi. 20-9-1996 428.000 gms. 14. Shri Satish Kumar Sharma, Resham Katra, Varanasi 10-9-1996 466.800 gms. 15. Smt. Rani Devi, C/o Shiv Kumar, Govindpura, Varanasi 8-9-1996 362.500 gms. 16. Sri Ganesh Prasad Manjul, Palika Colony, Sheopur, Varanasi 2-9-1996 482.800 gms. 17. Sri Vinod Seth, Panchkoshi, Ashapur, Varanasi 31-8-1996 466.300 gms. Total 5090.110 gms. In the books of account seized from the premises of the assessee having no details of payments to the above persons and addresses of these persons were also incomplete. In the order book and purchase invoice the weight of the gold have been shown in the above names whereas the stock found in the premises was in the shape of new manufactured new jewellery. There was no evidence that the stock found was connected with the deposit of gold by the so-called above customers. It is beyond imagination that any customer will leave his/her ornaments for more than 7 months from the date of delivery of gold/old ornaments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k proceeding as they are not undisclosed income under section 158BA(3). 5. Regular assessment of this firm, i.e., M/s. Vishwanath Prasad Ashok Kumar Sarraf for the assessment year 1997-98 was completed on December 29, 1999. In this assessment the above mentioned amounts were not considered as these amounts already brought to tax in the proceeding of block year, now, vide order dated August 29, 2002, the hon'ble Income-tax Appellate Tribunal has held that these amount are not to be assessed in the block, thus, these amounts are escaping assessment altogether. In view of the above facts and discussion, I have reason to believe that the total amount of (Rs. 24,45,055 + Rs. 2,28,030 + Rs. 1,17,565) Rs. 28,90,650 as stated above has escaped assessment and to assess the same the case has to be reopened under section 147 of the Income-tax Act, 1961. The approval accorded by the hon'ble CIT (Central), Kanpur, vide his satisfaction dated March 17, 2003 as per letter dated March 17, 2003. Date : 20-3-2003 (Sd.) . . . . . . . . . . . . . (K. K. Upadhyay) Asst. Commissioner of Income-tax Central Circle-II, Varanasi." 5. Learned counsel for the petitioner submitted that the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis and is liable to be set aside. The same cannot be termed as 'undisclosed income' in the block assessment. The addition made on this issue is accordingly deleted." "1997-98 24. The Assessing Officer has dealt with this issue and issued questionnaire dated August 18, 1997 whereby the assessee has been asked to explain gold jewelleries weighing 5090.110 gms. recorded on the order book. It was stated that these gold articles were found mentioned against the names of 17 customers, which is incorporated in this order also. The assessee relied on the same. The assessee initially filed 14 affidavits of these customers and for one customer, Shri Kailash Singh, advocate, affidavit was filed on October 22, 1997. The remaining two affidavits were not filed as the gold articles were already returned to Smt. Rani Devi and other customer, Ganesh Prasad Manjul appeared before the Assessing Officer and was examined under section 131. The Assessing Officer recorded the statement of some of these customers on random basis under section 131 of the Income-tax Act. All the customers affirmed their dealings with the assessee and also affirmed that they had handed over their jewelleries for remak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the gold jewellery is found mentioned in the records of the assessee and the books of account prior to the date of the search, how the same can be treated as undisclosed income. All the details of 17 parties who have handed over their gold ornaments for remaking were found mentioned in the records, which were seized by the search party. The assessee has filed 14 affidavits of the different customers at the initial stage and also filed one more affidavit of Shri Kailash Singh, advocate on October 22, 1997 to prove the dealing with these customers. The remaining two affidavits could not be filed as the articles belonging to Smt. Rani Devi were already returned on October 18, 1996, i.e., prior to the search. The details are mentioned in the paper book at page 176 and the same tallies in the weight also. Another customer, Shri Ganesh Prasad Manjul had already appeared before the Assessing Officer and was examined under section 131 by the Assessing Officer. The Assessing Officer also admitted to have examined eight persons out of these 17 parties on random basis under section 131 of the Income-tax Act. The Assessing Officer himself did not examine all the 17 parties, therefore, his ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to the search, therefore, it is unbelievable that any undisclosed income was discovered during the search operation. The very purpose of Chapter XIV-B is frustrated in this case in view of the entries made in the books of account and other records of the assessee, which were also seized and scrutinised by the Department. We have already indicated that search was made prior to the expiry of the previous year and the assessee has shown all the details in the regular assessment also, therefore, no presumption could be drawn against the assessee that the assessee would not disclose the dealings with the customers and karigars in its return for the purpose of the Income-tax Act. The scope of section 158BC is to assess undisclosed income not recorded in the books or documents maintained in the ordinary course of business relating to previous year. Since all the entries were found to have been mentioned, therefore, it was beyond the scope of section 158BC to take out discrepancy in the statement of the customers to make addition by way of undisclosed income which might be the subject matter of regular assessment. The Assessing Officer acted beyond his jurisdiction. The reasons giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at pages 59 and 60 in the paper book. The Assessing Officer has accepted the details of the cash available up to October 24, 1996 in a sum of Rs. 56,520.10p. A further sum of Rs. 50,000 was believed to have been withdrawn on October 26, 1996. There after, in the cash reconciliation the assessee has shown cash sale of gold ornaments (150.300 gms) in a sum of Rs. 82,316 on November 1, 1996 and on the same date, cash sale of silver in a sum of Rs.4,508.50. On that date, some petty cash was also recovered from /s. Roopanjali Swarn Kala Kendra against sale and trade tax. Certain expenses are also shown. The account on November 2, 1996, cash sale of gold ornaments (161.130 gms) in a sum of Rs. 83,787.60 is shown. The remaining small details are also mentioned with regard to the petty sales and cash recovered from M/s. Roopanjali Swarn Kala Kendra. The major items are the sales of gold ornaments in a sum of Rs. 82,316 and Rs. 83,787.60. The Assessing Officer believed that only gold weighing 5090.110 gms. was to be explained, though the entries in the stock register were found of 7,134,780 gms. of gold ornaments. The remaining items were the gold ornaments sold on November 1, 1996 and No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Held, no.' 28. The Income-tax Appellate Tribunal, Delhi Bench in the case of Ashok Kumar Agrawal reported in [1990] 38 TTJ 189 (Delhi) has held : 'Where the cash recovered from the assessee's possession did in fact belong to his brother as evidenced by confirmation of the affidavits of the lending parties, the Income-tax Officer was not justified in treating the amount as income from undisclosed sources of the assessee.' It was further held : 'Suspicion, though a ground for scrutiny of evidence cannot be made the foundation of decision. Conjecture is not a substitute for legal proof. Suspicion, however strong, cannot take the place of proof.' Though Ashok Kumar, partner of the assessee-firm has surrendered cash of Rs. 1,89,880 in his initial statement on November 3, 1996 but in the same statement, Ashok Kumar partner has specifically stated that he was not sitting in the shop for the last ten days and therefore, he is not aware of the cash details. We have already stated above that though Ashok Kumar has surrendered the cash of Rs.1,89,880 but subsequently, Ashok Kumar had been able to explain the inflow and out flow of cash. The major difference was of the sales made on N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of 390 coins, 20 coins purchased on November 1, 1996, and as such, the same was fully reconciled. However, the Assessing Officer disbelieved as no purchase voucher was found at the time of search and no payment was made and no supporting evidence was found available. Similarly, addition was made in respect of silver brick in a sum of Rs.39,433 as no evidence of silver brick taken on loan on November 1, 1996 from Smt. Radha Devi was found. Lastly, the addition of Rs.20,611 was made in respect of silver ornaments as no supportive evidence was found. The Assessing Officer made the addition as no evidence to the so-called loan was found at the time of search. As far as the silver ornaments are concerned, purchase bill is a document. The Assessing Officer failed to make any enquiry with regard to this purchase. Nothing is mentioned in the assessment order whether the Assessing Officer has made any enquiry from any of the dealers from whom the purchases are made by the assessee. The details of the bill were produced before the Assessing Officer. No reasons were given by the Assessing Officer that the assessee would not disclose some purchases in the return for the purpose of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment. 'Unexplained deposit in the bank account of Ashok Kumar (HUF)' 30. The Assessing Officer made an addition of Rs. 5,000 in the hands of the assessee, though it was found to have been deposited on different dates on August 13, 1996, August 14, 1996 and August 20, 1996 in the bank account in the name of Ashok Kumar (HUF) in Oriental Bank of Commerce. The Assessing Officer did not find any evidence that this amount belongs to the assessee-firm. The Assessing Officer on the same reasons did not make addition in respect of the bank account of Smt. Vimla Devi and Gajendra Kumar. In the case of these persons, the bank pass book was found at the time of search in the business premises of the assessee in respect of Smt.Vimla Devi and Gajendra Kumar. The assessee explained that the bank account did not belong to the assessee-firm and as such, the Assessing Officer did not take any adverse view against the assessee and did not make any addition in the hands of the assessee-firm. On the same reasons, the Assessing Officer should have believed the statements of the assessee. In the case of Ashok Kumar (HUF), it is very clear that the account did not belong to the assessee-firm. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated November 27, 1997. The assessing authority has treated the said amount as undisclosed income. However, in appeal, the Tribunal has held that these amounts are not the undisclosed income of the assessee. He submitted that once the said amount has been held as not undisclosed income of the assessee then for the purpose of section 147 of Act the said amount cannot be treated as the escaped income, inasmuch as those amounts have already duly considered and held to be not undisclosed income. 8. Sri Shambhu Chopra, standing counsel, submitted that the amounts, which are said to be escaped income in the reason recorded, have not been assessed to tax either in the original proceeding or in the block assessment and, therefore, the said income have escaped to be assessed. Therefore, the initiation of proceeding under section 148 read with section 147 of the Act are legally correct. He, however, could not able to explain what material facts, which the petitioner ought to have disclosed in the return or in the original proceeding, have not been disclosed believing that there was escaped assessment. 9. Having heard learned counsel for the parties, we have given our anxious considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been 'underassessed' ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148." 10. For the assessment year 1996-97, four years expired on March 31, 2001, and for the assessment year 1997-98, four years expired on March 31, 2002. The notices under section 148 of the Act were issued on March 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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