9911796707
TMI Blog2011 (9) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... tner in M/s. Sri Raja Chit Funds, M/s. Sri Velmurugan Chit Funds, Coimbatore and M/s. United Fabrics, Tiruppur. A search was conducted in the business premises of the assessee on 31.01.2001 under section 132 of the Income Tax Act, 1961, hereinafter referred to as "the Act", by Investigation Unit-II, Coimbatore. During the course of search, various incriminating documents were seized, which indicated that the assessee did not disclose the correct income earned by him in the returns filed by him before conducting such search. Before the date of search, the assessee filed returns of income only upto the assessment year 1998-99. Therefore a notice under section 158BC of the Act was issued to the assessee on 28.02.2001. The search was concluded on 13.03.2001. On 18.09.2002, block return in Form 2B was filed by the assessee for the period from 01.04.1990 to 13.03.2001 declaring a loss of Rs. 16,47,844/-. In response to the notices and the letters issued, the assessee made written as well as oral submissions in respect of his income and investments during the said block period. The documents seized from his business premises and the documents produced by him were scrutinized and after hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had not maintained regular books of accounts for the period after 31.03.1998 and when he had received a sum of Rs. 72,00,000/- from sale of properties, out of which, Rs. 42,00,000/- was the "on money receipt", the Assessing Officer was right in treating the said amount of Rs. 42,00,000/- as income from other sources. The sum of Rs. 60,72,900/-, being the bogus outstanding deposit in M/s. Raja Jewellers Proprietary Concern of the assessee, was the undisclosed income of the assessee under section 69C of the Act for the assessment year 1998-99. While conducting the search of the assessee's business premises, fixed deposit receipt books of M/s. Sri Velmurugan Financiers were seized, from which, it came to light that a sum of Rs. 13,83,000/-, which was shown as outstanding as on 31.03.1998, was found to be bogus and since the assessee did not prove the genuineness of the deposits even by filing confirmation letters, the entire deposits were treated as bogus and taxed as unexplained expenditure. The reasoning given by the Assessing Officer, in respect of undisclosed payments made to M/s. P.C. & Sons and M/s. C.R.B.F. Ltd to the tune of Rs. 8,80,000/-; unaccounted payments made to M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal cannot be interfered with in any manner. Learned counsel appearing for the assessee relied upon various decisions of this court as well as other High Courts in support of the above submissions made. 7. It is seen from the materials available on record that the assessee filed his return of income upto the assessment year 1998-1999. A search was conducted in the business premises of the assessee on 31.01.2001 by Investigation Unit - II, Coimbatore and at that time, various incriminating documents were seized, which indicated that the assessee did not disclose the correct income earned by him in the returns filed before the conduct of such search. Therefore, a notice under section 158BC of the Act was issued to the assessee, pursuant to which, block return in Form 2B was filed by the assessee on 18.09.2002 declaring a loss of Rs. 16,47,844/-. On the basis of the materials available, the Assessing Officer passed the order of assessment under section 143(3) read with section 158BC(c) of the Act computing the total undisclosed income of Rs. 1,54,52,270/- and raising a tax demand of Rs. 1,34,50,894/-, after making the following additions: (1) Rs. 42,00,000/- undisclosed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on record, the Assessing Officer treated the said income of Rs. 42 lakhs as "income from other sources", being "on money receipt" due to the sale of the said property, during the assessment year 2001-02 and also made an addition of Rs. 1,52,950/-, being the difference in the sale price of Rs. 15 lakhs and purchase price of Rs. 13,47,050/-. However, the Commissioner of Income Tax (Appeals) had deleted the said addition made by the Assessing Officer on the ground that the assessee had accounted for the indexed cost of the property on the basis of the payments and expenses reflected in the relevant purchase documents and payments and expenses shown in the accounts prior to the date of search. The Commissioner had also held that the computation made by the assessee was verified and found to be correct. The Tribunal had held that the assessee had furnished the calculation of capital gains in respect of the said property while submitting his block returns for the period 01.04.1991 to 31.03.2001; therefore, the Assessing Officer was not justified in holding that the assessee had not disclosed the sale of the said property to the Department and when the entire consideration, including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years as undisclosed income of the assessee. Therefore, we are not inclined to agree with the said contention raised by the assessee. 10. As far as the second question of law is concerned, the assessee, in the returns filed by him for the year ended 31.03.1998, had shown a sum of Rs. 60,72,900/- as the total outstanding liability in respect of the jewellery chit business. However, from the documents seized viz., the ledgers, the outstanding liability was Rs. 39,51,500/- leaving a difference of Rs. 21,21,400/-. It is seen from the materials available on record that bogus credit to the tune of Rs. 21,21,400/- had been declared by the assessee vide his office letter dated 19.07.2002 and though the assessee was asked to furnish the name and address of the creditors, the assessee did not furnish the same. According to the assessee, the above difference was because, returns were filed for the year ending 31.03.1998 whereas, ledgers were not for the year ending 31.03.1998 but for the subsequent period and therefore it is factually incorrect to state that the assessee had not furnished the name and address of the creditors. During post search investigation, random verification was condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not genuine, then, the same cannot be treated as undisclosed income. The Tribunal had also confirmed the said order passed by the Commissioner of Income Tax in this regard. 11. It is seen from the materials available on record that the returns filed by the assessee for the assessment years 1991-92, 1992-93 and 1996-97 were not valid returns as per the Income Tax Law and that they were filed beyond the time limit prescribed under section 139 of the Act. During the course of assessment proceedings, the assessee had submitted cash flow statements in order to explain the investments. But however, no supporting documents were produced by the assessee. It may be true that if the assessee had filed the return of income for the respective years prior to the conduct of search and if no material was found during the course of search so as to establish that such credits were not genuine, then, the same cannot be treated as undisclosed income. However, in this case, admittedly the Assessing Officer had found that the assessee did not maintain proper books of accounts for his business transactions and also for other group concerns from the financial years 1998-99 till the date of search. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have held that the documents produced by the assessee cannot be relied upon. When the assessee himself had admitted in his sworn statement dated 02.03.2011 that he had not maintained proper books of accounts for his business transactions and also for other group concerns from the financial years 1998-99 till the date of search, we are not inclined to give much weightage to the observation made by the Commissioner of Income Tax that the Assessing Officer ought not to have held that the documents produced by the assessee cannot be relied upon. Therefore, we are of the opinion that the order passed by the Commissioner of Income Tax (A) and the Tribunal in this regard cannot be legally sustained. 12. As far as the third question of law is concerned, the assessee is the Proprietor of M/s. Sri Velmurugan Financiers. During the course of search, fixed deposit receipt books of the said company were seized, which revealed that an amount of Rs. 13,83,000/- was outstanding as on 31.03.1998 in favour of various depositors. The assessee was asked to furnish the list of such deposits along with confirmation letters. According to the assessee, the details regarding the deposits were available w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of law raised by this court is concerned, the finance companies viz., M/s. P.C. & Sons and M/s. C.R. Benefit Funds Limited are run by Shri. C. Ramasamy, the cousin brother of the assessee. The assessee had taken a loan of Rs.65 lakhs from the above concerns and Rs. 10 lakhs from the following companies viz., M/s. Chakra Group of concerns, Coimbatore; M/s. Kamadhenu Nidhi and M/s. Subash Financiers, Pandamangalam, Namakkal District, for purchasing a commercial property opposite to Coimbatore Railway Station. Enquiries were conducted to verify the genuineness of the said loan. As far as the amount of loan of Rs. 65 lakhs availed by the assessee is concerned, it is seen from the ledger extracts produced by the assessee that M/s. P.C. & Sons and M/s. C.R. Benefit Funds Limited had given the loan amount on various dates in the year 1996-97 by way of cheques. The assessee had paid interest in respect of the said loan amount before 31.03.1998 and the same was reflected in his return of income. Apart from the above interest, he had paid a total sum of Rs. 87,90,000/- on various dates subsequent to 31.03.1998 towards the principal and interest. The assessee had paid a sum of Rs. 11,55, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Fabrics for the financial year 1997-98, it had come to light that the assessee and his wife had introduced a sum of Rs. 2,50,000/- each, as capital. The return filed by the assessee for the assessment year 1998-99 did not indicate that the assessee became a partner of the said firm. Even the receipts and payments account filed by the assessee did not indicate the contribution of Rs. 2,50,000/- made by the assessee. During the assessment proceedings, the assessee did not also explain the source for the said contribution made by him. 14. From the above materials available on record, it is clear that the assessee had not offered proper explanation with regard to the above payments made to the said companies as well as the contribution made by him in M/s. United Fabrics viz., the partnership firm. No evidence whatsoever was produced by the assessee to prove the source for making those payments as well as the contribution. At the risk of repetition and as seen from the materials available on record, the assessee had not maintained proper books of accounts for the period after 31.03.1998. Returns were also not filed for the remaining period. Therefore, the Assessing Officer held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we went through the assessment order passed by the Assessing Officer to find out whether the Assessing Officer had committed any error in passing the said order. The Assessing Officer had clearly found that during the course of assessment proceedings, the assessee submitted the cash flow statement in order to explain the investments made by him. But however, no supporting documents, by way of books of accounts, were produced by the assessee, despite specific requisition in that regard. The Assessing Officer had also found that the assessee had not maintained regular books of accounts for his business transactions and also for other group concerns from the financial years 1998-99 till the date of conduct of search, which was confirmed by the assessee himself in his sworn statement dated 02.03.2001. In addition to the above, the Assessing Officer had also held that the assessee did not comply with the notices for producing the books of accounts for the period pertaining to the assessment years 1991-92 to 1998-99, for which returns were filed; therefore the cash flow statement submitted by the assessee could not be verified. Since the assessee had not adduced any concrete evidence to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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