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TMI Blog2011 (7) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(Appeals) overlooked the basic issue as to whom should the sources of deposits in the bank account be traced to. Since both protective and substantive, additions have been deleted the interests of the Revenue has been jeopardised. The Commissioner of Income-tax (Appeals) has failed to look into the sources of the funds made towards investment of auction money by the assessee thus giving a clean chit to the assessee. Her further observation that the Assessing Officer has made post-search enquiry from the Excise Department. In contraction of section is also incorrect since the Assessing Officer based his enquiry on seized documents. Since the seized documents did not name any other person it was for the assessee to explain the sources of deposit of auction money. The learned Commissioner of Income-tax (Appeals) has failed to appreciate this fact. - IT(SS) APPEAL NOS. 13 TO 21 (RANCHI) OF 2008 - - - Dated:- 14-7-2011 - K.K. GUPTA, K.S.S. PRASAD RAO, JJ. Deepak Raushan for the Appellant. V.K. Jalan and Vinod Kumar for the Respondent. ORDER 1. All these appeals are filed by the Department against the order of the learned Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erits only. However, the Department has filed these appeals aggrieved with those orders passed by the learned Commissioner of Income-tax (Appeals) and for upholding the same, the assessees filed cross-objections. On a perusal of the material placed before us, we firstly decided to take up the cross-objections filed by the assessees as it was the base order passed by the Assessing Officer. 4. During the course of hearing, the learned representative for the assessees has vehemently argued contending, inter alia, that the Assessing Officer has served several notices to the assessee(s) under section 158BD on April 6, 2005 as can be seen from the written submission filed by the learned Departmental Representative. Therefore, this is only after the assessment order under section 158BC was passed against such persons. He further drew our attention to the observation of the Assessing Officer in the assessment order, wherein it was observed by the Assessing Officer that protective assessments had been done in these cases. The assessees filed a paper book in support of the claim before the Assessing Officer for initiating proceedings under section 158BD. But nothing was communicated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against such other person and the provisions of this Chapter shall apply accordingly." 7. On reading of this provision makes it clear that before issuing notice under section 158BD, the Assessing Officer must be satisfied that any undisclosed income belonged to any person other than the person on whom search was made out from the material found during the course of search. The term "undisclosed income" clearly states that the Assessing Officer must derive his satisfaction from the perusal of seized documents after verifying them with the regular returns filed by the assessee. Coming to the question of satisfaction, which is most important to complete the process if the same is called for. The contention of the assessee was not accepted by the learned Commissioner of Income-tax (Appeals) by observing that the Assessing Officer has clearly written i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also found that the assessee had claimed refund of security money for Rs. 3,32,316 which was not processed by the treasury officer on the ground that the signature of the application did not tally with the signature made by him in the presence of the treasury officer. Accordingly, the Assessing Officer treated the refund amount as undisclosed and made necessary addition. However, he made the addition on a protective basis in the case of the assessee and on a substantive basis in the case of Sri Pramod Prasad. (2) The learned Commissioner of Income-tax (Appeals) has erred in deleting both additions in full by observing that the assessee is an old one who had been declaring the income from legal business to the Department and that he had been filing returns of income regularly. But the fact remains that the assessee never filed any return of income and the accounting statements before the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has not mentioned as to what amount of auction money and security deposits were declared by the assessee in his balance-sheet and whether the amounts revealed by the seized documents match with the amounts declared in the balance- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds under which additions have been made by the Assessing Officer are declared by the assessee. The learned Commissioner of Income-tax (Appeals) categorically mentioned that in the impugned order at page 1, paragraph 2 that the Assessing Officer was allowed an opportunity of being heard but he opted not to comply nor any written submission before the learned Commissioner of Income-tax (Appeals). Therefore, the learned Commissioner of Income-tax (Appeals) has called for the records and verified the returns of the assessee. At the time of verification, it was found by the learned Commissioner of Income-tax (Appeals) that the transactions are found to be disclosed in the returns of income of the assessee and hence, no addition can sustain and accordingly she deleted the additions made by the Assessing Officer in the hands of the assessee. Therefore, even on the merits also, the contention raised by the assessee has force. Hence, we are of the considered view that the Departmental appeal is devoid of merit and hereby dismissed. 13. Now coming to the appeal being IT (SS)A. No. 14/Ran/2008 filed by the Revenue in the case of Shri Dinesh Prasad, wherein the Revenue has raised the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him on the basis of such evidence in order to bolster the addition cannot be said to be enquiries conducted without any seized documents. The deletion of the entire additions totalling to Rs. 14,72,790 allowed by the learned Commissioner of Income-tax (Appeals) is bad in law as well as on the facts. 14. At the time of hearing, the learned Departmental Representative vehemently argued before the Tribunal that the Assessing Officer has not seen the regular returns of the assessee filed with the Department where the amounts added in the orders of the Assessing Officer were found to be disclosed. He further contended that the assessee never filed returns before the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has given relief to the assessee after verifying the returns of the assessee which were not filed before the Assessing Officer. The learned Commissioner of Income-tax (Appeals) has given relief to the assessee only verifying the returns. This clearly violates the provisions of rule 46A of the Income-tax Rules. 15. Contrary to this, the learned representative for the assessee has vehemently argued that the assessee has given reply to each and ever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or genuineness of the transactions could be filed prompting the Assessing Officer to treat the gifts as bogus and make necessary additions. Such addition was made on the basis of statement recorded under section 131(1) of Shri Pramod Prasad on March 17, 2003 in the course of which he could not furnish any evidence or clarify the donors. (2) The learned Commissioner of Income-tax (Appeals) erred in deleting the addition of Rs. 17,20,970 made on protective basis by holding that the Assessing Officer made the substantive addition in the case of Shri Sunil Kumar Shah husband of the assessee in whose case the addition was deleted and as such the Assessing Officer should not have made the addition again on protective basis in the case of the assessee. By holding such opinion, the learned Commissioner of Income-tax (Appeals) overlooked the basic issue as to whom should the sources of deposits in the bank account be traced to. Since both protective and substantive additions have been deleted the interests of the Revenue has been jeopardised. (3) Furthermore the observation of the learned Commissioner of Income-tax (Appeals) that the Assessing Officer has travelled beyond his jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 158BD on April 6, 2005. He also did not reply to the detailed questionnaire dated March 9, 2007 served on March 12, 2007 to explain the specific details on various seized documents. The Assessing Officer observed on the basis of seized documents that the assessee had deposited auction money for securing licence to lift country liquor as under : ( i ) Chhatatand Country Liquor Shop (auction fee for the financial year 1997-98) Rs. 5,85,000 ( ii ) Chhatatand Country Liquor Shop (auction fee for the financial year 1998-99) Rs. 5,40,000 ( iii ) Malgarha Country Liquor Shop (auction fee for the financial year 1999-2000) Rs. 18,56,380 (2) The assessee failed to clarify the sources of deposits despite having received adequate opportunities thus prompting the Assessing Officer to treat the entire amount of Rs. 29,81,380 as undisclosed investments of the assessee. The Assessing Officer also made a further addition of Rs. 1,87,780 being refund of security money by the Excise Department. Since the sources of the investments were not clarified or explained by the assessee the Assessing Officer made substantive as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of Rs. 2,23,82,500 in the balance-sheet filed by the learned authorised representative before her. As a matter of fact the assessee had never filed any such balance-sheet as on March 31, 2003 or March 12, 2003 nor has filed any explanation about the sources of the deposit. Even if the learned Commissioner of Income-tax (Appeals) has gone through the appraisal report as well as statement given by Shri Pramod Prasad and found that a note was given by the Assistant Director of Income-tax (Investigation) to the effect that the deposit of Rs. 2,23,85,500 were found during the course of search in the name of four persons, namely Shri Pramod Prasad, M/s. Jharkhand Liquor (P.) Ltd., Smt. Kavita Shah and Shri Sunil Kumar it is necessary and expedient that the assessee at the stage of assessment provide the sources of deposit in the hands of all the above four persons. If the assessee claims that its sources of deposits could be traded to the issued capital Rs. 1,00,000, share application money at Rs. 32,00,000 and loan from directors at Rs. 65,25,000 the onus was lying on the assessee to prove that the sources are linked to genuine persons who had the creditworthiness to make such invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antive addition in the case of Shri Anil Kumar Shah, husband of the assessee. It is noticed that learned Commissioner of Income-tax (Appeals) in her order dated December 31, 2005 had observed that Smt. Namita Shah is separately assessed to tax therefore, the deposits made in the undisclosed bank account in her name should not be added in the hands of Shri Anil Kumar Shah. Thus following the observation of the learned Commissioner of Income-tax (Appeals), the Assessing Officer did not make substantive addition in the case of Anil Kumar Shah but did so in the case of Shri Pramod Prasad. The learned Commissioner of Income-tax (Appeals) by deleting the substantive addition both in the case of Shri Pramod Prasad as well the protective addition in the case of the assessee has failed to look into the sources of deposits in the hands of the assessee, She has disregarded the protective addition as well after the substantive addition was knocked off by her. A contradictory opinion has been given by her. Thus the interests of the Revenue has been prejudiced. (3) The learned Commissioner of Income-tax (Appeals) by deleting the addition of Rs. 9,35,260 being bogus gifts on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed any return of income or any balance-sheet before the Assessing Officer on the basis of which necessary enquiries and verifications could have been made. Thus the observation of the Commissioner of Income-tax (Appeals) is factually incorrect. Furthermore, the observation of the learned Commissioner of Income-tax (Appeals) that the additions are the outcome of extensive post-search enquiry from the Excise Department. And beyond the purview of section 158BD is also incorrect in view of the fact that the Assessing Officer has based his addition on seized documents which are irrefutable seized documentary evidence. Thus any enquiries made by him on the basis of such evidence in order to bolster the addition cannot be said to be the enquiries conducted without any seized documents. Her observation that during the search the application for refund of security money in the name of the assessee seized by the Department cannot be acted upon to make post-search enquiry is erroneous in law as the seized document itself from the basis for further enquiries by the Assessing Officer to arrive at a clinching conclusion. The seized documents have enough evidentiary value, in this particular c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the basis of which necessary enquiries and verifications could have been made. Thus the observation of the Commissioner of Income-tax (Appeals) is factually incorrect. Furthermore, the observation of the learned Commissioner of Income-tax (Appeals) that the additions are the outcome of extensive post-search enquiry from the Excise Department and beyond the purview of section 158BD is also incorrect in view of the fact that the Assessing Officer has based his additions on seized documents which are irrefutable seized documentary evidence. Thus any enquiries made by him on the basis of such evidence in order to bolster the addition cannot be said to be the enquiries conducted without any seized documents. Her observation that during the search the application for refund of security money in the name of the assessee seized by the Department cannot be acted upon to make post-search enquiry is erroneous in law as the seized document itself from the basis for further enquiries by the Assessing Officer to arrive at a clinching conclusion. The deletion of the entire additions totalling to Rs. 14,72,790 allowed by the learned Commissioner of Income-tax (Appeals) is bad in law as well ..... X X X X Extracts X X X X X X X X Extracts X X X X
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