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TMI Blog2015 (3) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... ind merit in the argument of the Ld. Counsel for the assessee that the AO could not have issued notice u/s.147 of the I.T. Act before the order attained finality. Also find merit in the submission of the Ld. Counsel for the assessee that once an assessment has been framed u/s.158BA of the Act in relation to undisclosed income for the Block Period as a result of search, there is no question of the AO issuing notice u/s.148 of the I.T. Act for re-opening of such assessment as the said concept is repugnant to the special scheme of assessment of undisclosed income for the Block Period. - Decided in favour of assessee - ITA No. 160 and 161/PN/2009 - - - Dated:- 13-3-2015 - Ms. Sushma Chowla, Judicial Member and Shri R.K. Panda, Accountant Member Appellant by : Shri Nikhil Pathak Respondent by : Shri B.C. Malakar ORDER PER R.K.PANDA, AM : The above 2 appeals filed by the Revenue are directed against the common order dated 28-11-2008 of the CIT(A)-I, Nashik relating to Assessment Year 2000-01 and 2001-02 respectively. For the sake of convenience, both the appeals were heard together and are being disposed of by this common order. ITA No.160/PN/2009 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was floated by the appellant and the appellant is the whole and sole of the patsanstha and other directors are dummy directors and further the affairs of the patsanstha are closely controlled by the appellant himself. iii) that the appellant is running various businesses in his name and in the name of his family members and is controlling all these businesses on his own. iv) that there is great possibility that the funds represented by the said fixed deposits of ₹ 68,80,000/- in fact belonged to the appellant. v) that the preparation of fixed deposits in benami names or in the names of non-existent persons and also preparation of loan documents in respect of such fixed deposits could not have been done without the express instruction and knowledge of the appellant. vi) that an employee Shri Anil Agrawal continued as General Manager even after found engaged in fraudulent activities and not suspended as he was acting under the instructions of the appellant. vii) that the A.O. observed that in respect of two groups of fixed deposits, the signatures of the persons encashing the same were exactly identical. The A.O. also stated that the deposits claimed to be belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of actual depositors and not in the hands of the assessee. It was submitted that the observations and allegations made by the A.O. in his assessment order in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit are nothing but A.O's surmises, suspicions and conjectures without any supporting evidence. 3.2 The assessee submitted before Ld.CIT(A) that the A.O. has also assessed the income of the assessee u/s.158BC vide order dated 29/09/2004. In the said assessment, the A.O. has not written anything about the alleged undisclosed investment in fixed deposits of ₹ 68,80,000/- by the assessee. The A.O. has also not made any such addition on protective basis in the said order u/s.158BC. As regards allegation of the A.O. that in the two sets of fixed deposit receipts the signatures at the time of encashment are similar, it was submitted that the said signatures were not of Shri Radheshyam B. Agrawal. As regards deposits in the name of Shri Rajendra Sharma are concerned it was submitted that adequate proof regarding deposit and withdrawal of the said deposit were submitted during the assessment proceedings and the appellate proceedings to prove that the same we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and also by the provisions of the Cooperative Societies' Act. The Chairman, Office Bearers, Managing Committee are constituted or elected by members of the society. The managing committee takes policy decisions and the same are implemented by the manager and staff of the society. The chairman and directors are working honorary to serve the society and cannot be expected to know and look after each and every transaction of accepting and repaying the fixed deposits to the members. 3.7 It was submitted that M/s.Chintamani Nagari Sahakari Patsanstha Maryadit is governed by 11 Directors and 5 members of Advisory Committee and various employees. There are many renowned persons in the Board of Directors and the Advisory Committee of the society. These persons cannot be treated as the dummy directors or dummy members of advisory committee. 3.8 The assessee submitted that he is an engineer and is running several businesses and hence during the F.Ys 1999-2000 and 2000- 2001 could not devote much of his time to the patsanstha. He was never present and being chairman also not required to be present when the deposits are accepted or repaid. 3.9 Finally, it was submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of fixed deposits remained unexplained. Further, it was also noticed and held by the then C.I.T.(Appeals)-I, Nashik, in his order dated 29/12/2006 that the patsanstha has not earned any undisclosed income and hence the unexplained credits cannot be taxed in the hands of the patsanstha and are to be taxed in the hands of the actual investor. It is a wellestablished law that in such circumstances, the addition u/s.69 cannot be made in the hands of alleged investor without bringing on record cogent evidence. This proposition is supported by the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dayachand Jain Vaidya reported at 98 ITR 280. The brief facts of this case are that investment in shares of Navjeevan Co. Ltd. was made by the wife and sons of the assessee. The A.O. found the explanation in respect of shares purchased by wife and two major sons as unsatisfactory. However, as the revenue had not brought on record material from which it could be concluded that the investment made by the wife and two major sons were in fact made by the assessee himself, it was held that the addition cannot be sustained. 7.3 It is also noticed that during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The A.O. submitted his report by letter dated 18/11/2008. In the said report also, the A.O. has not brought on record any evidence in support of his claim that the fixed deposits amounting to ₹ 68,80,000/- belonged to the appellant. The A.O. has reiterated the contentions stated in the assessment order and also in the case of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit. The A.O. has proceeded in a manner as if the fixed deposits were found noted in the books of accounts of the appellant individual and they remained unexplained, ignoring the fact that these deposits were kept and found recorded in the books of M/s.Chintamani Nagari Sahakari Patsanstha Maryadit. In view of the above discussion, I am of the considered opinion that the A.O. was not justified in treating the fixed deposits of ₹ 68,80,000/- as the alleged unexplained investment of the appellant. The addition of ₹ 23,50,000/- for the A.Y.2000-2001 and ₹ 45,30,000/- for the A.Y.2001,-2002 [total ₹ 68,80,000/- made by the A.O. is hereby deleted. 4.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 5. The Ld. Counsel for the assessee submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of Radheshyam B. Agrawal. There are other businesses in the family such as running of lodge, etc. also Shri Radheshyam B. Agrawal, being head of the family practically controls all such businesses from behind the curtain. Thus, there is great possibility that the funds which are now taxed as unexplained cash credits u/s.68 of the I.T. Act in the hands of Pat Pedhi really belong to Shri Radheshyam B. Agrawal as his undisclosed income. The preparation of instruments of fixed deposits in benami names or names of non existent persons and also preparation of loan documents as discussed in cases of Shri Rajkumar alias Rajendra Jain, Shinder and Shri Mudane could not have been done by the employees of the Pat Pedhi without the express instructions and knowledge of Shri Radheshyam B. Agrawal. Any employer would not tolerate any breaches. The moment such breaches are noticed the concerned employee would be pulled up. If the claim of Shri Anil Agrawal, G.M. of the Pat Pedhi to the effect that he had raised loan of ₹ 18,00,000/- in his personal capacity to be utilized by him for stated purpose of purchase of land and had written identification Numbers of fixed deposit receipts of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was his money which was parked by him and withdrawn by him in different names as and when needed by him for unrecorded transactions of businesses of his family and hence would be taxable in his individual hands and hence would be liable to be recovered from his personal assets He submitted that when the same AO passed the orders in all 3 cases the AO could have made protective addition in the case of Radhyeshyam Agarwal like he has done in the case of Anil Agarwal. He submitted that in case of the Pat Sanstha the Ld.CIT(A) holds that in absence of any evidence brought on record that the Pat Sanstha has made deposits in bogus names out of its unaccounted money the addition cannot be made in the hands of Pat Sanstha. He has directed to initiate appropriate proceedings in the cases of the concerned persons who have made the investment. However, he has not specifically mentioned the name of the assessee. 5.2 The Ld. Counsel for the assessee drew the attention of the Bench to Explanation 3 to provisions of section 153 which reads as under : 153. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Explanation 3.- Where, by an order 1 referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act for reopening such assessment as the said concept is repugnant to the special scheme of assessment of undisclosed income for the Block Period. It has been held that the first proviso under section 158BC (a) of the Act specifically provides that no notice u/s.148 of the I.T. Act is required to be issued for the purpose of proceedings under Chapter XIVB. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of Western India Bakers Pvt. Ltd. Vs. DCIT reported in 87 ITD 607 to the proposition that provisions of section 147 cannot be applied in context of block assessment in terms of Chapter XIVB and claim of re-assessment. Referring to the decision of the Amristar Bench of the Tribunal in the case of ITO Vs. Arun Kumar Kapoor reported in 140 TTJ 249 he submitted that the Tribunal in the said decision has held that reassessment u/s.147 on the basis of incriminating material against the assessee found in search of third party and forwarded to AO of assessee by search officer was illegal and void ab-initio as in such a situation assessment could be made only u/s.153C which specifically ousted the application of sections 147/148. He also relied on the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case. Referring to page 3 para 4 of the re-assessment order, the Ld. Departmental Representative submitted that the AO has made the assessment order prior to the order passed in the case of the Pat Sanstha holding that the money is of the said Pat Sanstha. After the order of the CIT(A) the AO has issued notice u/s.147 since it was held by the CIT(A) that the fixed deposits do not belong to the Pat Sanstha. Therefore, there is no question of issuing notice u/s.158BD to the assessee as the law does not permit for issue of such a notice in case of a searched person. The Ld. Departmental Representative vehemently argued that the money belongs to somebody and it is not of any hoax and it is not out of nothing. Since the assessee was the whole and sole of the Pat Sanstha and without his knowledge such thing could not have happened, therefore, the AO was justified in treating the said unaccounted fixed deposits as the undisclosed income of the assessee. He accordingly submitted that the order of the AO should be upheld. 7. The Ld. Counsel for the assessee in his rejoinder submitted that the AO has passed the assessment order in the case of Mr. Anil Agrawal on the same da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained fixed deposits belong to the assessee. No such evidence was brought on record by the AO even during the course of the assessment proceedings. According to the Ld.CIT(A) no addition can be made on the basis of surmises, suspicion and conjectures without any supporting evidence. 8.1 It is the case of the revenue that since the assessee Mr. Radhe Shyam B. Agrawal was the Chairman of the Pat Sansth and was the whole and sole of the Pat Sanstha, therefore, without his support and knowledge the deposits could not have been made. Further, he was involved in a number of business activities. Therefore, it was his money that was kept as fixed deposits with the Pat Sanstha in the names of fictitious persons. It is the case of the Ld. Counsel for the assessee that during the course of search no evidence whatsoever was found to show that those fixed deposits were made by the assessee. There was no investigation by the AO as to who are the real beneficiaries. Further, it is also the case of the Ld. Counsel for the assessee that the CIT(A) in the case of the Pat Sanstha has only directed to tax the fixed deposits in the hands of the real persons and he has not given any specific dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of what would be the position in future should an appeal before the appellate authority, being the Tribunal or the High Court, result in a particular outcome. The statute does not contemplate the reopening of an assessment under section 148 on such a hypothesis or a contingency which may emerge in future. 8.4 We further find the same AO has passed the order in the case of Pat Sanstha as well as in the case of Mr. Anil Agrawal and Mr. Radhe Shyam B. Agrawal. Although protective addition has been made in the hands of Mr. Anil Agrawal, however, no addition on protective basis has been made in the case of Mr. Radhe Shyam B. Agrawal despite the observation of the AO at para 22.3 of the assessment order in the case of the Pat Sanstha which has already been reproduced in the preceding paragraphs (Para 5.1 of the impugned order). We therefore find merit in the submission of the Ld. Counsel for the assessee that once an assessment has been framed u/s.158BA of the Act in relation to undisclosed income for the Block Period as a result of search, there is no question of the AO issuing notice u/s.148 of the I.T. Act for re-opening of such assessment as the said concept is repugnant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the CIT(A) while deleting the addition, we find no infirmity in the same. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised by the revenue is dismissed. 9. Grounds of appeal No.2 to 4 by the Revenue read as under : 2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that the assessment completed by AO u/s. 143(3) r.w.s.147 is bad in law. The finding of the Ld.CIT(A) that the income which was assessable u/s. 158BC r.w.s. 158BD as per provisions of Chapter XIV-B cannot be assessed under general provisions of the Act under section 143(3) r.w.sec.147 under Chapter XIV is not correct as the provisions as appearing in the explanation (c) to sub-section (2) of Section 158BA are not relevant in the case of the assessee. 3. Whether in the circumstances and facts of the case the CIT(A) was right in relying on explanation (c) to Sec. 158BA(2). 4. Whether in the circumstances and facts of the case the CIT(A) was right in holding that provisions of Sec. 158BD were applicable and not that of Sec. 147. 9.1 Facts of the case, in brief, are that the assessee challenged the validity of the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as decided. The Hon'ble I.T.A.T. has laid down that where specific provision of the Act are applicable, general provisions of the Act cannot be applied. In view of the above discussion and respectfully following the above ratio laid down by the decisions cited by the appellant, I am of the considered view that the income which was assessable u/s.158BC r.w.s, 158BD as per the special provisions of Chapter XIV-B, cannot be assessed under the general provisions of the Act u/s.143(3) r.w.s. 147 of Chapter XIV and hence the assessment order is bad in law. 10.1 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us. 11. After hearing both the sides, we do not find any infirmity in the order of the CIT(A). The Hon ble Gujarat High Court in the case of Cargo Clearing Agency (Gujarat) (Supra) has held that once an assessment has been framed u/s.158BA of the I.T. Act in relation to undisclosed income for the Block Period as a result of search there is no question of the AO issuing notice u/s.148 of the I.T. Act for reopening such assessment as the said concept is repugnant to the special scheme of assessment of undisclosed income for the Block Period. 11.1 T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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