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TMI Blog2016 (7) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... closed income of Rs. 91,50,130/-. While doing so, he made same additions as were made at the time of earlier assessment proceedings. Against the said order of assessment, assessee filed the present appeal. 2. Consequent to search operations on 31-01-1996, assessee had filed return for the block period on 06-12-1996 admitting undisclosed income of Rs. 4,00,000/- as under: AY. Total income returned Original return of income Undisclosed Income 1986-87 to 1991-92 NIL NIL NIL 1992-93 4,44,400 44,400 4,00,000 1993-94 NIL NIL NIL 1994-95 NIL NIL NIL 1995-96 NIL NIL NIL 1996-97 NIL NIL NIL Total: 4,00,000 3. Since direct appeal was provided to ITAT at that time, assessee raised the following grounds in the appeal: 1. The order of the Assessing Officer is erroneous, unjust and contrary to the facts of the case; 2. The order of the Assessing Officer is not within time provided under the I.T. Act. 3. The Assessing Officer erred in holding that there is any undisclosed income in respect of the following items and further erred in holding that the said amounts are to be treated as the undisclosed income for the purpose of Sec.158BC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not emanate from search material. It is submitted that assessee was having source of income upto 31-03-1991 and that the amount of Rs. 1,51,241/- could have been accumulated from out of the said source. This fact was accepted by the AO while completing the original assessment on 31-01-1997. 3.4. As far as addition made by AO for gifts received by assessee for Rs. 6,07,852/-, Ld. Counsel submitted that on the occasion of the marriage, an amount of Rs. 4,00,000/- is concerned, the same was admitted by assessee in the return of income filed. 3.5. Ld. Counsel further submitted that gifts received by wife of assessee Smt. Uma of Rs. 2,03,460/- were admitted by her in the return of income filed in response to notice u/s. 158BD. The same should not have been added in the assessment of assessee. AY. 1993-94: 4. AO made an addition for investments in Ushodaya Oil Producers for an amount of Rs. 5,21,180/- which consists of the following items: i) Rs. 2 Lakhs invested by Smt. M. Vijaya Lakshmi in the partnership firm Ushodaya Oil Producers, which was treated as income of assessee; ii) Investment made by Shri V. Chandra Mohan of Rs. 2 Lakhs in the same partnership firm is also treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee, except the presumption of AO. Ld. Counsel urged that the profit cannot be added in the assessment of assessee. 5. As far as investment in Balaji Oil Producers of Rs. 20,000/- is concerned, Ld. Counsel submitted that assessee admitted the investment amount of Rs. 20,000/- made by him. There was an opening balance of Rs. 4,90,496/- and agricultural income of Rs. 1,25,000/-. The amount was paid to Balaji Oil Producers and assessee was having sufficient funds on that date. Therefore, the AO was not justified in holding that Rs. 20,000/- represents the undisclosed income of assessee. The addition was made based on the receipts and payments account and not based on seized material. 6. As far as investment in chit funds is concerned, Ld. Counsel submitted that the investments for an amount of Rs. 4,250/- in Orugallu Chit Fund and Rs. 9,600/- in Pramida Chit Funds were made by assessee. There was an opening balance of Rs. 4,90,496/- and agricultural income of Rs. 1,25,000/-. The amount of Rs. 13,850/- was paid to chit fund companies and assessee was having sufficient funds on that date. Therefore, the AO was not justified in holding that Rs. 13,850/- represents the undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also made jointly by Smt.V.Uma, Y.Mallaiah, M.Arunkumar and V.,Chandra Mohan. The documents found during the course of search show that the property was purchased by all the four persons. He submitted that there is no evidence during the course of search that the investment was made by the assessee. 8.2 With regard to the plot in the name of Sri V.Dayakar for Rs. 65,262/- is concerned, it is submitted that the investment was made from out of his own sources. 9. As far as the alleged investments in chits, which consists of receipt from Orugallu Chit Fund of Rs. 20,000/- and from Pramida Chit Funds of Rs. 65,000/- are concerned, Ld. Counsel submitted that this is not an investment as this amount does not represent investment but represents the receipt from Orugalla Chit Fund of Rs. 20,000/- and from Pramida Chit Funds of Rs. 65,000/-. He submitted that the said amounts of Rs. 85,000/-- are shown on the Receipts side of the receipts and payments account. 10. As regards the investments in plots at Shivnagar and Fort Road, Warangal, which consists of plot of the value of Rs. 70,440/- purchased by the assessee, property of the value of Rs. 38,000/- each in the names of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andra Mohan of Rs. 11,32,000, are concerned, Ld. Counsel submitted that the investment by the assessee is for Rs. 19,000/-. This amount is shown in the Receipts and Payments account. The Assessing Officer added Rs. 11,32,000/- invested by Sri V.Chandra Mohan. As submitted earlier, Mr.V.Chandra Mohan is assessed to tax. 15. As regards investment in purchase of property, which is made in acquisition of 489 sq.yds. jointly in the names of Smt. Uma, Y. Mallaiah, M. Arunkumar and V. Chandra Mohan, is concerned, Ld. Counsel submitted that this investment is Smt.Uma, Y.Mallaiah, M.Arunkumar made in acquisition of 489 and V.Chandra Mohan for acquisition of sq.Yds. jointly in the names the property of 489 Sq.Yds. The Smt. Uma, Y.Mallaiah, investment was not made by the assessee. There is no evidence in the seized material to show that the investment was made by the assessee. 16. The ld. DR on the other hand defended the order of AO and also filed written submissions as follows: "A survey operation u/s 133A of the Income Tax Act was initiated against the firm, M/s Padmavathi Oil Producers, in which above assessee is Managing Partner on 31-1-1996 when it was noticed that the firm filed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , sales made, expenses incurred etc. As regards the gifts received, it was explained that the gifts were received by his wife on 10th and 11th marriage anniversaries from the close relatives, but they are resisting to confirm the gifts. Thus, the assessee could not substantiate the gifts with necessary evidence except furnishing with the list of donors. Hence, the amounts were added as undisclosed income of the assessee. 5. For the assessment year 1993-94, the investment in the share capitals of firms, Ushodaya Oil producers and Balaji Oil Producers and investment in chits were added when the assessee could not furnish necessary and reasonable evidence. On enquiry, it was found that the alleged partners in these firms, viz, Smt. M. Vijaya Lakshmi and Sri V. Chandra Mohan are the benamis of the assessee who had no means to invest and are not genuine partners. With regard to investment in chits, it may be observed that the assessee has not offered any explanation. 6. For the assessment year 1994-95 and 95-96, the investment made in shares of M/s. Ushodaya Agro Products ltd., and purchase of properties, plots in Warangal and investment in chits of Rs. 34,35,781/- and Rs. 18,71,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deficit or excess stock and cash found in the absence of books of account. Being the case, where no incriminating material was found and particularly in the assessee's case, when the proceedings are initiated u/s 158BD, the scope of reassessment/assessment in this case is restricted. 17.1 The case law on the subject and on the provisions of Chapter XIV-B are very clear that only the undisclosed income which was found consequent to the search i.e. which has not been or would not have been disclosed for the purpose of the Act or any expense, deduction or allowance claimed under this Act, which is found to be false, can be brought to tax in the block period. 17.2 As briefly stated above and contentions reiterated by assessee in the submissions, assessee has filed returns of income before the so-called survey proceedings it self. As seen from the orders of the AO also, most of the additions are made on the basis of the cash flow statement furnished on the basis of assessee's recorded transactions. In view of that, we are of the opinion that many of the additions made by the AO cannot be sustained as such. 17.3 Not only that, as seen from the copies of the panchnama and the list of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as unexplained. It is to be noted that AO did not make any enquiry to disprove the source of funds. He has simply disbelieved the assessee's explanation, which cannot be accepted in the search proceedings, particularly, in the case of assessee where the proceedings are consequential u/s 158BD. The action of the AO in disbelieving the sources can also be evident from the additions made on the so-called investments in the Chit funds. Not only that assessee has explained that he has separate assessment in the status of HUF and some of the investments are made by the HUF, but, without disproving the same AO simply brought to tax all those investments also in the hands of assessee. There is evidence on record that assessee also offered incomes in HUF status, having its own sources of income and those were not disproved. In view of the above, keeping in mind the limited jurisdiction for making assessment u/s 158BD and the fact that assessee could explain various investments in cash flow statement itself which was accepted by the AO in the proceedings, we have no hesitation in allowing grounds taken by the assessee. Since all the investments brought to tax are either explained in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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