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TMI Blog2002 (6) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... hem. On 31-10-1995 both assessee and Shri N.N. Mittal addressed communications to S.O. Itmad-daula, wherein, it was pointed out that on 8-10-1995 actually the amount looted was about Rs. 1.00 crore, out of which Rs. 30.00 lakhs was claimed to be owned by Shri. N.N. Mittal and Rs. 70.00 lakhs was claimed by the assessee to be his property. On the basis of the F.I.R. lodged by Shri Mittal and information supplied to S.H.O. Itmad-daula, police authorities took action and recovered the amount aggregating to Rs. 72.60 lakhs from the alleged looters including Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi. However, in the meantime the Income-tax Department took search and seizure operation at the premises of the assessee on 26-10-1995 and thereafter on the following day i.e. 27-10-1995 warrant of authorisation under section 132A was also issued in favour of the police authorities to hand over the recovered amount of looting to the I.T. Department. Meanwhile the Department also moved a petition in the Court of IIIrd Additional District and Session Judge, Agra requesting to direct the police authorities to hand over the recovered amount to I.T. Department. Vide, order dated 8-7-1996 the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kh ---------------------------------------------------------------------------------- 4. In view of the direction issued by the Court of IIIrd Additional District and Session Judge, Agra dated 8-7-1996 the cash was actually handed over by the police authorities to the Income Tax Department on 16-7-1996. Meanwhile on 18-4-1996 notice under section 158BC was issued by the Assessing Officer to the assessee. It is also pertinent to note that the assessee was not sure that how much money was looted from him and Shri N.N. Mittal on 8-10-1995. The different figures given about the looting amount is as under:-- (i) On 8-10-1995 Shri N.N. Mittal while travelling in the car along with the assessee lodged F.I.R. at Thana Itmad-daula that a sum of Rs. 2.00 lakhs was looted from him. (ii) On 31-10-1995 both the assessee and Shri N.N. Mittal addressed communication to S.H.O. Itmad-daula, wherein, it, was pointed out that on 8-10-1995 actual amount looted was about Rs. 1.00 Crore out of which Rs. 30.00 lakhs claimed to be owned by Shri Mittal and Rs. 70.00 lakhs was claimed by the assessee. (iii) During course of search and seizure operation, statement under section 132(4) was recorded on 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. (viii) This revised return was filed by taking plea that the notice under section 132A was not finally executed. Therefore, notice under section 158BC was pre-matured. However, the warrant of authorisation issued under section 132 was concluded on 14-11-1995. Therefore, the revised return is being filed showing computation of undisclosed income consequent to search and seizure operation under section 132(1) of the I.T. Act, 1961 on 26th and 27th October, 1995. 5. From the above, it is clear that the assessee could not give exact quantum of amount looted from his possession. Anyhow, Shri N.N. Mittal was sure that his amount looted was Rs. 30.00 lakhs. The reason of this changed statement about quantum of looted money given by the assessee during the course of hearing before us was that the assessee has not counted the amount he carried for purchase of property at Kanpur. However, we find that from the Assessment Order that the Assessing Officer has considered in Assessment Order the total amount looted was at Rs. 1.03 crores wherein, Shri N.N. Mittal's claim was accepted at Rs. 30.00 lakhs as belongs to him and the balance amount of Rs. 73.00 lakhs was added in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 was illegal and bad in law as the assets have not been finally requisitioned under section 132A as the same remains as not executed." 4. "Because no undisclosed income was found in Assessment Years 1986-87 to 199S-96 and as such the income of these years have been wrongly and illegally taken in block assessment. The Assessing Officer can complete the income only for the years for which any adverse material, assets has been found." 13. "Because the addition of Rs. 73,00,000 on the basis of applicants statement is wrong and illegal. The amount as held to be owned by the appellant, by the competent Court can only be assessed in the appellant's hand. No addition can be made on the basis of mere statement." 14. "Because in the original return looted amount was shown as income from other sources and the amount of Rs. 73,00,000 has also been assessed under section 69A of the I.T. Act and as such question of addition of Rs. 5,00,000 as initial investment in speculation business is wrong and illegal." 15. "Because any view of the case unrecovered looted amount is trading loss." 9. Facts of the issue are that warrant of authorisation to search the premises of the assessee was issued o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mentioned the date of execution of warrant under section 132A......... "The notice does not indicate date of requisition of cash under section 132A. The same merely mentions the block period 1985-86 to 1995-96. The same has been issued without final execution of requisition under section 132A which implies the conclusion for proceedings under section 132 and/or 132A." The Commissioner of Income Tax, Agra vide letter dated 4-6-1996 F. No. 442/Release/CIT/95-96/AGR/1325 intimated to assessee that there is neither any infirmity in the notice nor the notice is premature. The assessee understands that consequent thereto, the Chief Commissioner of Income Tax, Kanpur is of the opinion that two separate block assessments have to be made namely:-- (a) "On consequent to search and seizure under section 132 of the I.T. Act, 1961." (b) 'and the other consequent to requisition under section 132A of the I.T. Act, 1961 dated 27-10-1995 to the S.H.O., Etmad-daula. Accordingly the directions have been issued to the Assessing Officer which are on Income Tax records." "........................................." "Therefore, the revised return is being filed showing computation of undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further mentioned as under:-- (h) Without prejudice to the claims of S/Sh. Ashok Tyagi, Devendra Tyagi and Mukesh Tyagi that sum of about Rs. 49.00 lakhs out of Rs. 72.60 lakhs seized by the Police, belongs to them, the said amount is being considered in the hands of the assessee because the assessee has claimed that on the basis of identification marks on the notes the said amount represented the part recovery of amount looted from him and Shri N.N. Mittal when they were going in car on 8-10-1995. Since the matter is subjudice before the Hon'ble Court, no findings regarding ownership of seized cash is given presently. 2.1 Keeping in view the factual position indicated above and considering admission/statements given by Shri Davi Sarin and Shri N.N. Mittal before various authorities a sum of Rs. 1.00 crore 3 lakhs which is said to be looted from the assessee and his companion Shri Mittal is required to be considered for computing the undisclosed income of the assessee and Shri N.N. Mittal. As Shri N.N. Mittal had claimed that sum of Rs. 30.00 lakhs belongs to him, the balance amount of Rs. 73.00 lakhs is required to be considered while computing the undisclosed income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly the counsel forcefully contended that the findings given by the Assessing Officer in Assessment Order is contradictory because at one stage he was unable to decide the ownership of the assessee of the amount of Rs. 73.00 lakhs and on the other hand he has made substantive addition of Rs. 73.00 lakhs under section 69A of the I.T. Act which is illegal and bad in law. It is also submitted that the amount to the extent of Rs. 64.00 lakhs, in aggregate, has also taxed on substantive basis in the hands of alleged looters S/Sh. Devendra Tyagi, Ashok Tyagi and Mukesh Tyagi. 18. It is further argued by the learned counsel of the appellant that no undisclosed income was found during course of search under section 132 at the premises of the assessee or from bank lockers owned by the assessee or his family members then how addition can be made for Rs. 73.00 lakhs in the assessment order for the block period 1-4-1985 to 14-11-1995. 19. The learned counsel in support of his above contention relied on following judgments: (i) Union of India v. Judicial Magistrate (Eastern Railway,) [1983] 140 ITR 553 (All.). (ii) CIT v. Tarsem Kumar [1986] 161 ITR 505 (SC) (iii) CBDT Circular No. 179 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement given in Court and Police report. She further stated that the Deptt. relied upon the evidentiary value of the statement recorded under sections 132(4), 131 and police report. 22. The learned D.R. also argued that statement recorded on oath under section 132(4) on 26-10-1995 by the authorised officer in respect of the requisitioned money has evidentiary value in respect of any proceedings under the I.T. Act in view of the provisions of section 132(4) of the I.T. Act. In support of her contention she cited various judgments of High Courts and Supreme Court. 23. Thereafter, the learned DR. contended in regard to plea taken by the learned counsel of the appellant about contradictory findings given by the Assessing Officer in regard to ownership of the looted money. The D.R. argued that issue of determination of ownership by the Criminal Court of the recovered cash is immaterial and inconsequential to the assessment framed in the case of the assessee. According to her, the income of Rs. 1.03 crore stood earned and quantified as on 7-10-1995 i.e. the eve of robbery. For the period 199495 this income had already been earned and it was being taken to Kanpur for some 'undisclo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equisitioned under section 132A, in the case of any person, then, (a) The Assessing Officer shall serve a notice to such person requiring him to furnish, within such time, not being less than fifteen days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purposes of proceeding under this Chapter; (b) The Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall, so far as may be, apply; (c) The Assessing Officer, on determination of the undisclosed income of the block period in accordance with this chapter shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; The assets seized under section 132 or requisitioned under section 132A shall be retained, to the extent necessary and the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of "block period" under section 158B, it could only mean that proceedings under section 132 is different from the proceedings under section 132A and the block period would be up to the date of commencement of search under section 132 or the date of requisition under section 132A. In the instant case the dispute is in regard to separate block proceedings. According to learned counsel to the appellant that since separate warrant of authorisation for search under section 132 was issued on 26-10-1995 and warrant of requisition of cash was issued on 27-10-1995. Therefore, two separate block proceedings should be initiated by issuing two different notices under section 158BC. The learned counsel further argued that in section 158BC the word used in "requisition" and the wording used in definition of "block period" is the "date of such requisition" which means that the date of looted cash actually received by the Department from tire Police Authorities. Therefore, on the date of issue of notice under section 158BC i.e. 18-4-1996, the warrant of authorisation under section 132A had not been executed since the assets had not come into the Department's possession. It came in possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch cases in Chapter XIV-B of the Income-tax Act, 1961 w.e.f. 1-7-1995. In the instant case, search commenced under sections 132 and 132A on 26-10-1995 and 27-10-1995 respectively. Hence, assessment in regard to undisclosed income is to be made according to the procedure laid down in Chapter XIV-B of the Act. 31. The findings given by the Assessing Officer in Assessment Order may be valid in context to regular assessment but not in regard to assessment made for block period. To set at rest the controversy as to whether block assessment subsumes the regular assessments or is independent of the latter. Finance (No. 2) Act, 1998 has inserted the clarificatory explanations with retrospective effect from 1-7-1995 after sub-section (2) of section 158BA of the Income-tax Act clarifying that assessments completed under Chapter XIV-B shall be in addition to regular assessments in respect of each previous year included in the block period. Further, undisclosed income relating to the block period shall not include the income assessed in regular assessment. Similarly, income in regular assessment shall not include the income of the block period assessed in block assessment. 32. Similarly, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lockers of the assessee which was initiated under section 132 by issuing warrant of search dated 26-101995. It proves that notice dated 18-4-1996 issued under section 158BC was for proceedings initiated under section 132 of the Income-tax Act, 1961 and not for proceedings initiated on 27-10-1995 by issuing authorisation under section 132A of the Act. 34. Though, the second proviso to clause (a) of section 158BC of the Act debar the assessee to file revised return of income for the block period but we cannot ignore the fact altogether that the original return was filed under protest for the reason that no notice under section 158BC was issued for the proceedings initiated under section 132A and hence, inclusion of requisitioned amount by the Department from police authorities on 16-7-1996 in block assessment for block period 1-4-1985 to 14-11-1995 is illegal and bad in law. 35. To settle the controversy regarding meaning of the words "execution" and "requisition' while calculating the period of limitation in section 158BE of the Income-tax Act, the Finance (No. 2) Act, 1998 has inserted a clarificatory explanation with retrospective effect from 1-7-1995. Explanation 2 to section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 of the Income-tax Act. During course of search statement under section 132(4) was recorded. It is further mentioned that the appellant Shri Davi Sarin had also given statements and admitted before various authorities (outside the department) that actually amount of Rs. 1 crore 3 lakhs was looted from him and his companion Shri N.N. Mittal on 8-10-1995. Shri N.N. Mittal had claimed that sum of Rs. 30.00 lakhs belong to him. Therefore, the balance amount of Rs. 73.00 lakhs was added in the hands of the appellant Shri Davi Sarin. Para 5 of page 6 of the assessment order is reproduced for more clarification:-- "The assessee in his statement under section 132(4) has admitted that he was carrying cash to Kanpur to buy certain properties. The assessee during course of his statement under section 132(4) on 26-10-1995 was required to explain the source of the looted cash of Rs. 73.00 lakhs. The assessee has admitted that he earned the amount of Rs. 73.00 lakhs from speculation business done by him. Thus, the assessee has failed to explain the nature and source of Rs. 73.00 lakhs which was looted from him on 8-10-1995, the same will be added to the income of the assessee as undisclosed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132) placed at record at pages 99 to 102 of the Paper Book I filed by the assessee. In reply to question No. 3, the assessee has deposed as under (English Translation)- Q. 3 The statement given by your younger brother, Shri Anil Sarin is being shown to you wherein he has stated that you have informed him that while travelling in car there was about one crore cash which had been looted and how much amount owned by whom, the details will be given by you. Ans. I admit the statement. Rs. 30.00 lakhs belonged to Shri Nirankar Nath Mittal. Balance amount of Rs. 70.00 lakhs was my personal money. This money is not concerned in any manner with the firm M/s. Sarin and Sarin. In the said car there was total amount of Rupees 1 crore 10 lakhs to 1 crore 25 lakhs. The amount was not counted. Out of that Rs. 30.00 lakhs belonged to Shri Nirankar Nath Mittal and the balance amount entirely belonged to me. 43. On the same day i.e. on 26-10-1995 statement under section 132(4) was also recorded in English which is placed at record at pages 103 to 105 of Paper Book I filed by appellant. Reply to question Nos. 1 and 2 is reproduced as under:- Q.1 You are requested to explain the details of cash, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered the submission made by the D.R. and reliance placed by her on various decisions. But in the instant case, facts are different from the case law cited by her. In the decisions cited by the D.R., the addition was upheld which based on statement recorded. But in the instant case the statement recorded under sectior 132(4) or 131 of the Income-tax Act was not relied upon by the Assessing Officer himself and thus addition was not based on the statement recorded. The addition made in block assessment passed on 31-10-1996 which based on the report of the same date (31-10-1996) from S.O. Police Station Rakabganj. It will be clear from para (g) of page 3 of the Assessment Order which is reproduced as under:-- "(g) The assessee produced a report from S.O. Rakabganj wherein it is mentioned that during the course of investigation carried out by the police, it has come to their knowledge that amount of money looted was Rs. 1.03 crore and not Rs. 2.00 lakhs which was indicated in the F.I.R. lodged on 8-10-1995. The assessee further concluded that in view of the clear indication regarding the quantum of money looted given in the latest report dated 31-10-1995 given by S.O. Rakabganj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney, bullion, jewellery or valuable article is not recorded in the books of account if any maintained by the assessee for any source of income. But in the instant case neither the amount of Rs. 30,40,000 was found to be owned by the appellant nor it is found as unrecorded in the books of account. Even no other evidence in form of loose paper or document was found to prove that the appellant owned undisclosed money of Rs. 30,60,000 except the statement recorded during course of search and that too was not relied upon by the Assessing Officer while making addition under section 69A of the Income-tax Act. In view of the above legal position and facts of the case the addition of Rs. 30,40,000 is also deleted, thus ground Nos. 4, 13 and 14 are allowed. 47. The 15th ground of appeal is that the unrecovered looted amount is trading loss. The addition on the amount concerned has already been deleted, therefore, this ground is not discussed as it would serve no purpose except academic discussion. Hence this ground is rejected. 48. The 16th ground of appeal is that addition of Rs. 5,00,000 as investment in speculation business is wrong and illegal. Neither there is proof of speculation bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition based on estimate in the assessment for block period? 51. Sub-section (1) of the newly inserted (w.e.f. 1-7-1995) section 158BA opens with a 'non obstante' clause, namely 'Notwithstanding anything contained in any other provisions of this Act' and, thus, enacts provisions of overriding nature so as to prevail over any other provisions of the 1961 Act. According to that sub-section (1), where after 30-6-1995- -a search initiated under section 132 or- -books of account, other documents or any assets are requisitioned under section 132A. in the case of any person, then-- The Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B (containing sections 158B to 158BH). 52. Now we have to see what is "undisclosed income". Clause (b) of section 158B gives an inclusive definition of the expression "undisclosed income' so as to include- -- any money, bullion, jewellery or other article or thing or * any income based on any entry in books of account or other documents of transaction where - such money, bullion, jewellery, valuable article, thing, entry in books of account or other document or transaction - repres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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