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TMI Blog2005 (1) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... of AOP and there is no evidence of pooling of resources by three persons and also about existence of any business in the status of AOP. (3) Because the authorities have erred in holding that cash recovered by the police was undisclosed income as the cash had earlier been withdrawn from bank and also because all the parties were produced before the AO whose statements were recorded by the AO and also because necessary evidence was produced to explain the nature and source of the cash. (4) Because, in any view of the matter and without prejudice to the above, the initial alleged investment by three persons cannot be assessed in the hands of AOP. (5) Because the AO has erred in charging interest under s. 158BFA(1) in the absence of any direction in the assessment order." 2. We have heard the counsel for the assessee as well as the learned Departmental Representative and have gone through various paper books filed by the assessee as well as the Department. 3. The brief facts relevant for disposal of various issues involved in this appeal and as have been revealed from the records are that the on the night of 3rd June, 1998, police party at Jhansi intercepted a Maruti car bea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place at p. 17 of assessee's paper book Vol. 2. 10. Thereafter, proceedings for block assessment under Chapter XIV-B of the IT Act, as is clear from para 5 of the order of the Dy. CIT, Circle-I, Jhansi, passed in consequence upon the directions of the Hon'ble High Court of Allahabad given as per order dt. 19th March, 1999, while disposing of Civil Misc. Writ Nos. 168, 172 and 173 of 1999, filed by Shri Ram Krishan Agarwal and Shri Vidit Kumar Agarwal, respectively, were initiated in case of Shri Vidit Kumar Agarwal, Shri Ram Krishan Agarwal and Shri Deepak Kumar Agarwal. 11. Before these proceedings could be concluded, these three individuals filed writ petitions before the Hon'ble High Court of Allahabad Writ No. 168 of 1999 filed by Shri Ram Krishan Agarwal, Writ No. 172 of 1999 filed by Shri Vidit Kumar Agarwal, and Writ No. 173 of 1999 filed by Shri Deepak Kumar Agarwal. 12. The Hon'ble High Court of Allahabad disposed of all the three writ petitions by separate orders dt. 19th March, 1999, which, except for amount of cash, are similarly worded. The order of the Hon'ble High Court passed in Writ Petition No. 168 of 1999 in case of Shri Ram Krishan Agarwal, copy of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dt. 14th Jan., 2000 (para 6), reads as under : "After making necessary enquiries in compliance with the Hon'ble High Court's orders and material brought on records, as also considering the facts and circumstances of the case in entirety, as discussed above, I hold the entire cash as undisclosed income of the persons, namely, S/Shri Ram Krishan Agarwal, Vidit Kumar Agarwal and Deepak Kumar Agarwal from whose possession it was recovered and seized under s. 132A of the IT Act, 1961." 14. Shri Vidit Kumar Agarwal and Shri Ram Krishan Agarwal had filed second set of writ petitions Writ No. 454 of 2000 and 455 of 2000, respectively, against the order of the Dy. CIT, Circle-I, Jhansi, dt. 14th Jan., 2000. 15. The Hon'ble High Court of Allahabad disposed of these two writ petitions as per orders dt. 19th May, 2000, which are similarly worded and the order in case of Writ No. 454 of 2000 reads as under : "By the Court Heard learned counsel for the parties. Against the impugned order dt. 14th Jan., 2000, the petitioner has a right to appeal under s. 246 of the IT Act. The petition is dismissed on the ground of alternative remedy. However, if petitioner files an appeal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Vidit Kumar Agarwal filed appeals before the Tribunal but the same have been dismissed being defective for want of proper payment of Tribunal's fee as per orders of the Tribunal, Agra Bench, in ITA Nos. 11 and 12 dt. 31st Dec., 2004. 19. Thereupon, the Revenue authorities initiated proceedings under s. 158BC of the Act in the case of AOP alleging the same to have been constituted by Shri Vidit Kumar Agarwal, Shri Ram Krishan Agarwal and Shri Deepak Kumar Agarwal (AOP). The assessment in the status of AOP under s. 158BC of the Act was completed on 29th June, 2000, whereby the undisclosed income was computed at Rs. 40,76,000 which was inclusive of cash of Rs. 32,34,600 found in three bags at the time of interception of Maruti car in which these three individuals were travelling. 20. The assessee went in appeal before the CIT(A). 21. Before the CIT(A), the assessee challenged the assessment order for block period of the status of AOP by raising the following objections : (1) The first objection raised by the assessee before the CIT(A) was that there cannot be two assessments for block period, for the same block period. According to the assessee, the Revenue having framed ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of s. 132A can be invoked only if some other authority has seized the assets or cash but in case of present three individuals, the police authorities had not seized the cash. The second objection raised with this regard was that all the three persons having owned their respective cash and explained the sources in the statements recorded by the police as well as by the IT authorities on 3rd June, 1998, the DIT (Inv.), Kanpur, had no material which could make him to have reasons to believe that this cash was unexplained cash, i.e., representing undisclosed or concealed income but the learned CIT(A) dismissed these plea as per para 5.2 of his order which read as under: "I have considered the facts of the case, submissions made by the appellant and the comments of the AO. In my view, this ground of appeal also deserves to fail. It is seen that similar objection was raised by the appellant before my predecessor while filing appeal against the AO's order dt. 14th Jan., 2000. The submissions made before him were almost the same as made before me. After considering the facts of the case and the submissions made by the appellant, my predecessor has held that the proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the cash of Rs. 32,34,600 was not explained. He, therefore, confirmed the AO's action in treating the same as undisclosed income of the appellant. Before me also, the submissions made by the appellant are almost the same as were made before my predecessor. I am in complete agreement with the views of my predecessor. Respectfully following his decision given in the order dt. 21st July, 2000, it is held that the cash of Rs. 32,34,600 represented the undisclosed income of the appellant. Thus, to this extent the action of the AO is confirmed." 23. It was in the light of the above facts and circumstances of the case that the parties have advanced their arguments. 24. The counsel for the assessee first of all submitted that the proceedings initiated under s. 132A of the Act were illegal and bad in law and in support of this objection, he made the following further submissions : 25. After referring to the provisions of ss. 132A and 132A(c), the learned counsel submitted that : (i) In this case all the three persons categorically admitted ownership of the cash seized and also disclosed the sources of the cash seized. The source disclosed was withdrawals either from banks or fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol or possession of such assets for violation of any law for the time being in force. This further requires certain conditions. The possession or control should be taken under any law. It is not the possession and control taken for no violation of the provision of any law. Also, it appears that such authority or officer, if it is police, is excluded because of the certain procedure prescribed in Cr. PC. This position is made clear by Hon'ble Andhra Pradesh High Court in their judgment in the case of : (iv) (a) Sadruddin Javeri vs. Govt. of A.P. (2000) 162 CTR (AP) 496 : (1999) 104 Taxman 335 (AP) (copy already filed), wherein the Hon'ble High Court has held that : "The police officer is duty-bound to report the seizure to the Court having jurisdictions and to transport same to the Court or to give custody thereof to any person on his executing a bound and undertaking to produce property before Court as and when required and give effect to further orders of Court as to the disposal of same." (b) Referring to present case, the learned counsel submitted that police has not registered a case hence it cannot take control and possession of the cash. Therefore, it could have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) by deleting the addition. Also, notice for AOP is dt. 23rd Nov., 1998 for regular assessment, while the order of AO on the directions of High Court is dt. 14th Jan., 2000, where it has been held that cash belongs to individuals. Thus, there is contradictions in the findings of AO itself. 28. To support the above submission, the learned counsel drew our attention to order of Dy. CIT, Circle-I, Jhansi, dt. 14th Jan., 2000. 29. The next objection raised by the assessee's counsel was that even if it is held that there was AOP then also the Revenue having assessed the cash in question under s. 158BC of the Act in individual hands as per order dt. 14th Jan., 2000, the same could not be assessed in the hands of AOP and for this purpose reliance was placed on the decision of Hon'ble Allahabad High Court in case of CIT vs. Jaiswal Motor Finance (1983) 37 CTR (All) 217 : (1983) 141 ITR 706 (All) and the decision of the Madras High Court in case of CIT vs. K. Chandrasekaran Ors. (1990) 182 ITR 392 (Mad), wherein the Hon'ble High Court has followed the earlier decision of the Madras High Court in CIT vs. R. Dhandayutham Ors. 1978 CTR (Mad) 112 : (1978) 113 ITR 602 (Mad). As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawal from more. During these assessment proceedings, all the three persons were produced and their statements were recorded. Copies of statements of various persons are at pages as under: Name Date of Statement Pages of paper book II Ram Krishan Agarwal 16-8-1999 125 to 130 Shiva Ram 16-8-1999 131 to 134 Smt. Phool Mani Devi 13-8-1999 135 to 138 Smt. Geeta Devi 13-8-1999 139 to 143 Rajjan Baboo 1-9-99 144 to 150 Harish Chand 1-9-99 151 to 154 Ashok Kumar 27-8-1999 155 to 160 Everyone of them has accepted to have owned the money in his statement on pages mentioned above. Thus, it is clear that money was disclosed along with its source. Deepak Kumar Agarwal : He is salesman of Shri Ashok Kumar proprietor of M/s Ashoka Automobile, Chhattatpur, MP. The money was given from the books. This was stated by Shri Deepak Agarwal in his first statement, p. 12 of paper book II which is further established by the copy of cash book at p. 121. Thus, the cash seized stands disclosed in every one's hand." 31. The last objection raised was with respect to levy of interest under s. 158BFA of the Act. With respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, or would not have been, disclosed for the purposes of the Indian IT Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then the (Director General or Director) or the (Chief CIT or CIT) may authorise any (Jt. Director), (Jt. CIT), (Asstt. Director (or Dy. Director), (Asstt. CIT (or Dy. CIT) or ITO) (hereinafter in this section and in sub-s. (2) of s. 278D referred to as the requisitioning officer) to require the officer or authority referred to in cl. (a) or cl. (b) or cl. (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer." (ii) CIT vs. Vindhya Metal Corporation Ors. The facts of this case, as were before the Hon'ble Supreme Court, were that one V, a resident of Mirzapur, was detained while travelling to Calcutta by train and cash of Rs. 4,63,000 was seized from him on the suspicion that the money was stolen property or had been obtained through some other offence. He was charged under s. 411 of the Indian Penal Code. Intimation of the seizure of the money was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized articles, and also issued notice under s. 37(1) of the WT Act, 1957, upon petitioner Independent investigation ordered by Court ended ultimately in submission of a final report by police under s. 173(2) of the Code that no offences were made out against petitioners Tax authorities found that value of seized articles did not exceed even Rs. 15 lakhs and thus they were not exigible Whether police officer was duty-bound to report seizure to Magistrate having jurisdiction and to transport same to Court or to give custody thereof to any person on his executing a bound and undertaking to produce property before Court as and when required and to give effect to further orders of Court as to disposal of same Held, yes Whether there can be no transfer or appropriation of any property seized by police except under order of Court Held, yes Whether s. 132A does not authorise any notice to Court or by no stretch of imagination, Court can be identified as any officer or authority under any other law in force as contemplated under cl. (c) of s. 132A(1), r/w cl. (a) thereof Held, yes Whether there was gross violation of law by entry of ITO to take the delivery of property from police before s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash or would not have been disclosed. 36. Once we have arrived at the above conclusion, the automatic result is that the Revenue authorities could not have reasons to believe that cash in question was undisclosed or would not be disclosed, meaning there by that there was no material with the DIT (Inv.), Kanpur, while issuing summon under s. 132A of the Act that the cash in question was undisclosed. 37. This aspect can further be considered in the light of evidence which was or could be available with the DIT (Inv.), Kanpur, and that evidence in the light of the facts and circumstances of the case could be as follows : (i) Information from the police authorities for having intercepted the car and recovered the cash in question contained in three bags. (ii) Statement of three concerned persons given before the police authorities and their admission to own their respective cash. (iii) Statement recorded by the Asstt. CIT, Jhansi, on 3rd June, 1998, of all the three individuals wherein they had owned their respective cash and explained the source of the same. 38. Since the Revenue has not brought to our notice that there was any other material available with the DIT (Inv.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion is just based on loose slip found from the possession of Shri Ram Krishan Agarwal which, in our opinion, was not sufficient evidence because even if it is assumed that these three persons had authorised one person to keep account of all the cash, then also, it cannot be concluded that they had decided to carry on business in the status of AOP. Thirdly, as stated by all the three individuals in their statements before the police as well as Asstt. CIT on 3rd June, 1998 itself, the cash was being carried for purchase of a property and since it is settled law that whenever any immovable property is purchased by more than one person then except in case of evidence of purchase for dealing in business of sale/ purchase of immovable properties, they purchase the same in the capacity of co-owner and not members of AOP. In other words, property can be purchased in the status of AOP only when the same is to be purchased for carrying on a business venture but neither there is such evidence on record nor the Revenue has claimed so. The Revenue's claim that they were going to carry on a clandestine deal is not supported by any evidence on record. If the Revenue authorities were havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust income cannot be taxed in the hands of the settlor and also in the hands of the trustee or beneficiary or in the hands of both the trustee as well as the beneficiary. These principles are subject to any special provision enabling double taxation in the statute. The assessee-firm consisted of four partners, all the partners having equal shares. Upto the asst. yr. 1967-68, the firm was assessed in the status of a registered firm. For the asst. yr. 1968-69, the firm filed Form No. 12 under s. 184(7) of the IT Act, 1961, for the grant of renewal of registration. Owing to disputes between them, one of the partners did not sign the form for renewal, and the ITO refused continuance of registration and assessed the firm in the status of an unregistered firm. On appeal to the AAC, the assessee contended that the assessment of the firm was completed on 30th March, 1973, in the status of an unregistered firm, but the assessment of one of the partners was completed on 30th March, 1972, i.e., one year earlier and since the ITO had exercised the option of assessing a partner of the firm directly, no assessment could be made in the hands of the firm thereafter in view of the decision in CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Leave Petition against the judgment dt. 20th Oct., 1986, of the Madras High Court in TC Nos. 338 340 of 1984, whereby the High Court, following CIT vs. Blue Mountain Engineering Corporation 1978 CTR (Mad) 142 : (1978) 112 ITR 839 (Mad), answered against the Department the question whether, where the ITO had already assessed each member of an AOP (under the 1961 Act), he could again assess the AOP. While dismissing the petition their Lordships made the following order : "In view of the fact that the view taken by the Tribunal is also the view that has been followed since 1966 as per circular of the CBDT, dt. 24th Aug., 1966, extracted in Laxmichand Harjibhai (1981) 21 CTR (Guj) 181 : (1981) 128 ITR 747, 751 (Guj), we do not think this is a fit case for interference under Art. 136. The Special Leave Petitions are, therefore, dismissed." CIT vs. K. Chandrasekaran : SLP (Civil) Nos. 1782-1784 of 1988." (3) CIT vs. K. Chandrasekaran Ors. In this case the Hon'ble Madras High Court, after following its own decision in CIT vs. R. Chandrasekaran held as under : "Where an assessment had already been made on each member of an AOP, the subsequent assessment on the AOP is not val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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