9911796707
TMI Blog2000 (1) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1996, is without jurisdiction and hence it is a nullity in law, and (3) the order under s. 153BC(c) dt. 29th Aug., 1996, to the extent additions to the declared total incomes are based on DVO's report, is also without jurisdiction. On merits (4) The learned AO is not justified in making addition of Rs. 50,000 on account of construction and renovation of residential house basing the same merely on assessee's disclosure duly and validly retracted. (5) The learned AO is not justified in making additions of Rs. 50,975, Rs. 2,95,137 and Rs. 2,49,233 (total Rs. 5,95,345) on the basis of DVO's report. (6) The learned AO is not justified in making addition under s. 68 at Rs. 7,00,000 on substantive basis and Rs. 10,20,000 on protective basis (total Rs. 17,20,000). (7) On the facts and circumstances of the case and in law, the learned AO assumed jurisdiction under various statutory provisions and made various additions mentioned in the foregoing grounds without properly considering and appreciating the explanation and replies submitted by the assessee. (8) The learned AO is not justified in making the following additions: (i) Rs. 45,962 On account of entry on page No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urvey was concluded after recording the answer to question No. 34. The relevant question and answer is reproduced hereunder: Q. 34. Taking into consideration the proceedings so far do you want to surrender the unaccounted income of your and your wife, if yes, furnish reply in detail. Ans. Yes sir, I, on behalf of my wife, who is the proprietor of Manali Restaurant and Hotel White Rose declare Rs. 1,55,000, as unaccounted income for the year 1994-95 and I agree to pay the tax on that income at the earliest. The above is free English translation given by the assessee of the statement. However, the assessee has also filed free English transaction of p. 9 of the above statement at p. 59 of the paper-book which reads as under: Ans. (34) Yes Sir, I on behalf of my wife who is proprietor of "Manali Restaurant" and "Hotel White Rose" declared unaccounted income of Rs. 1,55,000 for financial year 1994-95 and I agree to pay the tax thereon at the earliest. The above statement has been made by me with cool mind and without any coercion. This has been made as power of attorney holder of my wife. It is acceptable and binding to us. Above surrender unaccounted income made as constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng: Rs. Rs. Rs. Asst. yr. 1993-94 (1) Construction and renovation 50,000 of house Asst. yr. 1994-95 (1) On account of unexplained 50,975 expenditure in construction of Hotel White Rose Asst. yr. 1995-96 (1) Gifts received from NRE a/c (a) On substantive basis 7,00,000 (b) On protective basis 10,20,000 17,20,000 --------- (2) Entry on p. No. 57 of Ann. A1-1 45,962 (3) On account of unexplained expenditure in construction of Hotel White Rose 2,95,137 20,61,099 ----------------- Asst. yr. 1996-97 (1) Unexplained cash 2,00,000 (2) Entries on loose papers seized during the course of search, as per the body of the order 4,69,961 (3) Unexplained expenses as per Ann. A. 11 15,846 (4) On account of unexplained expenditure in construction of Hotel White Rose 2,49,233 9,35,040 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was concluded on 3rd Aug., 1995 and subsequently when the survey was converted into search, nothing new was found which was not disclosed and/or known to the Department before the search and as such it is clear that the conditions necessary for initiating action under s. 132 have not been fulfilled. Reliance was placed on the decision of the Allahabad High Court in the case of Motilal vs. Preventive Intelligence Officer (1971) 80 ITR 418 (AM) which decision has subsequently been approved by the Hon'ble Supreme Court in the case of CIT vs. Tarsemkumar (1986) 58 CTR (SC) 129 : (1987) 161 ITR 505 (SC). Reliance was also placed on the following decisions: (i) L.R. Gupta vs. Union of India (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del); (ii) H.L. Sibal vs. CIT 1975 CTR (P H) 302 : (1975) 101 ITR 112 (P H); (iii) Jagmohan Mahajan Anr. vs. CIT Ors. 1976 CTR (P H) 316 : (1976) 103 ITR 579 (P H); and (iv) Dr. C. Balkrishnan Nair vs. CIT (1999) 154 CTR (Ker) 523 : (1999) 237 ITR 70 (Ker). It was submitted that the composition of disclosure of Rs. 25 lacs noted by the AO at p. 2 of the assessment order which was subsequently retracted by the assessee vide letter dt. 4th Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure for the construction has been made on the basis of a report of the Valuation Officer which was received subsequent to the granting of approval by the CIT, Rajkot to the assessment order under s. 158BG which is totally illegal and in any case the same cannot be considered as undisclosed income within the meaning of s. 158BA. Accordingly it was pleaded that the assessment of the assessee framed under s. 158BC r/w s. 143(3) was null and void because there was no valid ground as contemplated under s. 132 to convert the survey into a search and consequently the block assessment framed by the AO was without jurisdiction and also because of the fact that no undisclosed income as defined in s. 158BA was discovered as a result of the search which itself was illegal on account of non-compliance with the statutory provisions of s. 132. 8. The learned Departmental Representative strongly supported the order of the AO. It was submitted that it is a matter of record that during the survey on 2nd Aug., 1995 unaccounted cash of Rs. 2.45 lacs and voluminous incriminating documents were found and the assessee and her husband during the course of statement recorded under s. 133A(1) had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from an assessment order are co-terminus with the powers of the AO. They can do what the AO could do and they cannot do what the AO has no power to do. It is also well settled that during assessment proceedings the AO has no power to examine the validity of a search authorised by the CIT or the Director of Income-tax (Inv.). Therefore, in an appeal arising from such an assessment order, the appellate authorities will also have no power to examine the validity of the search. (4) The first ground of appeal, relating to legality of the search, is not maintainable, as the Tribunal, while hearing an appeal against an assessment order, has no authority/power to examine the legality of action under s. 132 taken by the CIT/DIT prior to the commencement of assessment proceedings. The only remedy for challenging the legality of a search is a writ before the High Court, which the assessee has chosen not to avail. (5) In any event, the main submissions of the assessee for having the search declared as illegal, are that it emanated from a survey, and that no new material was found during the search. It is a matter of, record that during the survey on 2nd Aug., 1995, unaccounted cash of ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal as it was also before the AO when he completed the assessment. 3. It the Tribunal still insist on production of the "Satisfaction Note", they may be requested to pass a formal order directing the DIT (Inv) Ahmedabad to produce the same." Opinion of standing counsel of IT Department "We refer to your letter bearing No. CIT.R/Jud/MRG/99-2000, dt. 24th Nov., 1999. As recorded in your letter the Tribunal has directed the senior authorized representative to furnish copy of the Satisfaction Note recorded before issuing the warrant of authorization under s. 132. We had discussed the issue with Mr. R.K. Gupta, senior authorised representative. We are given to understand that satisfaction note contains details with regard to informant. An assurance is given by the Department to the informant that his identity will not be disclosed to any person. This therefore, is a privilege document and can be placed on record of proceedings. We are further given to understand that the subject-matter of appeal is not based on sufficiency or otherwise of the satisfaction recorded. In other words Satisfaction Note is not relevant for the proceedings before the Tribunal. Based on the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ug., 1975 at 11.30 P.M. only and was concluded at 11 AM on 4th Aug, 1975. (2) Although the assessee against whom the search warrant was issued was a Muslim lady, yet the search party which comprised of 16 persons did not contain a single lady officer/Inspector. From the Panchnama, the names and designation of the various officers along with the Inspectors who assisted them are as under: Name Full Designation 1. K.K. Kanwat Dy. CIT, Bhavnagar 2. L.R. Meena Asst. DIT (Inv), Bhavnagar. 3. R.B. Rande Asstt. CIT (Inv) Circle 3. 4. C.R. Ogawa ITO, Ward 5, Bhavnagar 5. B.K. Sataria ITO, Survey 6. V.R. Bhayow Inspector 7. J.L. Deshi " 8. B.K. Chauhan " 9. A.T. Vadher " 10. I.M. Dave " 11. M.B. Gohil " 12. M.V. " 13. N.K. Joshi " 14. M.N. " 15. J.V. Joshi " 16. K.M. " From the above it is clear that on 2nd Aug., 1995, there was no information with the learned CIT warranting search and no informant as involved at whose instance or on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed the income of Rs. 25 lacs in the statement recorded under s. 132(4) on 4th Aug., 1995 during the search. However, the allegation of the assessee is that the alleged surrender was not voluntary but was under threat and coercion because the assessee was called by the IT authorities on 3rd Aug., 1995 at 11.30 A.M. from her residence at Hotel Apolo where the survey was in progress since 2nd Aug., 1995, noon and she was confined to one place till 4th Aug., 1995 11 A.M. and the search was concluded only with signature of the assessee and her husband on the alleged voluntary declaration of Rs. 25 lacs on account of unaccounted income. The so-called voluntary surrender was retracted by the assessee by filing letter, dt. 4th Oct., 1995, addressed to the Asstt. CIT (Inv) Circle, Bhavnagar referred in para 5 above. A comparison of the list/inventory of account books, etc. found and not seized at the time of survey and these subsequently seized after the search, clearly indicates that some documents which were inventorised at the time of survey were subsequently seized. In this connection the assessee has furnished the details of books and documents found and inventorised during the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to search under the IT Act, in view of s. 132(13) and they are: (i) the empowered officer must have reasonable ground for believing that anything necessary for the purpose of assessment/recovery of tax is to be found in the place in respect of which authorisation is issued. (ii) He must be of the opinion that such thing can not be otherwise got without any undue delay. (iii) He must record in writing the grounds for his belief. (iv) He must specify in such writing so far as possible the thing for which the search is to be made. Apparently none of these has been done in this case and the search warrant has been given without complying with the requirements of s. 132 r/w s. 165 of the Cr. PC. 11. The matter can be looked from another angle. Chapter XIV-B is meant to tax undisclosed income unearthed as a result of search. In the case before us the assessee had disclosed the construction of Hotel White Rose in her books of account for the respective years. The alleged bogus gifts were received by the assessee, her son, and her husband by bank drafts through NRI accounts of the donors; these were credited into bank pass books of the assessee which are meant to be disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of Rs. 17,20,000 at the earliest and I surrender this as un-accounted income during the year 1994-95. Q. 38/39.- Please explain for refusing to sign page Nos. 9, 7, 10 of the statement which is now being recorded. Ans. The amount received from NRI account has been correctly show on page Nos. 9 10 but the question No. 35 and the details of the reply to it written on pp. 9 10 are not correct. Q. 44.- You have received huge amount of Rs. 3,00,000 and Rs. 5,00,000 by way of gift. It is, therefore, but natural that you should know that person. You must be having good relationship. You are, therefore, requested to say since how long you know Manoj Patel Nutan B. Patel. How do you know them? Please furnish in detail their full addresses. Ans. Shri Manoj Patel Nutan B. Patel met me at Vadodara. I came to know them through my friend. I do not know the name of the said friend. I had asked for a gift and they have given me the gift. Q. 45. From your above reply it is observed that in the statement recorded under s. 131 of the IT Act it is seen that you have been replying to the IT Department by giving replies which are intentionally false and are misguiding. You are now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re correct but I have no addresses. I therefore, fail to understand as to why this question is asked to me repeatedly. Q. 51. You have been clearly explained the provisions of s. 131 of the IT Act (in the question No. 45) still however you have not been furnishing true and complete information in respect of gift received by you. And in addition you have been misguiding the IT Department and your behaviour is non-cooperative. In this connection you are clearly made to understand that if you do not make available proof/evidence in respect of gift received by you, then at the time of assessment the gift is liable to be considered as unaccounted income and tax, interest and penalty would be recovered on the same. Hence if you now desire to give proof/evidence in respect of gift received please give information. Ans. I do not have any proof other than the zeroxed of the draft. Q. 52. Please furnish information in respect of household expenditure. How do you meet with the household expenses and from what sources of income. Ans. I have no information in respect of household expenditure. The details of household expenditure is available on the books. The details in respect of expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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