Ita/759/2010 Of The Commissioner Of Income Tax Xiii v. Qimat Ali Garg

HIGH COURT OF DELHI AT NEW DELHI ]udgment [Reserved ][on: ][L6ft September, ][20L0]]udgment [Pronounced on: ][6ft December, ][201-0] rTA759/20L0 THE COMMISSIONER OF INCOME TAX-XII ..... App"llantThrough: Ms. Rashmi Chopra, Advocate VCTSUS SH. QIMAT RAI GARG.... RespondentThrough: Mr. Sampath Krishnan, IvIr. K. Sampath,Advocates CORAM:HON'BLE THE CHIEF IUSTICEHON'BLE MR. IUSTICE MANMOHAN 1. 2. 3. Whether reporters of the local papers be allowed to see the judgment?NoTo be referred to the Reporter or not?NoWhether the judgment should be reported in the Digest?the judgment should be reported in the Digest?judgment should be reported in the Digest?should be reported in the Digest?be reported in the Digest?reported in the Digest?in the Digest?the Digest?No Whether the judgment should be reported in the Digest?the judgment should be reported in the Digest?judgment should be reported in the Digest?should be reported in the Digest?be reported in the Digest?reported in the Digest?in the Digest?the Digest? DIPAK MISRA, CI In the present appeal underSection 260A of the Income TaxAct, 196'1. (for brevity 'the Act'),the following question was re-formulated: "Whether the assessing officer while proceedingunder Section 158B8 read with Section 132(4) cantake note of any information or for that matter theunder Section 158B8 read with Section 132(4) cantake note of any information or for that matter thestatement recorded the assessee on oath andby proceed further to arrive at a conclusion that therehas been undisclosed income?"by proceed further to arrive at a conclusion that therehas been undisclosed income?" t .|' 2. Regard being had to the [aforesaid ][reformulated ][question, we]shall refer to the facts [which ][are ][requisite ][for ][the adjudication of ][the]appeal. The assessee-respondent [is ][a ][Chartered Accountant ][and ][a]director of M/s Amber [Deposits ][(P) ][Ltd., ][M/s ][Chatinya ][Hire]Purchase (P) Ltd., M/s [Pratap ][Oil ][& ][Fats ][Ltd. ][and ][M/s ][M.G. ][Leasing]Ltd. which are engaged in [Hire-Purchase ][and ][Finance ][services. ][A]search and seizure operation [was ][carried out ][in ][respect of ][a ][comPany/]M/s Golden Forest [India ][Ltd. ][(for ][short ]['M/s ][GFIL').]namely, Pursuant to the search carried [thereon, ][a ][search ][and seizure ][operation]was conducted at the residential [premises ][of ][the ][assessee ][on]12.g.1gg5. A statement of [the ][assessee ][on oath was ][recorded ][wherein]he had confessed that his companies [were involved ][in ][capital]generation for M/s GFIL. 3. On the foundation of the said [statement, ][the ][assessment ][for ][the]block period 1985-J6 to [12.9.1995 ][was completed ][on ][20.g.lgg6under]Section 158BC read with Section \M of [the ][Act on ][€u:t ][estimated]income of Rs.3,60,000/-. It is worth [noting, ][the ][assessee ][had ][never]appeared before the assessing officer. On [an appeal being preferred]by the assessee, the Commissioner of [Lrcome ][Tax ][(Appeals)]confirmed the additions made by the [aqsessing ][officer. In ][a ][further]appeal, the Income Tax Appetlate Tribunal, [Delhi ][Bench-G ][(for ][short]ITA No.75912010Page 2 of 9 'the tribunal') set aside the order and remanded the matter to the fileof the assessing officer for framing a fresh order of assessment. 3. On the foundation of the said [statement, ][the ][assessment ][for ][the]block period 1985-J6 to [12.9.1995 ][was completed ][on ][20.g.lgg6under]Section 158BC read with Section \M of [the ][Act on ][€u:t ][estimated]income of Rs.3,60,000/-. It is worth [noting, ][the ][assessee ][had ][never]appeared before the assessing officer. On [an appeal being preferred]by the assessee, the Commissioner of [Lrcome ][Tax ][(Appeals)]confirmed the additions made by the [aqsessing ][officer. In ][a ][further]appeal, the Income Tax Appetlate Tribunal, [Delhi ][Bench-G ][(for ][short]ITA No.75912010Page 2 of 9 'the tribunal') set aside the order and remanded the matter to the fileof the assessing officer for framing a fresh order of assessment. 4. After the remit, the notices were served on the assessee underSection 1,43(2) and eventually, the assessee appeared before theassessing officer on 12.1.2005. A questionnaire was issued to theassessee on 17.2.2005 requiring him to furnish details" of moveableand immoveable property, household expenses, source of incomeand copies of the bank statements. The assessee submitted the detailsexcept the bank statements, but ultimately on 10.3.2005, he submittedthat he is unable get the statements. The assessing officer took noteof the fact thai in his statement on oath, the assessee had stated on12.9.1995 that he had three bank accounts. As the assessee could notproduce the account statements, sununons were issued to the banksr,vcalling for the statement for the block period. The assessing officerreferred to the bank accounts and credit entries. It is worth noting, hereferred to Acc. I,Jo.224, Canara Bank, Mani Majra, Chandigarh,opened on 27.07.\995 and Acc. No.7553/63 in State Bank of India,opened on'1.6.9.92, jointly held by the assessee and his wife MadhuRai Garg 5. The Senior Manager of Dena Bank, Sector 7-9 Chandigarhreplied that Account No. SB 8589 was opened on 3.2.1994 but theITA No.759/2OIOPage 3 of 9of 99 Page 3 of 9of 99 f same was not available with the bank. The assessing officer requiredthe assessee to explain the receipts which were revealed from thebank accounts. Before the assessing officer, the assessee submittedthat he was trying to locate the documents including the papersregarding the loan given to him by his brother who had expired in1997. It was also put forth by him that account No. 7553/63 in StateBank of India was joint$ held by him and his wife Madhu Rai Gargwho is a LIC agent and the receipts relate to commission received bythe wife from LIC. He could not produce all the documents beforethe assessing officer. The assessing officer, considering the materialbrought on record, took note of the fact that the assessee had filed thereturn for the block period, that is, 1986-87 to 12.9.1995 on 22.7.1996and had disclosed Rs.22800/-, Rs.33,087, Rs.27,660 / - and Rs.49,908 / -for the assessment years 1987-88, 1988-89, 1989-90 and 1990-9'J,respectively but had not disclosed any income for the otherassessment years. The assessing officer observed that there was nomaterial available on record pertaining to the particulars of incomefor the assessment years 1986-87 to 1992-93 and, therefore, thereturned income for the said assessment years was accepted as theassessed income. The income for the other years was computed asundisclosed income as the deposits in the bank had not beendisclosed. ITA No.759/2OLO ITA No.759/2OLO 6. Being dissatisfied with the said order of assessment dated31.3.2005 framed under Section 1588C of the Act, the assesseepreferred an appeal before the tribunal. The assessee raised asingular ground that the addition of Rs.10,58,328/ - on account ofcredit entries in the bank accounts standing in the names of theassessee as well as in the joint name of the assessee and his wife wasnot sustainable. The tribunal took note of the history of litigation andits order of remand on the ground that at the time of remit, there wasa direction that any material intended to be used against the assesseehad to be put to him and fresh order of assessment was to be passedin accordance with law after affording reasonable opportunity ofbeing heard to the assessee. The tribr-rnal adverted to the reasoningsgiven by the assessing officer and opined that the assessing officer, inthe order of assessment, had stated that certain bank statements fromthe banks were collected after issuing requisition to the bank duringthe fresh assessment proceedings and had given details of the saidbank accounts being Account No.224 with Canara Bank, Mani Majra,Chandigarh opened on 27.7.1995, Account No. 7553 / 63 with the StateBank of Lrdia opened on'1,6.9.1992 jointly by the assessee and hiswife, Madhu Rai Garg. As is manifest, the tribunal referred to theadditions made by the assessing officer which pertained to the totaldeposit made in Account No.7553/63 with the State Bank of IndiaITA No.759/2OIOPage 5 of9of9 and the amount in Account No. 224 with the Canara Bankl Mur,iMajra, Chandigarh. Thereafter, the tribunal dealt with the factswhich we think it seemly to reproduce: "4. On perusal of the aforesaid order of the AO, it is seenthat the'AO has msde an addition of Rs.10,58,325/-pertaining to the assessment years 1-993-94, 1-994-95 and1-995-96 and block period from 1.4.L995 to 12.9.L995, Inthe assessment the AO has stated that certain bankstatements fro* the bank were collected after issuing. requisition to the bank during the fresh assessmentproceedings. The AO has giaen detsils of these bankaccounts being account No.224 tuith Canara Bank, ManiMajra, Chandigarh opened on 20,7,7995 and accountNo. 7553/63 zuith State Bank of India opened on16.9.1992, joinity held by the assessee and his wifeMadhu Rai Garg. The additions of Rs,1,06,724/-, Rs.30,235/-, Rs,53,368 and Rs.6,95,001-/- pertaining to theassessment years 1993-94, 1994-95, L995-96 and for theblock pteriod fro* 1.4.L995 to 12.9.1-995 are uith regardto the total deposit made in thz account No. 7553/63 zuithState Bank of India. The rest addition of Rs.7,73,000/-for [the ][block period ]fto* [1.4.1995 ][to ][12.9.1-995 ][is ][zuith]regard to the deposits in the account N0.224, CanaraBank, Mani Majra,Chandigarh. On perusal of theassessment order it is clear that the details of bankaccount N0.7553/63 zuith- State Bank of India rnerecollected by the AO during the block assessmentproceedings and the addition has been made on the basisof the inforntation so collected. These informations as toITA No.759/2OL0Page \, r.$ the account No,7553/63 with State Bank of India a)erenot found during the course of search conducted againstthe assessee. The addition on account of deposits in theaforesaid account N0.7553/63 is thus not based on anyseized eaidence or materials or informations foundduing the course of search conducted against theassessee. Thus these additions are out of the puraiezu oftheblock assessment made u/s158 BC in pursuance to thesearch conducted against the assessee on 12.9.1995. We,therefore, delete the aforesaid addition of Rs.1,06,724/-,Rs.30,235/-, Rs.53,368/- and Rs.6,95,001/- fo, theassessment years 1993-94 to 1995-96 and block periodfro* [1.4.95 ][to L2.9.95. ][The ] [shall modify ][the ][block]assessment order accordingly." \, r.$ the account No,7553/63 with State Bank of India a)erenot found during the course of search conducted againstthe assessee. The addition on account of deposits in theaforesaid account N0.7553/63 is thus not based on anyseized eaidence or materials or informations foundduing the course of search conducted against theassessee. Thus these additions are out of the puraiezu oftheblock assessment made u/s158 BC in pursuance to thesearch conducted against the assessee on 12.9.1995. We,therefore, delete the aforesaid addition of Rs.1,06,724/-,Rs.30,235/-, Rs.53,368/- and Rs.6,95,001/- fo, theassessment years 1993-94 to 1995-96 and block periodfro* [1.4.95 ][to L2.9.95. ][The ] [shall modify ][the ][block]assessment order accordingly." 7. After so holding, the tribunal proceeded to deal with theaddition of Rs.1,73 ,000/ -for the block period 1.4.1gg5 to tZ.g.tg95 onaccount of deposits in the bank Account No. 224 with the CanaraBank. The tribunal, on scrutiny of the material on record, came tohold that the credits in the aforesaid bank Account No. 224 are part ofthe seized documents or materials for.rnd during the course of searchand the assessee had failed to explain the source of the deposit in thesaid bank and, hence, the order passed by the assessing officer onthat score was justified. Being of this view, the tribunal directed theaddition of Rs.10,58,328/ - reduced to Rs.1,73,000/-. ITA No.759/2OIO t -r' ry 8. The learned counsel for the revenue has placed reliance on thedecision rendered rn Commissioner of Income Tax zt. Mukundray K.Shah, 120071 290 ITR 433 (SC). It is urged by her that after theamendment to Section 15888(b) and 158BC by the Finance Act, 2002with effect from ['1,.7.1995, ]the finding of the tribunal deserves to be re-considered. 9. The learned counsel for the assessee, controverting the said submission, has corrunended us'to the decisions in Commissioner ofIncome Tax a. Raai Kant fain, [2001] 250 ITR 141 (Delhi), CIT a.Elegant Homes P. Ltd., [2003] 259 ITR 232, Commissioner of rncomeTax a. Ashim Krishna Mondal, [2004] 270 ITR L60 (calcuna),commissioner of rncome Tax a. vishal Aggarual,lz00il283 ITR 326(Delhi), Commissioner of Income Tax a. G.K. Senniappan,120061 284ITR 220, Commissioner of rncome Tax, Neut Delhi a. AggarwalDeaelopers (P) Ltd., [2007] 163 Taxman 699 (Delhi) andIncome Tax a. Raai Kant fain, [2001] 250 ITR 141 (Delhi), CIT a.Elegant Homes P. Ltd., [2003] 259 ITR 232, Commissioner of rncomeTax a. Ashim Krishna Mondal, [2004] 270 ITR L60 (calcuna),commissioner of rncome Tax a. vishal Aggarual,lz00il283 ITR 326(Delhi), Commissioner of Income Tax a. G.K. Senniappan,120061 284ITR 220, Commissioner of rncome Tax, Neut Delhi a. AggarwalDeaelopers (P) Ltd., [2007] 163 Taxman 699 (Delhi) andCommissioner of Income Tax, Delhi-WI a. Ashok Dua, l}009l InTaxman a9a pelhi).Taxman a9a pelhi). 10. On a careful scrutiny of the order passed by the tribunal, it isvivid that the tribunal has not kept the amended provisions in view.The search had taken place on 12.9.1995 after the amendment hascome into force. The tribunal has not adverted to its impact. The ITA No.759/20IO c\. ,f.i' tribunal has also not taken into consideration the decision inMukundray K. Shah (supra). 1'J.. In view of the aforesaid, w€ are inclined to set aside the orderof the tribunal and remit the matter to the tribunal for re-consideration regard being had to the search and seizare, thestatement made by the assessee, the amendments brought into thestatute and the decisions in the field. 12. The appeal is allowed to the extent indicated above. /fo2/,l-'/o4c v-' CHIEF JUSTICE ilJ MANMffififi. DECEMBER 06,2O1O PK