Itta/367/2011 Of Gopal Lal Bhadruka v. Deputy Commissioner Of Income Tax

THE HON’BLE THE CHIEF JUSTICE SRI MADAN B. LOKURANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA Nos.367, 368, 369, 379, 383, 386, 390, 395 and 438 of 2011 15[th] December, 2011 Between:Gopal Lal Bhadruka … AppellantAndDeputy Commissioner of Income-Tax,Central Circle-2, Hyderabaad. … Respondent Counsel for the appellant : Sri S. Ravi, Senior Advocate, assisted by Sri Ch. Pushyam Kiran.Counsel for the respondent : THE HON’BLE THE CHIEF JUSTICE SRI MADAN B. LOKURANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR ITTA No.367 of 2011 and batch JUDGMENT: (per the Hon’ble the Chief Justice Sri Madan B. Lokur) This batch of appeals filed under Section 260A of the Income-Tax Act, 1961 (‘the Act’) has been preferred against a commonorder dated 26.11.2010 passed by the Income Tax AppellateTribunal, Hyderabad Bench ‘A’, Hyderabad. 2. The assesses before us are Gopal Lal Bhadruka, his sonAvadesh Bhadruka and their firm Ahura Holdings. In fact, the firmAhura Holdings has two other partners but they are not concerned withthese proceedings. Ahura Holdings is engaged, inter alia, in realestate and at the relevant time it was developing a property in theSecunderabad Cantonment. 3. On 26.6.2006 and 27.6.2006, a search and seizure operationwas conducted in the residential-cum-business premises of GopalBhadruka. 4.During the course of search and seizure operations, it came tolight that Gopal had obtained a General Power of Attorney to developthe Secunderabad Cantonment property belonging to two persons.The firm had developed 32 plots and had disposed them of to variouspersons. The search and seizure operation revealed that the saleconsideration as per the sale deed did not tally with the actualpayments made by the purchasers. In effect, there was a suppressionof sale receipts. It appeared from a scrutiny of eight sale deeds that on-money was paid to Ahura Holdings by the vendees. 5. The statement of Gopal was recorded on more than oneoccasion, and in reply to certain questions, he confirmed the receipt ofon-money but claimed that it was received in his hands and in the hands of Avadesh. Neither Ahura Holdings nor the other partners hadanything to do with the receipt of on-money. 6. The Revenue also examined the purchasers of eight plots inrespect of whom there was evidence of payment of on-money. Three ofthese persons admitted payment of on-money, while five personsdenied the payment. There was no evidence with regard to paymentof on-money for the remaining 24 plots by the vendees. 7. On these broad facts, proceedings were initiated by the Revenueunder Section 153A of the Act in respect of Gopal, while proceedingswere initiated against Avadesh and Ahura Holdings under Section153C of the Act. 8. The main issue that arose for consideration before the AssessingOfficer was with regard to suppression of sale proceeds and estimationof undisclosed income of Ahura Holdings. 9. The Assessing Officer passed an assessment order in respect ofAhura Holdings on a substantive basis, while protective assessmentswere made in respect of Gopal and Avadesh. The Assessing Officerrejected the contention of Gopal and Avadesh that on-money wasreceived in their hands and held that there was sufficient evidence toshow that the true sale proceeds had been suppressed and that AhuraHoldings had received on-money in respect of the transactions. Onthe basis of his best judgment, the Assessing Officer estimated theundisclosed income. 8. The main issue that arose for consideration before the AssessingOfficer was with regard to suppression of sale proceeds and estimationof undisclosed income of Ahura Holdings. 9. The Assessing Officer passed an assessment order in respect ofAhura Holdings on a substantive basis, while protective assessmentswere made in respect of Gopal and Avadesh. The Assessing Officerrejected the contention of Gopal and Avadesh that on-money wasreceived in their hands and held that there was sufficient evidence toshow that the true sale proceeds had been suppressed and that AhuraHoldings had received on-money in respect of the transactions. Onthe basis of his best judgment, the Assessing Officer estimated theundisclosed income. 10. The assessees preferred appeals which came to be rejected inrespect of the issues that we are concerned with by the Commissionerof Income-Tax (Appeals). The appellate authority observed that therewas sufficient material to conclude that Ahura Holdings had receivedon-money. By and large, the CIT (Appeals) agreed with the AssessingOfficer in respect of the ratio of the on-money component to thepurchase price as per the sale deeds. 11. Feeling aggrieved by the order passed by the CIT (Appeals), theassessees preferred appeals before the Tribunal. The Revenue also preferred appeals before the Tribunal, but we are only concerned withthe appeals preferred by the assessees. 12. The primary question of law agitated before the Tribunal waswhether, for the purpose of computing income under Section153A/153C of the Act, the Assessing Officer was required to confinehimself only to the material found during the course of searchoperations. The Tribunal held against the assessees in this regard,and before us also the same question has been agitated by learnedcounsel for the assessees. 13. In respect of the protective assessment made in case of Gopaland Avadesh, two additional contentions have been made to the effectthat the Assessing Officer did not take into account the expenditureincurred in the development of the property and also that theAssessing Officer as well as the appellate authority failed to considerthat the partners of Ahura Holdings had categorically stated that on-money was received by them and not by Ahura Holdings. In thisregard, reference was made to the statement made by the otherpartners of the firm that on-money was not received by AhuraHoldings. 14. In our opinion, for the reasons mentioned below, the Tribunalhas not committed any error in rejecting the contentions of theassessees and we are also of the opinion that no substantial questionof law arises for consideration in these appeals. 15. There is no dispute that Sections 153A, 153B and 153C wereinserted in the Act by the Finance Act, 2003 with effect from 1.6.2003in Chapter XIV thereof. These sections are applicable to searchoperations or requisitions made after 31.5.2003. Simultaneously, theFinance Act also inserted Section 158BI in Chapter XIV-B of the Act.16. The provisions of Section 153A, Section 153C and Section158BI of the Act, as they stood at the relevant time, read as follows:- “153-A. Assessment in case of search or requisition.—Notwithstanding anything contained in Section 139, Section 147, — Section 148, Section 149, Section 151 and Section 153, in thecase of a person where a search is initiated under Section 132 orbooks of account, other documents or any assets are requisitionedunder Section 132-A after the 31st day of May, 2003, the AssessingOfficer shall— “153-A. Assessment in case of search or requisition.—Notwithstanding anything contained in Section 139, Section 147, — Section 148, Section 149, Section 151 and Section 153, in thecase of a person where a search is initiated under Section 132 orbooks of account, other documents or any assets are requisitionedunder Section 132-A after the 31st day of May, 2003, the AssessingOfficer shall— (a) issue notice to such person requiring him to furnish withinsuch period, as may be specified in the notice, the return ofincome in respect of each assessment year falling within sixassessment years referred to in clause (b), in the prescribedform and verified in the prescribed manner and setting forthsuch other particulars as may be prescribed and theprovisions of this Act shall, so far as may be, applyaccordingly as if such return were a return required to befurnished under Section 139;such period, as may be specified in the notice, the return ofincome in respect of each assessment year falling within sixassessment years referred to in clause (b), in the prescribedform and verified in the prescribed manner and setting forthsuch other particulars as may be prescribed and theprovisions of this Act shall, so far as may be, applyaccordingly as if such return were a return required to befurnished under Section 139; (b) assess or reassess the total income of six assessment yearsimmediately preceding the assessment year relevant to theprevious year in which such search is conducted orrequisition is made:immediately preceding the assessment year relevant to theprevious year in which such search is conducted orrequisition is made: Provided that the Assessing Officer shall assess or reassessthe total income in respect of each assessment year falling withinsuch six assessment years: Provided further that assessment or reassessment, if any,relating to any assessment year falling within the period of sixassessment years referred to in this section pending on the date ofinitiation of the search under Section 132 or making of requisitionunder Section 132-A, as the case may be, shall abate.Explanation.—For the removal of doubts, it is hereby declared that, (i) save as otherwise provided in this section, Section 153-Band Section 153-C, all other provisions of this Act shallapply to the assessment made under this section;and Section 153-C, all other provisions of this Act shallapply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of anassessment year under this section, the tax shall bechargeable at the rate or rates as applicable to suchassessment year.assessment year under this section, the tax shall bechargeable at the rate or rates as applicable to suchassessment year. 153-C. Assessment of income of any other person.— (1) Notwithstanding anything contained in Section 139,Section 147, Section 148, Section 149, Section 151 and Section153, where the Assessing Officer is satisfied that any money,bullion, jewellery or other valuable article or thing or books ofaccount or documents seized or requisitioned belongs or belong toa person other than the person referred to in Section 153-A, thenthe books of account or documents or assets seized orrequisitioned shall be handed over to the Assessing Officer havingjurisdiction over such other person and that Assessing Officer shallproceed against each such other person and issue such otherperson notice and assess or reassess income of such other person in accordance with the provisions of Section 153-A: 153-C. Assessment of income of any other person.— (1) Notwithstanding anything contained in Section 139,Section 147, Section 148, Section 149, Section 151 and Section153, where the Assessing Officer is satisfied that any money,bullion, jewellery or other valuable article or thing or books ofaccount or documents seized or requisitioned belongs or belong toa person other than the person referred to in Section 153-A, thenthe books of account or documents or assets seized orrequisitioned shall be handed over to the Assessing Officer havingjurisdiction over such other person and that Assessing Officer shallproceed against each such other person and issue such otherperson notice and assess or reassess income of such other person in accordance with the provisions of Section 153-A: Provided that in case of such other person, the reference to thedate of initiation of the search under Section 132 or making ofrequisition under Section 132-A in the second proviso to Section153-A shall be construed as reference to the date of receiving thebooks of account or documents or assets seized or requisitioned bythe Assessing Officer having jurisdiction over such other person.(2) Where books of account or documents or assets seized orrequisitioned as referred to in sub-section (1) has or have beenreceived by the Assessing Officer having jurisdiction over suchother person after the due date for furnishing the return of incomefor the assessment year relevant to the previous year in whichsearch is conducted under Section 132 or requisition is madeunder Section 132-A and in respect of such assessment year— (a) no return of income has been furnished by such other personand no notice under sub-section (1) of Section 142 has beenissued to him, orand no notice under sub-section (1) of Section 142 has beenissued to him, or (b) a return of income has been furnished by such other personbut no notice under sub-section (2) of Section 143 has beenserved and limitation of serving the notice under sub-section(2) of Section 143 has expired, orbut no notice under sub-section (2) of Section 143 has beenserved and limitation of serving the notice under sub-section(2) of Section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documentsor assets seized or requisitioned by the Assessing Officerhaving jurisdiction over such other person, such AssessingOfficer shall issue the notice and assess or reassess totalincome of such other person of such assessment year in themanner provided in Section 153-A. 158-BI. Chapter not to apply after certain date.—The provisionsof this Chapter shall not apply where a search is initiated underSection 132, or books of account, other documents or any assetsare requisitioned under Section 132-A after the 31st day of May,2003.” 17. By virtue of Section 158BI of the Act, the various provisions ofChapter XIV-B of the Act are made inapplicable to proceedings underSections 153A/153C of the Act. The effect of this is that while theprovisions of Chapter XIV-B of the Act limit the inquiry by theAssessing Officer to those materials found during the search andseizure operation, no such limitation is found insofar as Sections153A/153C of the Act are concerned. Therefore, it follows that for thepurposes of Sections 153A/153C of the Act the Assessing Officer can take into consideration material other than what wasavailable during the search and seizure operation for making anassessment of the undisclosed income of the assessee. 18. At this stage, we may mention that learned counsel for theassessees relied upon Manish Maheshwari v. Asst. Commissioner Officer can take into consideration material other than what wasavailable during the search and seizure operation for making anassessment of the undisclosed income of the assessee. 18. At this stage, we may mention that learned counsel for theassessees relied upon Manish Maheshwari v. Asst. Commissioner of Income Tax[[1]]for the purposes of interpreting Section 158BB of theAct. We have gone through the decision cited by learned counsel andfind that it does not support his case for the simple reason that theprovisions Chapter XIV-B of the Act are not applicable to proceedingsunder Sections 153A/153C of the Act. Consequently, theprinciples of Section 158BB of the Act cannot be imported forthe purposes of interpreting Section 153A/153C of the Act. The viewexpressed by the Supreme Court in Manish Maheshwari has noapplication to the present case. 19. Under these circumstances, in our opinion, since theinterpretation of Sections 153A/153C of the Act is quite clear, nosubstantial question of law arises for consideration. We may in thiscontext recall the words of the Supreme Court in Santosh Hazari v. Purushottam Tiwari (dead)[[2]]wherein it was said: “A point of law which admits of no twoopinions may be a proposition of law but cannot bea substantial question of law.” 20. It was contended by learned counsel for the assessees that therewas no evidence before the Assessing Officer to conclude that on-money was received by Ahura Holdings in respect of all the saletransactions. It was submitted that there may have been material withregard to eight such transactions but that does not mean that the samescript was played out for all the transactions. We cannot agree. Therewas adequate material before the Assessing Officer in the form of eightsale deeds and in the form of replies given by Gopal to questionsposed to him with regard to receipt of on-money to enable theAssessing Officer to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of theAssessing Officer and this does not lead to any substantial question oflaw, unless the conclusions arrived at are perverse. That is not theposition in this case. 21. In CST v. H.M. Esufali, H.M. Abdulali[[3]]the Supreme Courtnoted the difficulty in making an assessment of the escaped turnoverfor the purposes of levy of sales tax in the following words: “In estimating any escaped turnover, it isinevitable that there is some guess-work. Theassessing authority while making the “best-judgment” assessment no doubt should arrive at itsconclusion without any bias and on rational basis.That authority should not be vindictive or capricious.If the estimate made by the assessing authorityis a bona fide estimate and is based on arational basis, the fact that there is no goodproof in support of that estimate is immaterial.Prima facie, the assessing authority is the bestjudge of the situation. It is his “best-judgment” andnot of any one else's.” (emphasis supplied) In our opinion, these principles would equally apply for decidingwhether, as in the present case, the evidence of payment of on-moneyin some transactions would or would not relate to all similartransactions. 22. The next contention urged by learned counsel for the assesseesis that though Gopal and Avadesh had stated that on-money wasreceived by them and not by Ahura Holdings and this was alsoconfirmed by the other two partners of the firm, yet the AssessingOfficer completed the assessment in respect of Ahura Holdings on asubstantive basis. 23. In our opinion, on an appreciation of the evidence, the AssessingOfficer, the CIT (Appeals) as well as the Tribunal have all come to thesame conclusion, namely, that the undisclosed income was that ofAhura Holdings. There is no perversity pointed out in the view that all 22. The next contention urged by learned counsel for the assesseesis that though Gopal and Avadesh had stated that on-money wasreceived by them and not by Ahura Holdings and this was alsoconfirmed by the other two partners of the firm, yet the AssessingOfficer completed the assessment in respect of Ahura Holdings on asubstantive basis. 23. In our opinion, on an appreciation of the evidence, the AssessingOfficer, the CIT (Appeals) as well as the Tribunal have all come to thesame conclusion, namely, that the undisclosed income was that ofAhura Holdings. There is no perversity pointed out in the view that all of them have concurrently taken. We do not think that any substantialquestion of law arises in this regard nor there is any occasion for us tointerfere with the view taken concurrently by all the authorities. 24. Finally, it was argued that the expenditure incurred in thedevelopment of the plots was not taken into account. We have gonethrough the assessment order as well as the appellate order passed inrespect of Ahura Holdings (ITTA No.360 of 2011). We find that the CIT(Appeals) agreed with the assessee that disallowance on the cost ofland was not justified. As regards legal fees and some developmentexpenses etc., the Assessing Officer was directed to have a fresh lookinto the matter. Consultancy fees paid to Sridev Sharma wasdisallowed since there was no evidence to show the payment. Therefore, it is not correct to say that the expenditure incurred was notconsidered by the Revenue. Moreover, the issue raised is purely oneof fact, raising no question of law, let alone a substantial question oflaw. 25. No substantial question of law arises in these appeals. They areaccordingly dismissed. ___________________ MADAN B. LOKUR, C.J. 15[th] December, 2011. ________________ SANJAY KUMAR, J. Note: LR Copy be marked. ARS [1][2007] 289 ITR 341 [2][2001] 251 ITR 84[2001] 251 ITR 84 [3][1973] 90 ITR 271 = (1973) 2 SCC 137[1973] 90 ITR 271 = (1973) 2 SCC 137