Y. Ramachandra Reddy v. Additional Commissioner of Income-tax (Assessment)
[Citation -2014-LL-1028-1]

Citation 2014-LL-1028-1
Appellant Name Y. Ramachandra Reddy
Respondent Name Additional Commissioner of Income-tax (Assessment)
Court HC
Date of Order 28/10/2014
Judgment View Judgment
Keyword Tags undisclosed income • block assessment • documents seized • promissory note • seized material • block period • nil income
Bot Summary: All the three items were attributed to the statement recorded from the appellant under section 132(4) of the Act. Sri A. V. Krishna Kaundinya, learned counsel for the appellant, submits that the Assessing Officer rested his conclusions exclusively on the statement recorded under section 132(4) of the Act and that the same is opposed to law. The defence offered by the appellant was that he clearly mentioned at the time of recording of the statement that the same would be subject to verification of the books of account. If the statement is retracted and there does not exist any other reliable material, making of assessment on the basis of such retracted statement cannot be treated as legal. If the search did not lead to the discovery of any matters, referred to above, there would not be any occasion to record the statement at all. The Assessing Officer extracted in detail, the statement recorded from the appellant during the course of search. The circular relied upon by the learned counsel for the appellant deals with the cases, where the orders of assessment are passed exclusively on the basis of the statement.


JUDGMENT judgment of court was delivered by L. Narasimha Reddy J.-The appellant is assessee under Income-tax Act, 1961 (for short "the Act"). His office and other premises were searched by concerned officials of Income-tax Department on March 4, 1997, in exercise of powers under section 132 of Act. Based on that, notice dated November 25, 1997, was issued under section 158BC of Act. appellant submitted his returns on December 27, 1997, covering block period from 1987-88 to 1997-98 declaring nil income. It was also mentioned that regular assessment of assessment year 1998-99 has not been completed and that there was still time to file returns for assessment year 1997-98. Assessing Officer passed order dated March 22, 2001, holding that there are three items of undisclosed income of appellant in relation to block period. first is amount of Rs. 7,50,000 said to have been paid to Yeturi General Finance, second is sum of Rs. 6,73,000 used for purchased of land at Guttala Begumpet and third is sum of Rs. 2,20,000 representing value of land paid over and above one shown in sale deed. All three items were attributed to statement recorded from appellant under section 132(4) of Act. Aggrieved by order of Assessing Officer, appellant filed I. T. (SS) A. No. 16/Hyd/2001 before Hyderabad Bench of Income-tax Appellate Tribunal. appeal was dismissed by Tribunal through its order, dated November 23, 2001. Hence, this further appeal under section 260A of Act. Sri A. V. Krishna Kaundinya, learned counsel for appellant, submits that Assessing Officer rested his conclusions exclusively on statement recorded under section 132(4) of Act and that same is opposed to law. He contends that at earliest point of time itself, appellant made it clear that he made statement subject to verification of books of account and that three items, referred to above, are dealt with under books of account. He places reliance upon judgment of this court, dated September 9, 2014, in I. T. T. A. No. 112 of 2003, (CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171 (T & AP)) as well as circular dated March 10, 2003, issued by Department. Sri J. V. Prasad, learned standing counsel for Department, on other hand, submits that during course of search, substantial material was recovered and appellant was questioned with reference to material so recovered. He contends that statement is mostly in form of questions and answers and at no point of time, appellant has either retracted from statement or stated that same was recorded under any pressure or threat or coercion. He also submits that judgment of this court in I. T. T. A. No. 112 of 2003 (CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171 (T & AP)) is in relation to case, where assessee retracted from statement under section 132(4) of Act and that same does not apply to facts of present case. search that was conducted on March 4, 1997, led to block assessment against appellant covering period from 1987-88 to 1997-98. Though appellant submitted returns showing nil income, Assessing Officer conducted detailed enquiry with reference to various items that are said to have been noticed by him before search. three items referred to above were dealt with in detail in order of assessment. defence offered by appellant was that he clearly mentioned at time of recording of statement that same would be subject to verification of books of account. statement recorded under section 132(4) of Act would certainly constitute important basis for Assessing Officer to take necessary steps under provisions of Act. However, if statement is retracted and there does not exist any other reliable material, making of assessment on basis of such retracted statement cannot be treated as legal. In I. T. T. A. No. 112 of 2003, (CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171 (T & AP)), this court held as under (page 175): "Secondly, recording of statement even during search is not matter of course. It is only when material such as, books of account, documents, money, bullion, jewellery and like are found or discovered during search, that statement can be recorded. If search did not lead to discovery of any matters, referred to above, there would not be any occasion to record statement at all. In this case, admittedly, nothing was recovered from respondent during search. Hence, there was no occasion or basis to record statement, even if it is done when search was in progress. Hence, there is basic infirmity in very foundation of case, upon which appellant sought to rest their block assessment vis-a-vis respondent." Two other important aspects in that case are that (a) statement was recorded long after search was conducted; and (b) assessee retracted from statement. That is not case here. search and recording of statement have taken place simultaneously and appellant did not complain of any coercion much less did he retract from statement. Assessing Officer extracted in detail, statement recorded from appellant during course of search. For example, questions Nos. 13 and 17 and answers thereto, which are part of statement, read as under: "Question 13: During course of search, promissory note was found for Rs. 20,000 given to Askari Venkataswamy by you. Please confirm whether you have given above amount? Answer: Yes. I have given amount of Rs. 20,000 to Aksari Venkataswamy. Question 17: Please go through page 7 of annexure YRR/A/1 of seized material found in your room in office and comment on contents of same? Answer: Yes. I have gone through page of annexure of seized material found in my table draw. This paper relates to letter head of Yeturi General Finances Ltd. on which payment of Rs. 7.50 lakhs in written in my own hand writing. This is amount paid on account which I am not able to explain. I cannot explain sources also for same. amount of Rs. 7.50 lakhs paid in cash is form my own sources which is not shown in books of account, in other words, it is my unaccounted income. Hence, I offer same for tax under section 132(4) of Income-tax Act." Therefore, it is difficult to hold that statement was bereft of any material. As matter of fact, relevant documents were shown to appellant and he not only admitted genuinity of those documents but also made it clear that amount mentioned therein is unaccounted income. Assuming that appellant hyphenated his statement with plea that contents thereof are subject to verification of books of account, there is nothing on record to disclose that amounts mentioned in statement were explained in any other manner. Heavy reliance is placed by learned counsel for appellant on certain observations made by Tribunal, which are to effect that no material was recovered during course of search. statement of that nature cannot be taken as reflecting any undisputed set of facts. circumstances under which such observation was made are not immediately before this court. Once questions were put to appellant, on basis of seized documents, which in turn were assigned separate numbers, there is no way appellant can disown same. Further, this is not case, where block assessment is based exclusively upon statement. It was supported by other documents seized during course of search. circular relied upon by learned counsel for appellant deals with cases, where orders of assessment are passed exclusively on basis of statement. It has already been mentioned that considerable material was seized during course of search. Therefore, circular has no application. We do not find any basis to interfere with order passed by Tribunal. appeal is, accordingly, dismissed. miscellaneous petition filed in this appeal shall also stand disposed of. There shall be no order as to costs. *** Y. Ramachandra Reddy v. Additional Commissioner of Income-tax (Assessment)
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