Principal Commissioner of Income-tax Central 2, Chennai v. Rakesh Sarin
[Citation -2020-LL-1016-32]

Citation 2020-LL-1016-32
Appellant Name Principal Commissioner of Income-tax Central 2, Chennai
Respondent Name Rakesh Sarin
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 16/10/2020
Assessment Year 1997-98, 1998-99, 1999-00, 2000-01, 2001-02, 2002-03, 2003-04
Judgment View Judgment
Keyword Tags assumptions and presumptions • unaccounted transactions • sufficient opportunity • negative cash balance • disclosure of income • additional evidence • undisclosed income • repayment of loan • suspense account • unexplained cash • cash withdrawals • mode of payment • bank statement • credit balance • loan advanced • income earned • demat account • interim stay • nri account • tax payable • surcharge • due date • lender
Bot Summary: 1060 of 2019 18, 72 to 78 of 2020 the assessee towards undisclosed income from various modes without appreciating that the assessee was not able to explain the source for all those investmentsWhether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in allowing the claim of the assessee towards other additions while upholding the enhancement made by the CIT(A), which is completely contradictory 4. In the interregnum, the Tribunal allowed the assessee's appeal by order dated 09.06.2011 on the ground that the Writ Petition filed by the assessee was allowed. The assessee had filed a return offering Rs.18,50,000/- as undisclosed income, which was taken note of, after the assessee filed break up details and the said sum was treated as 'undisclosed income'. Further, the assessing officer came to a reasonable conclusion by observing that if the assessee has not advanced any loan on pronotes, he ought to have destroyed them or returned it to the person, who has signed the pronotes and the very fact that the pro- notes were kept in safe custody by the assessee would show that the assessee had in fact, lent the said amount. The investments in Andhra Bank by way of fixed deposits were analysed and wherever the assessee was able to explain, the assessing officer had taken note of the same and those fixed deposits not reflected in the books of accounts maintained by the assessee and his relatives in the tally package were added as undisclosed income to the tune of Rs.2,17,610/-. With regard to the addition in the name of the assessee's minor daughter, the assessing officer in Paragraph No.20 has analysed the entire submission made by the assessee as to how his daughter inherited more than of Rs.43 Lakhs from the assessee's mother, who passed away in the year 1991 and after considering all aspects, made the addition. While dealing on this issue, it is relevant to point out that when the assessee has not filed return of income by the due date and it was only after initiation of block asssessment proceedings, assessee filed its return for the period, the assessing officer was justified in assuming the assessee would not have disclosed its total income.


T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 12.10.2020 Pronounced on : 16.10.2020 Coram HONOURABLE Mr. JUSTICE T.S.SIVAGNANAM AND HONOURABLE Mrs. JUSTICE V.BHAVANI SUBBAROYAN T.C.A.Nos.1060 of 2019; 18 and 72 to 78 of 2020 T.C.A.No.1060 of 2019 Principal Commissioner of Income Tax Central 2, No.108, Mahatma Gandhi Road, Chennai - 600 034 .. Appellant Vs. Shri. Rakesh Sarin No.5-E, Mookambigai Complex, Lady Desika Road, Chennai - 600 004 ..Respondent Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, is directed against Common Order passed by Income Tax Appellate Tribunal D Bench in I.T.(SS)A.No.66/Chny/2007 dated 11.03.2019 for Block Period 1997-98 to 2002-03 and part of 2003- 2004. 1/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 In all Tax Case Appeals For Appellant : Mr.T.R.Senthilkumar Senior Standing Counsel Ms.K.G.Usha Rani For Respondent : Mr.Mohan Parasaran Senior Counsel for Mr.A.V.Arun Mr.Arunesha [TCA No.1060 of 2019] Mr.K.Ravi [for other appeals] COMMON JUDGMENT T.S.SIVAGNANAM, J. These Tax Case Appeals have been filed by Revenue under Section 260-A of Income Tax Act, 1961 [the 'Act' for brevity] challenging orders dated 11.03.2019; 20.03.2019 and 12.03.2019 respectively in I.T.[SS]A.No.66/Chny/2007; I.T.(SS)A.No.17/Chny/ 2014; I.T.A.No.100/Chny/2013; I.T.A.No.864/Chny/2011; I.T.A.No.99/Chny/2011; I.T.A.No.866/Chny/2011; ITA No.15/Chny/2015; I.T.A.No.867/Chny/2011; I.T.A.No.865/Chny/2011 passed by Income Tax Appellate Tribunal Madras 'D' Bench, Chennai [hereinafter referred to as 'Tribunal'] for Block Period 1997-1998 to 2002-2003 and part of 2003-2004. 2/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 2. These appeals have been filed by revenue. T.C.A.No.1060 of 2019 was admitted on 02.01.2020 on following substantial questions of law:- (i)Whether on facts and in circumstances of case, Appellate Tribunal was correct in confirming CIT(A)'s order even though CIT(A) admitted additional evidence under Rule 46A without providing opportunity of being heard to Assessing Officer, while finalising Block Assessment? (ii)Whether on facts and in circumstances of case, ITAT was correct in confirming learned CIT(A)'s order in giving relief on all issues despite fact that on certain issues relief has given by stating that after examining books of accounts and verifying facts it is concluded that amounts were properly account in books of accounts and on certain issues relief has given by stating that it is admitted fact that books of accounts of assessee were incomplete and therefore proper opportunity ought to have been provided to assessee for completing his books? (iii)Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.1,97,00,000/- towards loan extended which was not account in books of account even though learned CIT(A) erred in law and on facts in admitting additional evidence under Rule 46A without providing opportunity of being heard to AO? 3/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 (iv)Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.98,25,000/- towards advance even though learned CIT(A) erred in law and on facts in admitting additional evidence under Rule 46A without providing opportunity of being heard to AO? (v)Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.1,26,73,370/- towards advances from consolidated account even though CIT(A) erred in law in admitting additional evidence under Rule 46A without providing opportunity of being heard to AO? '' 3. T.C.A.No.18 of 2020 was admitted on 22.01.2020 on following substantial questions of law:- (i)Whether on facts and in circumstances of case, Appellate Tribunal is justified in deleting additions made on account of various undisclosed incomes when assessee had not filed any return of income u/s.139 before date of search? (ii)Whether on facts and in circumstances of case, ITAT is correct in law in not appreciating that is onus cast on assessee to prove that when no money was advanced, why pro-notes were found in her custody? (iii)Whether on facts and in circumstances of case, Appellate Tribunal is justified in allowing claim of 4/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 assessee towards undisclosed income from various modes without appreciating that assessee was not able to explain source for all those investments? (iv)Whether on facts and in circumstances of case, Appellate Tribunal is justified in allowing claim of assessee towards other additions while upholding enhancement made by CIT(A), which is completely contradictory? 4. T.C.A.Nos.72 to 78 of 2020 was admitted on 12.02.2020 on following substantial questions of law:- (i)Whether on facts and in circumstances of case, Appellate Tribunal in confirming CIT(A)'s order eventhough CIT(A) admitted additional evidence under Rule 46A without, providing opportunity of being heard to Assessing Officer, while finalising Block Assessment? (ii) Whether on facts and in circumstances of case, ITAT was correct in confirming learned CIT(A), in Block Assessment Order, while giving relief on certain issues, relief has given by stating that after examining books of accounts and verifying facts it is concluded that amounts were properly account in books of accounts and on certain issues relief has given by stating that it is admitted fact that books of accounts of assessee were incomplete and therefore proper opportunity ought to have 5/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 been provided to assessee for completing his books, which is contradicting?' 5. With consent of learned counsels on either side, T.C.A.No.1060 of 2019 is taken as lead case where assessee is Shri.Rakesh Sarin, who is also respondent / assessee in T.C.A.Nos.72 to 78 of 2019. respondent / assessee in T.C.A.No.18 of 2020 is spouse of Shri.Rakesh Sarin. In this Common Judgment, we shall refer to Shri. Rakesh Sarin, as 'assessee'. 6. assessee is individual engaged in business of financing. search was conducted in assessee's premises under Section 132 of Act between 27.03.2003 and 28.08.2003. Thereafter, block assessment was completed under Section 153BC read with Section 143 (3) of Act on 30.06.2005. assessing officer computed total undisclosed income of Rs.23,40,15,480/- and calculated income tax payable thereon at Rs.16,21,72,727/-. assessee preferred appeal before Commissioner of Income-Tax [Appeals] -X, Chennai. appeal was allowed and all 28 additions made by assessing officer were deleted. Aggrieved by same, 6/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 revenue preferred appeal to Tribunal, which has been dismissed by Impugned Order. 7. Impugned Order has been passed by Tribunal upon matter being remanded to Tribunal pursuant to Judgment in T.C.A.No.677 of 2013 dated 21.10.2013. assessee had filed Writ Petition challenging search operations and consequential proceedings in W.P.No.25078 of 2005, which was allowed by learned Single Bench. Aggrieved over same, revenue preferred Writ Appeal before Hon'ble Division Bench in W.A.No.874 of 2011, which was admitted by Hon'ble First Bench on 23.06.2011 and order of Interim Stay was granted. Subsequently, Writ Appeal filed by Revenue was allowed by Judgment dated 24.09.2013. Consequently, proceedings had to be restored to original position. In interregnum, Tribunal allowed assessee's appeal by order dated 09.06.2011 on ground that Writ Petition filed by assessee was allowed. As against said order of Tribunal, Revenue preferred T.C.A.No.677 of 2013, which was disposed of by Judgment dated 21.10.2013 after Writ Appeal 874 of 7/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 2011 was allowed by Judgment dated 24.09.2013. Division Bench set aside order passed by Tribunal dated 09.06.2011 and remitted matter back to Tribunal for consideration on merits of matter other than limitation issue, which was decided against assessee. This was how Tribunal reheard matter and passed impugned order. 8. Mr.T.R.Senthilkumar, learned senior standing counsel for appellant / revenue submitted that CITA grossly erred in allowing assessee's appeal and deleting all additions made by assessing officer on undisclosed income without considering materials, which were available on file of assessing officer and without appreciating reasons assigned by assessing officer. Further, by relying upon decision of Hon'ble Supreme Court in Shibu Soren Vs. C.I.T. reported in [2016] 69 Taxmann.com 435 (SC), it was submitted that where assessee had never filed their regular returns of income, mere statement recorded under Section 131 prior to search giving details of bank accounts would not amount to disclosure of income as to tax said amount in regular assessment. 8/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 9. Further, by relying upon decision of Hon'ble Supreme Court in Assistant Commissioner of Income-Tax, Chennai V. A.R.Enterprises reported in [2013] 350 ITR 509, it is submitted that when assessee did not file his return before due date, and it was only after intimation of block assessment proceedings, return was filed and in such case, mere payment of advance tax made earlier would not amount to disclosure of total income and consequently, block assessment should have been upheld by Tribunal. 10. It is further submitted that materials which have collected during survey can be utilised while making block assessment in respect of assessee under Section 158BB read with Section 158BH of Act, as such material would fall within ambit of "and such other materials or information as are available with assessing officer and relatable to such evidence" occurring in Section 158BB. In support of such contention reliance was placed on decision of Hon'ble Supreme Court in Commissioner of Income Tax Vs. S.Ajit Kumar reported in [2018] 93 Taxmann.com 294(SC). 9/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 11. Further, learned counsel had in great extenso took us through findings recorded by assessing officer while completing assessment and making additions under 28 Heads of undisclosed income and correspondingly referring to observations made by CIT while allowing assessee's appeal, submitted that none of issues, which were taken note of by assessing officer was considered by CITA and order suffers from perversity on face of it. 12. It is also submitted that before Tribunal, revenue had placed all materials and prayed for sustaining order of assessing officer. However, Tribunal also fell in error by giving stamp of approval to finding of CITA. It is further submitted that Tribunal has not recorded any reasons as to why grounds raised by Revenue before it are not sustainable, but merely endorsed order passed by CITA. Therefore, it is submitted that when order passed by CITA as well as Tribunal suffers from errors on face of it and when perversity is writ large on face of order, this Court would exercise its powers under Section 260A of Act, as such issue would be substantial question of law. 10/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 13. Per contra, Mr.Mohan Parasaran, learned senior counsel assisted by Mr.A.V.Arun and Mr.Arunesh, learned counsels for respondents / assessee submitted that there is no perversity on face of impugned order. Tribunal has appreciated factual position and has recorded its finding by approving finding rendered by CITA. CITA interfered with order passed by assessing officer, as it was found to be perverse and CITA and Tribunal concurrently rendered factual finding in favour of assessee and this Court exercising power under Section 260A of Act will not interfere with such finding of fact, especially, when order passed by Tribunal as well as CITA is not cursory disposal, but detailed order, considering all issues. 14. Also, it is submitted that though revenue has raised substantial question of law referring to Rule 46A by contending that CITA had permitted assessee to produce documents without opportunity to assessing officer, such is not factual position, as no such record was admitted by CITA, without notice to assessing officer. Therefore, said issue regarding applicability 11/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 of Rule 46A would not arise in instant case. Further, on facts, Tribunal has given independent reasons and in doing so, referred to various material, which was taken note of by CITA. Such finding would not be interfered in appeal under Section 260A of Act. In support of his submissions, learned counsel placed reliance on decision of Division Bench of this Court in T.C.A Nos.249 and 250 of 2019 dated 01.04.2019 in case of Commissioner of Income Tax, Madurai Vs. T.Ani Chandra Kala. 15. facts in T.C.A.No.18 of 2020, wherein respondent / assesseee is spouse for respondent in T.C.A.No.1060 of 2019 are identical and it was also block assessment and assessing officer completed assessment by order dated 23.12.2005 by holding that Rs.2,65,51,725/- is undisclosed income of assessee and demanded sum of Rs.1,84,00,345/- as tax, surcharge and interest. 16. assessee, Smt.Renu Sarin, filed appeal before Commissioner of Income Tax [Appeals] (C)-II, Chennai [CITA], which was dismissed and proposal for enhancement which was made 12/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 during pendency of appeal proceedings was allowed and undisclosed income of assessee was enhanced. Aggrieved by same, assessee preferred appeal to Tribunal, which was allowed by order dated 20.03.2019. 17. T.C.A.Nos.72 to 78 of 2019 have been filed by Revenue where respondent / assessee is Shri. Rakesh Sarin. assessments were completed on various dates computing total undisclosed income. Aggrieved by same, assessee preferred appeals to Commissioner of Income Tax Appeals II (CITA), which were allowed consequent upon order passed by CITA dated 04.01.2017 in assessee's case, which is subject matter of T.C.A.No.1060 of 2019. Aggrieved by such order passed by CITA, revenue preferred appeal before Tribunal, which was dismissed by order dated 12.03.2019 by following decision in I.T.SS.A.No.66/Chny/2007 dated 11.03.2019, which is impugned in T.C.A.No.1060 of 2019. 13/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 18. Heard Mr.T.R.Senthilkumar, learned Senior Standing Counsel assisted by Ms.K.G.Usha Rani, learned counsel for appellant and Mr.Mohan Parasaran, learned Senior Counsel for Mr.A.V.Arun, learned counsel for Mr.Arunesha [TCA No.1060 of 2019], learned counsel and Mr.K.Ravi [for other appeals], learned counsel for respondent / assessee. 19. Before we list out substantial questions of law, which have to be answered in these appeals, we considered submissions made on either side as to whether at all issue pertaining to applicability of Rule 46A would arise in instant cases. 20. revenue cannot dispute fact that CITA before passing order dated 04.01.2007, did not admit any fresh evidence, but proceeded to consider correctness of findings of assessing officer. Therefore, in our considered view such question would not arise for consideration, therefore, we re-frame substantial questions of law in these appeals as follows: 14/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 (i)Whether on facts and in circumstances of case, ITAT was correct in confirming learned CIT(A)'s order in giving relief on all issues despite fact that on certain issues relief has given by stating that after examining books of accounts and verifying facts it is concluded that amounts were properly account in books of accounts and on certain issues relief has given by stating that it is admitted fact that books of accounts of assessee were incomplete and therefore proper opportunity ought to have been provided to assessee for completing his books? (ii)Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.1,97,00,000/- towards loan extended which was not accounted in books of account. (iii) Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.98,25,000/- towards advance. (iv)Whether, on facts and in circumstances of case, ITAT was correct in confirming CIT(A)'s order in deleting addition of Rs.1,26,73,370/- towards advances from consolidated account. 15/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 (v)Whether on facts and in circumstances of case, Appellate Tribunal is justified in deleting additions made on account of various undisclosed incomes when assessee had not filed any return of income u/s.139 before date of search? (vi)Whether on facts and in circumstances of case, ITAT is correct in law in not appreciating that is onus cast on assessee to prove that when no money was advanced, why pro-notes were found in her custody? (vii)Whether on facts and in circumstances of case, Appellate Tribunal is justified in allowing claim of assessee towards undisclosed income from various modes without appreciating that assessee was not able to explain source for all those investments? (viii)Whether on facts and in circumstances of case, Appellate Tribunal is justified in allowing claim of assessee towards other additions while upholding enhancement made by CIT(A), which is completely contradictory? 21. perusal of assessment order dated 30.06.2005, order of CITA dated 04.01.2007 and order of Tribunal dated 11.03.2019 shows that they are all running to several pages. However, that by itself 16/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 cannot go to prove that order is detailed and reasoned order, for which we are required to examine orders and ascertain as to whether though order runs to several pages, whether reasons have been assigned and if reasons have been assigned, whether reasons are sustainable in law and on facts. 22. We have perused assessment order and we find that assessee had been given sufficient opportunity by assessing officer on each and every head of undisclosed income. After search, assessee had filed return offering Rs.18,50,000/- as undisclosed income, which was taken note of, after assessee filed break up details and said sum was treated as 'undisclosed income'. 23. By way of illustration, we take up discussion in Paragraph No.4.1 of assessment order where there was discrepancy in cash to tune of Rs.2,40,102/-, which was found in residence of assessee. assessing officer by letter dated 28.10.2004 called upon assessee to explain whether cash found at business premises and his residence were reflected in his books of accounts. 17/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 assessee by letter dated 03.12.2004 stated that cash of Rs.2,43,200/- found at his residence, sum of Rs.1,56,200/- belong to his family members, namely his sisters and brother-in-law. 24. assessing officer considered his submission and agreed that total sum of Rs.87,000/- belong to three persons and not assessee. assessee by letter dated 11.01.2005 stated that his family members have admitted cash balance of Rs.2,09,922/- as on 31.03.2003 in return of income filed for assessment year 2003- 2004 on 16.02.2004 [after search operations]. It was stated that Rs.1,56,200/- belong to assessee and his family members and it is from out of cash balance of Rs.2,09,922/-. account books and computer, which was found in business premises of assessee during search, showed credit balances of Rs.12,52,900/- in name of assessee, Rs.7,68,000/- in name of Ms.Aashana Sarin, Rs.4,72,330/- in name of M/s Rakesh Sarin & Sons and Rs.2,86,313/- in name of Ms.Renu Sarin. 25. assessing officer examined aspect and held that evidence found during search indicates negative cash balance where assessee has filed return of income for same period after 18/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 date of search showing positive cash balance. Therefore, assessee was requested to prove cash balance as shown by him in return of income filed after date of search by producing books of accounts by order dated 18.02.2005. assessing officer specifically records that in response to said order, assessee has not furnished any reply. Therefore, assessing officer concluded that sum of Rs.1,56,200/- is treated as 'undisclosed income'. 26. In paragraph No.4.3, assessing officer considers about unexplained cash of Rs.2,40,102/- found in business premises. assessee by letter dated 03.12.2004 stated that cash belongs to M/s Akshya Mercantile Private Limited and they have disclosed same in return of income filed on 18.02.2004 [after search]. assessing officer pointed out that at time of search, books of accounts maintained by M/s Akshaya Mercantile in computer was found and as per cash book, company had credit balance of Rs.84,742/- as on date of search and return of income filed by M/s Akshya Mercantile was after date of search. Further, assessee is Managing Director of M/s Akshya Mercantile and return of income filed after date of search has not been proved by 19/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 production of books of accounts and accordingly, explanation offered was rejected, sum of Rs.2,40,102/- was treated as 'undisclosed income'. 27. With regard to several pronotes and cheques which were kept in safe custody by assessee were found and seized during search operations. Some of pro-notes did not contain name of lender and date of payment and assessee was requested to furnish details of name of lender and date of advancing loan. In respect of pronotes, which did not contain name of lender, however, assessee did not furnish details. 28. By letters dated 28.10.2004 and 10.02.2005, assessee was asked to explain whether pronotes are accounted in his books of accounts. assessee by reply dated 25.02.2005 stated that he has not lent any money in respect of pro-notes and does not have name of lender, mode of payment, cheque number and other information and explained their line of business, especially, in film financing. By letter dated 09.05.2005, assessee was requested to 20/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 explain circumstances under which persons have signed pronotes. assessee by reply dated 27.05.2005 onceagain stated that he has not financed any amount on such pronotes and those documents are null and void in eye of law. 29. After examining facts, as set out by assessee in his reply, assessing officer found explanation is not acceptable that assessee used to obtain pronotes in advance was held to be not established. Further, assessing officer came to reasonable conclusion by observing that if assessee has not advanced any loan on pronotes, he ought to have destroyed them or returned it to person, who has signed pronotes and very fact that pro- notes were kept in safe custody by assessee would show that assessee had in fact, lent said amount. 30. assessing officer then proceeded to list out details of loan advanced on pronotes that did not contain name of person and details are in form of Annexure I to assessment order to tune of Rs.5,59,98,709/-. assessing officer further found that only three transactions were accounted for by assessee 21/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 in books of accounts maintained in computer and accordingly, assessing officer held that only three pronotes can be taken as transaction effected to assessee as they were reflected in books of accounts and remaining pronotes to tune of Rs.1,97,00,000/- was treated as 'undisclosed income'. 31. During search operations, laptop was recovered, wherein assessee had entered names of borrowers, amount advanced, date of loan, due date for returning loan, date of receiving loan advance and name of person concerned, who has advanced loan. assessee by letter dated 09.05.2005 was asked to explain as to whether amounts advanced, as per accounts maintained in laptop were accounted in regular books of accounts. assessee replied stating that list furnished is full of duplicates. stand was tested for its correctness after oncegain refiling computer printouts and it was found by assessing officer that loans were renewed on due date, if they were not repaid within due date and some of borrowers have repaid loans after renewals and accordingly, assessing officer proceeded to treat thirty 22/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 seven such transactions as 'undisclosed income' to tune of Rs.98,25,000/-. 32.Similarly, there were other details, which were found in laptop which could not be explained by assessee and accordingly, sum of Rs.1,85,65,000/- was treated as 'unaccounted income'. From books of accounts, which were seized at time of search, which was maintained in computer in tally package were verified, which shows credit to tune of Rs.1,28,78,370/-, from twenty nine entities. 33. assessee by letter dated 27.05.2005 stated that except for one such party, no one is his creditor and no loan is borrowed from them and all other parties appearing in list are his debtors and credit in account represents repayment of loan made by them to assessee as well its group concerns. assessing officer on perusal of books of accounts found that parties accounts were credited and there is no opening debit balance outstanding in books of accounts and found that assessee did not disclose advances made to them in his books and hence, repayment of loan 23/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 made by said persons was treated as 'undisclosed income' to tune of Rs.1,26,73,370/- 34. With regard to deficit in cash, which was culled out from computer statement, assessee was asked to explain and correctness of explanation was considered by assessing officer, who found upon perusal of cash book that all debts and credits in cash book are only withdrawals and deposits in bank account and debits were not reflected in bank statement and assessing officer found that assessee had increased his cash balance without withdrawing cash from bank. This was to tune of Rs.11,46,000/- and Rs.4,19,250/- 35. assessing officer found that cash books show deficit cash balance Rs.12,52,900/-and deposit in bank account was not reflected in cash book and fictitious cash withdrawals from bank were treated as undisclosed income of assessee. Totally, Rs.35,86,150/- [Rs.12,52,900/- Plus Rs.11,46,000/-, plus Rs.4,19,250/- Plus Rs.7,68,000/-]. On verification of accounts, assessing 24/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 officer found that assessee had suspense account where credit of Rs.18,59,513/- was mentioned. assessee minor daughter's books of accounts show credits in suspense account totalling Rs.20,59,313/-. assessee was called upon to explain, however, he did not produce books of accounts that are completed showing entries in suspense account are entered in proper account, accordingly, explanation was rejected and total amount of Rs.39,18,826/- was treated as 'undisclosed income' of assessee. 36. During search, it was found that assessee and his minor daughter had invested in various bonds Kisan Vikas Patra etc., assessee could not explain investments by producing books of accounts and after considering all aspects, sum of Rs.26,80,565/- was treated as 'undisclosed income'. 37. Further, during search it was found that there were fixed deposits receipts in names of 28 persons, who are all close relatives and was available with assessee. After taking note of, all explanation offered by assessee and taking note of sworn 25/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 statement recorded from Shri. Rajprith and Shri. Bushan Sharma, who stated that he is not aware of transaction in his bank account. Mr.Shiv Bushan Sharma in his sworn statement stated that capital of his sons were given to assessee without any interest. Accordingly, sum of Rs.6,32,80,053/- was treated as 'undisclosed income' of assessee. 38. There was addition of Rs.41,00,000/- on ground of unaccounted bank account. sum of Rs.1,34,445/- being undisclosed income earned by way of bank interest. other advances were verified and additions were made. deposit shown to have been made in name of Shri.Bhushan Arora, who is NRI and could not establish that deposits were made from out of withdrawals from NRI Account of Shri. Bhushan Arora. Accordingly, sum of Rs.38,87,751/- was added as 'undisclosed investment' of assessee. sum of Rs.17,73,000/- was found to be investments in M/s Aasana Investments Private Limited, which was not disclosed by assessee and accordingly, made as 'undisclosed income'. 26/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 39. investment shares, demat account of assessee were taken note of and sum of Rs.20,00,000/- was treated as undisclosed income under said head. investments made in name of assessee's minor daughter was analysed and sum of Rs.1,59,777/- was added as undisclosed income and discussion on this aspect is at Paragraph Nos.20 and 20.1 of assessment order and assessing officer has given due credit to investments, which have been accounted for. 40. sum of Rs.20,00,000/- was treated as undisclosed income of assessee in respect of investment in bungalow at Mumbai. investments in Andhra Bank by way of fixed deposits were analysed and wherever assessee was able to explain, assessing officer had taken note of same and those fixed deposits not reflected in books of accounts maintained by assessee and his relatives in tally package were added as undisclosed income to tune of Rs.2,17,610/-. investment by way of fixed deposits to tune of Rs.3,00,000/- was found to be not undisclosed and accordingly, held to be investment by way of unaccounted money. Thus, assessing 27/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 officer by very detailed order completed total undisclosed income under 28 heads at Rs.23,40,50,480/- 41. CITA has also done exercise by referring to various grounds raised by assessee. On cursory reading of order passed by CITA, one gets impression that it is speaking and reasoned order. However, when we closely examine same, we found it to be totally devoid of reasons. 42. learned senior standing counsel for revenue as well as learned senior counsel for respondent had drawn our attention to Paragraph Nos.4 and 7. It is submission of learned senior standing counsel that no cogent reasons were assigned by CITA for reversing well considered order of assessing officer, whereas learned senior counsel by referring to paragraph no.4.3 had submitted that cash found attributable to assessee and other family members was also accepted and not seized considering their explanation. Therefore, it is submitted that order passed by CITA is very detailed and reasoned order, which was confirmed by Tribunal. 28/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 43. We have carefully gone through findings rendered by CITA on each of grounds. CITA in Paragraph No.4.3 has criticized conduct of search party and considered status of assessee and his family members and therefore, held that cash cannot be treated as undisclosed income. We do not approve of this finding. In Paragraph No.5.3, CITA held that having regard to volume of transaction of company, income returned as also amount involved cannot be treated as undisclosed income. This finding is also not borne out by any records. 44. With regard to pronotes, which do not have name of person, CITA held that amounts represented by Pronotes should be treated as bad debts, to be set off against assesses pronotes advances and income there for. This appears to have never been assessee's case and it is finding rendered by CITA on presumptions and assumptions, because assessee did not furnish details, when called upon to do so by letter dated 25.01.2005. In his subsequent reply dated 25.02.2005, assessee 29/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 stated he has not claimed any money in respect of pronotes. Therefore, finding in Paragraph No.6.3 is wholly erroneous. 45. finding in Paragraph No.7.3, CITA faults assessing officer for not having made verifications with borrowers, who are all assessees and accordingly, deleted addition. This conclusion has been arrived at by CITA without noting that it is for assessee to establish by producing books of accounts. 46. Paragraph No.8.3.1 is absolutely without any reasons. CITA states that assessee has flatly denied having any unaccounted transactions and faulted assessing officer for not bringing on record any material, though CITA states that assessing officer proceeded on assumptions and presumptions, we find it is CITA which proceeded on assumptions. 47. In Paragraph No.9.3, CITA records submissions of assessee that said addition of Rs.1,26,73,370/- is more comical than illegal. Without taking note of fact that upon considering 30/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 explanation, assessing officer found that except transaction with M/s Akhand Pharma represented by its proprietor, Dr.Shivbushan Sharma, assessee stated that no one is his creditor and no loan has been borrowed from him. CITA ought to have seen that assessee should have established same. Therefore, we do not approve finding in Paragraph No.9.3. 48. With regard to ground nos.9, 10 and 11, CITA held that they are interconnected and brushed aside findings rendered by assessing officer under each of these heads separately and held that there was no fresh materials referred to or relied upon by assessing officer for impugned additions. 49. With regard to investments to tune of Rs.26,80,565/-, CITA proceeded to accept explanation given by assessee before assessing officer without taking note of discussion contained in Paragraph Nos.10.1 and 10.2 of assessment order, therefore, we hold that finding in Paragraph No.14.3 is unsubstantiated and without reasons. 31/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 50. With regard to findings in Paragraph No.15.3, CITA held that additions were baseless and this finding is rendered based on written submissions filed by assesee. If in opinion of CITA, there was no adequate material or no proper verification was done by assessing officer, then, he ought to have called for remand report or remanded matter for fresh consideration and that could not be reason to delete addition, which has been made by assessing officer after recording reasons. Paragraph No.16.3, in our opinion, is presumptive statement and personal opinion made by CITA and could not have lead to deletion of addition. 51. observations in Paragraph No.17.3, 18.3, 19.3, 20.3 are almost on same lines, all finding fault with assessing officer without holding that finding of assessing officer is factually incorrect or legally erroneous. Equally finding in Paragraph No.21.3, 22.3 is also on presumptions and assumptions. 52. In Paragraph No.23.3, CITA comes to conclusion that some of shares have been repeated by assessing officer and 32/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 has not listed out which are those shares, but given only few illustrations and such observation, cannot automatically lead to deletion of addition of Rs.20 Lakhs. said finding is wholly erroneous. 53. With regard to addition in name of assessee's minor daughter, assessing officer in Paragraph No.20 has analysed entire submission made by assessee as to how his daughter inherited more than of Rs.43 Lakhs from assessee's mother, who passed away in year 1991 and after considering all aspects, made addition. However, CITA held that assessing officer has disregarded all evidence and proceeded on basis of conjunctures and surmises. In fact, order passed by CITA is based on conjunctures and surmises because he has not recorded any reasons as to why finding of assessing officer in Paragraph No.20 is factually incorrect. 54. assessing officer in Paragraph No.21.1 has made addition of Rs.5,00,000/- on ground that investment is not 33/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 reflected in books of accounts of assessee or in books of Akshya Mercantile. However, CITA says it is reflected in balance sheet of Akshya Mercantile and it is not clear as to how he came to such conclusion whether at all he had verified those documents etc., therefore, finding is perverse. 55. With regard to investment in Bungalow in Mumbai, CITA in Paragraph No.26.3 holds that assessee does not own any such bungalow. It is not clear as to where from he came to such conclusion, when assessing officer has recorded that in Page 95 of seized documents shows that assessee entered into agreement for purchase of Bungalow at Mumbai, therefore, finding is perverse. 56. With regard to fixed deposits, assessing officer found that fixed deposits are not reflected in books of accounts maintained by assessee and his relatives in tally package and hence, fixed deposits mentioned in Paragraph No.22 of assessment order except that of Akshay Sarin was assessed as undisclosed income. CITA states that considering status of assessee and other relatives, amount of deposits there is no 34/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 warrant to treat them as undisclosed income, this finding is utterly perverse. 56. Tribunal in Paragraph No.2 has extracted grounds raised by Revenue. In Paragraph No.3 it narrates briefly as to how assessments were concluded after search operations. From Paragraph No.5, various grounds have been dealt with. Once again as observed in order passed by CITA, on cursory reading of order of Tribunal, one gets impression that order is very detailed order. However, on closure reading, we find all that Tribunal has done is to endorse stand taken by CITA and none of grounds raised by revenue had been dealt with nor reasons assigned to show as to why ground canvassed by Revenue is not tenable. Thus, we find though impugned order runs to 158 pages, it is order of devoid of reason and merely making endorsement what CITA has held, which we have held suffers from gross illegality and perversity, writ large on face of order. 35/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 57. In Paragraph No.29 of impugned order, tribunal records that revenue has relied on various decisions and it finds that they are relevant to assessee's case because facts are not identical. Tribunal did not even mention what are decisions referred to by revenue. It does not state as to how those decisions are factually distinguishable, therefore, finding in Paragraph No.29 is untenable and other observations are absolutely vague. In fact, Paragraph No.29 can be fitted into any order passed by Tribunal where they want to confirm order passed by CITA. 58. decision in case of CIT Vs. D.K.Gupta reported 308 ITR 230 (Delhi) relied on Tribunal mentions that Tribunal is final fact finding authority, there can be no quarrel to such proposition. However, in instant case, Tribunal abdicated its responsibility as final fact finding authority. Tribunal is required to examine facts available before assessing officer, conclusion arrived at by him, grounds raised before CITA and conclusion arrived at by CITA. If conclusion arrived at by one of authorities is not 36/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 relatable to factual position or legal position, finding is required to be rendered. 59. In instant case, Tribunal has not given any independent finding on correctness of order of assessing officer, but merely goes by observations rendered by CITA, which we have found to be erroneous, therefore, decision relied on by Tribunal can in no manner help assessee's case. Tribunal has also referred to decision of this Court in ACIT V. Kences Foundation Private Limited reported in 289 ITR 509 [Madras] for proposition that documents seized from premises of assessee at time of search were not conclusive proof to arrive at undisclosed income. Admittedly, in instant case, search was concluded between 27.03.2003 to 28.08.2003, assessing officer had issued several letters, collected response of assessee and then proceeded to decide matter. In several places, it was found that assessee attempted to buttress his case based on records / returns submitted after search. These issues were never considered by Tribunal. Thus, we find that impugned order passed by Tribunal is wholly unsustainable without noting factual and legal position. 37/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 60. In so far as impugned order in TCA Nos.72 to 78 of 2019, it appears that Tribunal was not clear as to whose appeal it was dealing with. Tribunal has referred to grounds as assessee's appeal in more than one place, whereas it was revenue's appeal, this also according to learned senior standing counsel for appellant shows non-application of mind. 61. In T.C.A.No.18 of 2020, appeal was by assessee and reading of order passed by CITA dated 31.03.2014, shows it is reasoned and detailed order, which notes factual position as well as legal position. While dealing on this issue, it is relevant to point out that when assessee has not filed return of income by due date and it was only after initiation of block asssessment proceedings, assessee filed its return for period, assessing officer was justified in assuming assessee would not have disclosed its total income. This decision of Hon'ble Supreme Court in A.R.Enterprises fully supports case of revenue. 38/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 62. In case of S.Ajit Kumar, Hon'ble Supreme Court pointed out method of calculating undisclosed income of block period, as provided under Section 158BB of Act and held that it can be calculated only on basis of evidence found, as result of search or requisition of books of accounts and other documents, which are available with assessing officer and Section 158BB prescribes boundary, which has to be followed and power of survey has been provided under Section 133A of Act and any material or evidence found / collected in survey, which has been simultaneously made at premises of connected person can be utilised while making block assessment in respect of assessee under Section 158 BB read with 158 BH of Act. In fact, these decisions were noted by CITA in its order dated 31.03.2014. Therefore, we find that order passed by Tribunal impugned in TCA No.18 of 2020 also suffers from same errors and lacuna, as pointed out by us in TCA No.1060 of 2019. 63. Impugned order in TCA Nos.72 to 78 of 2019 dated 12.03.2019, does not contain any independent reasons, but on account of order passed in assessee's case by Tribunal, same 39/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 has been allowed, as we have held that order impugned in TCA No.1060 of 2019 is wholly unsustainable, order impugned in TCA Nos.72 to 78 of 2018 have also to be held wholly unsustainable. 64. Under Section 260A, Court has to decide substantial questions of law, word substantial questions of law, means, question of law having greater importance and Hon'ble Supreme Court in several decisions, one of which, is in Santhosh Hazari Vs. Purushotaman Tiwari reported in 251 ITR 84 [SC] laid down test that can be applied to determine whether substantial question of law is involved. One of test is, does it directly or indirectly affects substantial rights of parties. 65. In our view, this test stands fulfilled in cases on hand, because finding of tribunal, directly and substantially interferes in interest of revenue and finding are not based on evidence brought on record by assessing officer and order of Tribunal suffers from material irregularities without any independent reasons, it has glossed over relevant facts, which were brought on record by assessing officer and therefore, impugned orders are perverse and undoubtedly, perversity can be taken up in appeal under 40/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 Section 260A of Act. finding on question of fact can be challenged as being erroneous in law, when there is no evidence to support it or when it is based on surmises and conjunctures. order of CITA suffers from perversity, which has travelled up to Tribunal, which confirmed order of CITA. Therefore, argument that generally, Court under Section 260A would not interfere with Tribunal's finding of fact cannot be applied to facts of this case because Tribunal did not record any finding of fact that finding of fact recorded by assessing officer is erroneous and not borne out by records. 66. Thus, for all above reasons, Revenue has to succeed in these Appeals, accordingly, tax case appeals are allowed and impugned orders passed by Tribunal is set aside and substantial questions of law are answered in favour of Revenue. No costs. (T.S.S.J.) (V.B.S.J.) 16.10.2020 Index :Yes / No Internet :Yes / No Speaking Judgment / Non Speaking Judgment 41/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 To Income Tax Appellate Tribunal D Bench Chennai 42/43 http://www.judis.nic.in T.C.A.Nos.1060 of 2019 & 18, 72 to 78 of 2020 T.S.SIVAGNANAM,J., AND V.BHAVANI SUBBAROYAN, J., ssd Pre-delivery Common Judgment in T.C.A.Nos.1060 of 2019; 18 and 72 to 78 of 2020 16.10.2020 43/43 http://www.judis.nic.in Principal Commissioner of Income-tax Central 2, Chennai v. Rakesh Sarin
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