MADHAV K KUNDER, MUMBAI v. ACIT 25(2), MUMBAI

ITSSA 15/MUM/2010 | misc
Pronouncement Date: 30-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 1519916 RSA 2010
Assessee PAN AAAHM0694Q
Bench Mumbai
Appeal Number ITSSA 15/MUM/2010
Duration Of Justice 1 year(s) 1 month(s) 5 day(s)
Appellant MADHAV K KUNDER, MUMBAI
Respondent ACIT 25(2), MUMBAI
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 30-03-2011
Date Of Final Hearing 09-03-2011
Next Hearing Date 09-03-2011
Assessment Year misc
Appeal Filed On 23-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER IT(SS)A NO. 15/MUM/2010 (BLOCK PERIOD: 1988-99 TO 1998-99) SHRI MADHAV K. KUNDER A C I T 25(2) GREEN CABLES OPP. NARMADA BLDG. MUMBAI I.C. COLONY BORIVALI (W) VS. MUMBAI 400020 PAN - AAAHM 0694 Q APPELLANT RESPONDENT APPELLANT BY: SHRI ASHWIN S. CHHAG RESPONDENT BY: MS. REENA JHA TRIPATHI O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-35 MUMBAI DATED 11.12.2009. 2. ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F CONSTRUCTION AND TRADING IN CHEMICALS. A SEARCH UNDER SECTION 132 WA S CONDUCTED ON 05.12.1997 AND IN THE COURSE OF POST SEARCH ENQUIRI ES ASSESSEE SEEMS TO HAVE ADMITTED AN INCOME OF ` 37 00 000/- WHICH INTERALIA INCLUDED SALE OF FLAT OF ` 7 00 00/- FOREIGN GIFT OF ` 8 00 000/- LOAN AND CASH DEPOSITS IN THE BANKS OF ` 16 00 000/- AND RENOVATION OF PROPERTY OF ` 6 00 000/-. IN THE BLOCK RETURN ASSESSEE ADMITTED AN AMOUNT OF ` 16 00 00/- AS UNDISCLOSED INCOME. THE SAME WAS ACCEPTED BY THE A.O. VIDE ORDE R DATED 31.01.2000. SUBSEQUENTLY THE CIT-XXV MUMBAI HAS INITIATED PROC EEDINGS UNDER SECTION 263 AS THE A.O. HAS NOT EXAMINED VARIOUS ISSUES AND RELYING ON THE DISCLOSURE MADE IN THE COURSE OF SEARCH THE PROCEED INGS UNDER SECTION 263 WERE INITIATED AND ASSESSMENT WAS SET ASIDE. ASSESS EE HAS ACCEPTED THE ORDER UNDER SECTION 263 AND IN THE REASSESSMENT THE A.O. ADDED OTHER SUMS DISCLOSED DURING THE COURSE OF SEARCH. THE MATTER W AS CARRIED TO THE CIT(A) IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 2 WHO VIDE HIS ORDER DATED 17.04.2003 DELETED THE ADD ITION MADE ON ACCOUNT OF FLAT FOREIGN GIFT AND RENOVATION. ASSESSEE CHAL LENGED THE JURISDICTIONAL ISSUE OF ASSESSMENT BEING PASSED AS TIME BARRED BEF ORE THE CIT(A). THE CIT(A) REJECTED THE CONTENTION. THEREAFTER THE MATT ER WAS CARRIED BY THE ASSESSEE TO THE ITAT ON THE JURISDICTION ISSUE WHER EAS THE REVENUE CARRIED THE MATTER ON DELETION OF AMOUNT OF ` 7 00 000/- BY THE CIT(A) WHILE ACCEPTING THE DELETION OF OTHER TWO AMOUNTS. THE IT AT VIDE IT(SS)278/MUM/2004 AND IT(SS) 288/MUM/2004 DATED 9 TH AUGUST 2007 CONSIDERED THE CROSS APPEALS AND ASSESSEES APPEAL ON JURISDICTION WAS REJECTED WHEREAS IN THE REVENUE APPEAL THE MATTER WAS RESTORED BACK TO THE A.O. FOR THE LIMITED PURPOSE OF COMPUTATION OF CAPI TAL GAIN AND TO TAX CAPITAL GAINS IN THE BLOCK ASSESSMENT INSTEAD OF TAXING THE ENTIRE SALE PROCEEDS OF ` 7 00 000/-. ASSESSEE CAME UP IN MISCELLANEOUS APPLI CATION ON THE ISSUE OF JURISDICTION WHICH THE ITAT REJECTED. THEREAFTER AS SESSEE FILED WRIT PETITION NO. 1407 OF 2008 BEFORE THE HON'BLE HIGH COURT OF J UDICATURE AT BOMBAY AND THE HON'BLE HIGH COURT VIDE ORDER DATED 6 TH JULY 2008 REJECTED THE PETITION. IN THE REASSESSMENT CONSEQUENT TO THE SET TING ASIDE BY THE ITAT ON THE ISSUE OF SALE PROCEEDS THE A.O. ENQUIRED ABOUT THE WORKING OF CAPITAL GAINS IN WHICH THERE IS NO DOUBT WITH REFERENCE TO THE COST OF PURCHASE OF ` 1 70 000/-. THE ASSESSEE CLAIMED COST OF IMPROVEMEN T OF ` 2 60 000/- WHILE WORKING OUT CAPITAL GAINS BY CLAIMING INDEXATION BE NEFIT. A.O. DENIED THE BENEFIT OF COST OF IMPROVEMENT AS ASSESSEE COULD NO T FURNISH ANY EVIDENCE FOR THE SAME AND DETERMINED THE CAPITAL GAINS AT ` 5 47 360/- ON THE SALE OF FLAT. ASSESSEE CARRIED THE MATTER FURTHER TO THE CI T(A) AND AGAIN RAISED THE JURISDICTIONAL ISSUE AS WELL AS ON MERITS. 3. THE CIT(A) IN HIS ORDER REJECTED THE CONTENTIONS ON JURISDICTIONAL ISSUE HOLDING THAT THE SAME WAS ALREADY DECIDED BY THE IT AT AND IT IS ALSO SUBJECT MATTER OF WRIT PETITION BEFORE THE HON'BLE HIGH COU RT AND FURTHER NOTICING THAT THE ISSUE WAS RESTORED TO THE FILE OF THE A.O. FOR LIMITED PURPOSE OF WORKING OUT THE CAPITAL GAINS HE REJECTED ASSESSEE S CONTENTIONS ON IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 3 JURISDICTION. ON WORKING OF CAPITAL GAINS HE CONFIR MED THE ORDER OF THE A.O. AS ASSESSEE COULD NOT FURNISH ANY EVIDENCE IN SUPPO RT OF COST OF IMPROVEMENT EVENTHOUGH THE ASSESSEE CONTESTED THAT THE SAME WAS CLAIMED IN THE ORIGINAL PROCEEDINGS AND NOWHERE THERE IS DI SPUTE ABOUT THE COST OF IMPROVEMENT AND IT WAS NOT POSSIBLE TO FURNISH THE NECESSARY EVIDENCE AFTER LAPSE OF 20 YEARS. ASSESSEE CARRIED THE MATTER FURT HER IN APPEAL BEFORE US AND RAISED VARIOUS GROUNDS. 4. GROUND NO. 1 IS WITH REFERENCE LIMITATION UNDER SEC TION 158BE. GROUND NO. 2 IS WITH REFERENCE TO THE PROCEEDINGS U NDER SECTION 132(3) WHICH WAS INVOKED ON THE DAY OF SEARCH. GROUND NO. 3 IS ON MERITS ABOUT THE COMPUTATION OF CAPITAL GAINS AND GROUND NO. 4 I S WITH REFERENCE TO LEVY OF INTEREST UNDER SECTION 234D. GROUND NO. 5 IS WIT H REFERENCE TO INITIATION AND LEVY OF PENALTY EVENTHOUGH IT WAS ON LEVY OF I NTEREST FOR FILING THE RETURN BELATEDLY. GROUND NO. 6 IS GENERAL IN NATURE. 5. WE HAVE HEARD THE LEARNED COUNSEL OF THE ASSESSEE WHO MADE ELABORATE ARGUMENTS ON EACH OF THE ISSUE AND ALSO F ILED UNSIGNED WRITTEN SUBMISSIONS AFTER THE ARGUMENTS ARE OVER. THE LEARN ED D.R. ALSO MADE SUBMISSIONS. AFTER HEARING BOTH PARTIES AND EXAMINI NG THE PAPER BOOK AND VARIOUS CASE LAW DIGEST PLACED ON RECORD THE ISSUES ARE CONSIDERED AS UNDER. 6. WITH REFERENCE TO GROUND NO. 1 IT WAS THE SUBMISSIO N OF THE LEARNED COUNSEL THAT THE SEARCH WAS CONDUCTED ON 05.12.1997 BY AN AUTHORISATION DATED 04.12.1997 AND A PANCHANAMA DRAWN ON 05.12.19 97. AT END OF THE DAY THE RESTRAINT ORDER UNDER SECTION 132(3) WAS IS SUED FOR 55 PAGES KEPT IN THE CUPBOARD AND SUBSEQUENTLY SEIZED AND SINCE THE SEARCH WAS COMPLETED ON 05.12.1997 THE ORDER COULD HAVE BEEN PASSED ON O R BEFORE 31.12.1999 BUT THE ORDER WAS PASSED ON 31.01.2000. THEREFORE T HE ORDER WAS BARRED BY LIMITATION. IT WAS FURTHER CONTENDED THAT THE PANCH ANAMA DRAWN ON 09.01.1998 WAS NOT GIVEN TO THE ASSESSEE AND WAS NO T IN HIS KNOWLEDGE AND THEREFORE RELIANCE ON THE SECOND PANCHANMA IS NOT P ROPER. EVEN OTHERWISE IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 4 ONLY ONE AUTHORIZATION DATED 04.12.1997 WAS ISSUED THEREFORE THE LIMITATION HAS TO BE CONSIDERED FROM 05.12.1997 WHEN THE SEARC H WAS CONDUCTED. 7. THE LEARNED D.R. POINTED OUT THAT THIS ISSUE IS ALR EADY CONSIDERED BY THE ITAT IN ITS ORDER IN THE FIRST ROUND OF APPEAL AND HENCE THE ISSUE HAS ALREADY REACHED FINALITY. FURTHER THERE ARE ALREAD Y HIGH COURT ORDERS BY WAY OF DISMISSAL OF WRIT PETITION. THEREFORE THIS F ORUM DOES NOT HAVE ANY JURISDICTION TO CONSIDER AS THE ISSUE WAS ALREADY C RYSTALLISED IN THE EARLIER ORDER. 8. IN REPLY IT WAS LEARNED COUNSELS SUBMISSION THAT T HERE IS NO PRINCIPLE OF MERGER FOLLOWING THE ORDER OF THE HON'BLE HIGH C OURT IN THE WRIT PETITION PREFERRED BY THE ASSESSEE AGAINST THE MA AS THE PRI NCIPLE OF MERGER WILL APPLY ONLY WHEN THE MATTER WAS CARRIED IN APPELLATE JURISDICTION UNDER SECTION 260A BUT NOT WHEN THE MATTER WAS CONTESTED IN WRIT JURISDICTION. HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KUNHAYAMMED AND OTHERS 245 ITR 360. SINCE THE WRIT JURISDICTION IS DISCRETIONARY THERE IS NO MERGER OF THE ORDER SO T HE ORDER OF THE CIT(A) IS NOT CORRECT. FURTHER IT WAS SUBMITTED THAT THE ASSESSEE DID NOT RELY ON THE SECOND PANCHANAMA UNDER SECTION 132 BEFORE THE ITAT . THEREFORE AS NOTICED BY THE HON'BLE HIGH COURT THIS POINT COULD NOT BE POINTED OUT IN THE FIRST ROUND OF APPEAL HENCE THE ISSUE WAS NOT A SU BJECT MATTER OF APPEAL EARLIER. IT WAS FURTHER SUBMITTED THAT THE QUESTION OF LIMITATION IS A MANDATE WHICH CAN BE RAISED SO LONG THERE IS NO DISPUTE ON FACTS AND RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F UNION OF INDIA VS. BRITISH INDIA CORPORATION LTD. 268 ITR 481. FURTHER IT WAS SUBMITTED THAT THE ISSUE OF LIMITATION IS DIFFERENT FROM THE PRINC IPLE OF FINALITY AS IT GOES TO THE ROOT OF THE PROCEEDINGS AS WAS HELD IN P.V. DOS HI VS. CIT 113 ITR 22 (GUJ) AND INVESTERS INDUSTRIAL CORPORATION LTD. 194 ITR 548 (BOM). HE FURTHER SUBMITTED THAT QUESTION OF JURISDICTION CAN BE RAISED FOR THE FIRST TIME IN THE SECOND INNING OF THE APPELLATE PROCEEDI NGS AS DECIDED BY THE KOLKATA BENCH IN THE CASE OF PEERLESS GENERAL FINAN CE & INVESTMENT CO. IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 5 LTD. 21 SOT 440 AND ASSESSEE CAN AS WELL RAISE THE ISSUE OF LIMITATION. IT WAS HIS SUBMISSION THAT THE SECOND PANCHANAMA CANNO T BE CONSIDERED AS THE ADIT UNNECESSARILY EXTENDED THE PROCEEDINGS FRO M THE DATE OF ORIGINAL SEARCH TO A LATER DATE ONLY TO GET OVER THE LIMITAT ION AND ACCORDINGLY THE ORDER PASSED IN JANUARY 2000 WAS BARRED BY LIMITATI ON. 9. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE CIT( A)S ORDER WHICH WAS SUBJECT MATTER OF APPEAL BEFORE THE ITAT IN IT( SS) 278 & 288/MUM/2004 THE CIT(A) VIDE ORDER DATED 10.03.2004 CONSIDERED THE ISSUE OF JURISDICTION AND HELD AS UNDER: - HOWEVER HAVING CONSIDERED THE MATTER CAREFULLY I S EE NO MERIT IN APPELLANTS REPRESENTATIVES ARGUMENTS IN (A) AND ( C) ABOVE AS HE IS QUESTIONING THE VALIDITY OF THE ORIGINAL ASSESSMENT ORDER DATED 30 TH JAN. 2000 WHEREAS THE ASSESSMENT ORDER QUESTIONED B EFORE ME IS THE SECOND ONE I.E. DATED 20 TH MARCH 2003 AND NOT THE FIRST ONE FOR WHICH THE NOTICES WERE ISSUED AND SERVED CORRECTLY AND NO DISPUTE IS RAISED FOR THE SAME. MOREOVER THIS ORDER IS PASSED AFTER SEEKING THE APPROVAL OF THE ADDL. C.I.T. RANGE 25(2) MUMBAI AN D HENCE THERE IS NO MERIT IN THE ARGUMENT AND HENCE NO INTERFERENCE IS PROPOSED TO BE MADE ON THIS POINT. SECONDLY FOR ARGUMENT IN (C) IF THE STATEMENT RECO RDED U/S 132(4) IS READ IT IS SEEN THAT THERE ARE CERTAIN DOCUMENTS SE IZED ON 9 TH JAN. 1998 AND THEREFORE ORDER IS TO BE MADE WITHIN 2 YEA RS FROM THE END OF THE MONTH JAN. 98 AND NOT DEC.97 AS MENTIONED BY T HE APPELLANTS REPRESENTATIVE AND THEREFORE ORDER PASSED IN THE TI ME AND THEREFORE THERE IS NO MERIT IN THE ARGUMENT. ADDITIONAL GROUN D RAISED IS DISMISSED. IT INDICATES THAT THE PANCHANAMA DATED 09.01.1998 W AS WITHIN THE KNOWLEDGE OF THE ASSESSEE AT THE TIME OF PASSING TH E ORDER BY THE CIT(A) AND BASED ON THAT PANCHANAMA THE CIT(A) HELD THAT THE O RDER PASSED WAS WITHIN TWO YEARS FROM THE END OF THE MONTH JANUARY 1998 AN D NOT DECEMBER 1997 AS MENTIONED BY ASSESSEES REPRESENTATIVE. THE SAME MATTER WAS CARRIED TO THE ITAT AND ITAT ON THE GROUND RAISED BY THE ASSES SEE IN THEIR APPEAL HAS CONSIDERED AND DECIDED THE ISSUE AS UNDER: - 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI ASHWIN S. CHHAG A.R. APPEARED AND CONTENDED THAT ORIGINAL ASSESSMENT IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 6 ORDER U/S. 143(3) R.W.S. 158BC PASSED BY THE ASSESS ING OFFICER ON 31.1.2000 WHICH COURT MERGED WITH ORDER DATED 20.03 .2003 U/S. 158BC R.W.S. 263 OF I.T. ACT IS BARRED BY LIMITATI ON. TO A QUERY FROM THE BENCH WHERE ANY APPEAL WAS FILED AGAINST THE O RDER DATED 31.1.2000 U/S. 143(3) R.W.S. 158BC COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT NO APPEAL WAS FILED AGAINST THE SAID ORDER. THE COUNSEL FOR THE ASSESSEE FURTHER POINTED OUT THAT LAST PANC HANAMA WAS DRAWN ON 5.12.1997. THEREFORE AS PER THE PROVISIONS CONT AINED IN SEC. 158BC ASSESSMENT WAS REQUIRED TO BE COMPLETED WITHI N 2 YEARS FROM THE END OF THE MONTH IN WHICH THE LAST PANCHANAMA W AS ISSUED. ON THE OTHER HAND MS. APARNA SAXENA D.R. APPEARED FO R THE REVENUE AND CONT5ENDED THAT PLEA OF TIME BARED COULD NOT BE TAKEN BECAUSE AGAINST THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) R .W.S. 158BC DATED 31.1.2000 NO APPEAL WAS FILED. SHE FURTHER POINTED OUT THAT LAST PANCHANAMA WAS DRAWN ON 09.01.1998 AND THEREFORE OR DER IS TO BE MADE WITHIN 2 WEEKS FROM THE END OF THE MONTH I.E. JAN. 1998 AND NOT DEC. 1997 AS CLAIMED BY THE LD. COUNSEL FOR THE ASS ESSEE AND THEREFORE ASSESSMENT FRAMED WAS IN TIME AND HENCE THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE. 5. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY LA ST PANCHANAMA WAS DRAWN ON 09.01.1998 WHICH IS CORRECTLY MENTIONED BY LD CIT(A) IN THE IMPUGNED ORDER. THE ORDER WAS MADE WITHIN TWO WEEKS FROM THE END OF JAN. 98. THEREFORE THERE IS NO MERIT IN THE GRO UNDS RAISED BY THE ASSESSEE IN THE APPEAL. IN VIEW OF THIS WE DECLINE TO INTERFERE AND APPEAL OF THE ASSESSEE IS DISMISSED. 10. THE ASSESSEE ALSO CAME UP WITH A MISCELLANEOUS APPL ICATION ON THE VERY SAME ISSUE AND THE MATTER WAS REJECTED BY THE ITAT AND THE HON'BLE HIGH COURT ALSO REJECTED THE WRIT PETITION. IN VIEW OF THIS WE ARE OF THE OPINION THAT CONSIDERING THE ISSUE OF JURISDICTION CONTESTING THE PANCHANAMA DRAWN ON 09.01.1998 IS BAD IN LAW. IT CA NNOT BE ENTERTAINED AS THE MATTER HAS REACHED FINALITY IN THE FIRST ROUND OF APPEAL. IT IS ALSO NOTICED THAT ASSESSEE HAS NOT QUESTIONED THE PROCEEDINGS UN DER SECTION 263 INITIATED BY THE CIT ON THE VERY FIRST ORDER PASSED ON 31.01.2000 AND THE PROCEEDINGS WHICH WERE SUBJECT MATTER OF APPEALS WE RE PROCEEDINGS COMPLETED AFTER BEING SET ASIDE BY THE CIT. BE THAT AS IT MAY SINCE THE ISSUE OF PANCHANAMA DATED 09.01.1998 WAS ALREADY IN THE K NOWLEDGE OF THE ASSESSEE. AND AS THE ISSUE WAS DECIDED IN THE FIRST ROUND AND REACHED IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 7 FINALITY BY THE ORDER OF THE ITAT WE ARE OF THE OP INION THAT ASSESSEE CANNOT REAGITATE BEFORE THE SAME FORUM. ACCORDINGLY THIS G ROUND IS REJECTED. 11. GROUND NO. 2 PERTAINS TO THE ISSUE OF LEGITIMACY OF INVOKING PROVISIONS UNDER SECTION 132(3) AND COMPLETING THE SEARCH ON 0 9.01.1998. ASSESSEE WITHOUT PREJUDICE TO THE FIRST GROUND RAISED THAT T HE ORDER PASSED IS BAD IN LAW SUBMITTED THAT THERE IS NO IMPRACTICABILITY TO SEIZE 55 PAGES PLACED UNDER PROHIBITARY ORDER IN THE CUPBOARD ON 05.12.19 97 BEFORE TEMPORARILY CONCLUDING THE SEARCH ACTION AT 6.00 P.M. AND SEIZI NG THEM AFTER 35 DAYS ON 09.01.1998. IT WAS HIS SUBMISSION THAT RELYING ON T HE PRINCIPLES LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF MRS. SA NDHYA P. NAIK 253 ITR 534 AND HON'BLE DELHI COURT IN THE CASE OF B.K. NOW LAKHA & ORS. 192 ITR 436 AND THE DECISION IN THE CASE OF PLASTIKE ENTERP RISES 180 TAXMAN 293 (BOM) THAT THERE WAS NO PRACTICAL DIFFICULTY IN EFF ECTING SEIZURE ON THE VERY FIRST DAY ITSELF AND THE SEARCH ACTION COULD NOT HA VE PROLONGED FOR 35 DAYS TO DO NOTHING EXCEPT COLLECTING 55 PAGES DUMPED IN THE CUPBOARD AND VALUING JEWELLERY LYING THE BANK LOCKER. IT WAS LEARNED COU NSELS SUBMISSION THAT THERE IS NO NEED FOR POSTPONE UNREASONABLY AND TEMP ORARILY SUSPENDING SEARCH ONLY TO GET OUT OF THE LIMITATION PERIOD AND RELIED ON THE DECISION IN THE CASE OF DR. C. BALKRISHNAN NAIR 237 ITR 70 (KER ) WHEREIN THE POSTPONEMENT OF SEARCH FOR 14 DAYS WAS NOT CONDONED BY THE HON'BLE HIGH COURT. HIS SUBMISSIONS ARE THAT THE AUTHORISED OFFI CER ON FIRST DAY WAS DIFFERENT FROM THE AUTHORISED OFFICER WHO CAME ON S ECOND PANCHANAMA DATE AND SO HE BEING ONE OF THE NON- AUTHORISED IT HAS T O BE CONCLUDED THAT THE PROCEEDINGS ON 09.01.1998 IS BAD IN LAW FOLLOWING T HE PRINCIPLES ESTABLISHED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF MRS. SANDHYA P. NAIK (SUPRA). AT THIS POINT THE BENCH ASKED WHETHER THE ASSESSEE WAS AVAILABLE ON THE DAY OF SEARCH FOR WHICH THE LEARNED COUNSEL INFORMED THAT THE ASSESSEE WAS NOT AVAILABLE ON THE DAY OF SEARCH AND HE CAME FROM VAPI GUJARAT ON THE VERY SAME DAY BUT THE SEARCH PARTY L EFT HIS HOUSE BUT WAITING IN HIS OFFICE. HE FURTHER SUBMITTED THAT THE KEY OF THE CUPBOARD WAS HANDED IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 8 OVER TO THE AUTHORITIES AS CAN BE SEEN FROM THE PAN CHANAMA DATED 05.12.1997. IT WAS HIS SUBMISSION THAT THE SEARCH O UGHT TO HAVE COMPLETED ON 05.12.1997 AND THEREFORE SUBSEQUENT ACTIONS WERE CONTRARY TO THE LAW AS IT WAS BASED ON AUTHORISATION DATED 04.12.1997 TH EREFORE THE LIMITATION PERIOD CANNOT BE EXTENDED AND THE ORDER PASSED ON 3 1-01-2000 IS BAD IN LAW. 12. THE LEARNED D.R. SUBMITTED THAT THE ASSESSEE WAS NO T AVAILABLE ON THE DAY OF SEARCH AND STATEMENT WAS TAKEN SUBSEQUENTLY AND THEREFORE IT CANNOT BE STATED THAT THE PROHIBITORY ORDERS ARE BAD IN LA W. IT WAS FURTHER SUBMITTED THAT THE CIRCUMSTANCES IN WHICH PROHIBATO RY ORDER WAS PLACED WAS KNOWN TO THE PARTY AND ON THE DAY OF SEARCH BAN K LOCKER KEY WAS ALSO TAKEN INTO POSSESSION AND AFTER THE ASSESSEE RETURN ED FROM OUT STATION THE PROCEEDINGS CONTINUED AND ENQUIRES ARE MADE AND THE PROBIBATORY ORDERS LIFTED NEXT MONTH ON 09.01.9988 WITHIN A REASONABLE TIME AND IT CANNOT BE STATED THAT THE SEARCH WAS PROLONGED ONLY TO GET OU T OF THE LIMITATION. HE REFERRED TO THE STATEMENT UNDER SECTION 132(4) AND VARIOUS ANNEXURES PLACED TO SUBMIT THAT THE FACTS IN THE VARIOUS CASE S ARE ENTIRELY DIFFERENT AND THE FACTS IN THIS CASE WAS THAT THE ASSESSEE WAS N OT AVAILABLE ON THE DAY OF SEARCH AND WITHIN REASONABLE THE LOCKERS WERE OPENE D AND PAPERS WERE SEIZED ON THE DAY OF 09.01.1998. HE SUBMITTED THAT AS PER THE EXPLANATION TO THE PROVISION THE LAST OF THE PANCHANAMA WAS CO NCLUDED ON 09.01.1998 AND THEREFORE THE ORDER PASSED WAS WITHIN TIME. FUR THER IT WAS THE SUBMISSION THAT ASSESSEE CANNOT BE ALLOWED TO RAISE THE ISSUE ON SECOND ROUND WHEN THE ORDER OF THE ITAT HAS BEEN UPHELD AN D BECAME FINAL AND THE MATTER WAS RESTORED TO THE FILE OF THE A.O. ONLY FO R THE LIMITED PURPOSE OF WORKING OUT THE CAPITAL GAINS THEREFORE THIS GROU ND SHOULD NOT BE CONSIDERED. 13. WHILE AGREEING WITH THE ARGUMENTS OF THE LEARNED D. R WE ALSO NOTICE THAT ON THE DAY OF SEARCH THE WARRANT WAS EXECUTED ON THE WIFE OF THE ASSESSEE WHO WAS AVAILABLE AT THE PREMISES AND THE SEARCH COULD NOT BE IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 9 COMPLETED IN THE ABSENCE OF THE ASSESSEE. THEY HAVE PLACED PROHIBOTORY ORDERS ON THE CUPBOARD AND AS PER THE ANNEXURE SUBM ITTED BY THE LEARNED COUNSEL IT IS ALSO NOTICED THAT THE KEY OF THE BAN K LOCKER NO. 169 KEY NO. 111 IN SYNDICATE BANK BORIVALI AND GODREJ KEY NO. 145 OF LOCKER NO. 115 IN JANA SEVA SAHAKARI BANK LTD. IN THE NAME OF THE ASS ESSEE AND HIS WIFE AND GODREJ KEY OF THE CUPBOARD WERE TAKEN POSSESSION BY PARTY NO. 8 AS PER ANNEXURE-O ON 05.12.1997. ON THAT DAY THE JEWELLERY ON PERSON OF SMT. HEMLATA M. KUNDER WERE ALSO INVENTORISED. SUBSEQUEN TLY ASSESSEE APPEARED BEFORE THE INVESTIGATION AUTHORITIES AND GAVE STATE MENT AND ON 09.01.1998 THE CONTENTS OF THE BANK LOCKER WERE INVENTORISED A ND VALUED BY ONE MR. SURESH C . KAPOOR ON 09.01.1998 WHEREIN THE JEWELLE RY FOUND OF 150.7 GMS. WAS VALUED AT ` 87 868/- AND LOOSE PAPERS 55 WERE ALSO SEIZED VIDE ANNEXURE-A ON 09.01.1998. THEREFORE IT CANNOT BE S TATED THAT THE SEARCH WAS UNNECESSARILY PROLONGED FROM 05.12.1997 TO 09.0 1.1998 AS THERE ARE REASONS FOR NOT COMPLETING THE SEARCH ON 05.12.1997 IN AS MUCH AS ASSESSEE WAS NOT AVAILABLE FOR QUESTIONING AND ENQU IRY. SUBSEQUENTLY ON 09-01-1998 THE LOCKERS WERE OPENED AND CONTENTS WER E INVENTORISED AND VALUED AND LOSS PAPERS FILE HAVING 55 PAGES WERE AL SO SEIZED. ANOTHER PANCHANAMA WAS ALSO DRAWN UP ON 09.01.1998 AND WAS HANDED OVER TO THE ASSESSEES REPRESENTATIVE. IT CANNOT BE STATED THAT THE ISSUANCE OF PROHIBATORY ORDER ON THE FIRST DAY IS ONLY WITH THE INTENTION TO EXTEND THE LIMITATION PERIOD. THIS ALLEGATION HAS NO BASIS. MO REOVER AS SEEN FROM THE ORDER OF THE CIT UNDER SECTION 263 DATED 26.03.2002 THE ASSESSEE FILED A LETTER DATED 14.01.2000 BEFORE THE A.O. POINTING OU T THAT ON THE DAY OF SEARCH I.E. DECEMBER 5 1997 HE WAS NOT IN MUMBAI AND HE WAS IN VAPI GUJARAT AND WAS INFORMED ABOUT THE SEARCH. IT WAS F URTHER STATED THAT THE STATEMENT WAS RECORDED IN INCOME TAX OFFICE ONLY AN D HE WAS HAVING HYPERTENSION AND WAS UNDER MEDICAL TREATMENT TILL T ODAY I.E. 14.01.2000. UNDER STRESS AND TENSION HE WAS NOT ABLE TO EXPLAIN THE THINGS BEFORE THE INVESTIGATION OFFICER. IT WAS FURTHER ON RECORD THA T DUE TO HEALTH PROBLEMS IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 10 AND MENTAL PEACE HE WAS UNAWARE OF THE DECLARATION MADE AND HE MADE BLIND SIGNATURE ON THE REPORT. THIS INDICATES THAT THE ASSESSEE DUE TO HIS MEDICAL PROBLEMS WAS UNABLE TO EXPLAIN THINGS BEFOR E THE INVESTIGATION OFFICER AND AS SEEN FROM THE SECOND PANCHANAMA DATE D 09.01.1998 ASSESSEE WAS NOT EVEN PRESENT AT THE TIME OF CONCLUSION OF S EARCH WHICH INDICATES THAT THE DELAY COULD HAVE HAPPENED BECAUSE OF ASSES SEES INABILITY TO EXPLAIN THE MATTERS AND COMPLETE THE PROCEEDINGS AT THE EARLIEST. THEREFORE IT CANNOT BE STATED THAT THE ADIT PROLONGED THE SEA RCH PROCEEDINGS UNNECESSARILY ONLY TO GET OUT OF LIMITATION. THE CI RCUMSTANCES AT THAT POINT OF TIME INDICATE THAT THE SEARCH COULD NOT BE COMPL ETED ON 05.12.1997 DUE TO ABSENCE OF THE ASSESSEE AND THE SEARCH CONCLUDED AT 06.00 P.M. ON THAT DAY. SUBSEQUENTLY FOR OPENING BANK LOCKERS AND INVE NTORSING THE CONTENTS THEREIN AND ALSO ENQUIRING ABOUT ASSESSEES BANK TR ANSACTIONS IN HIS CONSTRUCTION BUSINESS ETC. WHEREIN ASSESSEE HAS ADM ITTED UNDISCLOSED INCOME THE SEARCH COULD BE COMPLETED ONLY 09.01.19 98. THEREFORE ON THE FACTS OF THIS CASE WE ARE OF THE OPINION THAT IT C ANNOT BE STATED THAT THE SEARCH WAS PROLONGED ONLY TO GET OUT OF THE LIMITAT ION PERIOD. THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE ARE GIVEN IN DIFFERENT SET OF FACTS WHICH ARE NOT APPLICABLE TO THE PRESENT CASE. THERE FORE WE ARE OF THE VIEW THAT THE SEARCH HAVING BEEN CONCLUDED ON 09.01.1998 THE ORDER PASSED ON 31.01.2000 ORIGINALLY WAS WELL WITHIN THE TIME. THE RE ARE NO REASONS TO SUSPECT THAT THE SECOND PANCHANAMA WAS BAD IN LAW. 14. IT IS ALSO ONE OF THE ALLEGATIONS THAT THE AUTHORIS ED OFFICER WHO CAME ON THE FIRST DAY IS NOT THE SAME ONE WHO CONCLUDED THE SAME ON 09.01.1998 HENCE CONCLUSION OF SEARCH BY A DIFFERENCE OFFICER IS BAD IN LAW. ASSESSEE HAS NOT PLACED A COPY OF THE WARRANT FOR THE LIST OF AU THORISED OFFICERS WHO WERE EMPOWERED TO CONDUCT THE SEARCH. IT IS NOTICED THAT AS PER THE FORWARDING LETTER OF ADIT (INVESTIGATION) UNIT 3.1 TO THE A.O. OF THE SEIZED PAPERS IN PANCHANAMA SHRI SANJAY MISHRA WAS THE ADIT WHO CON DUCTED THE SEARCH. IT IS HE WHO CONCLUDED THE SEARCH ON 09.01.1998 WHE REAS THE SEARCH WAS IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 11 ORIGINALLY INITIATED VIDE AUTHORISATION DATED 04.12 .1997 BY THE DIRECTOR OF INVESTIGATION. SINCE SHRI SANJAY MISHRA IS THE INVE STIGATION OFFICER IN THE CASE NATURALLY AS PER THE DEPARTMENTAL PRACTICE HI S NAME WOULD BE FIRST ONE TO MENTION AS AUTHORISED OFFICER. SINCE THE WARRANT WAS NOT EXAMINED BY THE ASSESSEE NOR PLACED BEFORE US IT CANNOT BE STATED THAT SHRI SANJAY MISHRA IS NOT AN AUTHORISED OFFICER TO CONTINUE THE SEARCH PR OCEEDINGS AND COMPLETE THE SAME ON 09.01.1998. GENERALLY IN A SEARCH VARIO US AUTHORISED OFFICERS ARE SENT TO DIFFERENT PREMISES AND NATURALLY EACH O FFICER WILL ATTEND TO THE PROCEEDINGS ON THAT DATES. WHAT IS TO BE SEEN IS TH E WARRANT OF AUTHORISATION AND THE PERSONS WHO ARE AUTHORISED TO CONDUCT THE S EARCH. SINCE THE SAME WAS NOT EXAMINED BY THE ASSESSEE THE ALLEGATION TH AT A DIFFERENT AUTHORISED OFFICER HAS COME WITHOUT ANY AUTHORISATION CANNOT B E ACCEPTED. THEREFORE THIS CONTENTION IS ALSO REJECTED. AS ALREADY STATED IN EARLIER GROUND THESE ISSUES WERE ALREADY CONTESTED ON JURISDICTION AND W E ARE OF THE OPINION THAT ASSESSEE WAS RAISING THESE ISSUES FOR THE SAKE OF A RGUMENTS WITH OUT ANY MERIT IN ITS CONTENTIONS. THE GROUND IS REJECTED. 15. THE ISSUE IN GROUND NO. 3 IS WITH REFERENCE TO COMP UTATION OF CAPITAL GAINS. IN THE COURSE OF SEARCH CERTAIN PAPERS AND B ANK ACCOUNTS PERTAINING TO SHRI HARISHCHANDRA SHRIYAN NEPHEW OF THE ASSESS EE WAS FOUND IN ASSESSEES PREMISES WHICH WAS PLACED IN ANNEXURE-A 1. ASSESSEE ADMITTED BEFORE THE INVESTIGATION OFFICER THAT THE FLAT IN T HE NAME OF HARISHCHANDRA SHRIYAN WAS SOLD FOR A CONSIDERATION OF ` 7 00 000/- AND FUNDS WERE UTILISED BY HIM. THIS ` 7 00 000/- WAS OFFERED AS PART OF ` 37 00 000/- OFFERED IN THE COURSE OF SEARCH UNDER SECTION 132(4). HOWEVER THE ASSESSEE HAS NOT ADMITTED THIS INCOME AT THE TIME OF FILING THE RETU RN. THE A.O. ACCEPTED THE SAME. THE CIT AS STATED EARLIER INVOKING PROVISION S OF SECTION 263 SET ASIDE THE ASSESSMENT COMPLETED ON 31.02.2000. THE REASSES SMENT WAS SUBJECT MATTER OF APPEAL BEFORE THE ITAT AND ITAT HAS OPINE D THAT THE ENTIRE SALE CONSIDERATION CANNOT BE BROUGHT TO TAX AS INCOME OF THE ASSESSEE AND IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 12 RESTORED THE MATTER FOR THE LIMITED PURPOSE OF WORK ING OF CAPITAL GAINS. FINDINGS OF THE ITAT IN PARA 18 ARE AS UNDER: - 18. NOW COMING TO THE WORKING OF CAPITAL GAIN IT IS WELL SETTLED LAW THAT FOR COMPUTING THE UNDISCLOSED INCOME OF THE BL OCK PERIOD THE ASSESSMENT WILL HAVE TO BE MADE FOR ALL THE PREVIOU S YEARS IN THE BLOCK PERIOD AGAIN UNDER DIFFERENT HEADS OF INCOME WITHOU T TAKING INTO ACCOUNT THE SET-OFF OF LOSSES AND UNABSORBED DEPREC IATION. EXCEPT AS OTHERWISE PROVIDED UNDER CHAPTER IV-B ALL PROVISIO NS OF THE ACT ARE APPLICABLE DURING SUCH ASSESSMENT PROCEEDINGS. AND THEREAFTER INCOME OR LOSSES OF ALL THE PREVIOUS YEARS OF THE B LOCK PERIOD WILL BE AGGREGATED AND REDUCED/INCREASED BY ALREADY ASSESSE D INCOME OR LOSSES AND THERE NOT ASSESSED AS PER EARLIER RETU RNED INCOME OR LOSSES. THEREFORE WHAT IS TAXABLE ONLY CAPITAL GAI N AND NOT ENTIRE SALE PROCEEDS OF RS.7 LAKHS. IT IS PERTINENT TO NOTE THA T NEITHER THE AO NOR LD. CIT(A) MADE AN ATTEMPT TO VERIFY THE COMPUTATIO N OF CAPITAL GAIN. WE THEREFORE FOR THIS LIMITED PURPOSE RESTORE TH E MATTER TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO WILL VERIFY T HE WORKING OF CAPITAL GAIN AND TAX THE CAPITAL GAIN IN THE BLOCK PERIOD I NSTEAD OF TAXING THE ENTIRE SALE PROCEEDS OF 7 LAKHS. 16. IN THE REASSESSMENT PROCEEDINGS THE ASSESSEE SUBMIT TED THAT THE SAME CAPITAL GAIN WORKING WHICH WAS ALREADY FILED I N THE NAME OF SHRYAN WHEREIN THERE WAS A CLAIM OF PURCHASE PROPERTY FOR ` 1 20 000/- AND COST OF IMPROVEMENT OF ` 2 60 000/- THEREBY CAPITAL GAIN BEING NIL. A.O. ACC EPTED THE COST OF THE FLAT AT ` 1 20 000/- AND DISALLOWED THE COST OF IMPROVEMENT CLAIMED AT ` 2 60 000/- ON THE PRETEXT THAT ASSESSEE IS NOT ABLE TO FURNISH ANY EVIDENCE IN SUPPORT OF THE SAME. THE CIT(A) ALS O CONFIRMED THE ABOVE ACTION OF THE A.O. IT WAS THE SUBMISSION OF THE LEA RNED COUNSEL THAT THE SUBJECT MATTER WAS RESTORATION IN WORKING OF CAPITA L GAIN AND THE A.O. COULD NOT HAVE TRAVELLED BEYOND THAT AND ASKED THE ASSESS EE TO FURNISH THE EVIDENCE OF COST OF IMPROVEMENT AFTER 20 YEARS. REF ERRING TO THE ORDER OF THE ITAT IT WAS SUBMITTED THAT THE ASSESSEE HAS PLACED THE CAPITAL GAIN WORKING BEFORE THE A.O. IN THE FIRST ROUND OF APPEAL ITSELF AND THE SAME WAS ALSO EXTRACTED VIDE PARA 9 OF THE ITAT ORDER. ON THE BAS IS OF THE SUBMISSION MADE THE CIT(A) HAS AGREED WITH THE ASSESSEE AND DE LETED THE ADDITION WHICH THE REVENUE CONTESTED. HAVING ACCEPTED THE CO MPUTATION PLACED THE IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 13 A.O. NOW AGAIN ASKED FOR EVIDENCE OF COST OF IMPROV EMENT AND THAT IS THE ISSUE OF SUBJECT MATTER OF APPEAL AND RELIED ON THE PRINCIPLES ESTABLISHED BY THE HON'BLE DELHI COURT IN THE CASE OF MARUBENI IND IA (P) LTD. VS. CIT 195 TAXMAN 76. IT WAS HIS SUBMISSION THAT THE ASSESSEE CANNOT BE ASKED TO FURNISH EVIDENCE OF MORE THAN 20 YEARS AND THE STAT EMENTS MADE THEREIN ARE TO BE ACCEPTED AS SUCH. 17. THE LEARNED D.R. HOWEVER SUBMITTED THAT THE COMPU TATION OF CAPITAL GAIN WAS RESTORED BACK TO THE A.O. AND THEREFORE TH E A.O. IS WELL WITHIN THE JURISDICTION TO ASK FOR THE EVIDENCE FOR COST OF IM PROVEMENT. 18. WE HAVE CONSIDERED THE ISSUE. IT IS ALREADY ON RECO RD THAT THE ASSESSEE HAS CLAIMED COST OF PURCHASE OF ` 1 20 000/- AND COST OF IMPROVEMENT OF ` 2 60 000/-. THE ITAT VIDE PARA 9 HAS ALSO EXTRACTED THE COMPUTATION OF CAPITAL GAIN IN PAGE 6 OF THE ORDER WHICH WAS PLACE D BEFORE THE A.O. CONSEQUENT TO THE PROCEEDINGS UNDER SECTION 263. TH EREFORE WE ARE OF THE OPINION THAT THE A.O. CANNOT INSIST ON FURNISHING O F PROOF AT THIS POINT OF TIME WITH REFERENCE TO THE CLAIM OF COST OF ACQUISI TION ONLY TO DENY THE BENEFIT AND BRING TO TAX THE CAPITAL GAIN AT A HIGH ER FIGURE THAN WHAT WAS ACTUALLY OFFERED. SINCE THE REVENUE ALSO DID NOT HA VE ANY EVIDENCE TO DENY THAT ASSESSEE HAS NOT INVESTED ANY AMOUNT FOR COST OF IMPROVEMENT THE CONTENTION OF THE ASSESSEE IS TO BE ACCEPTED AS THE SAME CONTENTION WAS BEING MADE IN THE FIRST ROUND OF APPEAL ALSO. THERE FORE WE ARE OF THE OPINION THAT THE CLAIM OF COST OF IMPROVEMENT OF ` 2 60 000/- SHOULD BE ALLOWED TO THE ASSESSEE. THE A.O. IS DIRECTED TO ALLOW THE SAM E AND WORKOUT THE CAPITAL GAIN ACCORDINGLY. THIS GROUND IS ALLOWED. 19. GROUND NO. 4 IS WITH REFERENCE TO THE LEVY OF INTER EST UNDER SECTION 234D. LEVY OF INTEREST UNDER SECTION 234D DOES NOT ARISE BECAUSE THE PROVISION CAME SUBSEQUENTLY AND AS HELD BY THE ITAT SPECIAL BENCH IN THE CASE OF EKTA PROMOTERS 113 ITD 919 THE SAME IS NOT RETROSPECTIVE AND SO INTEREST WAS NOT LEVIABLE. THE SAME OPINION WAS ALS O UPHELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BAJAJ HINDUSTAN LT D ITA 198 OF 2009 IT(SS)A NO. 15/MUM/2010 SHRI MADHAV K. KUNDER 14 (BOM). ACCORDINGLY THE A.O. IS DIRECTED TO DELETE T HE INTEREST UNDER SECTION 234D. 20. GROUND NO. 5 PERTAINS TO LEVY OF INTEREST WRONGLY S TATED AS PENALTY. IT WAS THE SUBMISSION THAT THE RETURN WAS TO BE FILED WITHIN 45 DAYS AND THE DUE DATE WAS FALLING ON 2 ND OCTOBER WHICH HAPPENED TO BE A HOLIDAY AND RETURN WAS FILED ON 5 TH OCTOBER THE VERY NEXT WORKING DAY THEREFORE THE RE WAS NO DELAY IN FILING THE RETURN. FURTHER IT IS AL SO THE SUBMISSION THAT NO INTEREST WAS LEVIED ORIGINALLY. CONSIDERING THE ARG UMENTS WE ARE OF THE OPINION THAT THERE WAS NO DELAY IN FILING THE RETUR N AND ACCORDINGLY LEVY OF PENALTY UNDER SECTION 158BFA(1) IS NOT WARRANTED. T HE GROUND S ALLOWED 21. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 30 TH MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VII MUMBAI 4. THE CIT CENTRAL IV MUMBAI CITY 5. THE DR J BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.