Sri K. Mohan, Salem v. DCIT, Salem

ITSSA 76/CHNY/2002 | misc
Pronouncement Date: 10-12-2010 | Result: Allowed

Appeal Details

RSA Number 7621716 RSA 2002
Bench Chennai
Appeal Number ITSSA 76/CHNY/2002
Duration Of Justice 8 year(s) 7 month(s) 11 day(s)
Appellant Sri K. Mohan, Salem
Respondent DCIT, Salem
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 10-12-2010
Date Of Final Hearing 25-11-2010
Next Hearing Date 25-11-2010
Assessment Year misc
Appeal Filed On 29-04-2002
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T(SS).A NO. 73/MDS/2002 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 SHRI K. SADASIVAM P/O ANBU SILK TEX 27-D RAMASUNDARAM STREET SALEM 636 001 VS THE DY. CIT CIRCLE II SALEM (APPELLANT) (RESPONDENT) I.T(SS).A NO. 74/MDS/2002 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 M/S ALAMELU KANDAS 27-D RAMASUNDARAM STREET SALEM 636 001 VS THE DY. CIT CIRCLE II SALEM (APPELLANT) (RESPONDENT) I.T(SS).A NO. 75/MDS/2002 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 SHRI K. MOHAN 27-D RAMASUNDARAM STREET SALEM 636 001 VS THE DY. CIT CIRCLE II SALEM (APPELLANT) (RESPONDENT) I.T(SS).A NO.76/MDS/2002 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 SHRI K. MOHAN(HUF) P/O ANBU TEX 27-D RAMASUNDARAM STREET SALEM 636 001 VS THE DY. CIT CIRCLE II SALEM (APPELLANT) (RESPONDENT) IT( SS )A 73 TO 77/02 & 119/2003 :- 2 -: I.T(SS).A NO. 77/MDS/2002 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 SHRI K. THULASILINGAM P/O APSARA SILK CENTRE 20 BIG CHOWK STREET TRICHY VS THE ACIT CENTRAL CIRCLE I TRICHY (APPELLANT) (RESPONDENT) I.T(SS).A NO. 119/MDS/2003 BLOCK PERIOD : 1986-87 TO 1996-97 AND 1.4.1995 TO 15.2.1996 M/S KANDASWAMY SILK MILLS 27-D RAMASUNDARAM STREET SALEM 636 001 VS THE DY. CIT CIRCLE III SALEM (APPELLANT) (RESPONDENT) APPELLANTS BY : DR. ANITA SUMANTH RESPONDENT BY : SHRI ANIRUDH RAI O R D E R PER HARI OM MARATHA JM: THESE ARE RECALLED MATTERS. SINCE IDENTICAL I SSUES ARISING OUT OF COMMON FACTS ARE INVOLVED THEREIN WE ARE PROCEE DING TO DECIDE THEM BY A COMMON ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. I.T(SS)A. NO.73/MDS/2002 2. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE ASSESSING OFFICER DATED 20.6.2002 PASSED U/S 158BC( C) R.W.S 254 OF THE I.T.ACT. IT( SS )A 73 TO 77/02 & 119/2003 :- 3 -: 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDUAL IS ONE OF THE PARTNERS OF M/S ANBU TEXT ILES SALEM. A SEARCH WAS CONDUCTED IN THE PREMISES OF THIS FIRM U /S 132 OF THE ACT ON 15.2.1996. THE PREMISES OF THIS ASSESSEE WAS AL SO COVERED UNDER THIS SEARCH. THIS ASSESSEE IS ALSO RUNNING A PROPR IETARY CONCERN IN THE NAME OF M/S ANBU SILK TEX WHICH CARRIES ON WHOLES ALE TRADING IN SAREES LUNGIES DHOTIS ETC. AS A RESULT OF THIS S EARCH BLOCK ASSESSMENT U/S 158BC OF THE ACT WAS MADE IN THIS C ASE ON 28.2.1997 AS PER RULES. UNDISCLOSED INCOME OF THE BLOCK ASSE SSMENT WAS DETERMINED AT ` 8 16 250/- AS AGAINST THE UNDISCLOSED INCOME OF ` 2 37 677/- ADMITTED BY THE ASSESSEE. ADDITIONS AL ONGWITH DETAILED REASONS ARE AS UNDER: (I) NO REGULAR RETURN WAS FILED FOR THE ASST. YEAR 93-94 BEFORE THE DATE OF SEARCH. THE ASSESSEE ESTIMATED THE INCO ME FROM ANBU SILK TEX FOR THIS YEAR AT ` 20 422/- AND OFFERED THIS AS UNDISCLOSED INCOME. IT WAS NOTICED DURING T HE COURSE OF ORIGINAL BLOCK ASSESSMENT PROCEEDING THAT THE TOTAL SALES TURNOVER OF THE CONCERN FOR THE YEAR WA S ` 1 94 99 607/ACCORDING TO THE SALE BILL BOOKS SEIZED AND THAT THE INCOME ADMITTED FOR THIS TURNOVER WAS VERY LOW. HENCE THE NET PROFIT ON THIS TURNOVER WAS ESTIMATE D BY THE A.O AT 2.5% OF THE TOTAL SALES AND THE PROFIT THUS DETERMINED VIZ. ` 4 87 490/- WAS TREATED AS THE UNDISCLOSED INCOME FROM THIS BUSINESS FOR THE PREVI OUS YEAR RELEVANT TO ASST. YEAR 94-95 AS AGAINST ` 20 422/- ADMITTED. (II) FOR THE ASST. YEAR 94-95 THE ASSESSEE E STIMATED THE BUSINESS INCOME FROM ANBU SILK TEX AT ` 26 000/-AND ADMITTED THIS AS UNDISCLOSED INCOME FOR THE YEAR. S INCE NO BOOKS OF ACCOUNTS WERE MAINTAINED AND THE TURNOVER DETAILS WERE NOT AVAILABLE THE A.O. ESTIMATED THE INCOME FROM THIS BUSINESS AT ` 50 000/- AND TREATED THIS AMOUNT AS THE UNDISCLOSED INCOME FOR THE ASST. YEAR 94-95. FO R THE SAME REASONS THE TOTAL INCOME FROM THIS BUSINESS F OR THE ASST. YEAR 95-96 WAS ESTIMATED AT ` 60 000/AS AGAINST THE INCOME OF ` 30 000/- ESTIMATED BY THE ASSESSEE. IT( SS )A 73 TO 77/02 & 119/2003 :- 4 -: (III) NO UNDISCLOSED INCOME WAS DECLARED FOR THE PREVIOUS YEAR RELEVANT TO ASST. YEAR 96-97 (UPTO 14.2.96). HOWEVE R THE A.O ESTIMATED THE PROFIT FROM THIS BUSINESS @ 2.5% OF THE UNACCOUNTED PURCHASES AMOUNTING TO ` 23 00 000/- AND DETERMINED THE UNDISCLOSED INCOME FOR THE YEAR AT ` 57 500/-. 4. IN THE FIRST ROUND APPEAL WAS FILED BEFORE THE TR IBUNAL [AT THAT TIME IN SEARCH CASES APPEAL AGAINST BLOCK ASSESSMEN T ORDERS LIED DIRECTLY BEFORE THE ITAT]. THE TRIBUNAL VIDE ORD ER DATED 14.5.1999 SET ASIDE THE BLOCK ASSESSMENT WITH THE FOLLOWING DIRECTIONS: I. THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY O F BEING HEARD TO ARGUE HIS CASE. II. THE ASSESSEE SHOULD BE INTIMATED AS TO HOW THE TURNOVER WAS CALCULATED AND ALSO ABOUT THE NET PROF IT ESTIMATED AND THE EXPLANATIONS OF THE ASSESSEE SHOU LD BE CONSIDERED. III. FRESH BLOCK ASSESSMENT HAS TO BE MADE AFTER CONDUCTING NECESSARY ENQUIRIES IN ACCORDANCE WITH T HE PROVISIONS OF LAW. 5. IN SECOND ROUND WHILE COMPLYING WITH THE DIRECTION S OF THE TRIBUNAL A LETTER DATED 15.3.2002 WAS FILED IN WHI CH HE HAS CONSENTED TO ADOPT THE INCOME FROM ANBU SILK TEX AT ` 4 87 490/- ` 50 000/- ` 60 000/- AND ` 57 500/- AS DETERMINED BY THE ASSESSING OFFICER FO R ASSESSMENT YEAR 1993-94 1994-95 1995-96 AND 1996- 97 RESPECTIVELY IN THE ORIGINAL BLOCK ASSESSMENT. IN ADDITION TO ABOVE LETTER IT WAS ALSO CONTENDED ON BEHALF OF THE ASSE SSEE AS UNDER: . I. THE ASSESSEE'S CASE IS ONE OF THE GROUP CASES OF M /S ANBU TEXTILES AND IN ALL THE CASES OF THE GROUP BLOCK A SSESSMENT PROCEEDINGS WERE INITIATED. THE UNDISCLOSED INCOME IN THE HANDS OF VARIOUS ASSES SEES OF THE GROUP WAS ADMITT ED IT( SS )A 73 TO 77/02 & 119/2003 :- 5 -: TAKING AN OVERALL V.1 EW OF THE NET WORTH OF THE GR OUP WITH REFERENCE TO ASSETS OWNED BY VARIOUS PERSONS AND HE NCE WHATEVER UNDISCLOSED INCOME DETERMINED IN ONE CASE WOULD HAVE BEEN OFFERED IN THE HANDS OF ONE OR THE OTHER OF THE PERSONS OF THE GROUP. II. ALL THE MEMBERS OF THE FAMILY WHETHER THEY DID BUSINESS OR NOT COMBINED AS ONE GROUP AND OFFERED INCOME ON THE BASIS OF ASSETS OWNED AND INVESTMENTS MADE BY ALL T HE PERSONS. III. THE PROFITS FROM THE BUSINESS OF THE ASSESSEE THER EFORE HAVE TO BE TAKEN AS HAVING BEEN DECLARED. 6. THE ASSESSING OFFICER DID NOT FIND THE ABOVE EXPLAN ATION TO BE SATISFACTORY. HE HAS GIVEN FOLLOWING REASONS IN SU PPORT OF HIS OPINION. I. IN THE BLOCK RETURNS FURNISHED BY VARIOUS ASSESSEES OF THE GROUP THE UNDISCLOSED INCOME WAS OFFERED AS THE IN COME OF THE PERSON WHO HAD DECLARED THE INCOME IN THE RETUR N AND NOT THE INCOME OF ANY OTHER PERSON. II. AT NO STAGE OF THE BLOCK ASSESSMENT PROCEEDINGS IT WAS POINTED OUT THAT THE INCOME HAD BEEN DISCLOSED TAKI NG AN OVERALL VIEW OF THE NET WORTH OF THE GROUP. III. IT IS TO BE NOTED THAT THE NET WORTH METHOD IS NEITHER AN EXHAUSTIVE NOR A FOOL-PROOF METHOD FOR COMPUTATION OF UNDISCLOSED INCOME AND WHETHER THE DISCLOSURE HAS T AKEN CARE OF THE UNDISCLOSED OUTGOINGS IS NOT KNOWN. MOR EOVER THIS METHOD IS TO BE APPLIED ONLY IN A CASE WHERE N O BOOKS OF ACCOUNT OR OTHER RECORDS ARE MAINTAINED BY THE A SSESSEE BUT IN THE CASE OF THE ASSESSEES OF THIS GROUP ASSE SSMENTS HAVE BEEN FRAMED ON THE BASIS OF BOOKS AND OTHER DOCUMENTS MAINTAINED. IV. THIS GROUND WAS NOT TAKEN BEFORE THE HON. APPEL LATE TRIBUNAL AT ANY STAGE. NOR IN THE ORDER PASSED BY T HE HON. TRIBUNAL WAS THERE ANY DISCUSSION REGARDING SUCH A CLAIM. V. THE CLAIM IS ARBITRARY NOT BASED ON ANY MATERIA LS AND RESULT OF AFTERTHOUGHT. 7. ULTIMATELY THE ASSESSING OFFICER HAS DETERMINED T HE TOTAL UNDISCLOSED INCOME AT ` 9 17 215/-. THE ASSESSEE IS FURTHER IT( SS )A 73 TO 77/02 & 119/2003 :- 6 -: AGGRIEVED. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE SECOND ROUND BEFORE US: 1. THE ASSESSMENT MADE BY THE ASSESSING AUTHORIT Y ON THE 26 TH MARCH 2002 FOR THE BLOCK PERIOD 1986-87 TO 1996- 97 IS BARRED BY LIMITATION AND IS HENCE LIABLE TO BE S ET ASIDE. 2. THE INCOME-TAX APPELLATE TRIBUNAL HAD SET ASIDE THE ORIGINAL ORDER OF ASSESSMENT ON THE 14 TH MAY 1999. HOWEVER THE PRESENT ASSESSMENT IS MADE ON THE 26 TH MARCH 2002 AND CONSEQUENTLY THE SAID ASSESSMENT I S BARRED BY LIMITATION. 3. THE ASSESSING AUTHORITY HAS MADE THE AT ON THE S AME LINES AS ORIGINALLY MADE. THE BASIS ADOPTED IN THE ORIGINAL ASSESSMENT HAS NOT BEEN APPROVED OR FOUND TO BE CORRECT BY THE INCOME TAX APPELLATE TRIBUNAL. NEVERTHELESS THE ASSESSING AUTHORITY HAS ADOPTED T HE SAME PROCEDURE AND METHOD OF DETERMINING THE TURNOV ER AND INCOME AND CONSEQUENTLY THE ASSESSMENT IS BAD IN LAW AND ON FACTS. 4. THE ASSESSING AUTHORITY HAS STATED THAT THE APPE LLANT HAS EXPRESSED ITS CONSENT TO ADOPT THE INCOME FROM ANBU TAX AT ` 4 87 490/- ` 50 000/- AND ` 60 000/- AND ` 57 500/- FOR THE YEAR 1993-94 1994-95 1995-96 AND 1996-97 RESPECTIVELY IN THE ORIGINAL BLOCK ASSESSMENT AND TO TREAT THE SAME AS UNDISCLOSED INCOME. THIS IS NOT A COR RECT UNDERSTANDING OF THE STAND TAKEN BY HE APPELLANT. IN FACT THE APPELLANT HAS SATED THAT THE ENTIRE INCOME SOUG HT TO BE ASSESSED REPRESENTS THE PROFITS OF VARIOUS ASSES SEES OF THE GROUP AND THE SAME HAS BEEN OFFERED BY DIFF ERENT ASSESSEES. HENCE THE APPELLANT HAS CONTENDED THAT THE AFORESAID INCOME IS NOT LIABLE TO BE ASSESSED I N THE APPELLANTS CASE. THIS SUBMISSION HAS BEEN MISUNDERSTOOD BY THE ASSESSING AUTHORITY AND CONSEQUENTLY HIS STATEMENT THAT THE APPELLANT HAS G IVEN CONSENT IS OPPOSED TO FACTS AND IS NOT CORRECT. 5. THE ASSESSING AUTHORITY OUGHT TO HAVE SEEN THAT THERE IS NO MATERIAL OR EVIDENCE FOR THE ESTIMATE OF AVERAGE TURNOVER OR THE INCOME IN THE APPELLANTS CASE. IT IS IN THIS CONTEXT THAT THE APPELLANT HAD SUBMITTED THAT THE O NLY BASIS OF ASSESSMENT IS THE NET ASSET BASIS. THE ASSESSING AUTHORITY ERRED IN REJECTING THE SAME. IT( SS )A 73 TO 77/02 & 119/2003 :- 7 -: 6. THE ASSESSING AUTHORITY ERRED IN REJECTING THE APPELLANTS CLAIM ON THE GROUND THAT THESE CONTENTIONS WERE NOT RAISED BEFORE THE APPELLATE TRIBUNAL. SUCH A CONTE NTION IS WHOLLY UNTENABLE. IN SO FAR AS THE ORIGINAL ASS ESSMENT HAS BEEN SET ASIDE AND THE ASSESSING AUTHORITY HAS HENCE TO PROCEED AFRESH IN MAKING AN ASSESSMENT . 7. THE ASSESSING AUTHORITY ERRED IN ADOPTING A SUM OF ` 4 87 400/- AS THE UNDISCLOSED INCOME FROM ANBU SILK TEX FOR THE ASSESSMENT YEAR 1993-94. 8. THE ASSESSING AUTHORITY ERRED IN ADOPTING A SUM OF ` 50 000/- AS THE UNDISCLOSED INCOME FOR THE ASSESSME NT YEAR 1994-95 THE SUM OF ` 60 000/- FOR THE ASSESSMENT YEAR 1995-96 AND A SUM OF ` 57 500/- FOR THE ASSESSMENT YEAR 1996-97. THESE AMOUNTS DO NOT REPRESENT THE UNDISCLOSED INCOME OF THE APPELLANT AND CONSEQUENTL Y THE ASSESSMENT IS NOT JUSTIFIED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RECORDS. IT IS A FACT THAT NO DIRECT I NCRIMINATING EVIDENCE WAS EITHER FOUND OR SEIZED DURING SEARCH TO MAKE TH E BASIS OF ADDITION IN THE BLOCK ASSESSMENTS. THE ASSESSEE HAD STATED THAT THE ENTIRE INCOME SOUGHT TO BE ASSESSED REPRESENTED THE PROFIT S OF VARIOUS ASSESSEES OF THE GROUP AND THE SAME HAS BEEN OFFERE D FOR TAX BY THEM. ACCORDING TO THE ASSESSEE THE ENTIRE INCOME CANNOT BE ASSESSED IN ASSESSEES HANDS ALONE. IN OTHER WOR DS THE ASSESSEE HAS SUBMITTED THAT THE ASSESSMENT HAS BEEN MADE ON THE BASIS OF NET ASSETS AND NOTHING ELSE. THE ASSESSING OFFICE R HAS ALTHOUGH FOUND THIS TO BE A CORRECT FACT BUT HE TOOK SHELTE R UNDER THE FACT THAT THIS PLEA WAS NOT RAISED IN THE FIRST ROUND BEFORE THE TRIBUNAL SO IT CANNOT BE RAISED NOW. WE ARE NOT IN AGREEMENT WITH THIS FINDING OF IT( SS )A 73 TO 77/02 & 119/2003 :- 8 -: THE ASSESSING OFFICER BECAUSE THE TRIBUNAL HAS SIMP LY SET ASIDE THE ORIGINAL BLOCK ASSESSMENTS AND HAS GIVEN A FREE HA ND TO THE ASSESSING OFFICER AS WELL AS THE ASSESSEE TO MAKE FRESH ASSE SSMENT. THE ASSESSEE WAS ALSO AT LIBERTY TO RAISE ANY PLEA BECA USE ONE OF THE POINTS FOR REMANDING THE MATTER WAS THAT OPPORTUNIT Y OF HEARING WAS NOT PROPERLY GIVEN. WE ARE IN AGREEMENT WITH THIS SUBMISSION RAISED THROUGH THE GROUNDS IN THE APPEAL THAT ASSETS-BASI S SHOULD BE ADOPTED TO FRAME THE BLOCK ASSESSMENT IN THIS CASE AND ALL OTHER CASES OF THIS GROUP. WITH THIS OBSERVATION WE REM AND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER AND ALLOW THE GROUNDS FOR STATISTICAL PURPOSES ONLY. 9. IN THE RESULT THE APPEAL IN I.T.(SS)A.NO.73/MD S/2002 IS ALLOWED FOR STATISTICAL PURPOSES. I.T(SS)A. NO.74/MDS/2002 THIS APPEAL OF THE ASSESSEE-FIRM IS DIRECTED AG AINST THE ORDER OF THE ASSESSING OFFICER DATED 26.3.2002 MADE U/S 1 53BC(C) R.W.S 254 OF THE ACT. 10. THE PREMISES OF THIS FIRM WERE ALSO SEARCHED BEIN G THE SISTER CONCERN OF M/S ANBU TEXTILES SALEM ON 15.2.1996. THE FIRM HAD FILED REGULAR RETURNS OF INCOME UPTO ASSESSMENT YEAR 1995 -96 BEFORE THE DATE OF SEARCH. AS PER THE SEARCH BLOCK ASSESSMEN T U/S 158BC WAS MADE ON 28.2.1997 AS PER RULES DETERMINING UNDISC LOSED INCOME AT IT( SS )A 73 TO 77/02 & 119/2003 :- 9 -: ` 4 58 164/- AS AGAINST NIL INCOME ADMITTED BY THE AS SESSEE. LIKEWISE IN EARLIER ASSESSEES CASE IN THE SECOND ROUND ASSESSMENT WAS AGAIN MADE ON 26.3.2002. THE MAIN CONTENTION O F THIS ASSESSEE IN THIS CASE IS THAT NO INCRIMINATING EVIDENCE WAS FOUND DURING SEARCH BUT THE INCOME HAS BEEN ESTIMATED WITHOUT ANY BASIS . 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS IN THE LI GHT OF THE MATERIAL AVAILABLE ON RECORD WE ARE SATISFIED THAT THE ENTIRE BLOCK ASSESSMENT WAS MADE WITHOUT ANY INCRIMINATING EVID ENCE HAVING BEEN FOUND DURING SEARCH. IT IS WELL SETTLED PRINC IPLES OF LAW THAT NO ADDITION CAN BE MADE DE HORS ANY EVIDENCE HAVING BEEN FOUND DURING SEARCH SIMPLY ON ESTIMATE BASIS. THEREFORE WE AL LOW THE APPEAL OF THIS ASSESSEE ON MERITS AND ORDER TO DELETE ALL THE ADDITIONS MADE THEREIN. 12. IN THE RESULT THIS APPEAL IN I.T.(SS)A.NO.74/MDS /2002 IS ALLOWED. I.T(SS)A. NO.75/MDS/2002 13. THIS APPEAL IS BY A PARTNER OF THE FIRM WHO WAS ALSO SUBJECTED TO THIS SEARCH. THE ASSESSEE ALSO RUNS HIS OWN BUSINESS IN THE NAME AND STYLE OF KANDAN MOHAN EXPORTS WHICH CARRIES ON WHOLESALE TRADING IN SAREES LUNGIES DHOTIS ETC. THE BLOCK ASSESSMENT WAS COMPLETED ON TOTAL INCOME OF ` 13 90 000/- WHICH INCLUDED ` 11 00 000/- REPRESENTING INVESTMENTS MADE BY 25 P ERSONS IT( SS )A 73 TO 77/02 & 119/2003 :- 10 - : AT KAVERI SPINNING MILLS AS UNDISCLOSED INCOME OF THE ASSESSEE. IT IS ALLEGED THAT NO OPPORTUNITY WAS GRANTED TO THE ASSE SSEE TO DEFEND ITS CASE. WE HAVE FOUND FORCE IN THIS ALLEGATION OF T HE ASSESSEE AND THEREFORE REMAND THE MATTER BACK TO THE FILE OF TH E ASSESSING OFFICER AFTER SETTING ASIDE THE ASSESSMENT ORDER DATED 26.3 .2002 WITH A DIRECTION THAT HE WILL GIVE REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE AND MAKE THE ASSESSMENT ORDER AFRESH AS PER LAW. 14. IN THE RESULT THE APPEAL IN I.T(SS)A.NO. 75/MDS/20 02 IS ALLOWED FOR STATISTICAL PURPOSES. I.T.(SS)A. NO.76/MDS/2002 15. THIS APPEAL OF THE ASSESSEE-HUF IS DIRECTED AGAI NST THE BLOCK ASSESSMENT ORDER DATED 26.3.2002 FRAMED U/S 158BC(C )R.W.S254 OF THE ACT . 16. THE ASSESSEE IS A HUF WHO CARRIED ON BUSINESS IN THE NAME AND STYLE OF ANBU TEX AT TRICHY. THIS IS ALSO ON E OF THE SISTER CONCERNS OF M/S ANBU TEXTILES WHOSE PREMISES WERE S EARCHED. IN THIS APPEAL ALSO THE MATTER WENT UPTO THE TRIBUNAL IN TH E FIRST ROUND. IN THE SECOND ROUND BEFORE US THE FOLLOWING GROUNDS HAVE BEEN RAISED. (A). THE ASSESSMENT IS AGAINST THE WEIGHT OF EVID ENCE ON RECORD THE SUBMISSIONS MADE BY THE APPELLANT AND T HE PROBABILITIES OF THE CASE. THE ASSESSMENT IS ALSO NOT IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XIV_B OF THE ACT. (B) THE ASSESSING AUTHORITY OUGHT TO HAVE SEEN TH AT IN RESPECT OF THE ASSESSMENT YEAR 1996-97 THE RETURN AT THI S STAGE WAS NOT DUE AT THE TIME OF SEARCH. IT IS NOT THE CASE OF THE ASSESSING AUTHORITY THAT THERE WERE ANY TRANSACTIONS WHICH WE RE NOT IT( SS )A 73 TO 77/02 & 119/2003 :- 11 - : RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. I N FACT THE TRANSACTION RELATING TO THE TURNOVER IS TAKEN BY TH E ASSESSING AUTHORITY FROM THE SALE BILL BOOKS WHICH ARE MAINTA INED BY THE APPELLANT. CONSEQUENTLY THERE CANNOT BE ANY UNDIS CLOSED INCOME FROM THE BUSINESS IN RESPECT OF THE ASSESSM ENT YEAR 1996-97. (C) THE APPELLANT SUBMITS THAT BY LETTER DATED 1 3-3-2002 THE APPELLANT ONLY ADMITTED THE TURNOVER AND THE POSSIB LE ESTIMATION OF INCOME. IT WAS NOT AGREED TO BE TREATED AS UNDI SCLOSED INCOME. THE ASSUMPTION OF THE ASSESSING AUTHORITY THAT THE APPELLANT AGREED TO TREAT A SUM OF ` 4 03 610/- AS UNDISCLOSED INCOME IS NOT CORRECT AND IS STOUTLY DENIED AND DI SPUTED BY THE APPELLANT. THIS AMOUNT CANNOT BE TREATED AS UNDISC LOSED INCOME. (D) THE ASSESSING AUTHORITY HAS ALSO NOTICED THAT THE APPELLANT HAS CLEARLY STATED THAT THE INCOME OF ` 4 03 160/- CANNOT BE TREATED AS THE INCOME OF THE APPELLANT. THIS BY IT SELF SHOWS THAT THE INCOME HAS NOT BEEN ADMITTED BY THE APPELLANT A S UNDISCLOSED INCOME. THE APPELLANT HAS ALSO SUBMITT ED AS NOTICED BY THE ASSESSING AUTHORITY THAT THE TURN O VER OF THE FIR HAS BEEN FULLY DISCLOSED. CONSEQUENTLY THERE IS NO UNDISCLOSED INCOME LIABLE TO BE ASSESSED. (E) THE VARIOUS REASONS ADDUCED BY THE ASSESSING AUTHORITY TO REJECT THE SUBMISSIONS BY THE APPELLANT THAT THE RE IS NO UNDISCLOSED INCOME LIABLE FOR ASSESSMENT ARE NOT T ENABLE ON FACTS OR IN LAW. (F) THE ASSESSING AUTHORITY ERRED IN TREATING A SU M OF ` 2 50 000/- AS THE UNDISCLOSED INVESTMENT IN CONSTRU CTION. THERE IS NO MATERIAL OR BASIS FOR SUCH AN ESTIMATE. IN T HE ABSENCE OF ANY MATERIAL TO SHOW THAT THERE IS ANY UNACCOUNTED INVESTMENT REPRESENTING THE UNDISCLOSED INCOME OF THE APPELLA NT NO SUCH ADDITION CAN BE MADE. (G) THE ASSESSING AUTHORITY ERRED IN REJECTING TH E ALTERNATIVE CONTENTION ADDUCED BY THE APPELLANT ON THE TECHNICA L GROUND THAT THERE WAS NO SUCH PLEA . SINCE THE ASSESSMENT HAS BEEN SET ASIDE IT IS OPEN TO THE APPELLANT TO RAISE ALL PLEAS LEGALLY AND FACTUALLY AVAILABLE TO IT. (H) THE ASSESSING AUTHORITY OUGHT TO HAVE SEEN TH AT NO MATERIAL RECORDS OR EVIDENCE WAS FOUND IN SUPPORT O F THE ASSESSMENT OF A SUM OF ` 2 50 000/- AS UNDISCLOSED INVESTMENT IN CONSTRUCTION. APART FROM THE FACT THAT THERE IS NO EVIDENCE IN SUPPORT OF THE CONCLUSION THE ASSESSING AUTHORITY ALSO LACKS IT( SS )A 73 TO 77/02 & 119/2003 :- 12 - : JURISDICTION TO CONSIDER SUCH AN AMOUNT FOR ASSESSM ENT UNDER CHAPTER XIV-B OF THE ACT. (I) THE ASSESSMENT ORDER IS TOTALLY VITIATED BOTH IN REGARD TO THE JURISDICTION AND IN REGARD TO THE COMPUTATION OF IN COME. (J) THE APPELLANT STATES AND SUBMITS THAT THE ASSE SSMENT IS BARRED BY LIMITATION IN SO FAR AS THE ORDER IS PASS ED BEYOND THE PERIOD SPECIFIED UNDER CHAPTER XIV-B OF THE ACT. 17. AFTER HEARING BOTH SIDES WE HAVE FOUND THAT NO INC RIMINATING EVIDENCE WAS FOUND RELATING TO THIS ASSESSEE ON THE BASIS OF WHICH ADDITIONS COULD BE MADE. THEREFORE WE ALLOW ALL T HE GROUNDS RAISED BY THE ASSESSEE ON THE BASIC PREMISE THAT DE HORS ANY EVIDENCE HAVING BEEN FOUND NO ADDITION CAN BE MADE IN A BLOCK ASSE SSMENT ORDER FRAMED UNDER CHAPTER XIV-B OF THE ACT AND HENCE O RDER TO DELETE ALL THE ADDITIONS. 18. IN THE RESULT THE APPEAL IN I.T.(SS)A.NO. 76/MDS/2 002 STANDS ALLOWED. I.T(SS)A. NO.77/MDS/2002 THIS APPEAL BY SHRI K.THULASILINGAM WHO IS PROPRIE TOR OF M/S APSARA SILK CENTRE IS DIRECTED AGAINST THE ORDER O F THE ASSESSING OFFICER DATED 22.3.2002 PASSED U/S 158BC R.W.S 254 OF THE ACT. 19. THE MAIN PLEA TAKEN IN THIS APPEAL VIDE GROUND NOS .B & C IS THAT THE ASSESSMENT HAS BEEN MADE WITHOUT AFFORDIN G OPPORTUNITY TO IT( SS )A 73 TO 77/02 & 119/2003 :- 13 - : THE ASSESSEE ACCORDING TO LAW DESPITE SPECIFIC DIRE CTION BY THE TRIBUNAL. 20. AFTER HEARING BOTH SIDES AND KEEPING IN VIEW THE NA TURE OF THE CASE WE REMAND THE ENTIRE CASE BACK TO THE FILE O F THE ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL GIVE DUE OPP ORTUNITY OF HEARING TO THE ASSESSEE BEFORE MAKING THE ORDER. 21. IN THE RESULT THE APPEAL IN I.T.(SS)A NO.77/MDS/20 02 IS ALLOWED FOR STATISTICAL PURPOSES. I.T(SS)A. NO.119/MDS/2003 THIS APPEAL OF THE ASSESSEE-FIRM CONSISTING OF FIV E PARTNERS IS DIRECTED AGAINST THE ORDER DATED 29.3.2003 PASSED U /S 143(3)/158B/254 OF THE ACT. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THE ORDER OF THE ASSESSING OFFICER IN ESTIMATING TH E UNDISCLOSED INCOME OF THE APPELLANT :FIRM @1% OF TH E SALES TURNOVER IS AGAINST THE PROVISIONS OF LAW AND CONTRARY TO FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE OFFICER SHOULD HAVE SEEN THAT THE APPELLANT HAS INCURRED HEAVY LOSSES FOR THE ASSESSMENT YEARS 93-9 4 & 94-95 AND BUSINESS WAS ALSO ULTIMATELY DISCONTINUED FROM DECEMBER 93 IN ORDER TO AVOID FURTHER LOSSES. 3. THE OFFICER SHOULD HAVE ALSO SEEN THAT ON ACCOUNT O F LOSSES THE :FIRM HAS NOT MAINTAINED ANY BOOKS OF AC COUNTS AS NO USEFUL PURPOSE COULD BE SERVED BY FILING THE LOSS RETURNS AS THE PARTNERS HAVE ALREADY MADE UP THEIR MIND TO CLOSE THE BUSINESS. 4. THE ASSESSING OFFICER SHOULD HAVE SEEN THAT FOR THE ASSESSMENT YEAR 92-93 THE APPELLANT'S NET INCOME WA S ONLY 0.67%. EVEN THIS MUCH PROFIT WAS NOT RECEIVED IN THE LATER YEARS AND THE :FIRM WAS COMPELLED TO CLOSE IT S BUSINESS TO AVOID FUTURE LOSSES. NO PRUDENT BUSINES S MAN IT( SS )A 73 TO 77/02 & 119/2003 :- 14 - : WOULD CLOSE HIS BUSINESS IF THERE IS SOME PROFIT IN THE BUSINESS AND THERE IS A POSSIBILITY OF FUTURE PROFI TS IN IT. 5. THE UNDISCLOSED INCOME DECLARED BY THE MEMBERS IN T HE GROUP AND THEIR INVESTMENTS WERE FILED BEFORE THE ASSESSING OFFICER. THE OFFICER HAD NOT FOUND ANY OM ISSION OR SUPPRESSION OF ASSETS OR INVESTMENTS IN THE COUR SE OF ASSESSMENT PROCEEDINGS OF BUSINESS CONCERNS AND FAM ILY MEMBERS IN THIS GROUP. 6. THE HONORABLE DELHI HIGH COURT IN THE CASE OF CIT V S. RAVI KHANT JAIN REPORTED IN 250 ITR 141 HAS HELD THAT TH E ASSESSMENT OF BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH. UNDISCLOSE D INCOME NOT DETERMINED ON THE BASIS OF ANY SEARCH MA TERIAL IS NOT VALID IN LAW. 7. THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJ ENDRA PRASAD GUPTA REPORTED IN 248 ITR PAGE 350 HAS HELD THAT THE ASSESSING OFFICER IS NOT CONFERRED WITH POWER T O MAKE ESTIMATE OF INCOME DE HORS MATERIAL IN HIS POSSESSI ON. AS NO MATCHING ASSET WAS FOUND EQUIVALENT TO THE UNDIS CLOSED INCOME DETERMINED BY THE OFFICER THE ASSESSMENT MAD E BY THE OFFICER IS NOT VALID IN LAW. 8. THE NON MAINTENANCE OF BOOKS OF ACCOUNTS BY THE APPELLATE FIRM IS THE ONLY REASON GIVEN BY THE OFFI CER FOR ESTIMATING THE INCOME OF THE APPELLANT FIRM. THE OF FICER SHOULD HAVE SEEN THAT THERE ARE OTHER PROVISIONS IN THE ACT TO PROCEED AGAINST A PERSON FOR NON MAINTENANCE OF ACCOUNTS. 9. THE OFFICER HIMSELF ADMITS THAT THERE IS A FAILING TREND IN THE APPELLANT'S BUSINESS. SO HE SHOULD NOT HAVE ESTIMA TED THE INCOME OF THE FIRM WHICH HAD ALREADY CLOSED ITS BUS INESS ON ACCOUNT OF LOSSES. 10. FOR THE ABOVE GROUNDS AND ANY OTHER GROUND THAT MAY BE TAKEN UP AT THE TIME OF HEARING THE APPELLANT PRAYS THE HONORABLE TRIBUNAL MAY KINDLY DELETE THE ADDITION O F UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFI CER AND RENDER JUSTICE. 22. THE MAIN PLANK OF THE ARGUMENTS OF THE LD.AR AS ADV ANCED BEFORE US IS THAT ALL THE ADDITIONS ARE BASED ON N O EVIDENCE AS NO INCRIMINATING EVIDENCE WAS FOUND DURING SEARCH. IT WAS ARGUED THAT IT( SS )A 73 TO 77/02 & 119/2003 :- 15 - : WITHOUT THERE BEING ANY EVIDENCE FOUND DURING SEARC H NO ADDITION CAN BE MADE DE HORS ON ESTIMATE BASIS ALONE. WE ARE IN AGREEMENT WITH THIS MAIN REASONING OF THE LD.AR AND IN VIEW OF THE SETTLED PRINCIPLES ON THIS ISSUE WHICH IS GIVEN IN THE DECISIONS REFE RRED TO IN GROUND NOS. 6&7. THEREFORE WE ORDER TO DELETE ALL THE ADDITI ONS MADE IN THIS CASE WITHOUT ANY BASIS. 23. IN THE RESULT THE APPEAL IN I.T(SS)A. NO.119/MDS/2 002 STANDS ALLOWED. 24. TO SUMMARIZE THE RESULT THE APPEALS IN I.T.(SS)A. NOS.73/MDS/2002 75/MDS/2002 AND 77/MDS/2002 ARE AL LOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEALS IN I.T.(SS )A.NOS. 74/MDS/2002 76/MDS/2002 AND 119/MDS/2003 ARE ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 .12.2010. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 10 TH DECEMBER 10 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR