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2016 DIGILAW 1616 (GUJ)

K. P. M. Nair v. Asst. Commissioner of Income Tax

2016-08-03

G.R.UDHWANI, K.S.JHAVERI

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JUDGMENT : K.S. Jhaveri, J. 1. The assessee being aggrieved and dissatisfied with the impugned judgment and order dated 28.02.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in C.O. No. 146/Ahd/2003 for block assessment period 08.09.1990 to 1998-99 and upto 21.10.1999 has preferred the present Tax Appeal for consideration of the following substantial question of law: "Whether the Tribunal's conclusion that the assessee had received salary of Rs. 8000/- p.m. for the relevant block years in each year without evidence, is perverse?" 2. A search u/s. 158BC was carried out at the premises of the assessee on 21.10.1999. As against NIL return filed by the assessee on 23.04.2001, the assessment was completed determining undisclosed income of Rs. 53,87,152/-. The Assessing Officer during the course of statement u/s. 132(4) observed that the assessee had stated his monthly income to be Rs. 8000/- from Om Travels which is being run in the name of his wife which fact had been confirmed by his wife in her statement in reply to question No. 17. Later on the assessee denied to have received any salary from Om Travels vide letter dated 12.10.2001. The Assessing Officer by multiplying Rs. 8000/- per month for the ten previous block years which came to Rs. 9,60,000/- treated the same as the undisclosed income of the assessee. The CIT(A) as well as the Tribunal confirmed the addition and therefore the assessee has preferred the present appeal. 3. Mr. Tushar Hemani, learned advocate appearing for the assessee has drawn the attention of this Court to the order passed by the Assessing Officer more particularly para 2 which is reproduced hereinbelow and submitted that the said addition is based on simply the statement of the wife of the assessee without there being any material detected as a result of search to justify such addition. "2. Salary received from Om Travels In the statement recorded u/s. 132(4), in reply to question No. 5 assessee had stated that monthly income is approximately Rs. 8000 from Om Travels which is being run in the name of his wife. In response to question No. 17 assessee's wife has stated that she has been paying Rs. 8000 per month as remuneration to him from Om Travels for looking after the business. Accordingly vide this office notice dt. 6.9.2001 the assessee was called upon to furnish particulars of salary received from Om Travels. In response to question No. 17 assessee's wife has stated that she has been paying Rs. 8000 per month as remuneration to him from Om Travels for looking after the business. Accordingly vide this office notice dt. 6.9.2001 the assessee was called upon to furnish particulars of salary received from Om Travels. In response to this, vide reply dt. 12.10.2001 the assessee simply contended that no salary is received by him from Om Travels. This fact was pointed out to the assessee vide this office notice dt. 19.10.2001 and the assessee was required to show cause as to why the sum of Rs. 96,000 per annum for the last 10 years which comes to Rs. 9,60,000 should be taken as his undisclosed income. In reply sent by Registered Post, assessee did not comment on his own statement u/s. 132(4) which was also supported by his wife's statement. The assessee merely stated that he has not received any salary. It is to be appreciated here that neither the assessee nor his wife till date has retracted from their sworn statement u/s. 132(4). Thus, mere denial at the time of assessment i.e. after a considerable lapse of time that he has not received any salary does not serve any purpose, unless the assessee has retracted from his statements with cogent reasons and that too, within a reasonable time. Accordingly, sum of Rs. 9,60,000 being salary of 10 previous years relevant to the Block Period is hereby added to compute his undisclosed income." 3.1 Mr. Hemani has further drawn the attention of this Court to Question No. 5 asked to the assessee and questions No. 10 and 17 asked to the wife of assessee which are reproduced hereinbelow and submitted that there is no evidence to support the payment of Rs. 8000/- per month by the wife of the assessee. "Q-5 Please state whether your are assess to tax or not. If assess to tax the designation of IT authorities with whom you are filing your returns of income A-5 At present I am not filing any return of income. My monthly income is approximately from the vehicle Rs. 8000/- from the vehicle which is used for the travel business. However, I was filing returns of income upto A.Y. 1984-85 as I was having salary income from Auto Motive Mfg. My monthly income is approximately from the vehicle Rs. 8000/- from the vehicle which is used for the travel business. However, I was filing returns of income upto A.Y. 1984-85 as I was having salary income from Auto Motive Mfg. Ltd. Since Om Travel is proprietary concern of my wife, she is filing her return of income as a prop. of Om Travel. * * * Q-10 You being a housewife, who is really managing the business affairs? A-10 My husband is looking after business and I only sign the documents. Q. 17 Have you paid any remuneration to your husband for looking after the business? And if so, how much? A. 17. Yes, I am paying Rs. 8000/- p.m. from Om Travels." 3.2 Mr. Hemani submitted that merely on the above statements, the Assessing Officer has proceeded to calculate Rs. 9,60,000/- as undisclosed income for ten years. In this connection he has relied upon a decision of the Delhi High Court in the case of Commissioner of Income Tax v. Harjeev Aggarwal reported in [2016] 70 taxmann.com 95 (Delhi) and submitted that a statement recorded under section 132(4) can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and seizure. Referring to the substantial question of law raised in the said decision, he submitted that the merely on the statement of assessee, assumption made is not good. 3.3 Mr. Hemani has further drawn the attention of this Court to Circular No. F. No. 286/2/2003 - IT (Inv. II) dated 10.03.2003 which states that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. He has also relied upon another decision rendered by Madras High Court in the case of M. Narayanan & Bros. v. Assistant Commissioner of Income-tax, Special Investigation Circle, Salem reported in [2011] 339 ITR 192 (Madras) and submitted that the court therein has held that when assessee had explained his statement as not correct in context of materials produced, the amount could not be added to assessee's income on basis of his statement. He submitted that in light of the aforesaid decisions, the order passed by the Tribunal is required to be reversed. 3.4 In the alternative, Mr. He submitted that in light of the aforesaid decisions, the order passed by the Tribunal is required to be reversed. 3.4 In the alternative, Mr. Hemani submitted that even if the entire case is assumed against the assessee, without prejudice to the submissions made hereinabove, the income assessed by the revenue ought to have been for the relevant year and not the entire block period. In this regard he has relied upon a decision of this Court rendered in Commissioner of Income Tax -II v. Standard Tea Processing Co. Ltd. reported in [2013] 34 taxmann.com 31 (Gujarat) wherein this Court has held that in absence of link between document found during search and assessee's activities for entire block period, addition for undisclosed income on account of inflated purchase price could be made only for period to which document was related and not for entire block period. He submitted that in the instant case the statement was recorded in October 1999 and therefore the assessment ought to have been only for the period from 01.06.1999 to 31.10.1999 i.e. for a period of six months and not for the entire block period. 4. Mr. M.R. Bhatt, learned Senior Counsel appearing with Ms. Mauna Bhatt, learned advocate for the revenue submitted that in view of the concurrent findings arrived at by the Tribunal as well as CIT(A), this Court may not interfere in the impugned order. He submitted that the Assessing Officer had relied upon the statement made by the assessee's wife that she was paying a remuneration of Rs. 8000/- p.m to the assessee for looking after her business in the name of Om Travels. The assessee had only denied receiving any salary and therefore as the statement remained unretracted, the Assessing Officer made the said addition. 4.1 Mr. Bhatt submitted that the amount of Rs. 8000/- seems to be a smaller amount on record. However, there is much more to it as the assessee used to manage the business affairs under the name of his wife and has always tried to evade tax. He submitted that this Court may not interfere in the impugned order. 5. Having heard learned advocates for both the sides and having gone through the materials on record, it is borne out that the authorities proceeded on the basis of the statement made by the assessee's wife that she was paying salary to the assessee every month. He submitted that this Court may not interfere in the impugned order. 5. Having heard learned advocates for both the sides and having gone through the materials on record, it is borne out that the authorities proceeded on the basis of the statement made by the assessee's wife that she was paying salary to the assessee every month. This statement had been denied by the assessee but the same was not retracted by the assessee's wife. However, what remains to be seen here is that the revenue has not been in a position to bring any evidence on record so as to strengthen its case. Other than the statement made by the assessee's wife u/s. 134(2) of the Act which has been denied by the assessee, the revenue has not produced any substantial evidence to prove its case. 5.1 In the case of Harjeev Aggarwal (supra), the Delhi High Court in para 23 has held as under: "23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment." [Emphasis Supplied] 5.2 We would also like to refer to the circular dated 10.03.2003 issued by the revenue and relied upon by learned advocate for the assessee which relates to confession of additional income during the course of search and seizure and survey operation. The said circular reads as under: "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. The said circular reads as under: "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders." [Emphasis Supplied] 5.3 In view of the above, we are of the opinion that the Assessing Officer has erred in proceeding with the calculation of undisclosed income without there being any cogent and corroborating evidence to the statement made u/s. 132(4). 6. Moreover, the calculation made for the entire block period without any basis or material from the seized documents, in our opinion, cannot be permitted. In the case of Standard Tea Processing Co. Ltd. (supra), this Court has held that as the materials admittedly related to a brief period between 01.4.1998 till 29.7.1998, in absence of any documents found during search to even link the assessee's activities for the entire period, to project by way of extrapolation the facts found during the brief period of about four months would not be permissible and rightly so held by the Tribunal. 7. In view of the above, we are of the opinion that the Tribunal has erred in coming to the conclusion that the assessee had received salary of Rs. 8000/- p.m. for the relevant block years in each year without evidence. The impugned order passed by the Tribunal is therefore required to be set aside. 8. 7. In view of the above, we are of the opinion that the Tribunal has erred in coming to the conclusion that the assessee had received salary of Rs. 8000/- p.m. for the relevant block years in each year without evidence. The impugned order passed by the Tribunal is therefore required to be set aside. 8. In the premises aforesaid, the question raised in the present appeal is answered in favour of assessee and against the revenue. The impugned order dated 28.02.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in C.O. No. 146/Ahd/2003 for block assessment period 08.09.1990 to 1998-99 and upto 21.10.1999 so far it relates to concluding that the assessee had received salary of Rs. 8000/- p.m. for the relevant block years is quashed and set aside. Appeal is allowed accordingly.