Delhi High Court

Smt Alka Aggarwal vs Joint Cit on 31 December, 2002

Equivalent citations: (2004) 89 TTJ Del 178

ORDER

Keshal Prasad, A.M.:

This is an appeal against the block assessment order as a result of search carried out at the residence of the assessed on 19-4-1996. Block period is from 1-4-1986 to 19-4-1996. Assessment in this case was completed on 30-5-1997, on an undisclosed income of Rs. 64,28,200 as against Nil undisclosed income declared by the appellant. But on appeal, the Tribunal set aside the order on the ground that the appellant had not been provided proper and adequate opportunity in the course of assessment proceedings thereby violating the principles of natural justice.

2. In the fresh assessment proceedings, a questionnaire was issued to the assessed on 9-1-2001 and the case 'was heard till 23-3-2001, on regular basis as mentioned by the assessing officer in the impugned block assessment order. The assessing officer has made addition of Rs. 1,55,669 on account of undisclosed deposits in Banaras State bank ITD. and Rs. 18,17,410 on account of unexplained investment in the shares of Alankit Assignment ITD. against which the appellant has raised the following grounds of appeal :

"1. That the impugned order re-determining total undisclosed income of the appellant at Rs. 19,73,079 and consequent determination of total tax liability of Rs. 11,83,848 suffers from grave illegal infirmities and errors in as much as determinations and additions made towards the undisclosed income of the appellant are founded on illegal, unauthorised and factually incorrect grounds, not sustainable in law and on the facts of the case.

2.1 That the learned assessing officer acted without authority of law and without jurisdiction in assessing the peak amount of Rs. 1,55,669 as undisclosed income of the appellant, out of the deposits of Rs. 21,31,738 appearing in her bank account in Benaras State bank ITD. in different assessment years 1992-93 to 1996-97 (already disclosed prior to the date of search), on grounds not factually correct and not legally sustainable.

2.2 The allegation of the learned assessing officer that there was a seizure of the bank pass book of the appellant's above account was factually wrong and is not borne out by the seized material, and hence the impugned addition cannot be sustainable in law.

3.1 The learned assessing officer further misdirected himself in law in reassessing the appellant with an undisclosed income of Rs. 18,17,410 on account of difference between the actual sale consideration of Rs. 10 per share for purchase of 259630 shares of Alankit Assignments ITD. during the financial year 1995-96 and the sale consideration of Rs. 3 appearing on the seized share transfer deeds found and seized, by improperly and wrongly rejecting evidence adduced showing actual sale consideration of Rs. 10 per share, paid subsequent to the date of search.

3.2 There was no evidence found as a result of search or collected by the assessing officer during the proceedings for framing or reframing block assessment to substantiate that any payment to the tune of Rs. 18,17,410 was made by the -appellant during the financial year or at any time prior to the date of search from undisclosed sources, Hence, the impugned addition was illegal, arbitrary and unauthorised.

4. Various observations made by the learned assessing officer while making the above additions are either incorrect or untenable. The learned assessing officer either ignored the submissions made and evidence produced or had not given due weight to the same.

5. The appellant craves leave of this Honble Tribunal to add to, alter, vary, modify or otherwise amend the grounds of appeal before the appeal is finally disposed of."

3. The first grievance of the appellant is against the addition of Rs. 1,55,669 being the peak credit of the cash entries in the saving bank account of the appellant with Banaras State bank ITD. discussed by the assessing officer vide paras 4 to 6 at pp. 3-4 of his order. Though the assessing officer admits in the impugned assessment order that the entries in the bank account stood recorded by the appellant in her regular books of accounts but according to the assessing officer, such entries in the bank account were not explained in any regular assessment and, therefore, he has added the peak credit of the cash deposit at Rs. 1,55,669. The assessing officer has also observed that the appellant had failed to give any narration or filed any documentary evidence to explain the deposits of its bank account and that such a bank passbook having been found and seized during search was under the purview of Chapter XIV-B.

4. The assessed is in appeal before us against the findings of the assessing officer.

5. Shri O.P. Sapra, Shri J.K. Khanna, Advocates and Shri Ashuthosh Aggarwal, C.A. appeared and filed synopsis besides a paper book copies whereof were duly given to the learned departmental Representative. Both the parties were heard at great length.

6. The learned counsels took us through copy of the said bank account placed at pp. 74-106 for the block period 1-4-1986 to 19-4-1996, and that such bank account stood duly recorded in her books of accounts year after year which duly find place in the balance sheet of all the years covered by the block period as per copies placed at pp. 166-178 by highlighting the above bank account in the said balance sheets. According to the learned counsel, explanations of each entries in the bank account was also filed as per details placed at pp. 107-165 of the paper book and we were also taken through the letter dated 29-3-2001, along with copy of cash book for the block period as filed before assessing officer copies of which are placed at pp. 188 to 225 of the paper book. The learned counsel clarified that in fact the bank account of the appellant was not seized during search as is evident from Panchnama copy placed at pp. 180-183 and the observations of the assessing officer to the contrary are incorrect. It is vehemently argued that when the assessing officer himself concedes in the impugned assessment order that the above bank account had been disclosed by the appellant before the IT department in the course of regular assessment, were not applicable at all. Moreover, according to provisions of Chapter XIV the learned counsel each and every cash entry in the above bank account stood reflected in the regular account books maintained by the appellant on the basis of which she was being assessed to tax regularly by the revenue. Therefore, it was pleaded that the addition made being wholly unjustified deserves to be deleted.

7. The learned departmental Representative relied upon the observations of the assessing officer. He stated that admittedly there were certain deposits in the bank account of appellant. The onus was on her to prove the sources of deposits. Such bank account was also found during the course of search and seizure operation. The same was correctly considered under Chapter XIV-B. Moreover, only peak addition has been made by the assessing officer, which was in accordance with law and such addition deserves to be upheld.

8. We have given our thoughtful consideration to the facts stated and the submissions made before us. We have also perused various documentary evidence brought to our notice in the course of hearing by the learned counsels of the appellant as well as learned departmental Representative. The assessing officer has made the addition of Rs. 1,55,669 being the peak credit of the cash entries in the saving bank account of the appellant with the Banaras State bank ITD. on the ground that in the regular course of assessment proceedings, the above bank account was not examined. In other words, the assessing officer concedes that the bank account was duly reflected in the balance sheets of the appellant filed along with returns of various years. We have no hesitation in deleting the addition because we find that not only the bank account stands disclosed by the appellant year after year in her regular books of accounts but also in the balance sheet etc. filed with the returns before the date of search. Moreover, all the entries in such bank account are duly supported by the entries in the cash book maintained by the appellant year after year. But once the papers relating, to such bank account is found during the course of search and seizure operation, the assessing officer has every right to examine the same in an order under Chapter XW-B. We, therefore, set aside this issue and direct the assessing officer to examine the sources of bank deposits and for that purpose will allow reasonable opportunity to the appellant to file necessary evidences to support her claim. For statistical purposes, this ground of appeal is partly allowed.

9. The only other ground is against the addition of Rs. 18,17,410 being the difference between the actual sales consideration of Rs. 10 per share for purchase of Rs. 2,59,630 shares of M/s Alankit Assignment ITD. during the financial year 1995-96 and the sales consideration of Rs. 3 appearing in the seized transfer deeds. The assessing officer has discussed this issue in paras 7 to 12 at pp. 4-5 of the assessment order by giving details in para 8 of the assessment order and by rejecting the submissions of the appellant as made vide letter dated 25-1-2001 before the assessing officer. The assessing officer has further observed that it is a closely held company, managed by the husband of the assessed and shares were allotted to the shareholders in the year 1991-92 @ Rs. 10 per share and the appellant had shown transfer of these shares @ Rs. 3 per share as on 1st June, 1995, as per the seized transfer deeds. The assessing officer has assumed that the appellant must have made the payment at the time of acquiring the shares by the appellant from such shareholders and that it was unnatural and unbusiness like that the shareholders had purchased shares @ 10 per share in the year 1991-92 and after 4 years, they will transfer all the shares to the assessed @ Rs. 3 per share even without receiving payments. According to the assessing officer, even the source of payment had not been given by the assessed during the assessment proceedings. The balance sheet for the year ending 31st March, 1996, filed by the appellant has been considered to be an "afterthought" to cover the seized deeds at which the rate of acquiring these shares is shown at Rs. 3 per share. While conceding that the appellant had filed confirmations but according to the assessing officer, the appellant had not explained as to why on the seized deeds he had taken the amount of Rs. 3 in place of Rs. 10 per share and appellant's submission that it was a clerical mistake was not acceptable to the assessing officer and, therefore, he treated the difference of Rs. 18,17,410 as unexplained investment of the assessed and added the same as undisclosed income.

10. The assessed is in appeal before us against the above findings of the assessing officer.

11. The learned counsel drew our attention to various documents filed before assessing officer and the submissions made in the synopsis as reproduced below

"(c) Balance sheet of the assessed for the year ending 31-3-1996 (placed at page No. 178 of the paper book), as per the accounts books seized during search on 19-4-1996, duly depicted liability of Rs. 25,96,300 being actual agreed purchase value of shares agreed to be purchased at Rs. 10 per share payable by the appellant to all the six parties mentioned in para 8 of the assessing officer order.

(d) The assessing officer made observation in para 10 of assessment order as under:

"The plea of the assessed that regarding late payments ledger account has been filed Along with reply is not correct because no such account has been filed. "

12. It is submitted that the assessed never wrote that it was filing copies of ledger accounts of parties to prove late payments. What the assessed filed by way of evidence was as under :

Copies of confirmations from the sellers/shareholders Along with relevant documents relating to their assessment status, namely copies of their returns, their balance sheets showing the outstanding price of shares sold @ Rs. 10 per share.

Balance sheet of the assessed as on 31-3-1996, showing her liability in respect of unpaid purchase price of share @ Rs. 10 per share.

13. Therefore, the aforesaid observations of assessing officer is not correct on facts.

14. Copy of confirmation Along with relevant supporting documents namely copies of their assessment order/balance sheet as on 31-3-1996 and 31-3-2000, placed at page Nos. 34 to 71 which prove the appellant's case, also filed Along with letter dated 8-3-2001, page Nos. 32 and 33 which remain uncontroverter and disproved by the assessing officer. All such overwhelming evidence conclusively proves that no payment had been made to any of the parties on or before 1-6-1995, as assumed by the assessing officer and even till the date of search i.e., 19-4-1996.

15. Mentioning of Rs. 3 in the transfer deed was a clerical mistake which once made continued to be made in all the transfer deeds because all the transfer deeds are admittedly of 1st June, 1995, which was probable also.

16. When the purchase of shares @ Rs. 10 stood recorded in the account books of the appellant during the financial year 1995-96 which were seized, the assessing officer was not justified in alleging that it was an afterthought. Moreover, the provisions of Chapter XIV-B are also not applicable to the above transactions. Copy of the relevant ledger accounts from the books of appellant are enclosed.

17. The appellant had not paid even the amount of Rs. 3 per share as has been assumed by the assessing officer. Shares had been purchased to increase the shareholding of the promoters viz., the appellant and her husband Shri Alok Kumar Agarwal, both being promoters of M/s Alankit Assignments ITD., and it was the prerequisite to acquire the NSE membership which was acquired on February, 1996.

18. No evidence was found as a result of search nor brought by the assessing officer on record to prove his assumption that the appellant had paid Rs. 18,17,410 which as added as undisclosed income of the appellant in the impugned order as unexplained investment.

19. Though the assessing officer has not mentioned any particular section under which the above addition has been made but he appears to have in mind section 69 of Income Tax Act which could only be invoked by brining conclusive evidence on record that the 'A' did make the investment during financial year 1995-96. Following case law is relied upon :

(i) Rajpal Singh Ram Avtar v. Assessing Officer (1991) 39 TTJ (Del) 544

(ii) CIT v. P.K Noorlahan (1980) 15 CTR (Ker) 138 : (1980) 123 ITR 3 (Ker) affirmed by the Supreme Court in CIT v. P.K. Noorjahan (1999) 155 CTR (SC) 509: (1999) 237 ITR 570 (SC)

20. The learned departmental Representative supported the addition as made by relying on the assessment order. Her main emphasis was that mentioning of the consideration @ Rs. 3 in the seized transfer deed could not merely be a mistake on the part of appellant's staff as argued by the appellant and the appellant must have paid Rs. 10 per share and, therefore, the addition as made was justified.

21. We have carefully considered the facts of the case and have gone through various documentary evidences filed by the appellant before the assessing officer copies of which have been placed before us in the paper book. The appellant had filed confirmations from all the parties in whose cases the transfer deeds were lying with the appellant and were seized as per copies placed at pp. 34-71 along with relevant supporting documents in the form of copies of their assessment orders and balance sheet etc. as on 31st March, 1996 and 31st March, 2000 which goes to show that the appellant had not made any payment to any of the parties on or before 1st June, 1995, as assumed by the assessing officer and even till the date of search viz., 19-4-1996. The assessing officer has been factually wrong in assuming even the payment of Rs. 3 per share. As regards mentioning of Rs. 3 in the transfer deeds which according to the appellant had occurred because the clerk concerned mentioned Rs. 3 in one transfer deed which continued to be made in all the transfer deeds because all the transfer deeds are admittedly of 1st June, 1995, appears to be plausible. We also find that the purchase of such shares @ Rs. 10 stand recorded in the account books of the appellant during the financial year 1995-96, which were seized, the assessing officer could not treat the same as an afterthought. The explanation of the appellant that the shares had been purchased by the appellant to increase the shareholding.of the promoters viz. the appellant and her husband Sh. Alok Kumar Aggarwal both being promoters of M/s Alankit Assignment ITD. which was the prerequisite to acquire the NSE membership which was actually acquired in February, 1996, could not be ignored. The most important aspect is that no evidence was found during search nor any evidence had been brought by the assessing officer on record to prove his assumption that the appellant had paid Rs. 18,17,410 which was added as undisclosed income of the appellant in the impugned order as unexplained investment. Such type of addition as undisclosed income could only be made if the assessing officer had brought any evidence of conclusive nature on the record to support the same, which is completely lacking. On the other hand, the appellant having filed confirmations of all the parties to the effect that they had sold the shares to the appellant but had not actually received any payment against the same and that the payments had been received later on by cheques as per details given in their confirmations supported by their respective balance sheets and assessment papers, remain uncontroverter. The purchase of shares by the appellant and sale thereof by various parties on credit having been recorded in their respective account books before the date of search, the same could not be brought within the provisions of block assessment order. There being absolutely no evidence brought on record by the assessing officer that the appellant did make payment @ Rs. 10 per share till the date of search, the addition of Rs. 18,17,410 as undisclosed income of the appellant cannot be sustained and the same is deleted.

22. In the result, the appeal is allowed.