Delhi High Court
Commissioner Of Income Tax vs Chandra Kant Chanu Bhai Patel on 30 March, 2011
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.1280 of 2009 with ITA No.1365 of 2009,
ITA No.1366 of 2009, ITA No.1367 of 2009
% DECISION DELIVERED ON: MARCH 30, 2011.
1) ITA No.1280 of 2009
COMMISSIONER OF INCOME TAX . . . APPELLANT
through : Ms. Suruchi Aggarwal, Sr.
Standing Counsel with Ms.
Shawana Bari, Advocate.
VERSUS
CHANDRA KANT CHANU BHAI PATEL
. . .RESPONDENT
through: Ms. Shashi Kapila with Mr.
R.R. Maurya, Advocates.
2) ITA No.1365 of 2009
COMMISSIONER OF INCOME TAX . . . APPELLANT
through : Ms. Suruchi Aggarwal, Sr.
Standing Counsel with Ms.
Shawana Bari, Advocate.
VERSUS
CHANDRA KANT CHANU BHAI PATEL
. . .RESPONDENT
through: Ms. Shashi Kapila with Mr.
R.R. Maurya, Advocates.
3) ITA No.1366 of 2009
COMMISSIONER OF INCOME TAX . . . APPELLANT
ITA Nos.1280/ 2009, 1365/2009, 1366/ 2009, 1367 of 2009 Page 1 of 11
through : Ms. Suruchi Aggarwal, Sr.
Standing Counsel with Ms.
Shawana Bari, Advocate.
VERSUS
MITESH PATEL . . .RESPONDENT
through: Ms. Shashi Kapila with Mr.
R.R. Maurya, Advocates.
4) ITA No.1367 of 2009
COMMISSIONER OF INCOME TAX . . . APPELLANT
through : Ms. Suruchi Aggarwal, Sr.
Standing Counsel with Ms.
Shawana Bari, Advocate.
VERSUS
MITESH PATEL . . .RESPONDENT
through: Ms. Shashi Kapila with Mr.
R.R. Maurya, Advocates.
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
ITA Nos.1280/ 2009, 1365/2009, 1366/ 2009, 1367 of 2009 Page 2 of 11
A.K. SIKRI, J. (ORAL)
1. ITA Nos.1280 of 2009 and 1365 of 2009
These two appeals arise out of common orders passed by
the Income Tax Appellate Tribunal (hereinafter referred to
as „the Tribunal‟). To state in brief, a search had been
conducted in the business and residential premises of the
respondent-assessee on 18.11.1999. During the course of
search, shares and debentures were found and seized.
Some jewellery and cash were also found during the
search operation, but in respect thereof, no seizure was
made. Thereafter, notice under Section 142(1) of the
Income Tax Act („the Act‟ for brevity) was served upon the
assessee and block assessment was made and various
additions were made. Few of these additions were deleted
by the CIT (A) and some more additions were deleted by
the Tribunal. Some of the additions are sustained till the
level of the Tribunal, against which no appeals are
preferred by the assessee. In these appeals which pertain
to block assessment period 01.04.1989 to 18.11.1999, the
Revenue has proposed to raise the following questions of
law:
"1. Whether in the facts and circumstances of the
present case, Ld. ITAT has erred in confirming the
order of the CIT (A) in admitting fresh evidence
under Rule 46(A), when the assessee was not
fulfilling any conditions laid down for admission of
additional evidence under the Rule 46(A)?
2. Whether in the facts and circumstances of the
present case, Ld. ITAT has erred in deleting the
addition of `8,10,270/- on account of unexplained
investment in shares and debentures?
3. Whether in the facts and circumstances of the
present case, Ld. ITAT has erred in deleting the
addition of `5,31,170/- made by the ACIT on
account of peak credit as undisclosed income?
4. Whether the order of ITAT is perverse, as it has
ignored the relevant facts on record?"
2. Insofar as question No. (1) is concerned, it has bearing on
two additions in the nature of jewellery and unexplained
cash. According to the Assessing Officer (AO), in spite of
repeated opportunities given to the assessee, the
assessee could not produce any documentary or other
evidence to explain the jewellery and cash found during
the search and therefore, additions of `4,11,265/- and
`93,530/- were made respectively.
3. Before the CIT (A), the assessee furnished evidence for
the first time to explain the jewellery as well as cash. His
submission was that jewellery was belonging to the wife of
the assessee which was duly disclosed in the income tax
return filed by the wife of the assessee for the Assessment
Year 1989-90. In support thereof, the assessment order
of the income tax return filed by the wife of the assessee
was produced.
4. Insofar as cash is concerned, the assessee again produced
the bank statement of M/s Jagdamba Tobacco Co. (which
firm belongs to the assessee). The CITA (A) called for the
remand report from the AO. Thereafter, he considered the
question as to whether the fresh evidence is to be
admitted under Rule 46A of the Income Tax Act.
Observing that the assessee was not given sufficient
opportunity to produce this evidence, the fresh evidence
was admitted by the CIT (A) and on the basis of the
aforesaid evidence, he recorded the finding of fact that the
assessee had successfully accounted for the jewellery and
cash, and deleted the same.
5. The Tribunal has affirmed the aforesaid order of the CIT
(A). The Revenue in these appeals has not challenged the
orders of the two authorities below on merits. The only
challenge is to the admission of the fresh evidence under
Rule 46A of the Act on the ground that the CIT (A) and
the Tribunal was wrong in observing that sufficient
opportunity was not given.
6. Learned counsel for the Revenue submits that the
questionnaire was sent much in advance giving sufficient
opportunity to the assessee, but the assessee failed to
availed the same and produce the evidence. Therefore,
there was no justification for admitting the fresh evidence.
Apart from the fact that the two authorities below had
recorded that sufficient opportunity was not accorded to
the respondent-assessee, even if there is some
dispute/doubt about the same, we may mention that the
fresh evidence which was produced in the form of
assessment order in the of the wife of the assessee and
the bank statement. Such documentary evidence would
be without any blemish. Therefore, eve in order to
advance the cause of justice, this evidence was admitted,
it cannot be said that no prejudice is caused to the
Revenue.
7. For the above reason alone, we hold that no substantial
question of law arises.
8. Insofar as second question proposed by the Revenue is
concerned, which pertains to the addition made by the AO
on account of unexplained investment made in shares and
debentures. The case of the assessee was that the said
shares and debentures were belonging to Shri Mitesh Patel
and Smt. Jyotikaben Patel and in this manner, source of
making the aforesaid investments were explained. The
CIT (A) sent the matter to DDIT (Investigation) -I,
Baroda, who submitted the detailed report after carrying
out the investigation. Before him, the assessee had
produced Shri Mitesh Patel and Smt. Jyotikaben Patel,
who gave the statement on oath stating that the share
certificates in question were in their respective names and
these investments were made by them out of their funds.
On the basis of this investigation, DDIT (Investigation)-I,
Baroda concluded that the assessee satisfactorily
furnished the sources of the said investments. At the
same time, he also observed that the said two persons,
viz. Shri Mitesh Patel and Ms. Jyotikaben Patel had not
correlated the date-wise withdrawal with the dates of
investments made, inter alia, by producing the
documentary evidence, the original/regular books of
accounts. The CIT (A) accepted the said report and
deleted the addition. However, at the same time, he
remitted the case back to the AO to hold an inquiry about
the correlation between the date-wise withdrawal with the
dates of investments made by the aforesaid two persons.
9. The Tribunal has set aside this part of the order of the CIT
(A) remitting the case back to the AO and in our opinion
rightly so.
10. It is clear from the above that insofar as the assessee is
concerned, he had explained the source and his
explanation was accepted, viz., shares and securities
found from the residence in the form of Shri Mitesh Patel
and Smt. Jyotikaben Patel. Once this aspect is accepted,
there could not be any addition in the income of the
assessee. If further investigation was required for the
aforesaid correlation, i.e., in case of Shri Mitesh Patel and
Smt. Jyotikaben Patel, that aspect could not have been
remitted back to the AO for assessment while considering
the assessment of the assessee.
11. The third issue is about the peak credit. The AO had
made this addition on the basis of the diary seized from
the premises of the assessee. While computing the peak
credit, the AO had arrived at an addition of `5,31,170/- as
being the excess outgo as per the diary. Simultaneously,
the AO added a sum of `7,34,480/- to the peak credit as
appearing on 24.11.1995. The Tribunal had sustained the
addition of `7,34,480/-, but deleted the addition of
`5,31,170/- on the ground that the addition of both the
excess outgo as peak credits cannot be sustained in view
of the fact that when computation of peak credit, the
outgo would also be considered in the peak credit
calculated on the continuous inflow and outflow of the
funds, only once addition is called for. On this basis,
higher of the two is sustained. This approach of the
Tribunal is again without blemish.
12. We, thus, find that no question of law arises, these
appeals are accordingly dismissed.
ITA No.1366 of 2009 & ITA No.1367 of 2009
13. On the basis of the aforesaid search and block
assessment, the assessee herein, who happens to be son
of Shri Chandra Kant Chanu Bhai Patel (the respondent-
assessee in the aforesaid two appeals), two additions were
made in his case on protective basis. The fist addition
was on account of peak credit. Since peak credit to the
extent of `7,34,480/- ad been sustained in the case of
Chandra Kant Chanu Bhai Patel, the protective addition in
case of this assessee cannot be sustained.
14. Other addition made by the AO was in the sum of
`815994/- on account of excess stock. This addition has
been deleted by the Tribunal on the following grounds:
"15. We have considered the rival submissions. A
perusal of the assessments order shows that two
additions have been made as a result of survey conducted
on the business premises of M/s Jagdamba Tobacco Co.
It is further noticed that these additions have been made
substantially in the hands of Shri chanderkand Chandbhai
Patel. It is further noticed that this addition has also
been deleted by Ld. CIT (A) in the hands of Shri
Chanderkant Chandbhai Patel on the ground that these
additions are to be considered in the hands of Shri Mitesh
Patel as Shri Mitesh Patel was the proprietor of M/s
Jagdamba Tobacco Co. It is also noticed that the survey
in the case of M/s. Jagdamba Tobacco Co. has been
conducted on 18.11.1999 and the search u/s 158BC in
the case of Shri Mitesh Patel in a case of survey, which
has been converted into a search. Thus, what is noticed
is that in the course of survey, the excess stock had been
found and consequently in view of the decision of the
Coordinate Bench of this Tribunal in the case of GMS
Technologies referred to supra, where it has been held
that in the block assessment, material found during the
survey u/s 133A can be used only if it has some relation
with the material seized during the search, otherwise not,
as also the decision of Hon‟ble High Court of Madras in
the case of GK Senniappan referred to supra wherein it
has been held that such other material or information as
are available with the AO do not include the material
gathered during the survey proceedings u/s 133A, we are
of the view that these additions representing the excess
stock and additional income computed by virtue action,
cannot be treated as undisclosed income of the assessee
for the purpose of block assessment as the same has not
been linked to anything found in the course of search. In
the circumstances, the AO is directed to delete the
additions representing the alleged variation in stock found
as a result of survey vis-à-vis stock available on account,
as also the additional income computed by virtue of
survey action. In these circumstances, grounds No.5 and
6 of the assessee‟s appeal stand allowed. "
15. We agree with the aforesaid finding of fact. No question
of law arises, even otherwise tax effect in these cases is
less than `10 lacs. These appeals are according
dismissed.
(A.K. SIKRI)
JUDGE
(M.L. MEHTA)
JUDGE
MARCH 30, 2011
pmc
