2000-VIL-300-ITAT-DEL
Equivalent Citation: TTJ 067, 551,
Income Tax Appellate Tribunal DELHI
Date: 28.02.2000
AMAR NATH AGGARWAL.
Vs
DEPUTY COMMISSIONER OF INCOME-TAX.
BENCH
Member(s) : PHOOL SINGH., R. J. SINGH.
JUDGMENT
PHOOL SINGH, J.M.:
These two appeals of different assessees, relating to the same group, involving block assessment period1st April, 1986to10th Oct., 1996, were heard together and are being disposed of by a composite order for the sake of convenience.
2. First we take the appeal of Amarnath Aggarwal. At the very beginning it may be pointed out that a search and seizure operation under s. 132 of the IT Act, 1961 was conducted in the group of Satish Aggarwal on10th Oct., 1995. So far as case the Amarnath Aggarwal in IT(SS) 294/Del/1997 is concerned notice under s. 158BC was served on the assessee on 30th April, 1997 Notice under s. 142(1) was also issued and served along with questionnaire dt.19th Sept., 1997. The following is the complete assessment order in the case of Amarnath Aggarwal.
"2. The assessee has filed his return of income in Form No. 2-B on6th Oct., 1997. Notice under s. 143(2) was served on the assessee on7th Oct., 1997, Proof of having filed return of income for the asst. yrs. 1987-88 & 1988-89 by the due date has not been produced by the assessee. Hence, income declared for these two years (Rs. 18,400) & Rs. 18,500 for asst. yrs. 1987-88 & 1988-89 respectively) is being taken as nil and the above amount is taken as undisclosed income of the assessee for the block period.
3. Similarly, for asst. yr. 1995-96 & 1996-97, the return of income have been filed on 31st March, 1997, i.e. beyond the time limit, stipulated under s. 139 of the IT Act, 1961. The returned income for these two years is also being taken at nil and an amount of Rs. 2,64,408 for asst. yr. 1995-96 and Rs. 3,49,989 for asst. yr. 1996-97 is taken as undisclosed income of the assessee for the block period.
4. The search was conducted on10th Oct., 1996, hence the period from1st April, 1996to10th Oct., 1996is covered in the block period, the proportionate income of the assessee for this period works out to Rs. 1,84,716 taken as per the income shown by the assessee for the asst. yr. 1996-97. The return of income for the asst. yr. 1997-98 was due in June 1997. However, it has not been filed till date. Hence, the above amount is being taken as undisclosed income for the block period.
5. With these remarks, the total undisclosed income of the assessee is computed as under:
Undisclosed Income
Rs.
(1) Undisclosed income for the A.Is. 1887-88
& 1988-89 is taken at Rs. 18,400 &
Rs. 18,500 respectively as discussed above
in para 2 36,900
(2) Undisclosed income for asst. yr. 1995-96 &
1996-97 is taken as Rs. 2,64,408 &
Rs. 3,49,489 respectively as discussed
above in para 3 6,14,397
(3) Undisclosed income from 1st April, 1996 to
10th Oct., 1996 1,84,716
---------
Total undisclosed income 8,36,013"
---------
2. This assessment order is subject-matter of appeal, preferred by Amarnath Aggarwal. It is submitted by the learned counsel for the assessee that the AO had wrongly mentioned in para 2 of the assessment order that assessee had failed to file proof of having filed return of income for asst. yrs. 1987-88 and 1988-89 by the due date and he was not justified in treating the income of Rs. 18,400 and Rs. 18,500 for these two assessment years as undisclosed income of the assessee for the block period. In this connection our attention was drawn to pp. 13 and 14 of the paper book which are copies of assessment orders for asst. yr. 1987-88 and 1988-89 completed on23rd March, 1989and23rd Nov., 1989respectively. The assessee has certified that these documents were well before the AO and it was the contention of the learned counsel that AO has completely ignored the same.
2.1. The learned Departmental Representative has nothing to rebut the same.
2.2. After going through the copies of assessment orders for asst. yr. 1987-88 and 1988-89 which were completed well before the date of search, it was not justifiable on the part of AO to treat the income of Rs. 18,400 and Rs. 18,500 for these two assessment years as undisclosed income and the same is liable to be deleted.
2.3. So far as asst. yrs. 1995-96 and 1996-97 are concerned, the AO had noted that the assessee had filed the return for these two assessment years beyond the time stipulated under s. 139(1) of the Act. Thus, he treated the returned income for these two assessment years as Nil and made the addition of Rs. 2,64,408 and Rs. 3,49,998 respectively. The learned counsel pointed out that there is mistake in the income for asst. yr. 1996-97 as it was Rs. 2,26,408 and not Rs. 2,64,408 and for that he has invited our attention to copy of computation of taxable income appearing at pp. 67 of the paper book. This point has also not been challenged by the learned Departmental Representative and it appears to be typographical mistake on the part of AO and thus the amount of income in asst. yr. 1995-96 shall be read as Rs. 2,26,408 and not Rs. 2,64,408 shown in the assessment order.
3. The other point of the learned counsel for the assessee is that undisputedly the assessee has not filed return of income for asst. yr. 1995-96 and 1996-97 within the stipulated time under s. 139(1) of the Act but that fact alone will not make the returned income shown in the belated return under the provisions of s. 139(4) as undisclosed income contained in s. 158B(b) of the Act. The plea of the learned counsel was that assessee was income-tax assessee and he had been filing return for earlier years. The learned counsel pointed out that in asst. yr. 1987-88 to 1989-90 the assessee had been showing business income and the income as returned was accepted by the Department and no addition was made and the assessee had paid the tax. In asst. yr. 1994-95 the assessee had shown income from salary and income from interest at Rs. 1,20,400 and was accepted by the Revenue as is apparent from copy of assessment order for asst. yr. 1994-95 appearing at pp. 71 of the paper book. This assessment order is dt. 31st July, 1995, much before the date of search and fact which emanates from the said assessment order is that assessee had been showing income from salary and interest which was well within the knowledge of the Department and assessee may be defaulter in filing the return of income in time as prescribed under s. 139(1) of the Act but it was not expected from him that he will not be filing return at all showing income from salary and interest for asst. yrs. 1995-96 and 1996-97 as sources of income were well within the knowledge of the Department. It was also pointed out from the chart appearing at p. 72 of the paper book that whatever income from salary and interest had been declared by the assessee for asst. yrs. 1995-96 and 1996-97, the same had been assessed by the Department without making any addition and that income cannot be treated as undisclosed income. Reliance had been placed on the decision of Tribunal Nagpur Bench SMC in ITA No. 998/Nag/1996 in the case of Smt. Jatin Bai Baid vs. Asstt. CIT dt.24th June, 1997, copy of which is appearing at pp. 73 to 78 of the paper-book. According to the learned counsel the same was the controversy before the SMC Bench and after hearing the submission of the assessee- as well as that of Departmental Representative the Bench had concluded that s. 158BB provides a procedure for computation of undisclosed income of block period and that is a machinery section per-supposing undisclosed which is to be determined first and then only it is to be computed in the prescribed manner. The Bench has also taken into consideration the sub-s. (c) of s. 158BB(1) and concluded that this section will come into play only if undisclosed income is determined and if AO fails to determine the undisclosed income then the said provision will not come into play. In that case assessee was filing return but for asst. yr. 1995-96 he failed to file the same in time and Tribunal concluded that failure to file the return for asst. yr. 1995-96 up to the date of search will not give basis to the Department to treat the income of asst. yr. 1995-96 disclosed by the assessee in the return filed belatedly as undisclosed income. The learned counsel submitted that same view was followed by Tribunal Nagpur Bench SMC in ITA(ss) 124/Nag/1997 in the case of Mahesh Kumar S. Aggarwal vs. Asstt. CIT dt.31st Aug., 1998, copy of which is appearing at pp. 79 to 84 of the paper book. On the basis of these two decisions the plea was that AO was not justified in treating the disclosed income for asst. yr. 1995-96 and 1996-97 by the assessee in belated returns as the undisclosed income in the block period and the same should be deleted.
3.1. The learned Departmental Representative as against it has submitted that assessee had admittedly not filed return for these two assessment years as required under s. 139(1) of the Act and it could not be taken as granted that assessee would have filed return of income for these assessment years but for search and seizure operation. The learned Departmental Representative further relied upon the provisions of s. 158BB(1)(c) which provides that where the due date for filing return of income has expired but no return of income has been filed then the amount of income for that year shall be treated as Nil for the purpose of computing undisclosed income. In the case in hand as per plea of the learned Departmental Representative the assessee failed to file return for these two assessment years and thus there was justification for the AO to treat the income of asst. yrs. 1995-96 and 1996-97 and Nil and he rightly treated the belated income for asst. yrs. 1995-96 and 1996-97 as undisclosed income and there is no infirmity in the said order.
3.2. We have considered the rival submissions and perused the record carefully. In this connection we may look into the order of SMC Bench in the case of Shri Mahesh Kumar S. Aggarwal HUF vs. Asstt. CIT, copy of which is appearing at pp. 79 to 84 of the paper-book. The Bench has observed as under:
"I have carefully considered the rival submissions made before me. A glance through the Chapter XIV-B of the IT Act, 1961 will make it clear that it provides special procedure for assessment of search cases. Sec. 158B(b) under this Chapter defines "undisclosed income" which includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of IT Act. The undisclosed income includes income or property which has been defined in this definition and which has not been or would not have been disclosed for the purposes of IT Act. The words "which has not been or would not have been disclosed for the purposes of this Act" indicate that either the assessee failed to file the return or in the return filed the income has not been disclosed. But the second part applies in the case where the assessee has not filed return or omitted to mention in the return. Then the question arises whether the assessee would have disclosed or would not have disclosed. From the circumstances if it could be reasonably inferred that the undisclosed income which was likely to be disclosed then it cannot be said, it was an income which would not have been disclosed. The words "would not have been disclosed for the purposes of this Act" leads to a further posture. From the circumstances and facts of the case, a prudent man would have come to a conclusion that the circumstances indicate that the assessee would not have disclosed this income for the purpose of IT Act. Can a prudent and reasonable man will come to a conclusion, that in the instant case of the assessee on the basis of the facts presented, that the assessee would not have disclosed the income for the purposes of IT Act. It is to be noted that even before the search, the firm who paid the assessee salary and interest had filed the return and showed that whatever were paid to the assessee. In the preceding year, the assessee himself declared the same kind of income. The assessee had paid the advance tax for the year under consideration. All the facts taken together does not lead to a conclusion that the assessee would not have disclosed the income had there been no search. It is true that the time for filing the return under s. 139(1) was over. The assessee did not file the return. The assessee has not disclosed the income. The title of s. 158BBA is "Assessment of undisclosed income as a result of search". This indicates that the income might be detected as a result of search. If the existence of the income in the hands of the assessee was within the knowledge of the Department, even indirectly from the record available and not from the return filed by the assessee, it cannot be said that something has been found out as a result of search."
3.3. The Tribunal has again taken note of the provisions of s. 158BB(1)(c) and decided the controversy as under:
"Coming to the contention of the Revenue that once the assessee fails to file the return under s. 139(1), in all circumstances, the disclosed income should be taken as Nil, I am unable to agree. The Tribunal, Nagpur Bench, Nagpur in ITA No. 898/Nag/1996 had already taken the view that ii the assessee did not file the return as in certain contingencies such as income was below taxable limit or the time had not been lapsed for filing the return, in such case, s. 158BB(1)(c) cannot be resorted to. I am also unable to agree with the view of the Department that the due date mentioned in s. 158BB(1)(c) is the due date for filing the return under s. 139(1). It is very pertinent to note that s. 158BB(1)(b) specifically mentions s. 139(1) and ss. 147. Sec. 158BB(1)(b) states "where returns of income have been filed under s. 139 or s. 147 but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such return". It means that the returns filed under both the sections are equally to be considered for the purpose of computing the income. If that being so, it is not correct to say that in s. 158BB(1)(c), the words "due date for filing a return of income has expired but no return of income has been filed" means the due date under s. 139(1) only. There are different due dates for filing the returns in different sections under the Act. As in the case of this assessee against whom a notice has been served under s. 148 r/w s. 147 and the time for filing the return has not been expired, the due date for filing the return of income has not expired. In case of such an assessee, if transactions are reflected in the books of account, then they cannot be treated as undisclosed income."
3.4. The argument of the learned counsel as well as the learned Departmental Representative stand duly answered in the above observation of the Bench and we are in agreement with the view taken by the SMC Bench and respectfully following the same it is to be concluded that AO was not justified in treating the returned income of the assessee for asst. yrs. 1995-96 and 1996-97 in belated returns as undisclosed income for the block period and the same are liable to be deleted.
4. Now comes the third amount of Rs. 1,84,716 which is treated as undisclosed income for the period1st April, 1996to10th Oct., 1996. The AO had worked out the proportionate income of the assessee for this period on the basis of income shown by the assessee for asst. yr. 1996-97. The return for asst. yr. 1997-98 was due to be filed in June, 1997 and assessee, as noted by the AO, had not filed the same. The AO added the same as undisclosed income for the block period. In this connection the learned counsel pointed out that assessment order was framed on29th Oct., 1997and return was filed by the assessee for asst. yr. 1997-98 on24th Oct., 1997and thus the amount added by the AO was not justified and the same is subject-matter of assessment order to be framed afterwards. There appears to be logic in the argument of the learned counsel for the assessee. As the return was due in June 1997, the assessee cannot be taxed on the amount of income for which return was due after the date of search and admittedly the assessee had already filed the return though a bit late but that cannot be treated as undisclosed income for the block period. The result is that all the amounts treated as undisclosed income for asst. yr. 1987-88, 1988-89, 1995-96 and 1996-97 as well as for the period 1st April, 1996 to 10th Oct., 1996 were wrongly added as undisclosed income by the learned AO and the same are deleted. The assessment order stands set aside.
4.1. So far as appeal of Smt. Rita Aggarwal is concerned, admittedly date of search was the same and jewellery worth Rs. 11,04,177 was found out of which jewellery worth Rs. 4,69,832 was said to be belonging to the assessee. The assessee gave the following details of jewellery vide letter dt.29th Sept., 1997as below:
------------------------------------------------------------
Name Item Sl. No. Weight Value as on
as per list 10-10-96 as
per list
Rs.
------------------------------------------------------------
Smt. Rita Aggarwal 1, 2, 3, 4, 495.300 gms 2,22,173
5, 7, 9, 11,
15, 17
Late Smt. Dropdi Devi 6, 16 125.700 gms 1,58,798
(these items have
bequeathed to Smt.
Rita Aggarwal after
the death of Smt.
Dropdi Devi)
Sh. Satish Aggarwal 8 58.000 gms. 27,106
Needhi & Yamini 10, 12, 13 93.600 gms 47,755
(both daughters of & 14
Sh. Satish Aggarwal)
Smt. Rita Aggarwal 18 2 kg. 14,000
(Silver
articles)
--------
4,69,832
------------------------------------------------------------
4.2. The AO examined each of the part of explanation. About 495.300 gms. jewellery allegedly belonging to the assessee, the plea of the assessee was that she belonged to very rich family and possession of less than 50 tolas of gold jewellery by such married lady of more than fifteen years is not unbelievable fact. Reliance was placed on the CBDT Circular in which it has been emphasised on the search party that gold jewellery weighing 500 gms. in case of married lady be not seized. It appears that AO after considering all the facts noted that she may be possessed 250 gms. of jewellery and rest of the jewellery was treated as unexplained for the purpose of addition in the block period.
4.3. The AO further examined the case of the assessee that Smt. Dropdi, grand, mother of the assessee bequeathed 125.700 gms. jewellery through will. The AO did not find the alleged will as genuine. The AO also examined the plea of the assessee that ornaments of the assessee as well as of Smt. Dropdi Devi along with Shakuntla Devi were valued by registered Government Valuer as early as on 20th Dec, 1985 through Rajnish Bhushan Jain, a partner of M/s Jain Jewellers and after going through all the facts noted that this report of approved valuer was not inspiring any confidence but was manipulated move of the assessee. He did not find the story of assessee's getting ornaments from Smt. Dropdi Devi through Will as true and treated the said jewellery weighing 125.700 gms. as unexplained investment of the assessee for block period.
4.4. About 58 gms. jewellery the plea of the assessee was that it belonged to Satish Aggarwal, husband of the assessee but that plea was also rejected on the ground that all the ornaments allegedly belonging to Satish Aggarwal were not to be worn by men only. This jewellery was also taken as unexplained and same thing happened in respect of 93.600 gms. of jewellery allegedly belonging to Nidhi and Yamini, daughters of the assessee. About 2 kg. of silver, the plea of the assessee was that silver articles were received from different relatives etc. from the time of marriage onwards was also not believed by the AO and he treated all the amount of jewellery exceeding 250 gms. as undisclosed income and addition of Rs. 3,54,839 was made on this ground.
4.5. For asst. yr. 1996-97 the AO noted that assessee failed to file return for this assessment year in time and thus he treated declared income for asst. yr. 1996-97 as Nil and amount of Rs. 65,333 was taken as undisclosed income of the assessee. The same thing happened in respect of income for the period 1st April, 1996 to 10th Oct., 1996, the date of search as return was admittedly not due by that time but on the basis of earlier years the AO worked out the proportionate income for this period also and made an addition of Rs. 34,774.
4.6. So far as undisclosed income for asst. yr. 1996-97 and undisclosed income for1st April, 1996to10th Oct., 1996is concerned, our reasoning in the case of Amarnath Aggarwal, decided earlier shall be applicable and thus additions are treated as uncalled for and are liable to be deleted.
4.7. Now we are left with the amount of addition in respect of undisclosed investment in jewellery for the block period. So far as 495.300 gms. jewellery is concerned, it was submitted by the learned counsel for the assessee that CBDT vide its Circular, dt.11th May, 1994has emphasised upon raiding party that 500 gms. of gold jewellery and ornaments for married lady be not seized. Hon'ble High Court of Karnataka in the case of Smt. Pati Devi vs. ITO (2000) 159 CTR (Kar) 28 : (1999) 191 Taxman 350 (Kar) has laid down that assessee cannot be denied the benefit of instruction of CBDT and it was not open to the CIT(A) to reject the explanation of assessee in regard to 10 tolas of gold jewellery. On the basis of this ratio the contention of the learned counsel for the assessee was that said ornaments weighing 495.300 gms. was to be treated as belonging to Smt. Rita Aggarwal who was married in the year 1979 and keeping in view the status of her family as she hails from a very rich family and her parents were also dealing in jewellery business. About 93.600 gms. jewellery the plea of the learned counsel for the assessee was that the same belonged to Miss Nidhi and Miss Yamini, daughters of the assessee and in that Circular of CBDT it has been mentioned that 25 gms. gold ornaments per unmarried lady would not be seized and if applied that yardstick to the facts then the ornaments belonging to two daughters of the assessee were slightly excessive to the said yardstick but keeping in view the status of the family it cannot be believed that it was more. About 58 gms. of gold jewellery the contention of the learned counsel is that it belonged to Satish Aggarwal. The above referred to CBDT Circular further provides that 100 gms. gold jewellery per male member of the family be not seized and in view of this the explanation of the assessee should have been accepted. The contention of the learned counsel is that AO had wrongly rejected the explanation and there was no justification for AO to estimate that assessee may be having 250 gms. of gold jewellery. There is no basis to arrive at this figure. Contrary to it CBDT Circular provides the limit of 500 gms. of gold jewellery to a married lady. In the same way the explanation for holding the jewellery by two daughters as well as husband of assessee had wrongly been rejected without any basis and assessee hails from a rich family. The members of her family should be taken as having the gold ornaments as shown not exceeding the limit but well within the limit prescribed by the CBDT in its Circular. About 125.700 gms. of jewellery the contention of the learned counsel for the assessee is that it belonged to Smt. Dropdi Devi, grandmother of the assessee and by will executed as early as on15th Nov., 1993the said Dropdi Devi bequeathed the above referred to jewellery in favour of assessee. The assessee had filed original will before the AO along with affidavit of Guggan Ram, the only witness of execution of the will and also filed affidavit of assessee as well as her husband which has wrongly been rejected by the AO. Further the ornaments received by the assessee through this will were valued by the Government valuer as early as on 20th Dec, 1985 as is evident from copy of Valuer's report filed by the assessee before the AO which has wrongly been rejected pointing out unfounded mistakes and errors. It was the case of the learned counsel for the assessee that the amount charged by Rajnish Bhushan Jain for valuation had been charged in the account of Smt. Shakuntla Devi who paid Rs. 1,100 to him for valuation and copy of account of Smt. Shakuntla Devi is appearing at p. 32 of the paper-book showing that amount. On the basis of this it was the contention of the learned counsel that defects noted by the AO were not correct and plea of the assessee that Smt. Dropdi Devi got valued these ornaments in 1985 from the Government registered Valuer should have been accepted and theory of execution of will should have also been accepted. In the last the submission was that no addition was warranted and deserved to be deleted.
4.8. As against it the learned Departmental Representative draw our attention towards the statement of the assessee recorded at the time of search, wherein she admitted the entire jewellery belonging to her, as under:
Q. Approximately 800 gms. of jewellery found in your room does it belong to
you? Kindly explain.
Ans. Yes. Jewellery belongs to me which were received from in-laws, parents, relations and friends over period of times on different occasions."
4.9.1. It was thus contended by him that the assessee adopted the theory of bifurcation of her jewellery amongst his family members in the light of Circular of CBDT. He stressed that the statement recorded at the time of search had more authentic and evidentiary value over the explanation furnished later. He further placed relianced on the order of AO and submitted that theory of execution of will is prima facie not believable because the will was not a registered document. It was not signed by two witnesses and it has not been proved that the will was bearing the thumb impression of Smt. Dropdi Devi. Further, the plea of the assessee that Smt. Dropdi Devi got valued the ornaments on20th Dec, 1985from Government Approved Valuer, Rajnish Bhushan Jain was rightly rejected by the AO for the reasons recorded in the assessment order and additions were rightly made.
4.10. We have considered the rival submissions and also perused the material to which our attention was drawn during the course of arguments. Undisputedly CBDT Circular is there which provides that 500 gms. gold jewellery per married lady, 25 gms. per unmarried lady and 100 gms. per male member of the family is not to be seized. But before taking the benefit of this Circular, it is obligatory on the part of the assessee to establish that jewellery actually belonged to the family members. In the absence of such a factual position, no benefit of the Circular can be given. It is obvious from the statement of the assessee recorded at the time of search that the admitted entire jewellery belonged to her. In the background of this factual position, we are not inclined to accept the explanation furnished during the course of assessment proceedings as regards the ownership of jewellery favouring her husband and unmarried daughters. Since the assessee admitted her ownership of entire jewellery in her statement under s. 132(4), we are of the view that she should be granted benefit of 500 gms. of gold jewellery in view of the Circular and precedent cited above and the value of balance jewellery should be included in the undisclosed income of the block period.
4.11. About 125.700 gms. of gold ornaments, allegedly received by assessee from Smt. Dropdi Devi through will, we are not in agreement with the contention of the learned counsel for the assessee. A perusal of the will which had been filed before us, shall show that it bears signatures of one witness while requirement of execution of will is that it should be signed by two attesting witnesses. No reason has come as to why presence of other witness was not procured and thus it remains to be invalid document. The theory of assessee that Smt. Dropdi Devi got valued the gold ornaments on 20th Dec, 1985 from Rajnish Bhushan Jain is also not inspiring confidence in view of the facts noted by the AO in the assessment order and we are in agreement with those reasons and conclude that Smt. Dropdi Devi was not the owner of those ornaments and theory set up by assessee about receiving the alleged ornaments weighing 125.700 gms. gold ornaments from Smt. Dropdi Devi remained to be proved by cogent evidence and we conclude that the same had rightly been treated as undisclosed income of the assessee for the block period. Accordingly, we confirm the amount of Rs. 1,58,790 as value of Rs. 125.700 gms. as undisclosed income which has been added in the hands of assessee for block period.
4.12. In the result, ITA (SS) No. 294/Del/1997 is allowed and ITA (SS) No. 297/Del/1997 is partly allowed.
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