DCIT,CC-2(4), CHENNAI vs. V.BASKARAN, CHENNAI
Facts
The assessee, Shri V. Bhaskaran, is appealing against a block assessment order. The case involves multiple appeals and prior assessments/reassessments over several years. The core of the dispute revolves around the additions made by the Assessing Officer (AO) based on information found during searches and the assessee's subsequent explanations or lack thereof.
Held
The Tribunal partly allowed the assessee's appeal for statistical purposes and dismissed the Revenue's appeal. Several additions made by the AO were deleted, while others were upheld or partly allowed. The Tribunal found that some additions were not based on sufficient evidence or were not attributable to the assessee individually. The Revenue's appeal regarding jurisdiction under Section 153C was dismissed.
Key Issues
The appeal concerns various additions made by the Assessing Officer in a block assessment order, including deposits in the name of the assessee's wife, silverware, estimated marriage expenses, personal drawings, advance tax payments, foreign trip expenses, bank deposits, investment in Himalaya Benefit Fund, purchase of equipment abroad, purchase of Malaysian Ringets, and purchase of a car. Additionally, the Revenue's appeal challenges the quashing of assessment by the CIT(A) due to jurisdictional issues under Section 153C.
Sections Cited
143(3), 158BC, 254, 132, 142(1), 144, 69A, 153C, 153A, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI S.R. RAGHUNATHA
आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: The appeal by the assessee in IT(SS)A No.3/CHNY/2017 is arising out of the block assessment order for the Block Period 01.04.1986 to 24.09.1996 passed by the Assistant Commissioner of Income Tax, Central Circle 2(4), Chennai u/s.143(3) r.w.s. 158BC r.w.s. 254 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 31.03.2017.
Brief facts are that the assessee Shri V. Bhaskaran is the Managing Director of J. Jay TV Pvt. Ltd., and a search was conducted by the Income-tax Department u/s.132 of the Act on 24.09.1996. Prior to this search, Enforcement Directorate also conducted search on the premises of the assessee on 21.09.1995. Consequent to the search conducted on the assessee by the Income-tax Department u/s.132 of the Act on 24.09.1996, notice u/s.158BC of the Act dated 23.12.1996 was served on the assessee on 28.12.1996 through the Superintendent of Central Prison, Palayamkottai as the assessee was in remand proceedings. Subsequently, notice u/s.142(1) of the Act was issued on 11.08.1997 for which assessee filed reply on 26.08.1997. The assessee filed his return of income in Form No.2B
- 3 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 on 25.09.1997 just 5 days before limitation for completion of block assessment. The assessee admitted an income of Rs.18,04,100/- for the block period but without paying self-assessment tax of Rs.9,52,460/-. The original block assessment was completed for the period 01.04.1986 to 24.09.1996 vide ex-parte assessment u/s.144 r.w.s. 158BC of the Act by assessing total undisclosed income of Rs.9,60,84,250/- vide order dated 30.09.1997. The block assessment order was challenged before ITAT and ITAT vide order dated 07.08.1998 dismissed the appeal of assessee on the ground of non-payment of self-assessment tax on admitted liability. The assessee paid the admitted tax on 09.09.1998 and filed an appeal before the Tribunal, which has been numbered as ITA No.160 of 1998. Apart from that on 10.02.2002, the assessee filed miscellaneous application in MP.No.13 of 2000 before ITAT praying for restoration of appeal No.238 of 1997. The Tribunal by a common order dated 22.02.2001 dismissed the appeal No.160 of 1998 and miscellaneous application No.13 of 2000 in Appeal No.238 of 1997. The assessee preferred appeal before the Hon’ble High Court of Madras and the Hon’ble High Court vide judgment dated 29.04.2004 restored the appeal to ITAT and directed the ITAT to dispose the appeal within four months from the date of receipt of order. The ITAT in Appeal No.160/1998, order dated 27.09.2004 had set aside
- 4 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 the block assessment order, following the directions of Hon’ble High court of Madras and directed the AO to reframe the block assessment. Accordingly, again block assessment was framed u/s.143(3) r.w.s 158BC of the Act on 30.03.2006 by assessing undisclosed income at Rs.9,60,84,250/-. Aggrieved by the block assessment order, assessee preferred appeal before ITAT and ITAT vide its order in IT(SS)A No.90/Mds/2006 dated 14.12.2007 for the block period 01.04.1986 to 24.09.1996 set aside the block assessment order by observing in paras 13 & 14 as under:- “13. We have heard both the parties and perused the materials on record. In our opinion, the assessing officer has not furnished the requisite documents and details as requested by the assessee. There is merit in the plea of the assessee. Hence we direct the assessing officer to follow the directions given by the ITAT on earlier occasion and furnish the required documents to the assessee before placing reliance on the same. Further we direct the assessing officer to confine the determination of undisclosed income based on the evidence found as a result of search or the books of accounts or material or information as are available with the assessing officer relating to such findings. The material collected from other authorities can be used in the block assessment only when these enquiries is linked to some specific material or evidence detected during the course of search. If the search action u/s.132 has given birth to these information collected from the Government authorities, then only it can be used for the purpose of block assessment.
Hence we set aside the issue to the assessing officer to redo the assessment after giving adequate opportunity to the assessee.
2.1 Subsequently, the assessee filed appeal before Hon’ble High Court of Madras in TCA No.1790 of 2008 against the order of ITAT in
- 5 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 IT(SS)A No.90/Mds/2006 dated 14.12.2007 and the Hon’ble High Court of Madras granted interim stay for completion of assessment till 02.02.2009. The Hon’ble High Court vide its judgment dated 17.04.2009 directed the AO to pass the assessment order in accordance with law but giving effect of such order was stayed till the disposal of tax case appeal. Accordingly, the block assessment proceedings were again taken up for scrutiny and accordingly, block assessment u/s.143(3) r.w.s. 115BC r.w.s. 254 of the Act was completed on 15.06.2009 repeating the same total income for block period at Rs.9,60,84,250/-. Aggrieved against this block assessment order, assessee preferred appeal before ITAT and ITAT vide its order in IT(SS)A No.28/Mds/2009 dated 28.10.2016 had set aside the assessment order by observing in paras 5 & 6 as under:- “We have heard both sides, perused 1 the materials available on record and gone through the orders of authorities below. On perusal of the assessment order, we find that it is not authentically stated as to whether the notice for posting of the case for hearing has been duly served on the assessee or not. In the assessment order, notice date and date of hearing has been mentioned. In furtherance to the above, at para 8 of the assessment order, the Assessing Officer has mentioned that "assessment proceedings were again taken up and the case was posted for hearing on 15.05.2009 vide notice dated 30.04.2009. It was also mentioned that the assessee was also informed that all the copies of documents seized by the Enforcement Directorate had already been forwarded to him on 03.01.2006 and he may either personally or through authorized representative make any submissions or produce evidence in support of claims made. There was no response from the assessee.” However, it was not mentioned as to whether the said notice has been duly served on the
- 6 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 assessee or not. The Assessing Officer has simply stated in para of his order that on the date of hearing on 27.05.2009, a letter was received from Shri K. Ravi of Ravi & Co., intimating that the assessee had travelled out of country and requested for reposting the hearing after 05.06.2009 without bringing the contents of the letter on record and assigning reasons not entertaining the said adjournment letter.
On perusal of the Tribunal dated 14.12.2007 in I.T.(SS)A.No.90/Mds/2006, Shri K. Ravi of Ravi & Co has been represented on behalf of the assessee before the Tribunal. When the assessee had been travelled out of the country and not available to represent his case before the Assessing Officer, the intimation of his availability required to be brought to the notice of the Assessing Officer, Shri K. Ravi of Ravi & Co. has filed a letter of intimation about the availability of the assessee. For one reason or other, if the assessee was not available even to authorize somebody to represent, we are of the considered opinion that the Assessing Officer was not correct to reject the intimation letter filed by Shri Ravi on the ground that he was not authorized to do so. Under these facts and circumstances and to meet the ends of justice, we are of the considered opinion that the assessee should be given one more opportunity of hearing to represent his case before the Assessing Officer, Thus, we remit the matter back to the file of the Assessing Officer to give one more opportunity of hearing and thereafter the Assessing Officer is duty bound to complete the assessment in conformity with earlier directions of the Tribunal in I.T.(SS)A.No.90/Mds/2006 dated 14.12.2007 at paras 19 & 20 as well as by following the ratio laid down in the case of CIT v.R.M. Patel (HUF) 298 ITR 274(Mad). The assessee is also directed to cooperative with the Department for completing the assessment.”
2.2 In view of the above directions of ITAT, the AO issued detailed questionnaire dated 27.02.2017 calling for the sources in respect of various additions, which we will discuss in later part of this order. Accordingly, this block assessment was completed by the AO
- 7 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 u/s.143(3) r.w.s.158BC r.w.s. 254 of the Act, vide order dated 31.03.2017, which is the impugned order before us.
The first issue on merits in this appeal of assessee is as regards to the order of AO making addition in block assessment of the amount of deposits standing in the name of assessee’s wife as undisclosed income and consequential interest on the above deposits. For this, assessee has raised the following ground Nos.7 & 8:- Deposit in the name of wife : Rs.10 Lakhs 7. The Learned Assessing Officer has erred in making an addition of the amount of deposit standing in the name of the wife of the Appellant as his undisclosed income, despite the fact that it is not arising out of any evidence found as a result of search and despite the admission by the wife by a letter dated23/09/1997 that the deposit belongs to her and that it represents the money received by her at the time of her marriage. The addition cannot be made when the investment is not in the name of the assessee and there is no confirmation from either the assessee or from the wife or any other independent evidence to show that the deposit represents undisclosed income and that such income belongs to the assessee.
Interest On The Above Deposit : Rs.2.72 Lakhs 8. The Learned Assessing Officer has erred in making an addition of the interest arising from deposit standing in the name of the wife of the Appellant as his undisclosed income, despite the fact it is not arising out of any evidence found as a result of search.
Brief facts are that the AO while completing block assessment noted that during the course of search operation certain
- 8 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 incriminating materials pertaining to the assessee were found by the Enforcement Directorate at the time of search conducted and thereafter by the Department on the residence and business premises of the assessee on 21.09.1995 & 24.09.1996. As per information shared by Enforcement Directorate, it found a fixed deposit of Rs.10 lakhs in the name of assessee’s wife Smt. B. Subhashri which was made with Sri Ram Group of Companies on 17.10.1994. The assessee could not explain the source of this deposit, therefore the AO added the same in the hands of the assessee for the assessment year 1995-96 falling in the block period under consideration and consequent interest earned for assessment years 1995-96, 1996-97 & 1997-98 upto 24.09.2009 amounting to Rs.2,71,834/-. The AO added both the seed money and the interest thereon aggregate amounting to Rs.12,71,834/-. Aggrieved, now assessee is in appeal before us.
We have heard rival contentions and gone through facts and circumstances of the case. The ld.counsel for the assessee Shri K. Ravi read out from the assessment order that admittedly the FDR made with Sri Ram Group of Companies by Smt. B. Subhashri, the wife of assessee and this is accepted by Smt. B. Subhashri by filing a letter dated 23.09.1997 claiming the receipt of marriage gift and
- 9 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 made deposit out of such marriage gift but the AO has added in the hands of the assessee instead of assessing the same in her name. When a query was put to ld. Senior Standing Counsel for the Revenue, he could not controvert the above fact situation that the FDR was in the name of assessee’s wife Smt. B. Subhashri made with Sri Ram Group of Companies of Rs.10 lakhs as on 17.10.1994. The assessee in his sworn statement on 26.08.1997 admitted that the FDR is made by his wife out of her own sources i.e., gift received by her at the time of her marriage and it is her money only. Even, assessee’s wife Smt. B. Subhashri vide letter dated 23.09.1997 claimed the ownership of FDR of Rs.10 lakhs made with Sri Ram Group of Companies on 17.10.1994 and claimed receipt of marriage gift and made deposits out of such marriage gift. Lack of evidence or proof does not give entitlement to Revenue to make addition in the hands of the assessee as the ownership lies with the wife of the assessee. Admittedly, the FDR is in the name of assessee’s wife Smt. B. Subhashri maintained with Sri Ram Group of Companies of Rs.10 lakhs and admitted by her. Even the revenue could not brought on records any evidence that this amount was invested by assessee out of his own funds despite the fact that income tax department had carried out search on the assessee. In the given facts of the case, this addition, if at all, is to be made in the hands of assessee’s wife
- 10 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Smt. B. Subhashri and not in the hands of the assessee. Hence, we delete this addition and also delete the addition of consequential interest and thus, allow this issue of assessee’s appeal.
The next issue in this appeal of assessee is as regards to the order of AO making addition on account of silverware of Rs.2,00,000/- weighing about 33 Kgs. For this, assessee has raised following Ground No.9:- Silverware : Rs.2 Lakhs 9, The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search. The Learned Assessing Officer has erred in making an addition of Rs.2 Lakhs in the hands of the Appellant for silverware, not accepting the admission by the wife of the Appellant that the silverware was brought in by her at the time of the marriage, keeping up with the traditional South Indian Hindu marriage.
Brief facts are that during the search at the residence of the assessee, silverware weighing about 33 kgs valued at Rs.2,00,000/- was found. The AO asked explanation or the sources of the same and according to AO, the explanation is not reasonable or not to his satisfaction. Hence, he added the value of silverware/silverware articles as unaccounted investment u/s.69A of the Act in the hands of the assessee for the assessment year 1997-98 falling in the block period. Aggrieved, assessee came in appeal before the Tribunal.
- 11 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 8. We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee before AO and even before search party admitted that the silverware/ silverware articles were presented to his wife by her father and his friends. The assessee’s wife also owned up these articles by filing a letter dated 23.09.1997. The assessee has furnished the name of assessee’s father-in-law Dr.Vinodhagan but he expired on 19.03.1993. Admittedly, Dr.Vinodhagan’s elder son Shri Mahadevan denied the gifted article, but that is of no evidentiary value because he was not party to the gift. Hence, in the given facts and circumstances, as admitted by assessee’s wife Smt. B. Subhashri vide letter dated 23.09.1997 owning up these assets is to be considered as owner of the asset and addition in any case, is to be made in her hands only. Hence, in view of the above, we delete the addition and allow this issue of assessee’s appeal.
The next issue in this appeal of assessee is as regards to the order of AO in making addition of estimated marriage expenses of Rs.5 lakhs. For this assessee has raised the following ground No.10:- Estimated Marriage Expenses : Rs.5 Lakhs 10.The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search The Learned
- 12 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Assessing Officer has erred in making an estimated addition on account of marriage expenses disregarding that the south Indian Hindu marriage expenses to borne by the bride's family.
We have heard rival contentions and gone through facts and circumstances of the case. The facts are that during the search proceeding by Enforcement Directorate, information was obtained that the assessee got married in September, 1994. During the course of assessment proceedings, the assessee was asked to explain the source of marriage expenses. The assessee denied having spent any amount towards marriage and the parents of the assessee in their assessment also stated that they did not incur any substantial expenditure at the time of marriage as the assessee was having his own source of income from which marriage expenses were made. As there is no information or incriminating documents available with the Department that how much was the expenditure, the AO estimated marriage expenses at Rs.5 lakhs and considered as unaccounted expenditure for the assessment year 1995-96 falling in the block period. We noted that this is purely an estimate and there is no evidence how much is the expenditure incurred by assessee on marriage expenses. We noted that the AO simply estimated without any incriminating material or any material that assessee has incurred expenditure of marriage. However, going by
- 13 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 the fact that marriage happened and some expenditure might have been incurred for that, we restrict the estimate at 60% what was estimated by AO. Hence, we direct the AO to recompute the income for the block period after estimating the marriage expenses at Rs.3 lakhs instead of estimated by him at Rs.5 lakhs. Hence, this issue is partly-allowed.
The next issue in this appeal of assessee is as regards to the order of AO making addition of estimated personal drawings of Rs.8.05 lakhs. For this, assessee has raised the following Ground Nos.11 to 14:- Estimated Personal Drawings: Rs.8.05 Lakhs
11.The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search. 12.The Learned Assessing Officer has erred in making an estimation which is not permitted under block assessment. 13.The Learned Assessing Officer has ignored the fact that the rent for his premises was paid by the company, M/s J Jay TV P Ltd, without even examining the same from the books of the company, over which the Learned Assessing Officer had jurisdiction. 14.The Learned Assessing Officer has erred in considering the addition as unexplained investment u/s 69A without a finding of fact of any investment
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO while completing block assessment made estimate of personal drawings as under:-
- 14 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 i 1993-94 Rs.60,000(at the rate of 5,000/- p.m.) ii 1994-95 Rs.60,000 iii 1995-96 Rs.1,45,000 (In the month of September, 1994, the assessee got married. Accordingly the personal expenditure is estimated Rs.15,000/- p.m. from Sep,1994 and upto Aug,1994, it is 8,000/-p.,. iv 1996-97 Rs.3,60,000 (It is estimated at Rs.30,000/- p.m. in view of the fact that he had started paying a rent of Rs.15,000/- p.m. for his own residence.) v 1997-98 (upto Rs.1,80,000 Sep.) (It is estimated at Rs.30,000/- p.m. in view of the fact that he had started paying a rent of Rs.15,000/- p.m. for his own residence.)
In view of the above chart, the AO estimated personal drawings for the block period from 01.04.1993 to 31.03.1998, Rs.8.05 lakhs. We have gone through the block assessment order and noted that there is no incriminating material which indicates how much personal expenditure was incurred by assessee and once there is no incriminating material, there cannot be estimate which can be made by the Revenue for taxing the income. When a query was put to ld.Senior Standing Counsel of the Revenue, whether any incriminating material regarding domestic expenditure was unearthed during search, he could not reply. On the other hand, the ld.counsel for the assessee argued that without any incriminating material linking personal expenditure or domestic expenditure, no estimation can be made under the block assessment scheme. We
- 15 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 noted that only personal expenditure for the year 1995-96 noted by AO i.e., rent of Rs.15,000/- per month paid by assessee for his rental accommodation. This amount of Rs.15,000/- for 12 months and for the year 1997-98 upto September for six months at the rate of Rs.15,000/- per month can be estimated. It means that for 1½ years rent at the rate of Rs.15000/- per month, estimation of addition can be made at Rs.2,70,000/-. Hence, we direct the AO to recompute the addition on account of personal drawings at Rs.2,70,000/- as against estimated at Rs.8,05,000/-. Hence, we partly-allow this issue of assessee’s appeal.
The next issue in this appeal of assessee is as regards to the block assessment order of the AO making addition of advance tax payment of Rs.1.03 lakhs. For this assessee has raised following ground Nos.15 & 16:- Advance Tax Payment : Rs.1.30 Lakhs 15. The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search. 16. The Learned Assessing Officer has erred in making the addition of advance tax payment, which is not an undisclosed income at all. If at all, it only shows the intention of the Appellant to disclose his income and pay tax thereon
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee has made
- 16 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 payment of advance tax of Rs.10,000/- on 31.03.1995 and advance tax of Rs.1,20,000/- on 01.08.1996. Admittedly, these evidences are available with the Department and assessee is unable to show source for this advance tax and hence, the AO has rightly added the same and we confirm the same. This issue of assessee’s appeal is dismissed.
The next issue in this appeal of assessee is as regards to the order of AO making addition of foreign trip expenses of Rs.5.89 lakhs while completing block assessment. For this, assessee has raised following ground Nos.17 to 19:- Foreign Trips : Rs.5.89 Lakhs 17.The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search. 18.The Learned Assessing Officer has also erred in not considering the fact that one of the trips was sponsored by the company, M/s J Jay TV P Ltd. 19.The Learned Assessing Officer erred in estimating the expenses for the duration of stay @USD 500 per day, without any evidence for the same.
The brief admitted facts are that the assessee has undertaken three foreign trips and AO estimated expenses on account of air ticket and daily expenses for residing in US for assessment years 1993-94, 1994-95 & 1995-96 amounting to Rs.5,89,390/- as under:- To and Fro air tickets for 1st Trip Rs.51,575/- Daily expenses for 15 days at 500 US$ per day as
- 17 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 per rate permitted by the RBI for the A.Y. 1993-94 is Rs.2,25,375/- To and Fro air tickets for 2nd Trip Rs.31,290/- Daily expenses for 15 days at 500 US$ per day as per rate permitted by the RBI for the A.Y. 1994-95 is Rs.90,750/- To and Fro air tickets for 3rd Trip Rs.51,575/- Daily expenses for 15 days at 500 US$ per day as per rate permitted by the RBI for the A.Y. 1995-96 is Rs.1,38,825/- Rs.5,89,390/-
The assessee during the course of earlier proceedings admitted two trips to be pleasure trips and third one was claimed tobe in connection with the business of J Jay TV Pvt. Ltd. The assessee is unable to prove source and even now before us, when queried whether as regards to third trip which claimed to have been in connection with the business of J Jay TV Pvt. Ltd., any evidence is there that this is in relation to business trip of J Jay TV Pvt. Ltd., the assessee could not adduce any evidence and hence, no infirmity in the AO’s order making addition of Rs.5,89,390/- in the block assessment. Hence, we confirm the addition and dismiss this ground of assessee’s appeal. 17. The next issue in this appeal of assessee is against the block assessment order by AO making addition of bank deposits of Rs.6.83 lakhs. For this, assessee has raised following ground Nos.20 & 21:- Bank Deposits: Rs.6.83 Lakhs 20. The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search.
- 18 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 21.The Learned Assessing Officer has erred in not giving credit for the undisclosed income returned by the Appellant in his return. Investment in Himalaya Benefit Fund : Rs.4.78 Lakhs
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO while completing block assessment noted that the Department has received some information pertaining to the assessee found by the Enforcement Directorate at the time of search conducted on the residence and business premises of the assessee on 21.09.1995 that the assessee has following deposits in Mylapore Branch of Canara Bank in his SB A/c. No.24701, (i) Rs.1.50 lakhs on 06.04.1992& (ii) Rs.5 lakhs on 17.07.1992. The AO required the assessee to explain the source but assessee vide his letter dated 25.08.1997 categorically admitted that he was not in a position to explain the source of these deposits. Hence, the AO treated these deposits in assessee’s bank account maintained with Canara Bank, Mylapore Branch as unexplained and the same was assessed as undisclosed income of the assessee for the assessment year 1993-94 falling in the block period. Consequent, interest earned by assessee on these deposits amounting to Rs.33,453/- was as under:- AY 93-94 Rs 22,512/- AY 94-95 Rs 8,503/- AY 95-96 Rs 988/-
- 19 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 AY 96-97 Rs 956/- AY 96-97 (upto sep 96) Rs 494/- Total Interest Rs.33,453/-
Hence, the AO while completing block assessment added the entire bank deposit and consequent interest, added the entire amount at Rs.6,83,453/. Aggrieved, assessee preferred appeal before the Tribunal.
We noted that the information regarding deposits made in assessee’s savings bank account No.24701 maintained with Canara Bank, Mylapore Branch during assessment year 1993-94 amounting to Rs.6.50 lakhs was found during the search conducted by the Enforcement Directorate at the residential premises of the assessee. When the assessee was asked to explain the source, he could not explain before the AO. Even now, when a query was put to ld.counsel, he could not explain the source of these deposits and hence, we are of the view that the AO has rightly treated these deposits and consequential interests as undisclosed income of the assessee because assessee is a non-filer. The only argument by assessee is that the addition made is not made on any evidence found as a result of search and hence, in block assessment no addition can be made without incriminating material. We noted that
- 20 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 the Enforcement Directorate during search on 21.09.1995 on the residential premises of the assessee has found a bank passbook i.e., SB A/c No.24701, wherein assessee has deposited a sum of Rs.6.50 lakhs and assessee categorically admitted vide letter dated 25.08.1997 that he was not in a position to explain the source of these deposits. Hence, the AO made addition. Even now before us, the assessee could not adduce any evidence to explain the source and moreover this bank account was found during the course of search and assessee being a non-filer, this can be treated as incriminating material. Hence, we find no infirmity in the order of AO and the addition made by AO as undisclosed income for assessment year 1993-94 falling in the block period is upheld. This issue of assessee’s appeal is dismissed.
The next issue in this appeal of assessee is as regards to the order of AO making addition on account of investment made by assessee in Himalaya Benefit Fund of Rs.4.78 lakhs while completing the block assessment. For this, assessee has raised the following ground Nos.22 & 23:- 22.The Learned Assessing Officer has erred in making this addition, which is not based on any evidence found as a result of search.
23.The Learned Assessing Officer has erred in not giving credit for the undisclosed income returned by the Appellant in his return.
- 21 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021
We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO while completing block assessment proceedings noted that certain information in regard to assessee’s deposit of Rs.3,00,000/- on 02.03.1994 in Himalaya Benefit Fund, Tiruchirapalli was discovered from the residential premises of the assessee on 21.09.1995. The assessee vide his statement dated 10.09.1997 admitted this deposit of Rs.3,00,000/- made on 02.03.1994 in Himalaya Benefit Fund Ltd, Tiruchirapalli, but stated that he will explain the source of this deposit in the return of income to be filed u/s.158BC of the Act. The assessee has not given any detail in the return of income nor any explanation filed during the course of scrutiny assessment of block period. Hence, the AO added the deposit of Rs.3 lakhs made in Himalaya Benefit Fund Ltd., Tiruchirapalli for the relevant assessment year 1994-95 falling in the block period and consequently interest of Rs.1,77,529/-. Thereby the AO treated the entire amount of Rs.4,77,529/- as undisclosed income of the assessee for the block period. Aggrieved, assessee preferred appeal before the Tribunal.
- 22 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 22. Even now before us, on query from the Bench, the ld.counsel for the assessee could not explain the source of deposit of Rs.3 lakhs made on 02.03.1994 in Himalaya Benefit Fund Ltd., Tiruchirapalli and it was also not disclosed whether consequential interest for assessment years 1994-95, 1995-96, 1996-97 & 1997-98 i.e., upto 24.09.1996 in aggregate amounting to Rs.4,77,529/- is disclosed in the return of income filed or not. Since the assessee failed to explain, even now before us failed to explain the source of deposit, we feel that the AO has rightly treated the income as undisclosed and hence, we confirm the order of AO and this issue of assessee’s appeal is dismissed.
The next common issues in this appeal of assessee are as regards to the order of AO making following additions in the block period :- Additions made based on materials apparently collected from ED-Generally
24.The Learned Assessing Officer has made the following additions based on the materials collected from the ED namely: Items added Amount Payment for transponder hire 224.00 Lakhs Payment for up-linking facility 306.35 Lakhs Payment for equipment Abroad 49.58 Lakhs Payment in Malaysian ringets for 1.66 Lakhs purchase of other equipment Payment abroad to Intersputnik 301.19 Lakhs and Singapore Telecom
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23.1 As regards to above additions, the AO under each of the head of addition has mentioned above has taken the findings recorded in the original assessment order and after that recorded his reasoning. The AO in regard to payment made on behalf of J Jay TV Pvt. Ltd., for transponder hire charges of Rs.2.24 crores, recorded the original findings of the then AO as under:- “In the original assessment order the then Assessing Officer observed as under: This document is on the subject of the agreement of M/s. J Jay TV P. Ltd., with RIMSAT, a concern in USA which had in its possession transponder facility of being let on hire. Through this message the assessee has conveyed to his aunt that the agreement for hiring transponder and uplinking facilities has been arrived at for 10 lakhs and 3,60,000 US $ respectively. The message further says that out of these payments 50% of the amount viz 5 lakhs US $ for the transponder facility and 1,80,000 US $ for uplinking facility are to be paid off the record. This document had been signed by the assessee at the time of search by the Enforcement Authorities as evidenced by his signature for having seen it. In the sworn statement recorded on 10.09.1997 in question number 30 he was asked to state about the contents of the fax message. It was also pointed out to him that the information contained in this fax message goes against his earlier statement that no off the record payment has been made for these bills. In response to this query, the assessee simply stated that he does not know about his fax, he has not written the same and he has not paid anything off the record.”
23.1.1 We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee from the beginning claiming that the transponder hire charges are for the J Jay TV Pvt. Ltd., and its payment has no connection with the
- 24 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 assessee individually, because of assessee being Managing Director of J Jay TV Pvt. Ltd., some paper or fax message might have been found from the assessee’s house by the Enforcement Directorate at the time of search. The AO without pointing out in the block assessment order or even during the course of search by Enforcement Directorate that the payments of transponder hire charges of Rs.2.24 crores belongs to assessee or made by him is not at all proved. The assessee during the course of block assessment proceedings at various stages categorically denied in connection with the payment of transponder hire charges of Rs.2.24 crores individually. The assessee explained that if in connection with, all these payments, it is only with the J Jay TV Pvt. Ltd., and the agreement for this payment is also between J Jay TV Pvt. Ltd., with RIMSAT. The Revenue’s main contention is that these payments are made by assessee out of record of US$ 6.80 lakhs equivalent to Rs.2.24 crores and payments were made to RIMSAT and Subic Bay out of his undisclosed income. Here, we want to clarify that there is no evidence that assessee individually involved in any payment to Rimsat or Subic Bay. Once the assessee is not individually involved in the payment, the payment if at all is to be connection with, it can be connected with J Jay TV Pvt. Ltd., and not to the assessee. We have gone through the assessment order of J Jay TV Pvt. Ltd., for
- 25 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 the assessment year 1995-96 and there also this payment is added as a protective and substantive addition was made in the hands of the present assessee Shri V. Bhaskaran. When a query was put to ld.counsel, whether the assessment in the case of J Jay TV Pvt. Ltd., has become finalized, he stated that this matter is already been pending with the AO and set aside by the Tribunal in ITA No.519/Mds/2008, vide order dated 20.01.2017, which become subject matter of appeal before the Hon’ble High Court of Madras in Tax Case Appeal No.102 of 2019 dated 30.01.2019 and the Hon’ble High Court of Madras refused to interfere in the order of Tribunal. He made statement that this appeal is pending before the CIT(A) and the matter can be looked into there only. As in the present case before us, there is no evidence that the assessee has made payment of transponder hire charges abroad, i.e., off the record in US$ 6,80,000, rupees equivalent to Rs.2.24 crores. As there is no evidence linking the assessee, we delete the addition and allow this issue of assessee’s appeal. However, we clarify here that this addition can be considered in the hands of J Jay TV Pvt. Ltd., in case, there are evidences and in accordance with law. Hence, this addition is deleted and allowed in favour of assessee.
- 26 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 23.2 Similarly, payment towards transponder hire facility and uplinking facility add for Rs.3,06,35,300/- is recorded in the original assessment order. The observations are as under:- In the original assessment order the then Assessing Officer observed as under:-
“In the course of search by the Enforcemnet Directorate it came to light that payment of US $ 5 lakhs to M/s. Rimsat and US $ 180000 to M/s. Subic Bay have been made on regular basis for transponder hire facility and uplinking facility respectively. The assessee stated that they have not been paid by him and one Mr. Raju of Malaysia has paid this amount. It was further explained that Mr. Raju had already made the payment to Rimsat by way of transponder hire charger and since he could not use the facility for himself, he allowed the assessee to utilize the same. He further stated that he was waiting for the permission from the RBI to make the remittances to Rimsat. In other words, according to him, he has only used the transponder facility which was available with Mr. Raju of Malaysia.
On 8.11.1996 a statement was recorded from Sri Raju residing at No. 10, Jalantaman,Riadua, Qayeritum, Post Code 11500, Penang by Chief Enforcement Officer. As per this statement Mr. Raju is not related to the assessee. He developed acquaintance with Mr.Natarajan, husband of Smt. Sasikala, assessee's aunt. With this acquaintance he came to know the other members in his group, including the assessee. He accepted the fact that he made the payment of 6,80,000 US $ (5 lakhs US $ to Rimsat and 1,80,000 US $ to Ms Subic Bay by telegraphic transfer). He stated that initially all funds were put into Standard Chartered Bank before it was transferred by way of telegraphic transfer. For depositing this amount he initially used his own funds in Standard Chartered Bank, P. Jaya at Kualalumpur. The balance amount required for this was arranged through his daughter Smt. Usha through her friends. The assessee had promised to send him back the money immediately. Later it was decided that this will be adjusted out of 1 million Singapore Dollars deposited by assessee's brother Sri TTV Dinakaran for getting PR Status in Singapore. Mr. Raju has however not confirmed whether he got back the amount of 6,80,000 US $ out of 1 Million Singapore Dollars deposited by Shri TTV Dinakaran."
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23.2.1 We have heard rival contentions and gone through facts and circumstances of the case. We noted that the AO while making assessment in the original assessment order, as noted by the AO and reproduced by the AO in block assessment order, the amount of US $ 500000 for transponder facility and US $180000 for uplinking facility are again been added by the AO and this time, the new character has been added here namely one Shri Raju of Malaysia. Admittedly, the same payment of US $ 680000 (paid to Rimsat of US $ 500000 and US $ 180000 paid to Subic Bay by telegraphic transfer). Admittedly, in the discussion, there are inherent contradiction in the assessment order while adjudicating this issue of transponder hire facility and uplinking facility at page 13 of block assessment order, wherein the AO categorically admits that “Moreover it is the assessee who has executed the agreements with both Ms Rimsat and Subic Bay on 15.12.1994. In this agreement Raju’s name does not figure anywhere. The bill raised in the name of J Jay TV P Ltd. and as per the agreement it is the assessee who as Managing Director executed it on behalf of J Jay TV P. Ltd. Mr. Raju’s credit worthiness was also not proved by the assessee in any way. Moreover a copy of bill obtained by the Indian Embassy in USA evidencing the receipt 5 lakhs US $ by Rimsat clearly states that the
- 28 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 money has been received from Ms J Jay TV P. Ltd. only. This bill was sent to the ED by the Indian Embassy in USA after it was obtained from USA District Court, Northern District of Indiana. This bill also indicates that apart from US $ 5 lakhs paid on 23.12.1994, J Jay TV P. Ltd., has paid US $ 125000 each on 23.2.1995 and 11.05.1995 being quarterly installments payable as per agreement.” The above fact recorded by the AO contradicts the AO’s contention that the payment is made by assessee while reaching to conclusion rather if payment, if at all made, is to be made on behalf of J Jay TV Pvt. Ltd. Taking a similar view as above on the issue of payment abroad on behalf of J Jay TV Pvt. Ltd., for transponder hire charges, we now will consider the payment of US $ 125000 in assessment year 1995-96 and payment of US $ 125000 in assessment year 1996-97. We noted that these payments are in equivalent to Indian Rs.41,17,650/- for AY 1995-96 & 1996-97 i.e., in each of the years. It means that these are the payments made for installation payable as per agreement by J Jay TV Pvt. Ltd., if at all. In view of the above and our discussion in earlier issue, we feel that this being quarterly installment payable, the same cannot be treated as payment made by assessee individually. Hence, these additions are deleted by allowing this ground. However, we want to clarify that the assessment for assessment year 1995-96 is pending in the case of J
- 29 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Jay TV Pvt. Ltd., for adjudication before the AO. This addition, if at all or any evidence suggests as payment made by J Jay TV Pvt. Ltd., can be considered in the hands of J Jay TV Pvt. Ltd., in accordance with law. Hence, this issue of assessee’s appeal is allowed.
23.3 As regards to purchase of equipment abroad and payment made on behalf of the same at Rs.49,57,946, the AO originally recorded the facts as under:- "Information has come to light that through the help of one Mr. Ramachandran of Singapore, the assessee purchased equipments from Ms Tai Yeng Electronics for the use of M/s J. Jay TV P. Ltd. The BD took statements from Mr. Ramachandran, S/o late Karuppiah, at No. 37, Jalan Telait, Singapore - 537334 on 11.11.1996. As per these statements Sri Ramachandran came in contact with the assessee through Sri TTV Dinakaran, assessee's brother. He has explained in detail his association with Sri Raju of Malaysia, Sri TTV Dinakaran, brother of the assessee, and Mr. N.C. Rangesh, an advocate of Indian Origin (and adviser of Sri TTV Dinakaran). As per his statement Sri Baskaran approached him for purchase of electronic goods required by Ms J. Jay TV P. Ltd. of which -he is the Managing Director. Sri Ramachandran also has stated that Sri Baskaran used to arrange funds in Singapore for such purchases. Mr. Ramachandran used to purchase the necessary goods through his company Ms Tai Yeng Electronics. Sri Ramachandran was shown copies of Tai Yen Electronics's Invoice No. TYE 1004/95 dtd. 05.04.1995 and delivery order No. 6374 of Green Town Audio Video Singapore. Sri Ramachandran accepted in his statement that they relate to matters concerning procurement of equipments for J. Jay TV P. Ltd. In the detailed statement Mr. Ramachandran has further narrated as to how emissaries whose identity was not known to him used to meet him in Singapore and give him cash in Singapore dollars. He has not maintained any records of the amounts the assessee had given for purchase of these goods but he used to purchase the goods required and deliver them to person on the basis of assessee's instructions. However, according to him, such purchases may be
- 30 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 of the order of 2to 3 lakhs Singapore Dollars. In the course of search by the ED invoices of Tai Yeng Electronics referred to above, were seized. As per the Invoice No TYE 1004/94-95 goods/articles purchased by Mr. Ranmachandran was for 44,040 SD. It appears that the purchase was affected by Sri Ramachandran out of funds remitted by the assessee. The equipment was meant for M/s Super Duper TV, a proprietary concern of the assessee's brother Sri Sudhagaran. According to the Directorate of Revenue Intelligence the cost of purchase of articles vide bill No. TYE 1004, referred above dtd. 05.04. 1995 is understated and its actual cost will be Rs. 20,86,3 63/-. The reason for such understatement is apparently for reducing liability of customs duty. Yet another bill seized by the ED shows purchase of equipment for136094 SD, the equivalent in INR being Rs. 28,71,583/-. Thus as per bills seized by the ED total amount spent by the assessee on purchase of equipment is Rs. 49,57,946 ( Rs. 20,86,363+ RS. 28,71,583). It is relevant to mention here that Sri Ramachandran was shown both these bills by the ED officials and he in his statement before them confirmed that these bills relate to the purchases affected by him on behalf of the assessee.
Mr. Bhaskaran in the course of his statement was specifically questioned on his dealings with Mr. Ramachandran for purchase of equipments. He was also shown the relevant portions of the statement by Mr. Ramachandran and the relevant bills evidencing such purchases. Assessee, in answer to question No.5 on this issue totally denied purchase of any equipment for J Jay TV P. Ltd. According to him since no purchase is affected the question of payment also does not arise.”
23.3.1 We have heard rival contentions and gone through facts and circumstance on this issue. We noted that the AO while completing block assessment has relied on the original assessment order framed for the block period and made addition of purchase of equipments abroad from one M/s. Tai Yen Electronics. We noted that there are two bills found by Enforcement Directorate at the time of search conducted on the business premises of J Jay TV Pvt. Ltd, of
- 31 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 which assessee is a Managing Director. The following are the bills, i) Tai Yen Electronics Invoice No.TYE/1004/95 dated 05.04.1995 for an amount of Singapore Dollar 44040 ii) as regards to second bill claimed to have been for an amount of Singapore Dollar 136094, there is no mention of any bill number etc. We noted that the AO relied on the entire statement of one Shri Ramachandran of Singapore who claimed to have been purchased these equipments from dealers in Singapore and handed over or transmitted to India i.e., J Jay TV Pvt. Ltd. The AO has recorded the story and that reads as under:- “As per his statement Sri Baskaran approached him forpurchase of electronic goods required by Ms J. Jay TV P. Ltd. of which he is the Managing Director. Sri Ramachandran also has stated that Sri Baskaran used to arrange funds in Singapore for such purchases. Mr. Ramachandran used to purchase the necessary goodsthrough his company Ms Tai Yeng Electronics. Sri Ramachandran was shown copies of Tai Yen Electronics's Invoice No. TYE 1004/95 dtd. 05.04.1995 and delivery order No. 6374 of Green Town Audio Video Singapore. Sri Ramachandran accepted in his statement that they relate to matters concerning procurement of equipments for J. Jay TV P. Ltd. In the detailed statement Mr. Ramachandran has further narrated as to how emissaries whose identity wasnot known to him used to meet him in Singapore and give him cash in Singapore dollars. He has not maintained any records of the amounts the assessee had given for purchase of these goods but he used to purchase the goods required and deliver them to person on the basis of assessee's instructions. However, according to him, such purchases may be of the order of 2to 3 lakhs Singapore Dollars. In the course of search by the ED invoices of Tai Yeng Electronics referred to above, were seized. As per the Invoice No TYE 1004/94-95 goods/articles purchased by Mr. Ranmachandran was for 44,040 SD. It appears that the purchase was affected by Sri Ramachandran out of funds remitted by the assessee. The equipment was meant for M/s
- 32 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Super Duper TV, a proprietary concern of the assessee's brother Sri Sudhagaran. According to the Directorate of Revenue Intelligence the cost of purchase of articles vide bill No. TYE 1004, referred above dtd. 05.04. 1995 is understated and its actual cost will be Rs. 20,86,3 63/-. The reason for such understatement is apparently for reducing liability of customs duty. Yet another bill seized by the ED shows purchase of equipment for136094 SD, the equivalent in INR being Rs. 28,71,583/-. Thus as per bills seized by the ED total amount spent by the assessee on purchase of equipment is Rs. 49,57,946 ( Rs. 20,86,363+ RS. 28,71,583).”
From the above, it is clear that the invoices are in the name of J Jay TV Pvt. Ltd., and purchase of electronic goods on the requirement of J Jay TV Pvt. Ltd., and for J Jay TV Pvt. Ltd., only. It means that the assessee has nothing to do with these payments, individually. But in case he has made these payments and in case, the evidence suggest such, the same can be considered or can be investigated in the hands of J Jay TV Pvt. Ltd., while framing assessment in that case as per the provisions of the Act. Even the assessee required the following details from the AO:- “(i) Production of the persons in charge of Tai Yeng Electronics (ii) Books of accounts of Tai Yeng Electronics (iii) Production of Shri Ramachandran for cross examination
But the assessee was not allowed the opportunity to cross examine Shri Ramachandran or to examine the person incharge of Tai Yen Electronics, so that the assessee can establish that he has not made any payment. Actually, even the Revenue admits that these payments are for purchase of equipments for and on behalf of J Jay
- 33 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 TV Pvt. Ltd. Even Tai Yen Electronics also issued invoices in the name of J Jay TV Pvt. Ltd., only. Hence, in our view and discussion carried out in earlier issues, we are of the view that the AO while completing block assessment and without any incriminating material just on conjunctures and surmises made this addition. Hence, we are of the considered view that this addition of Rs.49,57,946/- is without any basis and hence, deserves to be deleted. We delete the addition accordingly.
23.4 As regards to purchase of Malaysian Ringets, the AO while completing block assessment noted that during the course of search by Enforcement Directorate on the residential and business premises of J Jay TV Pvt. Ltd., on 21.09.1995, certain information came to light that the assessee has acquired certain equipments as per bills seized and the details of payments are as under:- Bill No. Date Name of Company Amount in Indian Rs. Malaysian 8829 19.12.94 Alfa Computers 12700@11.70 1,48,590 SDNVHD 2085 17.12.94 Pineapple Computer 1365@11.65 15,902 Co. Kualalumpur 1412 17.12.94 -do- 90 @ 11.65 1,048 Total 14,155 1,65,540
- 34 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 When the block assessment was completed originally and subsequently now (the impugned order), we noted that the assessee has requested for the copies of bills and rebuttal of presumption u/s.132(4A) of the Act. The Revenue supplied copies of bills to the assessee and noted that since the bills seized from the residence of the assessee are in the name of assessee himself, the onus is on the assessee to prove explanation. As the assessee has not explained and only made submission that material seized by the Enforcement Directorate should not be used for completion of block assessment proceedings. The AO while completing block assessment added a sum of Rs.1,65,540/-. Aggrieved, assessee came in appeal.
23.4.1 We noted that this issue has not been examined by the AO and no finding is given as to how these bills found from the business premises of J Jay TV Pvt. Ltd., are relatable to assessee. The AO has noted in his assessment order that the bills seized from the residence of assessee are in the name of assessee himself, which fact needs verification. Hence to examine these aspects and for a detailed enquiry, we set aside this issue to the file of the AO and after enquiry may decide the issue afresh as per law. In term of the above, this issue of assessee’s appeal is set aside and we direct the AO to re-examine this issue.
- 35 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 23.5 Similarly, the AO recorded in regard to payment made abroad to Intersputnik Moscow and Singapore Telecom for transponder and linking facilities originally as under:- "Apart from the purchase of equipments, Sri Ramachandran's statement further clarified that the assessee approached him in 1996 for arranging transponder hire with Interesputnik, Moscow and up-linking facility with Singapore Telecom. Mr. Ramachandran stated in his statement dtd 11.11.1996 that for this arrangement also, the assessee promised to arrange Singapore Dollars. Payments were made by the assessee in Singapore in Singapore Dollars, as stated earlier, through some unidentified emissaries at specified places like Hotel Komala Vilas etc. According to Mr Ramachandran, the Singapore Telecom had to be approached through a company and hence a company was formed by the name M/s Hunters Hill Investment P. Ltd. with address No.9, Penang Road, Parkmal, Singapore in which Sri Ramachandran and his son Sivasubramanian were the Directors. He and his son had given guarantee to Singapore Telecom for securing up-linking facility for J. Jay TV P. Ltd whichwent off the air by the end of June, 1996. For the facility provided for a few months by Singapore Telecom payments were effected through a company by name APOOFFEZZPOINT P. LTD. with address at No. 163, Tras St., 10.05 Lian Heart Building, Singapore. This company Apooffezz Point P. Ltd has its Directors namely Mr. Ravindran S/o Sri Ramachandran and Mr. Shaukat Ali, the DGM of J. Jay TV P. Ltd. This company has bankaccounts with Union overseas Bank, Dhoby Ghat Branch, Singapore. Sri Ramachandran wasalso categorical about the remittance of funds into this company's bank account by way of SDs sent by the assessee through one Mr. Krishnan and one Mr. Baskaran(not the assessee).The modus operandi of the payments was the same as adopted by the assessee for remitting money for purchase of equipments. Though according to Mr. Ramachandran the total cash received will be 6 to 7 lakhs SDs, the accounts of Apooffezz Point P. Ltd with Union Overseas Bank show that the total of the deposits in this bank account is 11,89,565 SDs. The payments to intersputnik and Singapore Telecom were made from out of this bank account in Union Overseas Bank A/c of Apooffezz Point P. Ltd."
- 36 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 23.5.1 We have heard rival contentions and gone through facts and circumstances of this issue. We noted that the AO in the original assessment proceedings, as reproduced above has only noted that the assessee has approached Shri R Ramachandran in 1996 for arranging transponder hire with Intersputnik, Moscow and uplinking facility with Singapore Telecom and for this, assessee promised to arrange Singapore dollars. In turn, Shri Ramachandran stated that a company was found in the name of m/s. Hunters Hill Investment P. Ltd., at Singapore in which Shri Ramachandran himself and his son Shri Sivasubramanian were Directors and they were guarantors for Singapore Telecom for securing uplinking facility with J Jay TV Pvt. Ltd. He admitted that Singapore Telecom were paid through a company by name Apooffezz Point Pvt. Ltd., at Singapore and its Directors were namely Shri Ravindran S/o Shri Ramachandran and Shri Shaukat Ali, the DGM of J Jay TV Pvt. Ltd. This company has bank account with Union Overseas Bank, Dhoby Ghat Branch, Singapore and to this bank account money was sent in Singapore Dollar by assessee through one Shri Krishnan and one Shri Baskaran (not the assessee). The AO recorded that according to the statement of Shri Ramachandran, total cash in Singapore dollar was received about 6 to 7 lakhs but in the account of Apooffezz Point Pvt. Ltd., with Union Overseas Bank, total deposits in this bank account was
- 37 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 11,89,565 Singapore Dollars. He admitted that payments to Intersputnik and Singapore Telecom were made out of this bank account of Apooffezz Point Pvt. Ltd. The statement of Shri Ramachandran is the sole basis for making this addition of Rs.3,01,19,410/- equivalent to Singapore Dollar 11,89,565 but nowhere it is proved that the money has been arranged by assessee individually and the entire transponder and uplinking facility was for the telecasting by J Jay TV Pvt. Ltd., and this facility was provided by Singapore Telecom. Admittedly, there is agreement between J Jay TV Pvt. Ltd., and Singapore Telecom for uplinking facility and also the telecast was done through the facility provided by Singapore Telecom. There is no allegation in the assessment order that money was deposited by assessee out of his personal source and entire payment is through an agreement entered between J Jay TV Pvt. Ltd., and with that of Singapore Telecom. On earlier issues also, similar payments for transponder and uplinking facility was adjudicated and we have already held that the assessee individually is not at all responsible, even this addition of payment made abroad towards hire charges for transponder and uplinking facility was subject matter of addition in the case of J Jay TV Pvt. Ltd., for assessment year 1995-96 and the same is pending adjudication after set aside by the Tribunal. Even otherwise, there is no evidence
- 38 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 available that on which date, how assessee made payment, simpliciter that the payment abroad to Intersputnik, Moscow and Singapore Telecom was made by J Jay TV Pvt. Ltd., for the facilities of transponder and uplinking of telecast of TV does not bring assessee under any taxability. As the issues we have deliberated above in regard to other items like purchase of other equipments, payment towards transponder hire facility and uplinking facility and payment abroad on behalf of J Jay TV Pvt. Ltd., similarly following the same reasoning, we delete this addition of Rs.3,01,19,410/-. This issue of assessee’s appeal is accordingly allowed. However, we clarify here that this addition can be considered in the hands of J Jay TV Pvt. Ltd., in case, there are evidences and in accordance with law.
The next issue in this appeal of assessee is as regards to the order of AO framing block assessment and making addition of purchase of car for an amount of Rs.13,44,743/-. For this, assessee has raised the following Ground No.40:- “Purchase of Car: Rs.13.45 Lakhs
The Learned Assessing Officer has failed to establish that this investment has in fact been made and has assumed that the investment has been made and concluded that the Appellant has failed to prove the source of the investment. In fact, it is evident that the department is unclear about
- 39 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 the transaction and has also added the same item as gift under the Gift Tax Act on the ground that the Donor is not traceable.”
26.1 The brief facts are that during search proceedings by the Enforcement Directorate on 21.09.1995, according to AO, the assessee was found to have Lexus Car. During the course of earlier block assessment proceedings, which was set aside by the Appellate Authorities, the assessee was requested to explain the source of purchase of car and assessee claimed to have received the car as gift. The AO reproduced the original block assessment order which reads as under:- "Assessee got married in Sept, 1994. It is claimed that at the time of his marriage he received a Lexus Car by way of gift. The assessee was questioned on the details of his becoming the owner of this valuable car. In his letter dt. 25.08.1997 the assessee simply stated that the Lexus Car was given to him as a gift and the customs duty in respect of this was paid by Tamilarasi Publications of which his aunt's husband Mr. M. Natarajan is the proprietor. In the course of his statement on 10.09.1997, he further stated that one Dr.Balakrishnan of UK made the gift to him at the time of his marriage. Dr. Balakrishnan who is a resident of UK had sent a statement to the Enforcement Directorate in which he totally enied any connection with the assessee or anybody else in this group. The relevant portions of his statement viz. paras 11,12,13 and 14are as under: It will be observed from the newspaper extracts that this vehicle has precipitated the arrests of many high ranking officials of the South Indian Government, particularly the Former Chief Minister of Tamil Nadu, Ms. Jayalalitha. The newspaper extracts also refer to the other names particularly V. Baskaran, Sasikala, M. Natarajan, V.N. Sudhakaran and others.
I categorically deny the allegations appearing in the newspaper extracts and contend that the matters published therein have been exaggerated and
- 40 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 my involvement fabricated. I have never had any political inclination or political aspirations nor have I had any association with any of the parties mentioned above. Neither have I had any dealings, either socially or commercially with the above named persons. The true facts surrounding the shipment of the Lexus vehicle into the Indian Sub-continent are as follows:
Originally the car was to be shipped into India in the name of Mr. O. Kasimayan. I had no knowledge of the reasons surrounding the shipment of the lexus car but understand from my son that the car was purchased under the name of Mr. O. Kasimayan for Mr. V. Baskaran. It would be manifest that the car was purchased and paid for by Mr. O. Kasimayan since all the documents relating to the purchase namely letter from Lexus Toyota dt. 6" July, 1994, copy acknowledgement of order, copy of vehicle allocation, copy of tax free sales, purchase order, copy of receipt acknowledging cash in the region of pounds 23,095.00 are in favour of the Mr. O. Kasimayan. Copies of these documents are now annexed in Schedule C hereto I based my knowledge that the Lexus car was purchased by or on behalf of Mr. O. Kasimayansince the documents referred to above were addressed to my home.
As there were difficulties in shipment by Mr. Kasimayan, I was asked to assist which I duly obliged. At Madras I was never approached by any Customs Officer nor was my passport endorsed. Furthermore, I deny making any representations that I was intending to execute a transfer of residence nor did I make any representation that I was returning for permanent resettlement in India. I have never been in possession of any documents referred to at Paragraph 6(i) and 6(ii) herein above. I categorically deny making any misdescription of the age of the vehicle or the Indian Authorities to prove that any of the documents borne my signature or handwriting. I understand that my solicitors have written to the Indian Hon'ble High Court Commission requiring copies of these documents and also have suggested that the originals of the same should be forwarded to a forensic expert of our choice for examination."
26.2 We have heard rival contentions and gone through facts and circumstances of the case. We noted that originally this car was shipped into India in the name of Shri O. Kasimayan which was
- 41 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 admitted by Dr.Balakrishnan, who is a resident of UK and statement was sent to Enforcement Directorate in which he denied gifting this car. This car was purchased by Shri O. Kasimayan. Even the payment was made by Shri O.Kasimayan if we believe the statement of Dr.Balakrishnan which was made by him and accepted by Revenue. The statement of Dr.Balakrishnan categorically states that the car was purchased and amount was paid by Shri O. Kasimayan. Since all the documents relating to purchase are in his name i.e., letter from Lexus Toyota dated 06.07.1994, purchase acknowledgment order, copy of vehicle allocation, copy of tax free sales, purchase letter, receipt of acknowledgement of car for 23,095 pound in favour of Shri O. Kasimayan etc. Dr. Balakrishnan admitted that these documents were annexed with his statements as Schedule ‘C’ and he admitted that lexus car was purchased by and on behalf of Shri O. Kasimayan and shipped into India only in the name of Shri O. Kasimayan. When a query was put from the Bench, the ld.Senior Standing Counsel for the Revenue, that what is the basis for making addition, whether car stands in the name of the assessee or not and how the assessee is the owner of the car, it has to be established. The assessee admitted vide letter dated 25.08.1997, as claimed by Revenue, that the stated lexus car was given to him as gift by Dr. Balakrishnan but the same has been
- 42 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 denied by Dr. Balakrishnan and hence, the dispute regarding ownership remains whether it is in the name of assessee or Shri O. Kasimayan. It is also not clear whether the payment is made by Shri O. Kasimayan and gifted to assessee. Even block assessment order notes that the protective addition under the Gift Tax Act was made in the hands of assessee and assessee has filed appeal against the gift tax order. On query from the Bench neither Senior Standing Counsel nor assessee Counsel could point out what is the status of gift tax proceedings. In the event of facts of the case, we feel that this issue needs to be reconsidered by the AO afresh after taking into various consideration, who is the owner of the vehicle, whether any gift is given by Dr. Balakrishnan and consider relevant documents, the AO will reframe the assessment. In case, the car has already been assessed under the Gift tax Act, in the hands of the assessee and accepted by him, no further addition need to be made under the Act. In term of the above, we set aside this issue to the file of the AO and accordingly, this issue of assessee’s appeal is allowed for statistical purposes.
As regards to jurisdictional issue raised by assessee vide ground Nos.1 to 6, which are not at all argued by ld.counsel for the
- 43 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 assessee, we presume that the assessee is not interested in prosecuting these grounds and hence, the same are dismissed.
Accordingly, the appeal of the assessee is partly-allowed for statistical purposes.
Revenue’s Appeal in ITA No.604/CHNY/2021 29. This appeal by the Revenue is directed against the orderof Commissioner of Income Tax (Appeals)-18, Chennai in ITA No.1061/19-20 dated 06.10.2021. The assessment was framed by the Deputy Commissioner of Income Tax, Central Circle 2(4), Chennai for the assessment year 2017-18 u/s.143(3) r.w.s. 153C of the Act vide order dated 31.12.2019.
The only issue inthis appeal of Revenue is as regards to the order of CIT(A) quashing the assessment framed by AO u/s.143(3) r.w.s. 153C of the Act by holding that the AO erred in assuming jurisdiction u/s.153C of the Act, as the satisfaction note did not contain any seized material or documents pertaining to the assessee with regard to assessment year 2017-18. For this, Revenue has raised the following Ground Nos. 2 to 4:-
- 44 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 2.The learned CIT (A) erred in holding that the assuming jurisdiction by the assessing officer u/s.153C is not correct since the satisfaction note did not contain any seized material or documents pertaining to the appellant with regard to the determination of total income for the AY 2017-18.
The Learned CIT(A) failed to appreciate the fact that the AO has rightly. recorded in the satisfaction note that the seized material have bearing on determination of total income for the assessment year 2018-19 and proceeded to issue notice of six assessment years prior to assessment year related to the year of search as per the provision of Sec.153C w.e.f01/04/2017 as amended by the Finance Act, 2017.
The learned CIT(A) failed to appreciate that the Assessing officer rightly assessed/reassessed total income of the assessee for the AY 2017- 18 in accordance with the provisions of Sec.153A of the Act on assuming jurisdiction u/s. 153C of the Act.
The brief facts of the case are that a search u/s.132 of the Act was conducted in the group cases of Shri v. Dhivaharan on 09.11.2017. The assessee’s residence at No.5/28, Blue Beach Raod, Neelankarai, Chennai – 41 was also covered in the search. The assessee was engaged in the real estate business. During the course of search on the residential premises of the assessee, cash of Rs.14,02,310/- was found in the assessee’s premises. During the course of search, gold jewellery weighing 7900.800 gms (gross) and 7245.950 gms (net) for the value of Rs.2,59,00,543/- and silver article weighing about 31.823 kgs. valued at Rs.11,45,628/- were also found and seized. Consequent to the seized material, notice u/s.153C of the Act for the assessment years 2012-13 to 2018-19
- 45 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 was issued by the AO dated 13.09.2019. The assessee finally filed his return of income on 26.12.2019 declaring total income at Rs.13,06,610/-. During the course of assessment proceedings, the AO noticed that the assessee has made cash deposits to the tune of Rs.1,39,86,000/- during the financial years 2014-15 to 2017-18 in the bank account maintained with Armenian Branch of ICICI Bank. Accordingly, the AO treated the entire cash deposit of Rs.1,39,86,000/- as unexplained cash credit u/s.68 of the Act of the year and for the relevant financial year 2016-17 relevant to this assessment year 2017-18, he made addition to the extent of cash deposit during the year at Rs.75.98 lakhs. Before CIT(A), the assessee contended that the proceedings u/s.153C of the Act are without jurisdiction for the relevant assessment year 2017-18. It was contended that search warrant was in the name of Jazz Cinemas and the premises search is that of the assessee but panchanama does not contain any evidence to show that material pertaining to Jazz Cinemas was found in the assessee’s premises. The AO noted that the authorization was given to search the assessee’s premises by issuing the warrant in the name of Jazz Cinemas / V. Dhivaharan. The assessee contended before CIT(A) that the AO is silent about recording of satisfaction by the AO of the searched person by virtue of which, notice u/s.153C of the Act was issued. The assessee
- 46 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 challenged the very assumption of jurisdiction by the AO that from foundation of issuance of notice u/s.153C of the Act is without recording of satisfaction by the AO of the searched person. For this, before CIT(A), the assessee relied on the following case laws:- a) “Commissioner of Income Tax Vs Calcutta Kitwears (2014) 6 SCC 444 b) Pepsi Foods Pvt Ltd Vs Asst. Commissioner of Income Tax, 2014 367 ITR 112 Delhi c) Commissioner of Income Tax Vs Bipinchandra Chimanlal Doshi 2017 395 ITR 632 Gujarat d) Ganpati Fincap Services Pvt Ltd Vs Commissioner of Income Tax 2017 395 ITR 692 Delhi
The CIT(A) after considering the case records and the satisfaction recorded by the AO u/s.153C of the Act noted that there is no seized document or incriminating document relating to the assessee and that has bearing on the determination of total income of the assessee for this particular assessment year 2017-18. The AO has not brought any material on record to suggest that there was seized document that had bearing on the total income of the assessee. The CIT(A) after considering the case law of Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in [2017] 84 taxmann.com 290 (SC), held that the very assumption of jurisdiction u/s.153C of the Act without seized material in relation to
- 47 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 this present assessee is bad in law and he quashed the assessment by observing in para 14 & 15 as under:- 14. It is relevant to refer to the decision of the Hon'ble Apex Court in the case of CIT Vs Sinhgad Technical Education Society [20171 84 taxmann.com 290 (SC) wherein it has been held that in the absence of seized material pertaining to the assessee for the relevant assessment year, the initiation of search assessment u/s 153C is not valid in law. The Hon'ble Supreme Court in the said case has held that the seized incriminating material have to pertain to the AY in question and need to have correlation, document-wise qua and that this requirement is an essential pre-requisite u/s 153C and is a jurisdictional fact and that it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of account or documents seized should belong to a person other than the searched person referred to in S 153A of the Act. I am of the view that the said decision is squarely applicable to the facts of the case of the appellant.
After carefully considering the facts of the case, materials available on record, written/oral submissions and the extant judicial precedents including the afore-mentioned decision in the case of Sinhgad Technical Education Society (supra) and section 153C of the Act, it is noticed that for assuming jurisdiction u/s 153C for a particular AY in respect of the years prior to the year of search, there should be seized material pertaining to the assessee recovered during the course of search. However, in the present case, as seen from the satisfaction note, the AO has not referred any seized material pertaining to the appellant with regard to the determination of the additional income of the appellant relating to this AY. The satisfaction note does not contain any seized material or document that is relatable to this AY or has any bearing on the determination of the total income of the appellant [attributable to the cash deposits] for the current AY under consideration.
In view of the foregoing discussions, I am of the view that the assessment passed by the AO u/s 153C of the Act for the AY under consideration is bad in the eyes of law. The appellant’s ground on jurisdiction is allowed.
- 48 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Aggrieved, Revenue is in appeal before us.
Before us, the ld.CIT-DR made submissions that the assessee did not file any cross-objection to the appeal filed by the department in this Case. Therefore, the Grounds' in the written submissions, which go beyond the grounds of appeal filed by the department before the ITAT, may be construed only as points of argument by the respondent and nothing more. Many of the arguments now advanced by the responded were not taken by the assessee before the CIT(A). Ld CIT Dr argued that the CIT(A) was not right in holding that the assessing officer has not brought any material on record to suggest that there were seized material that had bearing on total income of the assessee qua the relevant assessment year and a general satisfaction note would not empower the AO to assume jurisdiction u/s 153C of the Act. He stated that the law requires the Assessing Officer to have only a prima facie satisfaction, at the time of issuance of notice under section 153C of the Act that the case is fit for issuance of notice under section 153C of the Act. In this particular case, it has been clearly mentioned that the seized materials have a bearing on the determination of the total income of the assessee.That the law requires only prima facie satisfaction only has been corroborated by the courts of law Reliance is made on the
- 49 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 ruling of the Hon'ble Delhi High Court in the case of Indian National Congress reported in 463 ITR 431(Del) where it has been held that satisfaction note merely forms foundation for initiation of action which would enable to evaluate whether an opinion has been validly formed and as long as it rests on incriminating material which pertains to assessment years in question, same would qualify requirement of section 153C of the Act.It is further submitted that in the satisfaction note, the assessment year has been wrongly mentioned as AY 2018-19 instead of 2017-18. Here, the intent of the AO is more important which can be inferred while looking at the top of the satisfactory note wherein AY 2017-18 is mentioned and also at the last paragraph of the satisfaction note wherein correct AY is mentioned. Therefore, as per provisions of section 292B of the Act, this mistake is merely a typographical error when the intent of the AO is clearly spelt in the satisfaction note. For the purpose of reference, section 292B is reproduced below: Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
- 50 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 32.1 He further argued that the assessing officer precisely and categorically has to determine the assessment year to which the seized material pertains and only then the statutory condition u/s 153C of the Act is made. The assessee has relied on the decision of the Hon'ble jurisdictional High Court in the case of Agni Vishnu Enterprise reported in 460 ITR 438, however, in a subsequent ruling reported in 463 ITR 431 in the case of Indian National Congress, the Hon'ble Delhi High Court has held that a composite Satisfaction Note would suffice requirements of section 153C provided it embody details of material gathered in course of search and pertaining to assessment years forming part of block as a whole. It may be mentioned that the scale and volume of seized material varies from year to year and in the facts and circumstances of the case, the satisfaction note has been correctly formed.
32.2 He further argued that section 153C of the Act does not mandate issuance of notice for all six AYs. It is further mentioned that the only exception that has been made in respect of issuance of notice in all the six assessment years is by virtue of insertion of Rule 114F by virtue of Finance Act 2012 for which a separate mechanism has been put in place and the Assessing Officer is statutorily bound by the provisions of section 153C for issuance of notice for all the six
- 51 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 assessment years. That exception is carved out only in respect of election related searches as is evident from the departmental circular issued in this regard. Reference is made to Circular No 10 of 2012 which is as under CIRCULAR NO. 10/2012 [F. NO. 282/22/2012-IT (INV. V)], DATED 31- 12-2012 As per provisions contained in section 153A and 153C of the Income Tax Act, 1961, the Assessing Officer is required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.
2.In consequence of the powers conferred by clauses (64) and (66) of the Finance Act, 2012 the Central Government amended the Income Tax Rules, 1962, to insert a new Rule 112F after the existing Rule I12E, specifying the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.
3.The aforesaid amendment was introduced with a view to reduce infructuous and unnecessary proceedings under the Income Tax Act, 1961 in cases where a search is conducted w/s 132 or requisition made u/s 132A and cash or other assets are seized during the election period, generally on a single warrant, and no evidence is available, or investigation require d, for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made. 4. In such cases, the officer investigating the case, with the approval of the Director General of Income Tax, shall certify that - (i) the search is conducted under section 132 or the requisition is made under section 132A of the Act n the territorial area of an assembly or Parliamentary constituency in respect of which a notification has been issued under section 30, read with section 56 of the Representation of the People Act, 1951; or
- 52 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 (ii)the assets seized or requisitioned are connected in any manner to the ongoing election process in an assembly or parliamentary constituency; and (iii)no evidence is available or investigation is required for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made. 5.The certificate of the investigating officer shall be communicated to the Commissioner of Income Tax and the Assessing Officer having jurisdiction over the case of such person.
The case of the assessee is not covered by the above Rule 112F and therefore, notice for all the six years have been validly initiated and served. The ld. CIT DR also relied on the decision of Hon’ble Supreme Court in the case of CIT vs. S.Ajit Kumar reported in [2018] 404 ITR 526(SC).
On the other hand, the ld.counsel for the assessee relied on the order of CIT(A).
We have heard rival contentions and gone through facts and circumstances of the case. We noted that search and seizure operation was conducted by the Department u/s.132 of the Act on 09.11.2017 in the group case of Shri V. Dhivaharan, uncle of the assessee. Consequently, the assessee Shri V. Dhivaharan was also covered under the search. During the course of search on the assessee, cash of Rs.14,02,310/- was found from his residential
- 53 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 premises and gold jewellery of 7900.800 gms valued at Rs.2,59,00,543/- and silver articles weighing 31.823 kgs valued at Rs.11,45,628/- was also found. As there is no search warrant in the name of the assessee, notice u/s.153C of the Act was issued after recording satisfaction by the AO of the searched person i.e., of Shri V. Dhivaharan. The satisfaction note as reproduced in the order of CIT(A) reads as under:- “A search and seizure operation u/s 132 of the 1.T. Act, 1961 vas conducted in the group cases of Shri V. Dhivaharan, uncle of Shri V. Baskaran on 09.11.2017 and Shri V. Baskaran was also covered u/s 132 of the Act. During the course of the search unaccounted physical unaccounted cash and physical gold & Diamond jewellery were found. Since, the assessee could not offer proper source he himself accepted that the cash found of Rs.14,02,310/- ashis unaccounted income. As far as the jewellery is concerned the assessee was not able to substantiate the source for the investment in gold jewellery of 7900.80o grams(gross wt. 7245.950 grams (net wt.) valued atRs.2,59,00,543 and silver articles weighing 31.823 Kgs value at Rs11,45,628 and hence the same is required to be treated as the unexplained/unaccounted investmentu/s 69 A of the Income tax Act, 1961 n view of this, the above mentioned saidseized materials have a bearing on the determination of the total income of theassessee for the A.Y. 2018-19, within the meaning of the provisions of Section 153C(1) ofthe Income tax Act 1961 as referred to sub-section( 1 ) of Section I53A of the Act
On being satisfied that the seized material belongs to the assessee, asmentioned above and contain he details of his unaccounted cash and investment in goldjewellery, notice u/s 153C is issued for the Asst Year 2012-13 to 2017- 18 as per thenewly inserted provisions of Sec.153C(1) w.e.f.14.2017 in accordance with theprovisions of Section 153A of the Act.”
We noted that the CIT(A) quashed the assessment framed u/s.143(3) r.w.s. 153C of the Act for the reason that there is no
- 54 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 seized material belonging to the assessee as the note clearly pertains for the relevant assessment year 2017-18. Admittedly, the search was conducted on 09.11.2017 and whatever cash found and gold jewellery found was to be assessed in financial year 2017-18 relevant to the assessment year 2018-19 and not this present assessment year 2017-18. Once there is no incriminating material or seized material, as is evidence from satisfaction note, in relation to this assessment year i.e., 2017-18, no assessment can be framed while invoking the provisions of section 153C of the Act, because assessee is not the searched person. The ld.counsel for the assessee relied on the decision of Hon’ble High Court of Madras in the case of Agni Vishnu Ventures (P.) Ltd., vs. DCIT reported in [2023] 157 Taxmann.com 242 (Mad), wherein the Hon’ble Madras High Court considering the provisions of section 153C of the Act held that recording of satisfaction by the AO of the searched entity should be on the basis of incriminating material found due to third party. The Hon’ble Madras High Court considered this issue vide paras 79 to 82 as under:- “79. Section 153C however requires the satisfaction of two conditions prior to issuance of notice:
i) Recording of satisfaction by the Assessing Officer of the searched entities that some of the incriminating materials relate to a third party.
- 55 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 ii)Recording of satisfaction by the Assessing Officer of the third party that the incriminating materials have a bearing on the determination of the total income of that third party.
Notice under Section 153C would have to be issued only upon the concurrent satisfaction of both conditions as aforesaid. To this extent, there is, in my considered opinion, a clear and marked distinction between the provisions of Section 153A and 153C. The contention of the revenue that a mandate is cast upon the Assessing Officer of the third party to issue notice under Section 153C for all the years comprising the block, mechanically and automatically, is thus rejected.
To clarify, it is only where the satisfaction note recorded by the receiving Assessing Officer, i.e., the Assessing Officer of the third party reflects a clear finding that the incriminating material received has a bearing on determination of total income of the third party for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, that such notice would have to be issued for all the years.
It thus flows from the provision that the receiving assessing officer must apply his mind to the materials received and ascertain precisely the specific year to which the incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of a notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by an assessing officer.”
34.1 In the present case, going by the satisfaction note purely, there is no incriminating material found during the course of search in relation to the assessee and hence, we confirm the order of CIT(A) holding the assessment framed for the relevant assessment year 2017-18 u/s.153C of the Act as bad in law and hence, quashed.
- 56 - IT(SS)A No.3/Chny/2017 & ITA No.604/Chny/2021 Accordingly, we uphold the order of CIT(A) and dismiss this appeal of Revenue.
In the result, the appeal filed by the assessee in IT(SS)A No.3/CHNY/2017 is partly-allowed for statistical purposes and the appeal filed by the Revenue in ITA No.604/CHNY/2021 is dismissed.
Order pronounced in the open court on 20th September, 2024 at Chennai.
(एस.आर. रघुनाथा) (महावीर �संह ) (S.R. RAGHUNATHA) (MAHAVIR SINGH) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 20th September, 2024 RSR आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. िनधा�रती /Assessee 2. राज� /Revenue 3. आयकरआयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF.
