ITO (E), NEW DELHI vs. SOCIETY FOR ECOLOGICAL MANAGEMENT OF WASTELANDS AND HABITATS, NEW DELHI

The appellant, ITO(E), Trust Ward II, Delhi-110 092 (hereinafter referred to as ‘the revenue’) by filing the present appeal, sought to set aside the impugned order dated 03.11.2009 passed by CIT(A), New Delhi qua the Assessment Year 1991-92 on the grounds inter alia that:

Shri M S Sekhon, CA/AR of the assessee appeared, filed details, books of accounts in response to the notice issued u/s 143(2) of the Act. During the course of fresh assessment, in the light of directions issued by Ld. CIT(A), assessee was called upon to produce the following details:

Consequently assessee filed requisite details vide letter dated 06.02.2011. The Assessing Officer however recorded in the assessment order that as per the direction issued by Ld. CIT(A) the physical nature of the land as to in what shape it is lying is immaterial to the proceedings and the assessee could not produce any convincing evidence for the amount of Rs.42,49,000/- in the hands of Anil Laul on the ground of dispute between the members. From perusal of ledger seized during search and seizure from Shri Anil Laul, then active member / secretary of the society shows that the same does not disclose any picture because there was no addition but when the said ledger was compared with the regular books of accounts of the assessee, the clear picture came out regarding the total financial transactions of the society. The ledger is giving complete picture of transaction of the society for the relevant period. Since the society has willfully concealed certain transactions and prepared regular books of accounts and filed its return, the same has to be added as income from undisclosed sources u/s 68 of the Act and the Assessing Officer thereby made addition of Rs.42,70,200/-.

Feeling aggrieved the assessee has carried the matter before Ld. CIT(A), who has allowed the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of the present appeal.

Ld. D.R. challenging the impugned order contended that when the assessee has failed to prove the source of cash credit deposited by the members of the society despite availing numerous opportunities, Ld.

However, to repel the arguments addressed by Ld. D.R., Ld. A.R. for the assessee contended inter alia that none of the members of the society has accepted that they had paid cash to the assessee society and there is no construction on the site and the area of farm houses do not form part of the land in question that as per office note, it is proved that the matter was earlier heard by the Assessing Officer on 22.03.1994 wherein notice was issued on 25.03.1994 and as such, has not been given an opportunity of being heard.

Undisputedly, this is a third round of litigation because on earlier two occasions, Ld. CIT(A) has set aside the assessment order with the direction to give reasonable opportunity to the assessee and then fresh assessment was made. Then, fresh assessment order dated 25.03.1997 was passed and an amount of Rs.42,49,000/- was added u/s 68 of the Act being the contribution made by the members of the society as is evident from the ledger seized from Shri Anil Laul. The assessee again approached Ld. CIT(A) who has set aside the assessment and directed to make necessary inquiries by visiting the site and examining the members of the society who actually contributed the amount. Then on failure of the assessee to produce evidence, made an addition of Rs.42,49,000/- in the hands of Shri Anil Laul. Then, the assessee’s appeal before Ld. CIT(A) has been accepted and now, the revenue has challenged the impugned order.

We have heard both the authorized representatives of the parties and perused the material placed on record in the light of facts and circumstances of the case and orders of authorities below.

When Ld. CIT(A) had set aside the assessment order on 14.01.1999 with the direction to make necessary enquiries by visiting the site and examining the members of the society who have actually contributed the amount, the assessee was called upon to furnish the following details:

From letter dated 076.02.2001, filed by the assessee, it has become apparently clear that the assessee has not denied the receipt of cash at Rs.43,37,000/- from its members as this fact has surfaced from the ledger seized from Shri Anil Laul, the acting Members Secretary of the society during the search and seizure. When the Assessing Officer has compared the seized ledger with the regular books of account of the assessee, it is proved on record that the society has intentionally not disclosed the cash transaction in the regular books of accounts.

Now, the next question arises for determination is, “as to whether material / ledger seized from Shri Anil Laul during search and seizure procedure, can be utilized for the purpose of assessment of the assessee society”? The Assessing Officer, without affording opportunity of being heard to the members, against whom the alleged amount of Rs.43,15,200/- has been shown, proceeded to make addition u/s 68 of the Act by disallowing the exemption u/s 11 of the Act. The Assessing Officer being a quasi judicial authority, is duty bound to afford opportunity of being heard to the assessee who has otherwise provided the complete details of the members against whom the said amounts have been shown and who are the income tax payers. More so, Assessing Officer has not preferred to conduct the investigation by calling the members of the society despite the fact that he has categorically mentioned at page 3 of the order that vide letter dated 06.02.2011, the assessee had submitted current addresses of the members of the society except Mrs. Anjali Sharma, settled in USA.

On the other hand, Ld. CIT(A) proceeded to delete the addition by harping upon the jurisdictional error with the Assessing Officer that the 7 I.T.A.No517/Del/2010 Assessing Officer was not competent to introduce new sources of income into the assessment so as to enhance the assessment, particularly when the case was remanded to him. When undisputedly, in the reframed assessment order dated 25.03.1997, addition of Rs.42,99,000/- was made out of which addition of Rs.25,86,000/- was made on protective basis and the addition of balance amount of Rs.16,63,000/- was made on substantive basis, it is settled principle of law that once the assessment has been set aside by the appellate authority, the powers of the Assessing Officer are confined to the issue remanded to him unless he is directed to make de novo assessment. So, when vide assessment order dated 25.03.1997, addition of Rs.42,49,000/- was made out of which addition of Rs.25,86,000/- was made on protective basis and the addition of balance amount of Rs.16,63,000/- was made on substantive basis, the Assessing Officer has exceeded his powers by overturning the projected and substantial addition made in the earlier assessment order, by making addition of Rs.42,70,200/- u/s 68 of the Act.

Even otherwise, material seized during search and seizure operation of Anil Laul, cannot be utilized for the purpose of assessment without affording opportunity of being head to the assessee society / members which has undisputedly not been given to them. Ld. CIT(A) has proceeded to delete the addition without entertaining any additional evidence and without calling upon remand report from the Assessing Officer. So, we are of the considered view that the matter is required to be restored to Ld. CIT(A) for fresh adjudication after providing opportunity of being heard to the assessee. Consequently, Grounds No.1 & 2 of the appeal are determined in favour of the appellant.

In view of what has been discussed above, the present appeal is hereby allowed for statistical purposes.