SHRI MAHENDRA LAL SALUJA,BILASPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), BILASPUR, BILASPUR

This appeal is filed by the assessee against the order passed by the CIT(A), Bilaspur, dated 21.03.2017, on the following grounds :-

Brief facts of the case are that the assessee family is in the business of pawning, sale, purchase of gold and silver jewllery and sale and purchase of gold silver bullion. There was a search and seizure operation was conducted in the residential premises of assessee i.e. Shri Mahendra Lal Saluja, Shri Satish Saluja and Shri Praveen Saluja at Tikarapara, Bilaspur and in business premises of M/s Mahendra Jewellers (Prop. Shri Praveen Saluja), Budhwari Bazar, Bilaspur. During the search operation, there were certain cash, jewellery (gold and silver) found from the residence of assessee and business premises of M/s Mahendra Jewellers, details of which are mentioned by the AO in its assessment order at page 2. Apart from the above, 146 NSCs in the name of various persons of Saluja Family were seized along with books of accounts and documents as per panchnama. In the course of assessment proceedings, the AO noted that during the search the search party had found ACs, TVs and other luxury goods and it was observed that the assessee was enjoying luxurious life, however, the house-hold withdrawal shown in the Income-tax returns are meagre. The assessee was asked to explain the low withdrawals but the assessee could not furnish complete break-up of household expenses. Therefore, the AO estimated the household expenditure for the impugned assessment year at Rs.10,08,000/-. After Rs.3,70,300/-, the AO determined the unexplained expenses of the family for the year at Rs.6,37,700/-. Thereafter the AO divided the same equally among three (3) main persons of the family, Mahendra Lal Saluja (assessee), Praeen Saluja and Satish Saluja and accordingly, made an addition of Rs.2,12,566/- to the total income of the assessee.

Further the AO noted that during the search u/s.132(1) of the Act, an amount of Rs.1 Crore was declared as undisclosed income u/s.132(4) of the Act against the undisclosed assets/transactions & other irregularities noticed during the search. It was also stated on oath that the disclosure is made by the assessee after obtaining permission from both the sons and other family members and requested to submit the break up of the same, but the assessee neither submitted the breakup nor was tax paid by the assessee. However, after a lapse of about two years the assessee filed return with Nil disclosure u/s.132(4) of the Act. In absence of any plausible explanation with regard to disclosure made u/s.132(4) of the Act, added Rs.1,00,00,000/- to the total income of the assessee. Similarly, the AO added Rs.4,80,080/- on account of suppressed rent receipt u/s.69A of the Act.

Against the above additions made by the AO, the assessee preferred appeal before the CIT(A) and the Ld CIT(A) has deleted the addition made by Ld AO. Subsequently, aggrieved by the order of the Ld CIT(A) dated 28.04.2010, revenue preferred an appeal before the Tribunal, the same was disposed off vide order dated 27.02.2012 in ITA No.227/BLPR/2010, allowing the appeal partly in favour of revenue with directions to restore the issue back to the files of AO for statistical purposes. Findings / observations of the ITAT in the said order were as under :- 4.4 We have considered the rival submissions made by both the sides, perused the orders of the A.O. and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that during the course of search the statement of the assessee was recorded u/s.132(4) of the Act in which Shri Mahendra Lal Saluja had offered Rs. 1 crore as undisclosed income against the undisclosed assets/transactions and other irregularities noticed during the course of search. We find Shri Mahendralal Saluja had also stated on oath that the disclosure is made after obtaining permission from both sons and other family members. A time of 15 days was requested to submit the break-up of heads under which the disclosure is to be considered. It was further promised that the entire tax will be paid on this disclosure during the current year. However, we find the assessee neither retracted the statement within a reasonable time nor paid any tax as promised and after a period of two years filed the return with nil disclosure u/s 132(4). Since the assessee has not retracted the statement made by him u/s 132(4) in writing within a reasonable time, therefore, the A.O., in our opinion, is justified in making the addition. The statement made during the course of search u/s 132(4) has got evidenciary value. The Id. ClT(A), in our opinion is not justified in deleting the addition merely because the A.O. has not given any independent basis to hold that the assessee earned Rs. 1 crore over and above the income determined on the basis of documents/assets noticed during the course of search. The affidavit filed by the assessee during the course of assessment proceedings in our opinion are of no use since those persons were not witness to the search taken place at the business premises of M/ s Mahendra Jewellers, the affidavits are dtd.4.12.2008 whereas the search took place on 1.2.2002 and both the persons are close relations of the assessee. Therefore, those affidavits in our opinion are only self serving documents without any evidenciary value. In our opinion any retraction by the assessee has to be in writing, in unambiguous terms and has to be made within a reasonable time. The submission of the Id. Counsel for the assessee that since the assessee has not paid advance tax and since there is no disclosure in the return filed, therefore, there is implied retraction, in our opinion, does not carry any force. Therefore, addition has to be made on the basis of disclosure made during the course of search in the statement recorded u/s.132(4) since it has got evidenciary value.

Ld AR of the assessee at the outset has shown us a statement u/s 132 dated 01.02.2007 of the assessee Mr. Mahendra Lal Saluja on pages 1 to 3 of the paper book. It was the submission of the Ld AR that the assessee had surrendered an amount of Rs. 1.00 Crore as per statement given which further needs to be reduced by the amount of additions already surrendered by the family members of the assessee, the remainder should be added in the hands of various family members in equal ratio in all 7 years i.e from AY 2001-02 to 2007-08. It is further Ld AO and Ld CIT(A) have not understood the directions of the ITAT in this regard and have made the adjustment confined to the AY 2007-08 only. In AY 2007-08 also certain additions which were made in the hands of other family members and needs to be deducted from the amount of Rs. 1.00 Crore were not reduced by the Ld AO, thus it was the prayer to direct the AO to recalculate the entire demand as directed by ITAT. Order of CIT(A) shall also be set aside.

On the other hand, ld. Sr DR relied on the orders of the authorities below 10. We have considered the rival contentions, perused the material available on records and findings of the coordinate bench of the ITAT as referred to supra.

Based on statement of the assessee u/s 132 dated 01.02.2017 and order of ITAT in the present case, the first contentions of the assessee as to restrict the addition to the difference of Rs. 1 Crore and additions already sustained in the hands of assessee and other family members was fortified by the findings of the ITAT thus we hold the same as correct and acceptable. The second contention to divide the said remainder amount between the assessee and other members of family is also categorically mentioned by the ITAT in its order in para 4.5 (supra), wherein it was observed that “Therefore, the entire disclosure made by the assessee was towards irregularities and undisclosed assets/transactions of himself as well as that of various family members” and thus held correct. Regarding third contention of the 7 years i.e form AY 2001-02 to 2007-08 has no base since neither such finding was given by the ITAT in the order referred herein above nor it was a mention by the assessee during the course of search while statement u/s 132 were given by the assessee, such contention is devoid and bereft of merit, thus unacceptable.

Considering the aforesaid observations, we are of the considered view that the Ld AO who was directed by the ITAT by order dated 27.02.2012 for the AY 2007-08 in ITA 227/BLPR/2010 to calculate the amount of addition as described therein and contented by the assessee in its first 2 contentions mentioned herein above, but the same could not be properly understood and worked out by the Ld AO, thus the appeal effect order passed by the Ld AO has mistakes apparent from records and needs rectification as requested u/s 154 by the assessee. Assessee’s non compliance while the appeal effect order was passed is also noted herewith, but because the mistake had took place on the part of department, in the interest of justice which will not cause any prejudice to the revenue if one more opportunity is granted to the assessee to represent its case before the AO. Accordingly, we restore the matter back to the files of AO with the directions to re calculate the amount of addition in the hands of assessee in terms of our observation herein above. Needless to say, that reasonable opportunity of being heard be give to assessee and the assessee is also directed to cooperate with the AO positively for early disposal of the case.

In the result appeal of the assessee is allowed for statistical purposes.