THE HONOURABLE Sr.JUSTICE L.
NARASIMHA REDDY and THE HONBLE Sr.JUSTICE M.
M.SEETHARAMA MURTI I.T.T.A.No.148 of 2004 24-12-2014 Malreddy Ranga Reddy, hyderabad.Appellant Assistant Commissioner of Income Tax, Central Circle 2, Hyderabad.Respondent Counsel for the Appellant: Sr.Y.
RATNAKAR Counsel for Respondent: Ms.M.KIRANMAYEE, representing Sr.J.V.PRASAD, learned Senior Standing Counsel ?.
Cases referred: HON'BLE Sr.JUSTICE L.NARASIMHA REDDY AND HON'BLE Sr.JUSTICE M.SEETHARAMA MURTI I.T.T.A.No.148 of 2004 JUDGMENT
: (per the Honble Sr.Justice L.Narasimha Reddy) This appeal under Section 260-A of the Income Tax Act, 1961 (for short the Act) is preferred against the order dated 28.04.2004 passed by the Hyderabad Bench A of the Income Tax Appellate Tribunal (for short Tribunal) in IT(SS).No.123/HYD/2003.
The assessee is the appellant.
The premises of the appellant was searched on 19.01.2001 by the officials of the Income Tax Department in exercise of power under Section 132 of the Act.
A receipt evidencing payment of a sum of Rs.10,00,000/- to one Mr.Prabhakar Reddy is said to have been discovered.
Another receipt evidencing repayment of that very amount was also discovered.
A statement under sub-Section (4) of Section 132 of the Act is also recorded on the day of search.
When a question was put to the appellant as to whether he has made any payment to one Mr.Prabhu, he gave answer in a negative.
Thereafter, a further statement was recorded on 27.03.2001.
A question was put to the appellant as to whether he paid a sum of Rs.10,00,000/- to Mr.Prabhakar Reddy.
The appellant accepted that he paid that amount to Mr.Prabhakar Reddy on 25.11.2000 for purchasing of a plot.
He further explained that the deal did not fructify, and as such, the amount of Rs.10,00,000/- was returned to him on 30.11.2000.
The case of the appellant was that the amount is from the funds of M/s.Sapta Sikhara Housing Private Limited (for short the company) in which he himself and his family members have substantial stake.
The Assessing Officer passed an order of Block Assessment on 31.01.2003 adding a sum of Rs.10,00,000/- to his income and levying tax as provided for under Chapter 14B of the Act.
The appellant filed an appeal before the Commissioner of Income Tax (Appeals)-I, Hyderabad.
The same was dismissed on 22.08.2003.
Thereupon, he filed an appeal before the Tribunal and that was also dismissed on 28.04.2004.
Sr.Y.
Ratnakar, learned counsel for the appellant submits that the very recording of statement from the appellant was without basis, since no cash or other incriminating documents were recovered during the search.
He contends that if the receipts in relation to the payment of amount and then refunding of the same are to be treated as documents within the purview of Section 132 of the Act, the very basis for the Block Assessment Proceedings ceases, since the Department did not believe those receipts at all as true.
He contends that though a specific mention was made that the company has sufficient resources and that the amount of Rs.10,00,000/- was from those resources, no effort was made to verify that.
Learned counsel submits that the amount has been reflected in the books of account of the said company and despite that the Block Assessment was made.
Ms.M.Kiranmayee, learned Junior Standing Counsel appearing for Sr.J.V.Prasad, learned Standing Counsel for Income Tax, on the other hand, submits that there existed adequate basis for recording the statement of the appellant once certain material in the form of receipts were recovered.
She contends that the appellant himself admitted that he paid a sum of Rs.10,00,000/- and then received it back, but, he did not indicate the source thereof.
Learned counsel points out that the inclusion of the amount in the books of account of the company was an after thought and that no interference is warranted in the orders passed by the Assessing Officer, the Commissioner and the Tribunal.
The appellant is an assessee under the Act and he has been filing returns year after year.
His premises were searched on 19.01.2001.
He stated that except two rough receipts evidencing payment and taking refund of a sum of Rs.10,00,000/- in a transaction with Mr.Prabhakar Reddy, nothing else was noticed or recovered in the search.
Section 132 of the Act confers power upon various authorities of the Department to conduct search.
Since it entails in penal consequences, every step stipulated therein is required to be followed meticulously.
The recording of statement under sub- Section (4) of Section 132 of the Act would take place, as a sequel to the search.
It is only when a person is found to be in possession and control of any books of account, documents, money, bullion or jewellery, that his statement can be recorded.
The sole basis for recording of statement from the appellant herein is the recovery of the two receipts referred to above.
In such an event, further steps in the matter must proceed on the assumption that those two receipts are true.
Sub-Section 4A(ii) of Section 132 of the Act becomes relevant in this regard, which reads as under: (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the couRs.of a search, it may be presumed - (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and.
(rest of the provision is omitted since it is not relevant for the purpose of this lis.) A perusal of this provision discloses that the contents of books of account or other documents must be taken as true.
If for any reason, the authority, who conducted the search, does not believe such documents as true, the very basis for the proceedings collapses.
In the instant case, the plea of the appellant was that the amount was held by the company and that it was paid to the owner of the land.
The transaction did not fructify and it was paid back to the company.
Neither the person, who is said to have received the amount nor any other individual, were examined to prove that the payment was by; or, for and on behalf of the appellant herein.
The plea of the appellant was that the department did not cross-verify the matter from any authorized representative of the company.
Therefore, whether one goes by the factum of the Department itself treating the only documents, namely, receipts as not true; or their failure to record the statements of any individual including the authorized representative of the company, the very basis for the proceedings ceases to exist.
The Assessing Officer as well as the Tribunal proceeded on the assumption that the appellant was under obligation to explain the factum of payment.
When the amount was not recovered nor was said to be in the control and custody of the appellant, there was no basis for initiating that proceedings.
We, therefore, allow the appeal and set aside the order of Block Assessment insofar as it has added a sum of Rs.10,00,000/- to the income of the appellant.
There shall be no order as to costs.
The miscellaneous petitions filed in this appeal shall also stand disposed of.
___________________________ L.NARASIMHA REDDY, J ____________________________ M.SEETHARAMA MURTI, J Date: 24.12.2014