The D.C.i.T. Vs. Shri Arjun Dass Kalwani - Court Judgment

Excerpt:
1. this appeal by the revenue and cross-objection by the assessee emanate from the order passed by the cit(a) on 13.03.2000 in relation to a.y. 1991-92.2. the only ground raised by the revenue is against the deletion of addition of rs. 4,25,437/- made by the assessing officer on account of unexplained investment in gold ornaments.3. briefly stated, the facts of this case are that a search action under section 132(1) was taken on the residential premises of the assessee on 17.8.1990 in which some incriminating material was found and seized. a notice under section 112a r.w.s. 132(5) was issued. in the meantime, the assessee filed writ petition before the hon'ble high court of rajasthan challenging the legality and validity of action under section 132(1). the hon'ble high court stayed the proceedings initiated under section 132(5) vide its order dated 12.9.1990 and a subsequent order staying the search proceedings was passed on 23.11.i990. however, on 6.7.1999 the assessee's petition was dismissed after which order under section 132(5) was passed. in the meantime, notice under section 148 dated 23.8.1999 was also served on the assessee. thereafter, assessment order was passed under section 143(3) on 3.11.1999.4. in the course of search, gold ornaments of 1296 gms. [net] were found. in his statement recorded under section 132(4) on 17.8.1990, the assessee stated that the gold ornaments found in the search belonged to the following family members:2. smt. indra w/o shri bhagwandass 350.5 gms. daughter-in-law3. smt. krishna 101 gms. daughter4. smt. usha khubani 177.2 gms. daughter 5. when asked to state the source and evidence of possession of 667.3 gms of gold ornaments as belonging to his wife, it was stated that action under section 132(1) was also taken earlier in his case on 30.10.1983 in which inventory of gold ornaments was prepared which comprised of more quantity of gold than presently. the assessee produced before the assessing officer the inventory of gold ornaments prepared on 20.12.1983. the assessing officer found variation of gold ornaments detailed in the list prepared on 20.10.1983 and that on 17.8.1990, being the date of instant search. it was explained on behalf of the assessee that the gold ornaments were remade and converted into new items. it was also stated that smt. meera kalwani was assessed to w.t. and copy of an order passed under section 16(3) for a.y. 1978 79 was placed on record. since the assessee could not adduce any evidence with regard to the remaking or conversion of old gold ornaments, the assessing officer treated 94.2 gms. as explained [representing the items which matched with those found during the course of search on 30.10.1983] and balance gold was held to be unexplained. as regards smt. indra, the daughter-in-law of the assessee, total gold ornaments weighing 350.5 gms were claimed to be belonging to her. the assessing officer found this claim to be unsubstantiated and did not accept the possession of any gold ornaments by her. smt. krishna alias rekha, daughter of the assessee claimed to be the owner of 101 gms of gold. it was stated that before leaving for surat, she left bangles, rings and one pandle weighing 101 gms with her mother, smt. meera kalwani, for getting the ornaments converted into new ones. the assessing officer did not accept the genuineness of this explanation as well. similarly, smt. usha khubani, the other daughter, for which 177.2 gms were claimed to be belonging to her, was also not accepted by the assessing officer.to sum up, out of total gold ornaments of 1296 gms. found in the search, the assessing officer treated 94.2 gms as explained and for the balance gold ornaments of 1201.8 gms he made addition of rs. 4,25,437/- under section 69 of the act. the ld. cit(a) in the first appeal, after considering the evidence and details, knocked out the said addition.6. we have heard the rival submissions and perused the relevant material on record. as regards the jewellery of 667.3 gms claimed to be belonging to smt. meera bai, wife of the assessee, we find that the assessing officer had accepted only 94.2 gms on the ground that the description of items in list dated 20.12.1983 and those found in the present search was not tallying. pages 13 and 14 of the pb are the copy of the assessment order passed in the hands of smt. meera bai under section 16(3) of the w.t. act for a.y. 1978-79 in which the gold ornaments at 1100 gms. [net] have been assessed by the revenue. page nos. 15 to 21 of the pb are the w.t. assessment orders passed under section 16(3) in the hands of smt. meera kalwani for the a.ys. 1988-89 and 1989-90 in which gold ornaments of 667.300 gms have been accepted.not only that, the lady had claimed before the authorities below that she was in possession of jewellery which was coming from the period anterior to the earlier search conduced on the assessee in 1983. simply because the assessee could not lead evidence for conversion or remaking of the jewellery, the possession of which is otherwise accepted, it cannot be said that the holding of gold jewellery to this extent cannot be accepted, when overwhelming evidence is available in which the revenue has assessed her at much more jewellery in the a.y. 1978-79 and to the present holding of jewellery in the a.ys. 1988-89 and 1989-90.in our considered opinion, the ld. cit(a) was justified in accepting the claim of the assessee with regard to the possession of gold jewellery by smt. meera kalwani to the tune of 667.300 gms of gold jewellery. in so far as smt. indra, the daughter-in-law of the assessee is concerned, she was claimed to be the owner of 350.5 gms. of gold jewellery. it was explained during the assessment proceedings that she received 194 gms of gold ornaments as wedding gift from her parents and brothers who resided at dubai and taiwan. she further claimed that she received four gold bangles from her mother-in-law as pre-nuptial gift and four more bangles on the occasion of diwali in 1987. thus the total possession of gold claimed to be belonging to her is 350.5 gms. we are reminded of the order passed by the chandigarh bench of the tribunal in the case of smt. neena syal v. acit [1999] 70 itd 62 [chd.] in which it was held that cbdt instruction no. f.288/63/93-it (lnv) ii dated 11.5.1994 containing guidelines for seizure of jewellery and ornaments in the course of search, was relevant with reference to the deeming provision of section 69a as well. in this instruction, the possession of gold jewellery by married ladies upto 500 gms has been held to be immune from seizure. the chandigarh bench in this case held that the possession of gold jewellery by married ladies to the extent of 500 gms should be considered as explained. several orders have been passed all over india by different benches of the tribunal accepting the possession of gold jewellery to the extent of 500 gms. per married lady. since smt. indra had claimed jewellery of 350.5 gms in her possession, which is much below the prescribed limit of 500 gms, we are of the considered opinion that no addition can be held to be sustainable on this count and the ld. cit(a) was justified in deleting it. as regards the two daughters of the assessee, namely smt. krishna and smt. usha khubani for which 101 gms and 177.2 gms have been claimed respectively to be belonging to them, we find that both of them had claimed to have left the jewellery with their mother for conversion. it is a common practice in our society that the daughters rely upon the experience and wisdom of their mother with regard to the conversion or purchase of jewellery. both of them had asserted through affidavits the retention of gold jewellery with their mother to this extent. not only this, the assessee in his statement recorded during the course of search also accepted this fact that some jewellery, lvps and kvps belonging to his daughters was lying with him. apart from that, another important aspect, which cannot be lost sight of is that the gold jewellery was found in packets bearing the names of the ladies concerned. copy of panchnama placed at pages 65 onwards of the pb clearly admits the fact of different boxes containing jewellery belonging to these ladies separately. these facts indicate that the jewellery to the extent claimed did belong to the concerned ladies. in our considered opinion, the ld. cit(a) was justified in deleting the addition which was erroneously made by the assessing officer. we, therefore, uphold his action.7. the first ground raised by the assessee in his cross objection is against the initiation of assessment proceedings by issuance of notice under section 148 and the passing of consequential order.8. it was contended by the ld. a.r. that the ld. cit(a) was not justified in holding that that the assessing officer had proper jurisdiction for issuance of notice under section 148 and passing of order. it was stated that the assessment proceedings should have been completed within two years as per section 153 and having not done so, the assessment was barred by time. it was also asserted that the hon'ble high court had stayed only the proceedings initiated under section 132(5), which did not operate as a bar for completion of regular assessment under section 143(3). another submission was made that once notice under section 143(2) was validly issued on 14.2.1992, a subsequent notice under section 148 on 23.8.1999 was beyond the jurisdiction of the assessing officer since the proceedings in response to notice under section 143(2) were already pending. he relied on several decisions to canvass the view that the income could not be said to have escaped assessment until final order of assessment was passed on pending proceedings. he explained the meaning of "assessment proceedings" with the aid of certain decisions to bolster his submission that on the issuance of notice under section 148, the proceedings already initiated by notice under section 143(2) were pending.9. in the light of all these submissions, it was vehemently argued that the entire proceedings be held to be invalid. in the opposition, the ld. d.r. countered the submissions by stating that the assessment order was passed under section 143(3) and there was no reference whatsoever to the proceedings under section 148. she submitted that the ld. cit(a) erroneously noted the fact of issuance of notice under this section though the final decision upholding the legality of the assessing officer's action was in order. it was further contended by her that when hon'ble high court stalled the proceedings and passing of order under section 132(5), the regular assessment could not have been made and hence the passing of regular assessment was also indirectly stayed.she also relied on certain decisions to submit that the order under section 132(5) was simply an interlocutory order and the subsequent proceedings were automatically stayed on the stayal of proceedings under section 132(5) and the assessing officer had rightly passed the assessment order under section 143(3) after the dismissal of the writ petition by the hon'ble high court on 6.7.1999.10. we have considered the rival submissions in the light of material placed before us and the precedents relied upon. the primary question, which falls for our consideration is to decide as to whether or not the regular assessment proceedings were stayed by the hon'ble high court, when the passing of final order under section 132(5) was stayed by it? in order to appreciate the controversy at hand, it is appropriate to have a cursory look at the provisions of section 132(5) at the relevant point of time alongwith other connected sections. section 132(5) states as under: 5) where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132a and 132b referred to as the assets) is seized under sub-section (1) or sub-section (1a), the income-tax officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the deputy commissioner, (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the indian income-tax act, 1922 (11 of 1922), or this act; (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the indian income-tax act, 1922 (11 of 1922), or this act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this act and any one or more of the acts specified in clause(a) of sub-section (1) of section 230a in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized sub-section (6) of section 132 prescribes that the assets retained under sub-section 5 may be dealt with in accordance with the provisions of section 132b. the sum and substance of the provisions of sections 132b(1), 132b(2) and 132b(3) is that the assets seized under section 132(5) would be utilized towards the tax liability of the assessee and the balance assets shall be made over or paid to the person from whose custody these were seized. the payment of interest on the excess assets retained is dealt with in sub-section (4) of section 132b, which reads as under: (a) the central government shall pay simple interest at the rate of eight per cent per annum on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132a, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorizations for search under section 132 or requisition under section 132a was executed to the date of completion of the assessment under section 153a or under chapter xiv-b.11. the logic behind sub-section (5) of section 132 is to expedite the return of seized assets after retaining what is due by way of tax to the govt. and has been illegally held by the person concerned. it stipulates that the summary enquiry must be made by the assessing officer with a view to ascertain that how much of the seized valuables should be retained against the unpaid tax liabilities. the excess is released on the passing of summary order under section 132(5). since the very object of this section is to retain the approximate amount of tax due out of the seized assets, it has to be done immediately after the close of search and order under section 132(5) is required to be passed within 120 days of the seizure. the matter does not end simply on the passing of the order under section 132(5), which is only in the nature of a summary provisional enquiry. regular assessment follows under the law in which the income is determined after considering the entire material after allowing reasonable opportunity of being heard to the assessee within the time stipulated under chapter xiv of the act.here it is important to mention that it is not in each and every case that the proceedings under section 132(5) are initiated, for the obvious reason that where any money, bullion or jewellery etc. is seized in the search action, the proceedings under section 132(5) follow and where such assets are not seized, there cannot be any question of seizure of money, bullion, jewellery, etc or application of such assets. in such latter cases, only regular assessment is made under which the income is determined in due course. it is, therefore, manifest that in a situation where any money, bullion or jewellery, etc. is seized in the search, normally an order under section 132(5)is passed on provisional summary enquiry with a view to determine that how much of the seized wealth can be legitimately and reasonably retained to cover the tax liability already incurred. thereafter, the regular assessment is made in the same manner as in the case of those tax evaders who are not found in the possession of concealed income. the relevant position has been aptly explained by the hon'ble supreme court in the case of pooranmal v. director of inspection [inv]. the nutshell is that where any money, jewellery or other valuable articles are seized in the search, primarily an order under section 132(5) is passed which is a provisional summary enquiry to determine the quantum of seized assets to be retained against the tax liability already incurred and thereafter, regular assessment follows finally determining the amount of income. it is clear that the passing of order under section 132(5) is a first step where money and valuables so seized are retained and after passing the order under this sub-section, the regular assessment takes place. if due to one reason or the other, the proceedings under section 132(5) are stayed, as is the case in hand, the final order of assessment under section 143(3) cannot be passed. if we go by the contention raised by the ld. a.r.that the assessing officer was not forbidden from completing the assessment under section 143(3) and the order under section 132(5), which was stayed for the time being, could have been passed later on, it would create a situation in which a baby is born first and act of conceiving takes place later. obviously, notice under section 132(5) was issued in the instant case on 23.8.1990 as against which the assessee approached the hon'ble high court, who vide its judgment stayed the passing of final order under section 132(5). once the passing of provisional summary order under section 132(5) was stayed, the application of retained assets under section 132b became impossible. in such circumstances, the assessing officer was rightly not competent to put on hold the passing of order under section 132(5) and jump to pass the final order of regular assessment. we are not inclined to accept the contention of the ld. a.r. that proceedings under section 143(3) could have continued and concluded without the passing of order under section 132(5) for the reason that the order under the later section has to precede the regular assessment order.this position has been made clear by the legislature itself through the above extracted section 132b(4), which deals with the payment of simple interest on the amount of excess amount retained. clause (b) provides that such interest shall run from the date immediately following the expiry of six months from the date of order under sub-section (5) of section 132 to the date of assessment or reassessment. the sequence in which the orders are to be passed has been made abundantly clear by this clause, as per which order under section 132(5) is required to be necessarily passed before the passing of the regular assessment order.in view of the above discussion, we are of the considered opinion that the assessing officer was, impliedly precluded from making regular assessment, till the pendency of the matter before the hon'ble high court. no sooner did the hon'ble high court dismiss the writ petition on 6.7.1999, an order under section 132(5) was passed on 7.9.1999 and the assessment order under section 143(3) was passed on 3.11.1999.under such circumstances, the period during which the matter was subjudice before the hon'ble high court was required to be excluded for the purpose of calculating the limitation. the ld. a.r. has fairly conceded that if such period is not taken into consideration, then the order so passed cannot be held to be barred by limitation.12. another legal issue raised by the ld. a.r. is on the question of the issuance of notice under section 148 during the pendency of proceedings from the earlier notice under section 143(2). it is observed that notice under section 143(2) was issued on 14.2.1992 whereas notice under section 148 was issued on 23.8.1999 and the final assessment order was passed under section 143(3) on 3.11.1999. the ld.a.r. has forcefully emphasized on the fact that the notice under section 148 was invalid because the earlier assessment proceedings were pending. we fully endorse his view, which is supported by several decisions of the hon'ble supreme court, high courts and tribunals that the income cannot be said to have escaped assessment until final order of assessment is passed on the pending proceedings. but the position under consideration is a bit different. it is no doubt true that notice under section 143(2) was issued on 14.2.1992 and notice under section 148 was issued by the assessing officer on 23.8.1999, but the crucial distinguishing feature in this case is that the assessment order was passed under section 143(3). there is no reference whatsoever to the passing of order under section 147. in other words, the assessing officer issued notice under section 143(2) and completed assessment under section 143(3) and in the process though a notice under section 148 was also issued but that was not proceeded with. hence the resultant assessment is pursuant to notice under section 143(2) and cannot be said to be a reassessment order under section 147. the position would have been different if the assessing officer had framed assessment pursuant to notice under section 148 after bidding farewell to the earlier notice under section 143(2). in that situation all the decisions relied upon by the ld. a.r. would have come into force to hold the resultant assessment order under section 147 to be illegal.since the situation under consideration is totally different wherein the assessing officer realized his folly of issuing notice under section 148 when the proceedings under section 143(2) were pending, he set the situation right by ignoring notice under section 148 and completing the assessment under section 143(3). the ld. cit(a) has, though upheld the action of the assessing officer, but failed to consider the facts in the right perspective that the assessing officer had not passed the order pursuant to notice under section 148. as the order itself was passed under section 143(3), in our considered opinion, the challenge to the validity of issuance of notice under section 148 and thereby contending the assessment order to be void, is alien to the scope of the appeal and hence bereft of any force. this ground is, therefore, not allowed.13. ground no. 2 of assessee's cross objection is against the confirmation of estimate of dalali receipts at rs. 1 lakh.14. facts of this ground are that the assessee was doing proprietorship business and was also having income from dalali of ghee, edible oil and vanaspati. in the course of action under section 132(1) a ledger for the financial year 1990-91 [exh-3] was found which was a sort of memorandum book containing certain details of transactions but the amount of dalali receipt was not recorded. in the course of assessment proceedings, the assessee produced cash book and ledger which was admittedly prepared after the date of search in which the assessee had shown brokerage receipts at rs. 81,605/-. since no evidence was available to substantiate this income, the assessing officer estimated the gross receipts at rs. 1 lakh and made addition of rs. 18,395/-. in the first appeal, the ld. cit(a) upheld the order of the assessing officer in estimating the gross receipts from dalali. since he had already confirmed the addition of rs. 16,200/- on account of insufficient drawings for household expenses, he allowed set off of rs. 16,200/- which left the addition at rs. 2,196/-.15. after considering the rival submissions and perusing the relevant material on record, it is found as an admitted position that the receipts and outgoings recorded in the cash book prepared after the date of search were not subject to verification in the absence of receipts and vouchers. here it is pertinent to mention that we are dealing with a search case, prior to the introduction of chapter xiv-b, being the special procedure for assessment of search cases. in the new procedure, the undisclosed income is determined under section 158bc, which is different in scope from regular assessment that is made in addition to the block assessment. whereas the ambit of block assessment is confined only to the determination of the undisclosed income, the verification of the disclosed particulars including the making of estimate of income, falls within the domain of regular assessment. in the period anterior to the concept of block assessment, only one assessment was made which comprised of both the determination of undisclosed income as well as regular income in one go. since we are dealing with the assessment in the prior period, the making of estimation of income by the revenue authorities cannot be interfered with, if such estimate is within the reasonable limits. adverting to the facts of the case, where the assessee had no material to substantiate his dalali income, in our considered opinion, the ld.cit(a) was justified in upholding the estimate at rs. 1 lakh as against the declared income of rs. 81,605/-. we, therefore, uphold the same.this ground is not accepted.16. ground no. 3 of the cross objection is against the confirmation of addition of rs. 27,000/- representing ivps and kvps in the name of assessee's daughter, smt. usha khubani, as unexplained investment by the assessee.17. in the course of search, ivps worth rs. 7,000/- [purchased on 24.5.1990] and kvps worth rs. 20,000/- [purchased on 25.5.1990] in the name of smt. usha khubani were found. the assessee in the concluding statement, stated that the ivps and kvps belonged to smt. usha khubani, his daughter. the assessee also filed a letter duly signed by smt. usha khubani stating that she purchased ivps of rs. 12,000/- and kvps of rs. 20,000/- while she was at jodhpur and the same were left in the custody of her mother. she further explained that the ivps were purchased out of maturity amount of fdr in her name at sbbj, sardarpura, jodhpur and the investment in kvps was made of rs. 5,000/- out of cash given to her by her mother and balance of rs. 15,000/- was invested out of withdrawals from her capital account in the firm m/s usha saree kendra, delhi. the assessing officer made addition of rs. 27,000/- under section 69 of the act. no relief was allowed in the first appeal.18. we have heard the rival submissions and perused the relevant material on record. we find that the ld. cit(a) has not accepted the claim of the assessee by observing that there was no evidence on record that smt. usha khubani had withdrawn a sum of rs. 15,000/- specifically for purchasing kvps. at the same time, it is an undisputed fact that she did withdraw this amount from her capital account. when the money has been withdrawn and claimed to have been used for a particular purpose and there is no evidence worth the name to the contrary that the said amount was utilized elsewhere, the explanation given by the assessee has to be accepted. it is a settled legal position that in order to controvert the assessee's version, the revenue is bound to falsify that explanation or establish that such explanation is untrue.likewise, a specific claim was made before the assessing officer that the amount was invested partly out of the proceeds of maturity amount of fdr in her name in the sbbj at sardarpura, jodhpur. here also, both the authorities below have brushed aside the explanation without assigning any reasons for not accepting the claim. smt. usha khubani had claimed by way of an affidavit that these instruments belonged to her, which is available on record. all this material goes to show that the assessee had discharged his onus cast upon him to prove that the ivps worth rs. 7,000/- and kvps worth rs. 20,000/- did belong to smt.usha khubani. another important fact, which merits acceptance is that the kvps were in the name of smt. usha khubani, a married daughter of the assessee for which the primary onus was upon her to explain the source of the investment. since she had discharged this onus by showing proceeds of maturity of fdr and withdrawal from her capital account from m/s usha saree kendra, delhi, we are of the considered opinion that no addition was called for in the hands of the assessee. this addition is, therefore, deleted.19. ground no. 4 of the cross objection deals with estimation of household expenses at rs. 60,000/-, which led to the making of addition of rs. 16,200/-.20. the assessee had shown household withdrawals at rs. 19,800/-. smt.meera kalwani the assessee's wife in her statement recorded under section 132(4) stated that the household expenses were ranging between rs. 4,000/- and rs. 5000/- p.m. and such household expenses were met out by her husband and partly from rental income. the assessing officer, going by the statement of smt. meera, estimated the household expenses at rs. 60,000/- per annum and made addition of rs. 16,200/- by allowing credit for rs. 19,800/- being the amount of withdrawals shown and rs. 18,900/- being the rental income. no relief was allowed in the first appeal.21. having heard the rival submissions and perused the relevant material o record, it is found that the assessee's wife in her statement admitted the household expenses were in the range of rs. 4,000/- to rs. 5000/- per month in such circumstances, the estimate of household expenses at rs. 5,000/- p.m cannot be held to be excessive in any manner. moreover, the ld. cit(a) ha already allowed the benefit of telescoping of this amount against the estimation of income from dalali, which we have upheld in one of the foregoing paras. we, therefore, do not find any infirmity in the impugned order on this score.22. in the result, the appeal of the revenue stands dismissed and the cross objection of the assessee is partly allowed.

Judgment:
1. This appeal by the Revenue and cross-objection by the assessee emanate from the order passed by the CIT(A) on 13.03.2000 in relation to A.Y. 1991-92.

2. The only ground raised by the Revenue is against the deletion of addition of Rs. 4,25,437/- made by the Assessing Officer on account of unexplained investment in gold ornaments.

3. Briefly stated, the facts of this case are that a search action Under Section 132(1) was taken on the residential premises of the assessee on 17.8.1990 in which some incriminating material was found and seized. A notice Under Section 112A r.w.s. 132(5) was issued. In the meantime, the assessee filed writ petition before the Hon'ble High Court of Rajasthan challenging the legality and validity of action Under Section 132(1). The Hon'ble High Court stayed the proceedings initiated Under Section 132(5) vide its order dated 12.9.1990 and a subsequent order staying the search proceedings was passed on 23.11.i990. However, on 6.7.1999 the assessee's petition was dismissed after which order Under Section 132(5) was passed. In the meantime, notice Under Section 148 dated 23.8.1999 was also served on the assessee. Thereafter, assessment order was passed Under Section 143(3) on 3.11.1999.

4. In the course of search, gold ornaments of 1296 gms. [net] were found. In his statement recorded Under Section 132(4) on 17.8.1990, the assessee stated that the gold ornaments found in the search belonged to the following family members:2.

Smt. Indra w/o Shri Bhagwandass 350.5 gms.

Daughter-in-law3.

Smt. Krishna 101 gms.

Daughter4.

Smt. Usha Khubani 177.2 gms.

Daughter 5. When asked to state the source and evidence of possession of 667.3 gms of gold ornaments as belonging to his wife, it was stated that action Under Section 132(1) was also taken earlier in his case on 30.10.1983 in which inventory of gold ornaments was prepared which comprised of more quantity of gold than presently. The assessee produced before the Assessing Officer the inventory of gold ornaments prepared on 20.12.1983. The Assessing Officer found variation of gold ornaments detailed in the list prepared on 20.10.1983 and that on 17.8.1990, being the date of instant search. It was explained on behalf of the assessee that the gold ornaments were remade and converted into new items. It was also stated that Smt. Meera Kalwani was assessed to W.T. and copy of an order passed Under Section 16(3) for A.Y. 1978 79 was placed on record. Since the assessee could not adduce any evidence with regard to the remaking or conversion of old gold ornaments, the Assessing Officer treated 94.2 gms. as explained [representing the items which matched with those found during the course of search on 30.10.1983] and balance gold was held to be unexplained. As regards Smt. indra, the daughter-in-law of the assessee, total gold ornaments weighing 350.5 gms were claimed to be belonging to her. The Assessing Officer found this claim to be unsubstantiated and did not accept the possession of any gold ornaments by her. Smt. Krishna alias Rekha, daughter of the assessee claimed to be the owner of 101 gms of gold. It was stated that before leaving for Surat, she left bangles, rings and one pandle weighing 101 gms with her mother, Smt. Meera Kalwani, for getting the ornaments converted into new ones. The Assessing Officer did not accept the genuineness of this explanation as well. Similarly, Smt. Usha Khubani, the other daughter, for which 177.2 gms were claimed to be belonging to her, was also not accepted by the Assessing Officer.

To sum up, out of total gold ornaments of 1296 gms. found in the search, the Assessing Officer treated 94.2 gms as explained and for the balance gold ornaments of 1201.8 gms he made addition of Rs. 4,25,437/- Under Section 69 of the Act. The ld. CIT(A) in the first appeal, after considering the evidence and details, knocked out the said addition.

6. We have heard the rival submissions and perused the relevant material on record. As regards the jewellery of 667.3 gms claimed to be belonging to Smt. Meera Bai, wife of the assessee, we find that the Assessing Officer had accepted only 94.2 gms on the ground that the description of items in list dated 20.12.1983 and those found in the present search was not tallying. Pages 13 and 14 of the PB are the copy of the assessment order passed in the hands of Smt. Meera Bai Under Section 16(3) of the W.T. Act for A.Y. 1978-79 in which the gold ornaments at 1100 gms. [net] have been assessed by the Revenue. Page Nos. 15 to 21 of the PB are the W.T. assessment orders passed Under Section 16(3) in the hands of Smt. Meera Kalwani for the A.Ys. 1988-89 and 1989-90 in which gold ornaments of 667.300 gms have been accepted.

Not only that, the lady had claimed before the authorities below that she was in possession of jewellery which was coming from the period anterior to the earlier search conduced on the assessee in 1983. Simply because the assessee could not lead evidence for conversion or remaking of the jewellery, the possession of which is otherwise accepted, it cannot be said that the holding of gold jewellery to this extent cannot be accepted, when overwhelming evidence is available in which the Revenue has assessed her at much more jewellery in the A.Y. 1978-79 and to the present holding of jewellery in the A.Ys. 1988-89 and 1989-90.

In our considered opinion, the ld. CIT(A) was justified in accepting the claim of the assessee with regard to the possession of gold jewellery by Smt. Meera Kalwani to the tune of 667.300 gms of gold jewellery. In so far as Smt. Indra, the daughter-in-law of the assessee is concerned, she was claimed to be the owner of 350.5 gms. of gold jewellery. It was explained during the assessment proceedings that she received 194 gms of gold ornaments as wedding gift from her parents and brothers who resided at Dubai and Taiwan. She further claimed that she received four gold bangles from her mother-in-law as pre-nuptial gift and four more bangles on the occasion of Diwali in 1987. Thus the total possession of gold claimed to be belonging to her is 350.5 gms. We are reminded of the order passed by the Chandigarh Bench of the Tribunal in the case of Smt. Neena Syal v. ACIT [1999] 70 ITD 62 [Chd.] in which it was held that CBDT Instruction No. F.288/63/93-IT (lnv) II dated 11.5.1994 containing guidelines for seizure of jewellery and ornaments in the course of search, was relevant with reference to the deeming provision of Section 69A as well. In this Instruction, the possession of gold jewellery by married ladies upto 500 gms has been held to be immune from seizure. The Chandigarh Bench in this case held that the possession of gold jewellery by married ladies to the extent of 500 gms should be considered as explained. Several orders have been passed all over India by different Benches of the Tribunal accepting the possession of gold jewellery to the extent of 500 gms. per married lady. Since Smt. Indra had claimed jewellery of 350.5 gms in her possession, which is much below the prescribed limit of 500 gms, we are of the considered opinion that no addition can be held to be sustainable on this count and the ld. CIT(A) was justified in deleting it. As regards the two daughters of the assessee, namely Smt. Krishna and Smt. Usha Khubani for which 101 gms and 177.2 gms have been claimed respectively to be belonging to them, we find that both of them had claimed to have left the jewellery with their mother for conversion. It is a common practice in our society that the daughters rely upon the experience and wisdom of their mother with regard to the conversion or purchase of jewellery. Both of them had asserted through affidavits the retention of gold jewellery with their mother to this extent. Not only this, the assessee in his statement recorded during the course of search also accepted this fact that some jewellery, lVPs and KVPs belonging to his daughters was lying with him. Apart from that, another important aspect, which cannot be lost sight of is that the gold jewellery was found in packets bearing the names of the ladies concerned. Copy of Panchnama placed at pages 65 onwards of the PB clearly admits the fact of different boxes containing jewellery belonging to these ladies separately. These facts indicate that the jewellery to the extent claimed did belong to the concerned ladies. In our considered opinion, the ld. CIT(A) was justified in deleting the addition which was erroneously made by the Assessing Officer. We, therefore, uphold his action.

7. The first ground raised by the assessee in his cross objection is against the initiation of assessment proceedings by issuance of notice Under Section 148 and the passing of consequential order.

8. It was contended by the ld. A.R. that the ld. CIT(A) was not justified in holding that that the Assessing Officer had proper jurisdiction for issuance of notice Under Section 148 and passing of order. It was stated that the assessment proceedings should have been completed within two years as per Section 153 and having not done so, the assessment was barred by time. It was also asserted that the Hon'ble High Court had stayed only the proceedings initiated Under Section 132(5), which did not operate as a bar for completion of regular assessment Under Section 143(3). Another submission was made that once notice Under Section 143(2) was validly issued on 14.2.1992, a subsequent notice Under Section 148 on 23.8.1999 was beyond the jurisdiction of the Assessing Officer since the proceedings in response to notice Under Section 143(2) were already pending. He relied on several decisions to canvass the view that the income could not be said to have escaped assessment until final order of assessment was passed on pending proceedings. He explained the meaning of "assessment proceedings" with the aid of certain decisions to bolster his submission that on the issuance of notice Under Section 148, the proceedings already initiated by notice Under Section 143(2) were pending.

9. In the light of all these submissions, it was vehemently argued that the entire proceedings be held to be invalid. In the opposition, the ld. D.R. countered the submissions by stating that the assessment order was passed Under Section 143(3) and there was no reference whatsoever to the proceedings Under Section 148. She submitted that the ld. CIT(A) erroneously noted the fact of issuance of notice under this section though the final decision upholding the legality of the Assessing Officer's action was in order. It was further contended by her that when Hon'ble High Court stalled the proceedings and passing of order Under Section 132(5), the regular assessment could not have been made and hence the passing of regular assessment was also indirectly stayed.

She also relied on certain decisions to submit that the order Under Section 132(5) was simply an interlocutory order and the subsequent proceedings were automatically stayed on the stayal of proceedings Under Section 132(5) and the Assessing Officer had rightly passed the assessment order Under Section 143(3) after the dismissal of the writ petition by the Hon'ble High Court on 6.7.1999.

10. We have considered the rival submissions in the light of material placed before us and the precedents relied upon. The primary question, which falls for our consideration is to decide as to whether or not the regular assessment proceedings were stayed by the Hon'ble High Court, when the passing of final order Under Section 132(5) was stayed by it? In order to appreciate the controversy at hand, it is appropriate to have a cursory look at the provisions of Section 132(5) at the relevant point of time alongwith other connected sections. Section 132(5) states as under: 5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in Sections 132A and 132B referred to as the assets) is seized under Sub-section (1) or Sub-section (1A), the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within one hundred and twenty days of the seizure, make an order, with the previous approval of the Deputy Commissioner, (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act; (iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause(a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized Sub-section (6) of Section 132 prescribes that the assets retained under Sub-section 5 may be dealt with in accordance with the provisions of Section 132B. The sum and substance of the provisions of Sections 132B(1), 132B(2) and 132B(3) is that the assets seized Under Section 132(5) would be utilized towards the tax liability of the assessee and the balance assets shall be made over or paid to the person from whose custody these were seized. The payment of interest on the excess assets retained is dealt with in Sub-section (4) of Section 132B, which reads as under: (a) The Central Government shall pay simple interest at the rate of eight per cent per annum on the amount by which the aggregate amount of money seized Under Section 132 or requisitioned Under Section 132A, as reduced by the amount of money, if any, released under the first proviso to Clause (i) of Sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (i) of Sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in Clause (i) of Sub-section (1) of this section.

(b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorizations for search Under Section 132 or requisition Under Section 132A was executed to the date of completion of the assessment Under Section 153A or under Chapter XIV-B.11. The logic behind Sub-section (5) of Section 132 is to expedite the return of seized assets after retaining what is due by way of tax to the Govt. and has been illegally held by the person concerned. It stipulates that the summary enquiry must be made by the Assessing Officer with a view to ascertain that how much of the seized valuables should be retained against the unpaid tax liabilities. The excess is released on the passing of summary order Under Section 132(5). Since the very object of this section is to retain the approximate amount of tax due out of the seized assets, it has to be done immediately after the close of search and order Under Section 132(5) is required to be passed within 120 days of the seizure. The matter does not end simply on the passing of the order Under Section 132(5), which is only in the nature of a summary provisional enquiry. Regular assessment follows under the law in which the income is determined after considering the entire material after allowing reasonable opportunity of being heard to the assessee within the time stipulated under Chapter XIV of the Act.

Here it is important to mention that it is not in each and every case that the proceedings Under Section 132(5) are initiated, for the obvious reason that where any money, bullion or jewellery etc. is seized in the search action, the proceedings Under Section 132(5) follow and where such assets are not seized, there cannot be any question of seizure of money, bullion, jewellery, etc or application of such assets. In such latter cases, only regular assessment is made under which the Income is determined in due course. It is, therefore, manifest that in a situation where any money, bullion or jewellery, etc. is seized in the search, normally an order Under Section 132(5)is passed on provisional summary enquiry with a view to determine that how much of the seized wealth can be legitimately and reasonably retained to cover the tax liability already incurred. Thereafter, the regular assessment is made in the same manner as in the case of those tax evaders who are not found in the possession of concealed income. The relevant position has been aptly explained by the Hon'ble Supreme Court in the case of Pooranmal v. Director of Inspection [INV].

The nutshell is that where any money, jewellery or other valuable articles are seized in the search, primarily an order Under Section 132(5) is passed which is a provisional summary enquiry to determine the quantum of seized assets to be retained against the tax liability already incurred and thereafter, regular assessment follows finally determining the amount of income. It is clear that the passing of order Under Section 132(5) is a first step where money and valuables so seized are retained and after passing the order under this Sub-section, the regular assessment takes place. If due to one reason or the other, the proceedings Under Section 132(5) are stayed, as is the case in hand, the final order of assessment Under Section 143(3) cannot be passed. If we go by the contention raised by the ld. A.R.that the Assessing Officer was not forbidden from completing the assessment Under Section 143(3) and the order Under Section 132(5), which was stayed for the time being, could have been passed later on, it would create a situation in which a baby is born first and act of conceiving takes place later. Obviously, notice Under Section 132(5) was issued in the instant case on 23.8.1990 as against which the assessee approached the Hon'ble High Court, who vide its judgment stayed the passing of final order Under Section 132(5). Once the passing of provisional summary order Under Section 132(5) was stayed, the application of retained assets Under Section 132B became impossible. In such circumstances, the Assessing Officer was rightly not competent to put on hold the passing of order Under Section 132(5) and jump to pass the final order of regular assessment. We are not inclined to accept the contention of the ld. A.R. that proceedings Under Section 143(3) could have continued and concluded without the passing of order Under Section 132(5) for the reason that the order under the later section has to precede the regular assessment order.

This position has been made clear by the legislature itself through the above extracted Section 132B(4), which deals with the payment of simple interest on the amount of excess amount retained. Clause (b) provides that such interest shall run from the date immediately following the expiry of six months from the date of order under Sub-section (5) of Section 132 to the date of assessment or reassessment. The sequence in which the orders are to be passed has been made abundantly clear by this clause, as per which order Under Section 132(5) is required to be necessarily passed before the passing of the regular assessment order.

In view of the above discussion, we are of the considered opinion that the Assessing Officer was, impliedly precluded from making regular assessment, till the pendency of the matter before the Hon'ble High Court. No sooner did the Hon'ble High Court dismiss the writ petition on 6.7.1999, an order Under Section 132(5) was passed on 7.9.1999 and the assessment order Under Section 143(3) was passed on 3.11.1999.

Under such circumstances, the period during which the matter was subjudice before the Hon'ble High Court was required to be excluded for the purpose of calculating the limitation. The ld. A.R. has fairly conceded that if such period is not taken into consideration, then the order so passed cannot be held to be barred by limitation.

12. Another legal issue raised by the ld. A.R. is on the question of the issuance of notice Under Section 148 during the pendency of proceedings from the earlier notice Under Section 143(2). It is observed that notice Under Section 143(2) was issued on 14.2.1992 whereas notice Under Section 148 was issued on 23.8.1999 and the final assessment order was passed Under Section 143(3) on 3.11.1999. The ld.A.R. has forcefully emphasized on the fact that the notice Under Section 148 was invalid because the earlier assessment proceedings were pending. We fully endorse his view, which is supported by several decisions of the Hon'ble Supreme Court, High Courts and Tribunals that the income cannot be said to have escaped assessment until final order of assessment is passed on the pending proceedings. But the position under consideration is a bit different. It is no doubt true that notice Under Section 143(2) was issued on 14.2.1992 and notice Under Section 148 was issued by the Assessing Officer on 23.8.1999, but the crucial distinguishing feature in this case is that the assessment order was passed Under Section 143(3). There is no reference whatsoever to the passing of order Under Section 147. In other words, the Assessing Officer issued notice Under Section 143(2) and completed assessment Under Section 143(3) and in the process though a notice Under Section 148 was also issued but that was not proceeded with. Hence the resultant assessment is pursuant to notice Under Section 143(2) and cannot be said to be a reassessment order Under Section 147. The position would have been different if the Assessing Officer had framed assessment pursuant to notice Under Section 148 after bidding farewell to the earlier notice Under Section 143(2). In that situation all the decisions relied upon by the ld. A.R. would have come into force to hold the resultant assessment order Under Section 147 to be illegal.

Since the situation under consideration is totally different wherein the Assessing Officer realized his folly of issuing notice Under Section 148 when the proceedings Under Section 143(2) were pending, he set the situation right by ignoring notice Under Section 148 and completing the assessment Under Section 143(3). The ld. CIT(A) has, though upheld the action of the Assessing Officer, but failed to consider the facts in the right perspective that the Assessing Officer had not passed the order pursuant to notice Under Section 148. As the order itself was passed Under Section 143(3), in our considered opinion, the challenge to the validity of issuance of notice Under Section 148 and thereby contending the assessment order to be void, is alien to the scope of the appeal and hence bereft of any force. This ground is, therefore, not allowed.

13. Ground No. 2 of assessee's cross objection is against the confirmation of estimate of Dalali receipts at Rs. 1 lakh.

14. Facts of this ground are that the assessee was doing proprietorship business and was also having income from dalali of ghee, edible oil and vanaspati. In the course of action Under Section 132(1) a ledger for the Financial Year 1990-91 [Exh-3] was found which was a sort of Memorandum Book containing certain details of transactions but the amount of dalali receipt was not recorded. In the course of assessment proceedings, the assessee produced cash book and ledger which was admittedly prepared after the date of search in which the assessee had shown brokerage receipts at Rs. 81,605/-. Since no evidence was available to substantiate this income, the Assessing Officer estimated the gross receipts at Rs. 1 lakh and made addition of Rs. 18,395/-. In the first appeal, the ld. CIT(A) upheld the order of the Assessing Officer in estimating the gross receipts from dalali. Since he had already confirmed the addition of Rs. 16,200/- on account of insufficient drawings for household expenses, he allowed set off of Rs. 16,200/- which left the addition at Rs. 2,196/-.

15. After considering the rival submissions and perusing the relevant material on record, it is found as an admitted position that the receipts and outgoings recorded in the cash book prepared after the date of search were not subject to verification in the absence of receipts and vouchers. Here it is pertinent to mention that we are dealing with a search case, prior to the introduction of Chapter XIV-B, being the special procedure for assessment of search cases. In the new procedure, the undisclosed income is determined Under Section 158BC, which is different in scope from regular assessment that is made in addition to the block assessment. Whereas the ambit of block assessment is confined only to the determination of the undisclosed income, the verification of the disclosed particulars including the making of estimate of income, falls within the domain of regular assessment. In the period anterior to the concept of block assessment, only one assessment was made which comprised of both the determination of undisclosed income as well as regular income in one go. Since we are dealing with the assessment in the prior period, the making of estimation of income by the revenue authorities cannot be interfered with, if such estimate is within the reasonable limits. Adverting to the facts of the case, where the assessee had no material to substantiate his dalali income, in our considered opinion, the ld.CIT(A) was justified in upholding the estimate at Rs. 1 lakh as against the declared income of Rs. 81,605/-. We, therefore, uphold the same.

This ground is not accepted.

16. Ground No. 3 of the cross objection is against the confirmation of addition of Rs. 27,000/- representing IVPs and KVPs in the name of assessee's daughter, Smt. Usha Khubani, as unexplained investment by the assessee.

17. In the course of search, IVPs worth Rs. 7,000/- [purchased on 24.5.1990] and KVPs worth Rs. 20,000/- [purchased on 25.5.1990] in the name of Smt. Usha Khubani were found. The assessee in the concluding statement, stated that the IVPs and KVPs belonged to Smt. Usha Khubani, his daughter. The assessee also filed a letter duly signed by Smt. Usha Khubani stating that she purchased IVPs of Rs. 12,000/- and KVPs of Rs. 20,000/- while she was at Jodhpur and the same were left in the custody of her mother. She further explained that the IVPs were purchased out of maturity amount of FDR in her name at SBBJ, Sardarpura, Jodhpur and the investment in KVPs was made of Rs. 5,000/- out of cash given to her by her mother and balance of Rs. 15,000/- was invested out of withdrawals from her capital account in the firm M/s Usha Saree Kendra, Delhi. The Assessing Officer made addition of Rs. 27,000/- Under Section 69 of the Act. No relief was allowed in the first appeal.

18. We have heard the rival submissions and perused the relevant material on record. We find that the ld. CIT(A) has not accepted the claim of the assessee by observing that there was no evidence on record that Smt. Usha Khubani had withdrawn a sum of Rs. 15,000/- specifically for purchasing KVPs. At the same time, it is an undisputed fact that she did withdraw this amount from her capital account. When the money has been withdrawn and claimed to have been used for a particular purpose and there is no evidence worth the name to the contrary that the said amount was utilized elsewhere, the explanation given by the assessee has to be accepted. It is a settled legal position that in order to controvert the assessee's version, the Revenue is bound to falsify that explanation or establish that such explanation is untrue.

Likewise, a specific claim was made before the Assessing Officer that the amount was invested partly out of the proceeds of maturity amount of FDR in her name in the SBBJ at Sardarpura, Jodhpur. Here also, both the authorities below have brushed aside the explanation without assigning any reasons for not accepting the claim. Smt. Usha Khubani had claimed by way of an affidavit that these instruments belonged to her, which is available on record. All this material goes to show that the assessee had discharged his onus cast upon him to prove that the IVPs worth Rs. 7,000/- and KVPs worth Rs. 20,000/- did belong to Smt.

Usha Khubani. Another important fact, which merits acceptance is that the KVPs were in the name of Smt. Usha Khubani, a married daughter of the assessee for which the primary onus was upon her to explain the source of the investment. Since she had discharged this onus by showing proceeds of maturity of FDR and withdrawal from her capital account from M/s Usha Saree Kendra, Delhi, we are of the considered opinion that no addition was called for in the hands of the assessee. This addition is, therefore, deleted.

19. Ground No. 4 of the cross objection deals with estimation of household expenses at Rs. 60,000/-, which led to the making of addition of Rs. 16,200/-.

20. The assessee had shown household withdrawals at Rs. 19,800/-. Smt.

Meera Kalwani the assessee's wife in her statement recorded Under Section 132(4) stated that the household expenses were ranging between Rs. 4,000/- and Rs. 5000/- p.m. and such household expenses were met out by her husband and partly from rental income. The Assessing Officer, going by the statement of Smt. Meera, estimated the household expenses at Rs. 60,000/- per annum and made addition of Rs. 16,200/- by allowing credit for Rs. 19,800/- being the amount of withdrawals shown and Rs. 18,900/- being the rental income. No relief was allowed in the first appeal.

21. Having heard the rival submissions and perused the relevant material o record, it is found that the assessee's wife in her statement admitted the household expenses were in the range of Rs. 4,000/- to Rs. 5000/- per month In such circumstances, the estimate of household expenses at Rs. 5,000/- p.m cannot be held to be excessive in any manner. Moreover, the ld. CIT(A) ha already allowed the benefit of telescoping of this amount against the estimation of income from dalali, which we have upheld in one of the foregoing paras. We, therefore, do not find any infirmity in the impugned order on this score.

22. In the result, the appeal of the Revenue stands dismissed and the cross objection of the assessee is partly allowed.