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Judgment
D. Murugesan, J.—The above tax case appeals are filed by the Assessee against the orders of the Tribunal, Chennai D Bench dated 27-5-2009 made in IT(SS)A Nos. 138/Mad/2006, 139/Mad/2006, 140/Mad/2006, 141/Mad/2006 and 142/Mad/2006 by raising the following questions of law:
Whether the Tribunal is correct in confirming the order of block assessment on the consideration of the definition of undisclosed income u/s 158B(b) of the Act even though the deposits and interest under scrutiny formed part of the regular returns of income filed prior to the date of search ?
Whether the Tribunal is correct in concluding the assessment of certain deposits and interest thereon as undisclosed income on the strength of the certain sworn statements even though the said sworn statements could be considered as valid evidence in framing of the block/special assessment under consideration in the light of the materials establishing and proving such deposits ?
Whether the Tribunal is correct in law in affirming the block assessment referring to the retrospective amendment brought in Chapter XIV-B of the Act even though there was misreading of the said amendment by the Respondent in as much as the post-search enquiry should relate to the materials found at the time of search ?
In all these appeals, though the Assessees are different, the issues raised are common. Hence, they are taken up together for disposal.
For the purpose of appreciation of facts, we may refer the facts relating to Tax Case (Appeal) No. 1157 of 2009.
The Assessee is a partnership firm consisting of 12 partners. It is engaged in finance business. On 28-11-2002, a search was conducted under s 132 of the Income Tax Act, 1961 in the business premises at door No. 207, Salem Road, Namakkal. During the course of search in one of the group concerns viz., M/s Lakshmi Finance, one Shri Arthanareeswaran, a customer, who came to repay the loan was interrogated and he stated that he had taken a loan of Rs. 3,00,000 from M/s Jai Investments, one of the sister concerns of the Assessee-firm for which monthly interest of Rs. 6,000 was being paid by him. But receipt was given only for Rs. 4,800. He also pointed out at the time of search that for other loans obtained from the concerns also the receipts in respect of interest were issued only for lesser amount.
One Shri Shanmugasundaram, manager of M/s Lakshmi Finance was confronted by the authorised officer with the statement of said Shri Arthanareeswaran. He admitted in his statement recorded on 14-11-2002 that the interest to the extent of 1.25 per cent was not accounted in the books of account in respect of hire purchase loans. He also admitted that in respect of short-term loans, interest was being charged at 4 per cent higher than the interest recorded in the books.
One Shri V. Kandasamy, another customer, who was also present at the time of search, was examined and he stated that his partner Shri P. Ramasamy had obtained hire purchase loan of Rs. 2,30,000 for the purpose of purchase of a lorry and he paid penalty to the finance concerns of the group @ Rs. 9 per day for delayed payment of the loan instalments. The said statement was also admitted by Shri R. Shanmugasundaram, the manager.
These confessional statements of the manager were admitted by Sri P. Nallappan, the managing partner of the said firm at the time of search. For verification as to the genuineness of the alleged loan credits, the officials caused enquiries to be made at random among 31 creditors. Out of those creditors, eight have given statements. Their statements disclosed that they had not made any investment as claimed by the financial concern. In these circumstances, notice u/s 158BC(a) of the Act was issued and after receipt of the response, the assessing officer found that there were enough evidence to hold that there was undisclosed income for various years and accordingly, he computed the amount of tax to be levied. Accordingly, he passed the assessment order dated 30-11-2004. That order was taken on appeal before the Commissioner (Appeals)-II, Coimbatore, and the same was confirmed by order dated 13-3-2006. Further appeal to the Tribunal also visited the same result as the Tribunal has also dismissed the case. Questioning the above order, the present appeal is filed. On the similar circumstances, other appeals have also been filed.
Mr. Balachander, learned Counsel appearing for the Appellants would contend that in as much as the statements recorded from the manager Shri R. Shanmugasundaram on 14-11-2002, those statements cannot be relied upon, as those materials were collected prior to the inspection. Secondly, the admission made by the managing partner on 28-11-2002 was subsequently retracted insofar as 23 creditors on the ground that there were no materials/evidence to show that the deposits claimed to be bogus.
Mr. Narayanaswamy, learned Counsel appearing for the revenue would on the other hand submit that insofar as the first submission is concerned, in view of subsequent amendment to the Finance Act, 2002, which came into force from 1-7-2002, the evidence or other material information relatable, which is available to the officer on the date of search could also be relied upon in terms of Section 158BB(1) of the Act. As far as the second submission is concerned, the learned Counsel would submit that on the date of search, as many as eight creditors were examined and from their statements, the assessing authority came to the conclusion that there were undisclosed income in view of the fact that they did not even make any deposit and most of the deposits were not genuine. Insofar as the remaining creditors, statements were recorded and those statements were not accepted on the ground that no materials were made available in support of their statements. Hence no interference is called for against the proceedings under challenge.
We have considered the respective submissions. As far as the first submission of the learned Counsel for the Appellants is concerned, it is true that the statements were recorded from the manager Shri R. Shanmugasundaram on 14-11-2002 much prior to the search, which was conducted on 28-11-2002. Section 158BB(1) was added (sic-amended) with effect from 1-7-2002. In terms of the said section a provision for placing reliance on materials relatable to such evidence is also added. By that addition, it could be seen that whatever materials, which are available on the date of search including the material collected much prior to the search could also be the basis for the conclusion, which could be arrived at by the assessing officer. That provision has also retrospective application from 1-7-1995. As the search was conducted on 28-11-2002 and on which date the statement of R. Shanmugasundaram was available with the assessing officer, he is entitled to rely on the said statement as well, as it is relatable to evidence. In view of the above, the first contention fails and accordingly we reject the same.
Insofar as the second contention is concerned, it relates to questions of fact. Admittedly there were 31 creditors. Out of 31 creditors, eight creditors gave their statements to the effect that they did not have any deposits in the respective concerns. Therefore, the assessing officer had rightly come to the conclusion that those deposits were not genuine. To this extent, the Assessees/Appellants cannot have any grievance before this Court.
Insofar as the remaining creditors are concerned, they were not examined at the time of search and their statements were recorded subsequently. In their statements, they had stated that they had deposited the amount and some of the depositors had also stated that they had withdrawn certain portion of the amount. However, those statements were not accepted by the assessing officer on the ground that none of those creditors could show the source for the amount said to have been deposited in the respective concerns. This being the factual finding, we find no substantial question was involved. That apart, we may even refer to one of the statements of rest of the creditors by name S. Rajendran. He is related to R. Appusamy. Though he claimed deposit of Rs. 16,000 at Sri Lakshmi Finance on 23-3-2000 and got back Rs. 18,460 on 26-9-2003, he had not shown it in his income tax statement. He had shown only in the IT return for the assessment year 2003-04, which was filed on 31-3-2004 after search. Since the same was shown in the return after search, the statement relating to the deposit was not accepted by the assessing officer. Similar is the case of the statements of other creditors as well. This being a question of appreciation of evidence, we are not inclined to go into the question, particularly when this finding was accepted by both the Commissioner (Appeals) as well as the Tribunal. In view of our reasons, we do not find any merit in these appeals and all the questions of law are answered against the Assessee and in favour of the revenue. Accordingly, these tax case appeals are dismissed. No costs.