ORDER
C.L. Bokolia, A.M.
This appeal is preferred by the revenue against the order passed by the Commissioner (Appeals)-X, New Delhi, dated 16-12-1994, and the cross-objection preferred by the assessed against the appeal filed by the revenue.
2. While filing the appeal, revenue has taken the following ground :
“On the facts and circumstances of the case, learned Commissioner (Appeals)-X, New Delhi has erred in directing the assessing officer to treat the cash of Rs. 31,50,000 assessed (sic-seized) during the search and seizure operations under section 132 as advance tax and interest under section 234B and 234C in violation of the provisions of section 132B of the Income Tax Act, 1961 “.
3. The facts of this appeal are that a search and seizure operation was carried out on 18-2-1993 at the business premises of the assessed and at the residential premises of its partners. From the residential premises of its partner, following unexplained assets were found and seized by the search party :
Rs.
(a)
Cash from residential house where all the partners are jointly residing
31.50 lacs
(b)
Jewellery found from the possession and control of the partners from their residential house as well as from their lockers
25.00 lacs
(c)
Silver utensils and other articles found from the possession of the partners
4.00 lacs
(d)
Unaccounted expenditure in the renovation of the joint residential house of the partners evidenced by incriminating papers and documents seized from the house during the course of search
5.00 lacs
Total amount
65.00 lacs
4. Before the Commissioner (Appeals), assessed has taken the ground that the amount of cash seized at the time of search should have been considered as having been adjusted/paid against the advance-tax liability. The Commissioner (Appeals) accepted this argument of the appellant and issued directions to the assessing officer who considered the same accordingly and also reduced the interest paid/payable under section 234B and 234C of the Act. Against this action of the Commissioner (Appeals), revenue is in appeal before us.
5. Learned Departmental Representative while strongly relying upon the order passed by the assessing officer submitted that the action of the Commissioner (Appeals) in issuing directions to the assessing officer are contrary to the provisions under section 132B of the Act. She has also relied upon the decision of the Madhya Pradesh High Court in the case of Ramji Lal Jagannath & Ors. v. Asstt. CIT (1999) 156 CTR (MP) 49 : (2000) 241 ITR 758 (MP). It was, therefore, finally submitted that the action of the Commissioner (Appeals) on this account is unjustified and deserves to be reversed.
6. Learned authorised representative on the other hand, drew our attention to the provisions of section 219 of the Act. Besides it was submitted that just after the seizure of the cash, assessed in his written request dated 10-3-1993, made before the assessing officer submitted that the cash seized be adjusted against the advance tax. It was further argued that the order under section 132(5) was passed on 17-6-1993 and, therefore, after this date, the balance amount seized should have been adjusted against the advance tax liability particularly when there was no other tax liability existing on that date.
7. We have examined the facts of this ground of appeal and are of the opinion that the amount of cash seized under section 132 is to be appropriated as per the provisions of section 132B, The decision of Madhya Pradesh High Court is fully applicable to this case wherein it has been held “that irrespective of the seizure the petitioners were obliged to pay advance-tax in accordance with law and if they had not paid the advance tax in accordance with the provisions of the Income Tax Act, they could not avoid the liability either under section 234B or 234C”. Keeping in view the decision of the Honble Madhya Pradesh High Court, we feel that the action of the Commissioner (Appeals) on this account was not justified and, therefore, the order passed by him is reversed. The appeal stands allowed.
8. Coming to the cross -objection, assessed has raised following grounds :
“That the assessing officer has erred in holding that business income of Rs. 65.50 lacs declared by the assessed in his statement under section 132(4) read with section 271(1)(c) Expln. 5 of the Act as income from other sources under section 69 of the Act.
That the income disclosed under section 132(4) of the Act was accounted for in the books of accounts maintained and were found recorded in the books in the previous year relevant to assessment year under consideration and, therefore, the same could not be considered as income under section 69 of the Income Tax Act.
That the assessing officer has erred in disallowing deductions allowable under section 80-IA of the Act on the business income disclosed under section 132(4) of the Act and computed under the head business income which has also been found recorded in the books of accounts of the previous year relevant to the assessment year under consideration.
That the charge of the interest under section 234C is illegal and unjustified as the assessed started its commercial production on 17-9-1992, as admitted by the assessing officer in the assessment order and, therefore, there is no liability for payment of advance tax Installment.
9. During the course of hearing of this appeal, assessed has moved an application for admitting an additional ground of appeal viz. “that the levy of interest under sections 234B and 234C is illegal and unjustified when there was no specific direction in the assessment order of such levy and when these sections were not attracted on the facts of the case at all.”
9.1. Since the additional ground being taken by the assessed is purely a legal point and no further investigation/verification is required, the same is allowed to be taken.
10. In regard to Grounds No. 1, 2 and 3 of the grounds taken in the course of appeal, the same relate to the treatment given by the assessing officer and the Commissioner (Appeals) to the amount seized and surrendered in the statement under section 132(4) as income from other sources rather than income from business. In this connection, learned authorised representative submits that the income of Rs, 65,50,000 was voluntarily surrendered during the course of statement recorded under section 132(4) read with Explanation 5 to section 271(1)(c) of the Act and this amount was credited to the audited profit & loss account attached with the return of income. Before completing the books of account, this amount was duly entered in the books before the close of the accounting period. This statement has duly been accepted by the assessing officer. But the assessing officer has grossly erred by including the aforementioned income under the residuary head of “income from business” (sic) declared by the assessed. The assessing officer has also held this income as assessable under section 69 or under section 69A of the Act. While doing so, the assessing officer has disallowed the claim of deduction under section 80-IA on the income so surrendered. In this connection learned authorised representative submitted that assessing officer was not justified in including the surrendered income under the head “income from other sources” under sections 69 and 69A of the Act. It was, therefore, argued that unless rebutted the unexplained investment/income found from the residence of the partners can be taxed only in the individual hands of the partners under whose control and possession the valuables were found, It was further argued that from the statement recorded at the time of search under section 132(4), it is very clear that the surrender was made as income of the business. The firm commenced its production during the instant year and that the income was derived from the business of manufacturing and sales of furnishing fabrics.
11. It was further submitted that conditions as specified under section 80-IA have also been satisfied and, therefore, allowance under section 80-IA should have been allowed On this account, the learned authorised representative also relies upon the various case laws including CIT v. Rajshree Cinema (P) Ltd. (2001) 247 TTJ 76 (A2) wherein it has been held that there is no other source of income where-from the assessed could earn income, the amount so found should be treated as income from business. Further reliance was placed on the decision in the case of Daulat Ram Rawat Mal v. CIT (1967) 64 ITR 593 (Cal), Lal Chand Baijnath v. CIT (1959) 35 ITR 416 (SC) and Mansfield & Sons v. CIT (1963) 48 ITR 254 (Cal).
12. Learned Departmental Representative while strongly relying upon the order passed by the assessing officer and the Commissioner (Appeals), submitted that on the date of search, the amount declared was not entered in anyway of the books of account maintained by the firm. While placing reliance on the decision of Kerala High Court in V. Kunhambu & Sons v. CIT (1996) 131 CTR (Ker) 396 : (1996) 219 ITR 235 (Ker), she has submitted that this income was rightly assessed under the head “income from other sources” and once so held no deductions under section 80-IA could be allowed to the appellant.
13. We have heard the rival parties and have perused the material placed on record and also the case laws relied upon. From the details of the valuables seized from the residential premises of the partners as reproduced supra, it is clear that the business of the appellant is of manufacturing furnishing items and the seized material is jewellery, silver utensils, investment in the renovation in the residential premises besides cash. It is clear that none of these items were seized from the business promises through the main partner of the assessed-firm has surrendered it under section 132(4) in the name of the firm. On the date of search, these items were not entered in the books of the appellant. It is only at the end of the accounting period that the same was entered in the books of account. By this action itself, the transaction in question would not become business transactions. Keeping in view the above facts decision of the Kerala High Court in the case of V. Kunhambu & Sons v. CIT (supra) is fully applicable to the facts of this case. We, therefore, decline to interfere in the order passed by the Commissioner (Appeals) on this account. We accordingly dismiss ground Nos. 1 to 3 taken by the assessed.
It is observed that while passing the assessment order, assessing officer has merely ordered “assessed, issue demand notice and challan. Give credit for taxes paid as per challan available on file”. The assessing officer has not ordered to charge any interest under any one of the provisions of the Income Tax Act. Therefore, the ratio of the decision of the apex court in the case of CIT v. Ranchi Club (2000) 164 CTR (SC) 200 : (2001) 247 ITR 209 (SC) and NTPC v. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) would be clearly attracted to the facts of this case. This being so, no interest under sections 234B or 234C could be charged. This ground of appeal taken by the assessed is, therefore, allowed. Cross-objection filed by the assessed is partly allowed.
14. In the net result, the appeal filed by the revenue is allowed and cross-objection filed by the assessed is allowed in part.