ORDER
R.K. Gupta, J.M.
1. This is an appeal- by assessee against the order of AO passed under Section 158BC/254 relating to block period for asst. yrs. 1986-87 to 4th Sept., 1995.
2. A search and seizure operation was conducted on 14th/l5th Sept., 1995 under Section 132(1) of the IT Act at the premises of the assessee. Assessment under Section 158BC was completed on 30th Sept., 1996, determining undisclosed income at Rs. 2,01,58,230. The assessee filed appeal before the Tribunal and the Tribunal set aside the order of the AO and matter was sent back to decide the same afresh, after affording proper opportunity to the assessee.
3. Fresh assessment was completed on 28th March, 2002 at an income of Rs. 55,50,000. Now the assessee is in appeal here before the Tribunal.
4. During the course of hearing of appeal, it was stated that AO has made an addition of Rs. 30,000 relating to asst. yr. 1991-92; Rs. 20,000 relating to asst. yr. 1992-93 and Rs. 55 lakhs relating to asst. yr. 1994-95. It was stated that amounts of Rs. 30,000 and Rs. 20,000 were taken by the company as cash loan from its directors, Shri Pramod Kumar Dang and Shri Radhey Shyam Dang. It was further stated that they were duly disclosed by filing the regular returns for asst. yrs. 1991-92 and 1992-93. The attention of the Bench was drawn on pp. 36 and 45 of the paper book, where the copies of annexure to the balance sheet as on 31st March, 1991 and 31st March, 1992 are placed. Therefore, it was submitted that these amounts cannot be treated as undisclosed income while completing the assessment under Section 158BC of the IT Act. It was also stated that no incriminating documents were found from which it can be established that this amount was not disclosed earlier.
5. Regarding remaining amount of Rs. 55 lakhs it was stated that the same was received from M/s Concept International India Ltd. during asst. yr. 1994-95. It was further stated that in fact a sum of Rs. 55 lakhs were taken by cheque and Rs. 40 lakhs was returned during the same year and there was only an outstanding of Rs. 15 lakhs. It was further submitted that the regular returns were filed and they were shown in the balance sheet. The attention of the Bench was drawn on copy of balance sheet and copy of annexure placed on record. It was submitted that in fact during the course of search, a paper marked Annex. A-21 was filed, which was in regard to p. 11-C and in this paper the outstanding balance was shown at Rs. 10 lakhs. Accordingly, the AO drew an adverse inference that the amount of Rs. 55 lakhs was from undisclosed source. Accordingly he made an addition of this amount of Rs. 55 lakhs. It was further stated that in fact there was another page i.e.,. page No. 122, which was not taken into consideration by the AO, as in this paper the entry of Rs. 5 lakhs is mentioned and if both the entries are taken into consideration, then it will be found that the outstanding amount of the party was Rs. 15 lakhs, which was shown in the balance sheet. The attention of the Bench was also drawn on copy of account of the respective party placed at p. 61 of the paper book, whereby it is confirmed that the outstanding amount against assessee is Rs. 15 lakhs. It was also submitted that in this confirmatory copy of account received from M/s Concept International India (P) Ltd., all the entries relating to the year under consideration are mentioned. It was also submitted that there is no dispute that returns for asst. yrs. 1991-92 to 1994-95 were filed by the assessee-company well in time. The attention of the Bench was drawn on acknowledgement receipt of the returns filed placed at pp. 29 and 37 for asst. yrs. 1991-92 and 1992-93, respectively. Therefore, it was submitted that as there was no undisclosed amount, therefore, the same cannot be assessed while completing the assessment under Chapter XIV-B of the Act. The reliance was placed on various case laws, reported in CIT v. Ravi Kant Jain (2001) 250 ITR 141 (Del); CIT v. Dr. M.K.E. Memon (2001) 248 ITR 310 (Bom); CIT v. Rajendra Prasad Gupta (2001) 248 ITR 350 (Raj) and CIT v. C.J. Shah & Co. (2000) 246 ITR 671 (Bom).
6. On the other hand, the learned Departmental Representative placed reliance on the order of the AO. On a query from the Bench, the learned Departmental Representative fairly admitted that while filing the regular returns, these amounts were shown by the assessee. Record for asst. yr. 1994-95 was also produced and it was seen by the Bench that assessee has filed regular return for asst. yr. 1994-95 and in schedule of balance sheet there was an outstanding of Rs. 15 lakhs in account of M/s Concept International.
7. We have heard rival submissions and considered them carefully. We have also perused the order of AO and found that the AO has made addition of Rs. 30,000; Rs. 20,000 and Rs. 55 lakhs pertaining to asst. yrs. 1991-92, 1992-93 and 1994-95, respectively, on the ground that assessee could not prove the genuineness of the loan taken by it. We further noted that the AO has observed in his order that a confirmation was filed on behalf of M/s Concept International (P) Ltd., whereby a debit was shown at Rs. 15 lakh. However, on scrutiny of the return of income, this entry was not in the balance sheet. Therefore, he treated the amount of Rs. 55 lakhs as unexplained in the books of account of the assessee and treated this amount as bogus cash credits and added under Section 68 of the IT Act. Likewise, the amounts of Rs. 30,000 and Rs. 20,000 treated as loan from undisclosed sources, though the AO has mentioned in his order that the confirmation of the directors of the company were filed, whereby it was confirmed that they have given loan in cash to the assessee-company during asst. yrs. 1991-92 and 1992-93. From these facts it clearly emerged that the assessee has disclosed all these amounts while filing its regular returns for all these three years. Copy of acknowledgement receipt for asst. yr. 1991-92 filed before the Department is placed on record and the copy of return filed for asst. yr. 1994-95 was produced by the learned Departmental Representative during the course of appellate proceedings. We have seen the annexures and found that the loans in the name of directors and debit balance on account of M/s Concept International was shown in the balance sheet. We have seen the copy of account furnished on behalf of M/s Concept International and found that all entries relating to Rs. 55 lakhs are mentioned in the statement. An amount of . Rs. 55 lakhs was taken through account payee cheque and Rs. 40 lakhs was returned back through account payee cheque during the year under consideration and the remaining amount of Rs. 15 lakhs was outstanding. Therefore, this amount cannot be treated as undisclosed while completing the assessment under Chapter XIV-B. If Department wants to question the genuineness of this amount, that could have been questioned while completing the assessments on the basis of the returns filed regularly or by reopening the assessments for those years. Various Benches of the Tribunal in the country have held that if the amounts have already been disclosed while filing the regular returns, that cannot be questioned while completing the assessment for the block period under Chapter XIV-B. As per Explanation to Section 158BA(1), it is clearly mentioned that assessment made under this Chapter shall be in addition to the regular assessment in respect of previous year included in the block period. It is further mentioned in Clause (b) that the total undisclosed income relating to the block period shall not include the income assessed in regular assessment as income of such block period. In clause (c), it is provided that the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. From these provisions, it is clear that if any amount has already been disclosed, that cannot be questioned while completing the assessment under Chapter XIV-B. Therefore, in view of these facts and circumstances, we find that there was no justification on the part of AO for making the addition of these amounts, which were already disclosed while filing the regular returns. Various case laws relied upon by the counsel of the assessee are in support of above view of ours. Accordingly, we delete the additions of Rs. 55,50,000.
8. The other grounds are consequential. Therefore, the AO is directed to allow consequential relief to the assessee.
9. In the result, the appeal of the assessee is allowed.
B.R. Jain, A.M.
28th May, 2004
1. The record reveals that the assessee was incorporated as a company on 6th March, 1991. An action under Section 132 on the appellant was taken on 14/15th Sept., 1995. The assessment completed under Section l58BC(c) of the Act on 30th Sept., 1996, at an undisclosed income of Rs. 2,01,58,230 stood set aside by the Tribunal in ITA No. 5591/Del/1996 dt. 30th Jan., 2001, as the assessee did not get proper and reasonable opportunity of being heard. In the set aside proceedings, the AO noticed from the cash flow statement that assessee had taken cash loan of Rs. 30,000 for the period ended 31st March, 1991 from Shri P.K. Dang, director, and Rs. 20,000 for the period ended 31st March, 1992 from Shri R.S. Dang. The assessee’s explanation for introduction of credits in the books was not accepted. Since Shri P.K. Dang confirmed about the credit in his name and also the credit in the name of Shri R.S. Dang was out of money brought on his return from Dubai and there being no dispute on the identity and nature of transactions and in the absence of any evidence found as a result of search to doubt the nature of transaction, the same could not be treated as undisclosed income of the block period. The conclusion arrived at by my learned brother to delete the addition though for different reasons has to be accepted. I have, however, not been able to persuade myself to agree with the reasoning and conclusion arrived at by my learned brother for deleting the addition of Rs. 55,00,000 as undisclosed income of the block period.
2. The admitted fact is that, as a result of search on the appellant, seized annex. A-21, which was a ledger for financial year 1993-94 revealed at p. 111C as balance loan payable to M/s Concept International for Rs. 10,00,000. The date-wise credits and debits have been narrated by the AO in the assessment order. In the return of income for asst. yr. 1994-95 no entry in the name of M/s Concept International (P) Ltd. was found appearing in the balance sheet appended therewith and confirmation filed in the post-search enquiries was found signed by Shri Vinod Javed, who is not a director in M/s Concept International (P) Ltd. This confirmation letter filed, copy placed at assessee’s paper book p. 61, revealed a debit balance of Rs. 15.00,000. The confirmation produced before the AO was thus at variance from the return of income. When the assessee was required to furnish confirmation and the genuineness of the transaction, the assessee tendered the following explanation :
“The addition of Rs. 55 lakhs for the asst. yr. 1994-95 being the alleged undisclosed receipt from M/s Concept International (P) Ltd., it is submitted that the entire amount is duly credited in the books of accounts and reflected in the regular books of accounts, Out of the aforesaid sum, the amount of Rs. 40 lakhs was returned and the balance amount of Rs. 15 lakhs was shown as the closing balance in the balance sheet for asst. yr. 1995-96. No incriminating material to establish that no such amount had been received from M/s Concept International (P) Ltd. was found or any material detected and as such the aforesaid addition is also untenable. The copy of account of M/s Concept International (P) Ltd. was filed during the course of block assessment proceedings.”
3. The AO being not satisfied about the genuineness and also by relying on the Hon’ble Calcutta High Court decision in CIT v. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Cal) treated the credits of Rs. 55,00,000 as unexplained and by holding the same as bogus cash credit and invoking Section 68 of the Act, the whole amount of Rs. 55,00,000 was treated as undisclosed income for asst. yr. 1994-95 comprised in the block period.
4. Before us the learned counsel filed written synopsis in brief and made references to paper book pp. 21, 61, 27, 49, 51 and 57. He also filed a copy of ledger folio p. 122, during the course of hearing though the same is not certified as a true copy of seized Annex. A-21. The learned counsel contends that as per the books of account of M/s Concept International (P) Ltd., they had duly entered the receipt of Rs. 40,00,000 by the . three cheques which stood tallied. The only difference remained in respect of Rs. 5 lakhs which was issued by M/s Concept International (P) Ltd. and had been entered in the books of account at p. 122 of the ledger against advance received. The assessee had duly shown the balance of Rs. 15 lakhs as would be seen from p. 47 of the paper book and the schedule annexed with the balance sheet from pp. 49 to 51 of the paper book. Thus, the contention made is that the amount of loan was duly entered in the books of account and had also been disclosed and no material has been found to establish that the same was the undisclosed income of the assessee-company. It was also submitted that for an assessment of undisclosed income, it is only such income detected as a result of search which could be assessed as undisclosed income. Reliance has been placed on the following judgments :
1. CIT v. Ravi Kant Jain (2001) 250 ITR 141 (Del)
2. CIT v. M.K. E. Menon (2001) 248 ITR 310 (Bom)
3. CIT v. Rajindra Prasad Gupta (2001) 248 ITR 350 (Raj)
4. CIT v. C.J. Shah & Co. (2000) 246 ITR 671 (Bom).
5. The learned counsel contends that the judgment of the Hon’ble Calcutta High Court in the case of CIT v. Precision Finance (P) Ltd. (supra) relied upon by the AO did not apply to the assessment of undisclosed income. It was thus stated that there was no basis of making addition as undisclosed income and a prayer was made to delete the addition.
6. On the other hand, the learned CIT Departmental Representative relied on the findings arrived at by the AO and while opposing the assessee’s plea made a prayer to reject the grounds raised by him.
7. After hearing the parties, careful perusal of material on record and precedents referred, it is found that the amount of credits aggregating to Rs. 55,00,000 never came to be assessed as income of the appellant in any regular assessment. In fact, there is no record to show that there was any order of regular assessment for asst. yr. 1994-95, though the appellant claims of filing of return. Mere filing of return cannot be treated as an order of assessment. This view has also been taken by the Hon’ble High Court of judicature at Delhi in Mahanagar Telephones Nigam Ltd. v. CBDT (2000) 246 ITR 173 (Del). Accordingly, the Explanation below sub-section (2) of Section 158BA of the Act, did not have any limitation to assess the undisclosed income in accordance with the provisions of Chapter XIV-B of the Act which is a special procedure for assessment of search cases.
8. The definition of ‘undisclosed income’ under Section 158B(b) of the Act has also been amended by the Finance Act, 2002, w.e.f. 1st July, 1995, by inserting ‘or any expense, deduction or allowance claimed under this Act which is found to be false’, so as to read as under :
“Undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act or any expense deduction or allowance claimed under this Act which is found to be false.”
9. Furthermore, Section 158BB deals with the computation of undisclosed income of the block period and sub-section (2) states that in computing the undisclosed income of the block period, the provisions of Sections 68, 69, 69A, 69B and 69C shall also apply.
10. Sub-section (3) of Section 158BB lays burden on the assessee to prove that any undisclosed income had already been disclosed in any return of income filed by him before the commencement of search.
11. In the appellant’s base the amounts aggregating to Rs. 55 lakhs which attracted provisions of Section 68 had never been treated as undisclosed income prior to this assessment nor the same was ever disclosed in any return of income filed by him before the commencement of search. The perusal of return and accompanying documents produced by the learned CIT Departmental Representative reveals that both secured loans and unsecured loans shown in the balance sheet as on 31st March, 1994, are disclosed as Nil. As a result of search on the assessee’s premises, ledger inventorised as Annexure A-21 revealed an entry of Rs. 50,00,000 credited to the loan account in the name of M/s Concept International (P) Ltd. on 27th Jan., 1994, by giving the narration of Syndicate Bank, cheque No. 226615
12. In post-search enquiries, the confirmation filed was of supplier ledger and it did not speak of any loan having been advanced to the appellant. Another amount of Rs. 5,00,000 as advance payment received was not shown as loan payable in the balance sheet filed with the return. No regular assessment was framed for that year. The AO, therefore, had found evidence which was detected as a result of search that the credits taken by the appellant and recorded as loan payable for Rs. 50,00,000 and advance payment received for Rs. 5,00,000 were not disclosed in the balance sheet filed with return. He, . therefore, had a valid jurisdiction to initiate action under Section 68 of the Act, requiring appellant to establish genuineness of the credits.
13. I have myself perused the material in the shape of ledger accounts and the confirmation. The confirmation had been signed by one Shri Vinod Javed in his capacity as authorized signatory by giving copy of supplier ledger account. This confirmation does not speak of any loan given, to the appellant, There is no mention of any bank with the place of its branch for showing any payment to the appellant. It has also not been shown that this company is assessed to tax Bank account of this company was also not produced nor Shri Vinod Javed and the books of account to substantiate the nature of transactions which were at variance with the ledger account seized during the course of search. Balance sheet for the year ended 31st March, 1994, sought to be relied by the assessee’s counsel, shows amount of sundry creditors of Rs. 2,19,06,704 under the head current liability. When a reference is made to Schedule 1 at assessee’s paper book p. 51, a credit is found made in the name of M/s Concept International. The assessee did not show at any stage of hearing before the AO nor before us that this creditor and M/s Concept International India (P) Ltd. are the same person. There is no legal document on record to enable me to accept the nature of transaction as genuine. The assessee has not tendered any explanation to the satisfaction of the AO about the nature of such sum aggregating to Rs. 55,00,000 found credited in the books of account maintained by him. The onus that lay upon the assessee has not been discharged. The AO, therefore, was justified in treating this amount as unexplained and undisclosed income of the block period.
14. Now I proceed to examine the applicability of various case laws referred by learned counsel of the assessee to the facts and findings arrived at hereinabove. In CIT v. Dr. M.K.E. Memon (supra), the assessee was regularly assessed by the Department. The Department had rightly invoked Chapter XIV-B of the Act but short point for determination was whether the AO was right in estimating the undisclosed income for the block period at Rs. 2.33 crores as against undisclosed income of Rs. 75,60 lakhs disclosed by the assessee. The Hon’ble Court after drawing a distinction that the regular assessment is to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid the tax in any manner whereas what is assessed under Chapter XIV-B is only the undisclosed income for the block period and not the income or loss of the previous year which is only done in the normal regular assessment under Section 143(3), came to the conclusion that the AO having adopted arbitrary method could not estimate the income under Chapter XIV-B of the Act. The appellant before us did not establish that the assessment of undisclosed income has occasioned arbitrarily or that it is a case of estimated addition.
15. In another case of CIT v. Rajendra Prasad Gupta (supra) the AO had not given any finding that the estimates of income was made after consideration of the material that came to light during the course of search and seizure. The Court, therefore, held that the assessing authority is not conferred with power to make estimation of income de hors the material under Section 158BB of the Act. This judgment also does not advance the case of the appellant,
16. In C.J. Shah (supra), there was no material to justify any figure to be included for a period earlier to the period of three months from 3rd Sept., 1996 to 4th Dec., 1996 and estimation of undisclosed income by arbitrary method for such period was not approved by the Hon’ble Bombay High Court.
17. The appellant has also placed strong reliance on the judgment of the jurisdictional High Court in the case of CIT v. Ravi Kant Jain (supra). This was a case when the assessee has returned income under the head capital gains in regular assessment, but the AO without any basis or evidence found as a result of search, sought to assess the same under a different head, i.e., as income from business. The Tribunal had already held that this was a case of mere change of opinion. In this background, the Hon’ble Court held that the special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected at a result of search. As the statutory provision go to show, it is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to the materials unearthed during search. It is in addition to the regular assessment already done or to be done.
18. In the case in hand, the undisclosed income is on the basis of material found as a result of search. Regular assessment was also not made nor it is shown that it was to be made. The insertion by the Finance Act, 2002, with retrospective effect from 1st July, 1995. in the definition of Section 158B(b) which permitted to find out undisclosed income from regular books of account also where the assessee has been found to have claimed false expenses, deduction or allowance under the IT Act, did not come for consideration of the Hon’ble Court while it took decision in the case of Ravi Kant Jain (supra). Thus, if there was material which was found as a result of search to indicate undisclosed income, merely because the entries were made in regular books will not preclude the jurisdiction of the AO from making assessment under Chapter XIV-B of the Act.
19. The Hon’ble Rajasthan High Court, Jaipur Bench, in CIT v. Ajay Kumar Sharma (2003) 259 ITR 240 (Raj), has also come to the similar conclusion by holding that merely because some entries in the books of account is shown, that does not prohibit the AO to tax that amount in the block period, if that amount has not been taxed in the regular assessment. When the cash credits are not taxed in the relevant assessment years, that can be treated as undisclosed income and can be taxed after search in the block period. The irresistible conclusion to which I have reached is that the aggregate amount of Rs. 55 lakhs appearing as cash credits in the books of the assessee were rightly treated as invoking provision of Section 68 of the Act thereby treating the same as undisclosed income of the block period. The action and conclusion of the AO is, therefore, upheld and the addition of Rs. 55 lakhs is directed to be sustained. As a result, the assessee’s ground on this count stands rejected.
20. In the result, the appeal of the, assessee stands-partly allowed.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961
31st May, 2004
Since there is a difference of opinion between the Members of the Bench, we state the following point of difference and refer the same to the Hon’ble. President for further necessary action as envisaged under Section 255(4) :
“Whether, on the facts and in the circumstances of the present case, the amount of Rs. 55 lakhs credited in the account of Concept International in the regular books of accounts maintained by assessee, can be assessed as undisclosed income for the purpose of Chapter XIV-B while completing assessment under Section 158BC/254 of the Act, or not ?”
Pradeep Parikh, A.M.
12th January, 2005
1. There being a difference of opinion between the two members, the Hon’ble President was pleased to appoint me as a third member under Section 255(4) of the IT Act, 1961 (the Act). The point of difference as referred to the third member is as follows :
“Whether, on the facts and in the circumstances of the present case, the amount of Rs. 55 lakhs credited in the account of Concept International in the regular books of account maintained by the assessee, can be assessed as undisclosed income for the purpose of Chapter XIV-B while completing assessment under Section 158BC/254 of the Act or not ?”
The facts stated by the two members in their respective orders are not in dispute. However, it would be advantageous to briefly recapitulate the reasons advanced by them for deleting/sustaining the addition.
2. The learned JM has given a finding that the balance standing to the credit of Concept International was shown in the balance sheet filed by the assessee along with the regular return of income for asst. yr. 1994-95, It has also been recorded by the learned JM that the records for asst. yr. 1994-95 were produced and seen by the Bench and that the learned Departmental Representative fairly admitted this fact. The learned JM has further observed that if the Department wanted to question the genuineness of this amount, it could have been questioned while completing the regular assessments or by reopening the assessments. According to him, if the amounts have already been disclosed while filing regular returns, the same cannot be questioned while completing the block assessment under Chapter XIV-B. On these grounds, the learned JM held that when the amount was already disclosed in the regular return, there was no justification for the AO to make the addition of Rs. 55 lakhs and hence deleted the addition.
3. The learned AM, on the other hand, observed that the credits aggregating to Rs. 55 lacs was never assessed as the income of the assessee in any regular assessment. In fact, according to him there was no order of regular assessment for asst. yr. 1994-95 and that mere filing of return did not amount to an order of assessment as was held by the Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. v. CBDT (2000) 246 ITR 73 (Del). It is further stated by the learned AM that the amount in question has not been disclosed in the balance sheet insomuch so that both secured as well as unsecured loans have been shown as nil in the balance sheet as on 31st March, 1994. According to him, the ledger found in the course of search and inventorised as Annexure A-21 revealed an entry of Rs. 50 lakhs credited to the loan account of Concept International (P) Ltd. Further, the confirmation filed was of supplier ledger and it did not speak of any loan having been advanced to the assessee. Another amount of Rs. 5 lakhs as advance payment received was not shown as loan payable in the balance sheet filed with the return of income. Accordingly, the learned AM held that, since the evidence which was detected as a result of search reflected the credits of Rs. 55 lakhs were not, disclosed in the balance sheet, the AO had a valid jurisdiction to initiate action under Section 68 requiring the assessee to establish the genuineness of the credits. The learned AM then proceeded to consider the genuineness of the transaction and to analyse the various case laws relied on behalf of the assessee to conclude that the action of the AO was in accordance with law and thus he sustained the addition of Rs. 55 lakhs.
4. After reading out the relevant portions from the orders of the two learned Members, the learned counsel directed his efforts to show as to how the entries were reflected in the balance sheet filed along with the regular return. The thrust of his argument was that when the amount was duly disclosed in the balance sheet, it cannot be said that it was detected only as a result of search. In fact, according to him, the detection was not at all as a result of search and hence no addition was justifiable in the block assessment proceedings.
5. The learned Departmental Representative contended that the definition of the term “undisclosed income” had a wide connotation to include income based on any entry in the books of account or other documents. He contended that if an entry represented wholly or partly an income, and if such an entry has been shown as a loan or a liability, but not as income, then it would come within the ambit of the definition of “undisclosed income”. It was also contended that merely because a particular transaction has been recorded in the books of account, it does not; by itself get excluded from being treated as undisclosed income. Finally, he strongly supported the order of the learned AM.
6. The differing orders and the rival contentions have been duly considered by me. Two confusions, which neither of the learned Members has tried to remove, have given rise to the present controversy. One is a major confusion arid the other is not so major a confusion. The major confusion first. Neither of the members has tried to ascertain the exact nature of payment received by the assessee. The learned JM has merely referred to as a credit without specifying whether the credit is on account of loan, advance, income or anything else. In para 11 of his order, the learned AM has given a finding that secured and unsecured loans, both are shown as nil. In the same para he mentions that the ledger inventorised as Annex. A-21 revealed an entry of Rs. 50 lacs credited to the loan account in the name of Concept International (P) Ltd. In para 12 of the order, it is mentioned that the confirmation filed was of supplier ledger and it did not speak of any loan having been advanced to the assessee. The assessee is no better. Though the ledger account (Annex. A-21 p. 57 of the paper book) speaks of loan account, the loans in the balance sheet are shown as nil, but the amount is reflected under the head “sundry creditors”. This gets some corroboration from the confirmation which speaks of “supplier ledger” (p. 61 of the paper book). But then, in its letter dt. 29th Jan., 2002 (p. 21 of the paper book) addressed to the Dy. CIT, Circle 10(1), New Delhi, the assessee refers to the sum of Rs. 55 lakhs as loan received from Concept international {p. 22 of the paper book). Thus, no one has clarified about the exact nature of credit shown by the assessee. When the learned counsel was asked to explain the nature of credit by me, it was explained that the assessee is an estate agent and the amount received by the assessee was an advance received towards purchase of certain properties The other confusion, not so major, is whether Concept International and Concept International (P) Ltd. are one and the same entity or are they different entities. However, nothing turns on this as the AO has treated it as one entity only. He has not raised any doubts about it. It has only somewhat weighed with the learned AM to draw adverse inference about the genuineness of the transaction. Therefore, I am ignoring this confusion. Anyway, amidst the confusion, I have to make my way to agree with one of the learned Members and hence I proceed further.
7. Let us assume that it is a loan received by the assessee. It is not in dispute that the assessee had filed its regular return of income for asst. yr. 1994-95 disclosing the impugned amount in the balance sheet. In fact, as per the observation of the learned JM, the learned Departmental Representative himself had placed on record a copy of the return for asst. yr. 1994-95. This fact is not disputed by any one including the learned AM. However, what the learned AM mentions is that mere filing of return cannot be treated as an order of assessment and for this proposition, he has relied on the judgment of the Delhi High Court in the case of MTNL (supra). With due respect to the learned Member, this judgement is cited totally out of context. In that case, there was an intimation passed under Section 143(1)(a) of the Act and thereafter the assessment was reopened under Section 147 of the Act. The assessee challenged the reopening on the ground that it was a change of opinion on the part of the AO. The High Court held that since intimation under Section 143(1)(a) is not a regular assessment, the AO cannot be said to have applied his mind and hence there is no question of any change of opinion. Nowhere the High Court has said that mere filing of return cannot be treated as an order of assessment. In fact, it is not the case of the assessee also in the present appeal. The assessee’s only contention is that the amount had been duly disclosed in the regular return of income. But then, the learned AM has observed in para 7 of his order that the amount of Rs. 55 lakhs never came to be assessed as the income of the assessee. By making this observation, the learned AM has prejudged the issue by treating it as assessee’s income. However, as has been discussed earlier, lot of confusion has prevailed whether it was income proper of the assessee or whether it was a loan. Even if it was loan, the amount thereof could have been added to the total income under Section 68 only if it was held to be non-genuine loan. The genuineness could have been gone into only the case of regular assessment when the assessee had duly disclosed the amount in its balance sheet. The assessee had discharged its part of the obligation by disclosing the amount in the balance sheet and by filing the return. It was not the assessee’s fault that no assessment was made. Further it was of no consequence as to under which head the amount was disclosed in the balance sheet. Amidst the confusion as to whether it is a loan or an income, it appears that it is an advance from customer for purchase of property. If it is an advance, then also it cannot be treated as income because it is merely an advance towards purchase of property and in no way the income of the assessee. The assessee also must have been under confusion whether such advance has to be treated as loan or advance, and hence the discrepancy that the ledger account reflects it as a loan account, whereas the balance sheet reflects it as sundry creditor. The crux of the matter is that the amount stood duly disclosed in the regular return of income. The AO could have gone into its genuineness in the course of regular assessment proceedings. When the amount stood duly disclosed in the regular return of income, the AO cannot resort to block assessment proceedings to go into its genuineness and subject it to a higher rate of tax. It is unfair. Thus, I agree with the view taken by the learned JM to hold that the addition of Rs. 55 lakhs was not justified.
8. The matter will now go to the regular Bench to give effect to the majority opinion.