Case Law Details
Brief of the Case
Delhi High Court held In the case of CIT vs. Harjeev Aggarwal that the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4). However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. If the provisions of Section 132(4) are read in the context of Section 158BB (1) read with Section 158B (b), it is at once clear that a statement recorded under Section 132(4) can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment.
Facts of the Case
A search was conducted on 01.02.1999 on the premises of one Mr Arvind Seth, a Non-resident Indian, pursuant to a specific information received from the investigation wing that the one property owned by Mr Arvind Seth, was being sold for Rs.86 lacs out of which only Rs.12 lacs were paid by cheque and the balance was payable in cash. He also stated in his statement that although he has signed the receipt for the full amount, Rs.20 lacs was still to be received by him from assessee. Later a search was conducted on assessee. During the search, the Income Tax Authorities seized certain books of accounts of the Assessee including a diary, which contained a record of certain unaccounted sales and purchases made by the Assessee. In his statement during the search, the Assessee admitted that he entered into a deal for purchase with Mr Arvind Seth for a sum of Rs.86 lacs. Out of the aforesaid sum, Rs. 14 lacs was paid in cash and 2 cheques each of Rs.50,000/- were given to Mr J K Gulati, the attorney holder of Mr Arvind Seth, on 08.07.1998; Rs.20 lacs in cash was given to Mr Arvind Seth on 28.01.1999; and Rs.39 lacs in cash was paid to Mr Arvind Seth on 28.01.1999. Mr Harjeev Aggarwal also handed over 6 cheques amounting to Rs.12 lacs to Mr Arvind Seth on 28.01.1999 and then received a signed receipt for the entire sum of Rs.86 lacs which was signed by Mr Arvind Seth. Mr JK Gulati and Mr Kamal Seth (brother of Mr Arvind Seth) signed the receipt as witnesses.
During the block assessment proceedings, the Assessee was again required to explain the source of investment of Rs.74 lacs. The Assessee replied by explaining that an amount of Rs.45 lacs was received in cash from M/s Penguin Chits Pvt ltd, M/s Parmeshwar Chits Pvt Ltd and M/s Jai & Associates as earnest money. The AO examined the returns filed by the Assessee for the block period and noticed that the income declared by the Assessee for the relevant AYs was barely above the threshold taxable limit. He, therefore, concluded that it was not possible for the Assessee to have purchased the property on the basis of his declared sources. The AO disbelieved the Assessee’s claim that bulk of the cash payments were made from advances received from M/s Penguin Chits Pvt. Ltd., M/s Parmeshwar Chits Pvt. Ltd. and M/s Jai & Associates. The AO reasoned that the property in question was not yet registered in the name of the Assessee, his wife and the HUF and consequently it was not plausible that other entities would pay large amounts in cash as earnest money for purchase of the said property from the Assessee. Accordingly, the AO taxed the entire amount paid for purchase of the property in question – Rs.86 lacs as undisclosed income of the Assessee.
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