THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY and THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM
I.T.T.A. No.109 of 2004
% 10.12.2014
Between:
# M.Sreeram Reddy. Versus $ The Additional Commissioner of Income Tax.
... APPELLANT ...RESPONDENT < Gist:
> Head Note:
! COUNSEL FOR THE APPELLANT :- Smt.B.Rachna Reddy ^COUNSEL FOR RESPONDENT :- Sri S.R.Ashok ? Cases Referred:
THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No. 109 of 2004
JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy)
The appellant herein is an assessee under the Income Tax Act (for short ‘the Act’). His principal business is running of Hotels. A search was conducted in his premises on 02.08.1996. A statement was recorded under Section 132(4) of the Act. In response to a notice under Section 158BC of the Act, the appellant filed a return disclosing the income of Rs.30,00,000/- for the block period from 1986-87 to 1997-98. He pleaded that in addition to the Hotel business, he has also undertaken real estate activity and the said income is derived there from. The tax at the rate of 60%, being Rs.18,00,000/- was paid.
The Assessing Officer sought to add Rs.4,27,565/- by taking into account, the transaction in respect of two plots, one at Banjara Hills and the other at Jubilee Hills. In the course of assessment, the appellant pleaded that some of the facts and figures furnished by him in the statement, recorded during the course of search do not accord with the relevant documents and the figures as reflected in the documents, especially in respect of those two plots, need to be taken into account. The request was not acceded to by the Assessing Officer and an order of assessment was passed by adding a sum of Rs.4,27,565/-. I.T.A.No.236/Hyd/97 filed by the appellant before the Hyderabad Bench ‘A’ of the Income Tax Appellate Tribunal was dismissed on 24.01.2003. Hence, this further appeal under Section 260A of the Act.
Heard Smt.B.Rachna Reddy, representing Sri B.Chandrasen Reddy, learned counsel for the appellant and Sri S.R.Ashok, learned Senior Standing Counsel for the respondent.
The statement recorded in the course of search under Section 132(4) of the Act becomes relevant and in many cases, it constitutes the sole basis for passing an order of block assessment. Where, however, the assessee resiles from the statement, different considerations altogether arise. Incidentally, the appellant herein did not resile from the statement and he stood by it.
In his returns, the appellant has shown the income of Rs.30,00,000/- mainly from real estate activity. The statement, no doubt, contained broad particulars of the transactions. However, when the respondent compared and cross-verified them with the relevant records, some difference was noticed. It is on the basis of his understanding of the matter, with reference to the relevant records, that the appellant disclosed the income of Rs.30,00,000/- and paid the enhanced tax at 60%. He pleaded that the facts furnished by him in the statement in respect of the two transactions do not conform to the documents. The Assessing Officer was under obligation to examine the record.
Even where an assessee resiles from the statement recorded under Section 132(4) of the Act, the Assessing Officer is entitled to place reliance upon the documents that are recovered during the course of search. The case where the assessee abides by the statement, but insists on verification of the same with reference to the record, does not stand on an inferior footing. The Assessing Officer cannot turn a blind eye to such verification and treat the statement recorded under Section 132(4) of the Act as an absolute truth irrespective of the facts and figures contained in the record. If that approach is adopted; even a statement wherein the facts are misstated or value is shown to be very low, must be taken on its face value by the same logic or reasoning, without making any effort to cross verify the same with reference to the records.
We, therefore, allow the appeal and set aside the order passed by the Tribunal as well as the Assessing Officer. We remand the case to the Assessing Officer with a direction that he shall take into account, only those figures in respect of two transactions of purchase of plots on the basis of the records pertaining to them. It is made clear that no other aspects shall be dealt with in the remand. There shall be no order as to costs The miscellaneous petitions, if any, filed in this appeal shall also stand disposed of.
L.NARASIMHA REDDY,J Dt:10.12.2014 Note: L.R. copy to be marked. kdl RAM,J CHALLA KODANDA