COMMISSIONER OF INCOME TAX Vs. C BALAKRISHNAN NAIR

JUDGEMENT

(1.) Petitioners are husband and wife. First petitioner herein was a professor in Pathology of the Calicut Medical College and was running a proprietary concern by name "Santhosh Clinic". He is an assessee with P.A. No. 46-007-PX-7697. Second petitioner, wife of the first petitioner, retired as a professor of Dermatology and is a private practitioner and is an assessee with P.A. No. 46-007-PQ-9485.

(2.) IT Department had received information that one Hamza, proprietor, Hotel Sagar, Mavoor Road, Calicut had purchased the residential house belonging to the petitioners at Mavoor Road, Calicut, for a consideration of Rs. 72 lakhs in the name of his children and the petitioners in turn purchased another residential property at Sathram Road, Calicut, belonging to Dr. N.M. Mathai and his son George Mathai for a sum of Rs. 59 lakhs. Enquiry conducted by the Investigation Wing of the Department revealed that petitioners had sold their residential house with 11.5 cents of land at Mavoor Road for a consideration of Rs. 42 lakhs and in turn purchased the residential house of one Dr. N.M. Mathai and his son for a consideration of Rs. 29 lakhs, but the consideration shown was only Rs. 12 lakhs. Both the transactions were registered on the same day, i.e., 29th July, 1995. Based on the information, a search was organised by the then Asstt. Director of IT (Inv. I), Calicut, as per the warrant of authorisation issued by the Director of IT, Bangalore, under Section 132 of the IT Act. Search operations were conducted on 27th Oct., 1995 at the residence of Sri K.T. Hamza, proprietor of Sagar Hotel at Kunnamangalam, residence of Dr. Balakrishnan Nair and Dr. K. Narayani at Sathram Road, Calicut, and at the residence of Dr. N.M. Mathai, Nedumchalil House at Muvattupuzha. During the course of search on 27th Oct., 1995, a preliminary statement and sworn statement under Section 132(4) were recorded from the petitioners. In the statement recorded, first petitioner stated that the residential house at Mavoor Road with 11.5 cents of land was sold in July, 1995 to one Abdul Razack and his minor brother (both children of Hamza, Hotel Sagar, Calicut) for a consideration of Rs. 12 lakhs. First petitioner also stated that the residence at Sathram Road, Calicut, was purchased in July, 1995 from Dr. N.M. Mathai and his son for a consideration of Rs. 24 lakhs and that there was no written agreement between him and Dr. N.M. Mathai. Registration charges were paid out of his own funds and the total consideration of Rs. 24 lakhs was paid. Rs. 6 lakhs by demand draft on 4th July, 1995, Rs. 2.75 lakhs by demand draft on 10th July, 1995, Rs. 0.25 lakhs by demand draft on 29th July, 1995 and Rs. 15 lakhs by cash on 29th July, 1995, constituting Rs. 24 lakhs. The search team consisted of six officers and 17 other officials assisted them. Search commenced on 27th Oct., 1995 at the residence of the petitioners at 8 a.m. and concluded at 8 p.m. and Panchnama was prepared as per the Departmental procedure in the presence of witnesses. Since search was not completed, books of account and records were put in an almirah and sealed in the presence of witnesses. Since scrutiny could not be completed during the search operations, prohibitory order under Section 132(3) was served on the petitioners on the same day and statement was recorded from them under Section 132(4) on the same day. 28th Oct., 1995 and 29th Oct., 1995 were holidays for the Department and the Asstt. Director of IT (Inv. I), Calicut, along with inspectors went twice to the residence of the petitioners and since they were not present it was not possible to resume the operations. Finally, on 10th Nov., 1995, first petitioner was requested to remain at his house and accordingly search was resumed and concluded on 10th Nov., 1995. In the statement recorded on 10th Nov., 1995 first petitioner had disowned the various statements made on 27th Oct., 1995 in respect of sale and purchase of immovable properties stating that he was in exhausted state of mind. When the search was effected on 10th Nov., 1995 at the residence of Dr. N.M. Mathai, he stated that the residential house at Calicut, Sathram Road was sold to the petitioners for a total consideration of Rs. 22 lakhs for which only Rs. 9 lakhs was shown in the registration deed. It was further stated that out of the amount of Rs. 22 lakhs received he had given 50 per cent to his son George Mathai (joint owner), Rs. 6 lakhs deposited in F.D. with Union Bank of India, Muvattupuzha, and the balance amount of Rs. 5 lakhs was given to his relatives and the Old Age Home at Muvattupuzha. Further, he also confirmed that he and his son had received Rs. 13 lakhs towards unaccounted consideration in the deal.

(3.) The post-search investigations were conducted by the then Asstt. Director of IT (Inv. I), Calicut, Sri P.N. Devadasan, who organised and executed the search operations and the relevant records were transferred to the Asstt. CIT, Investigation Circle I, Calicut, for further action. Accordingly, notices under Section 158BC were issued by the Asstt. CIT, Investigation Circle I, Calicut, on 16th April, 1996 on the basis of the records and reports received from the concerned Asstt. Director of IT. Petitioners then filed their returns under Section 158BC on 13th June, 1996.