TMI Blog2010 (10) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed investment or paid any on money to any person The learned CIT(A) considering the statement of the assessee admitted investment and surrender of the above amounts in the statement and that no fresh evidence is filed before him confirmed both the additions - In the absence of any specific findings as per the direction of the Tribunal dated 31-05-2005 and as per law for the block assessment noted above, before making the addition on the above issue the AO and the learned CIT(A) should have specified as to what material was found during the course of search to make the above additions - In the result, the departmental appeal is partly allowed; whereas the appeal of the assessee is allowed for statistical purposes. Regarding levy of surcharge - this issue is now covered by the judgment of the Hon’ble Supreme Court in the case of Suresh N. Gupta (2008 -TMI - 40397 - SUPREME Court) in which it was held that proviso to section 113 of the IT Act is clarificatory even to the search prior to insertion of the provisions - IT (SS) Appeal NOS. 94&98 (AHD.) of 2006 - - - Dated:- 22-10-2010 - BHAVNESH SAINI, JUDICIAL MEMBER J. AND D.C. AGRAWAL, ACCOUNTANT MEMBER J. M.K. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 17-12-2003. Both the assessee and the department went in appeal against the said order before ITAT Ahmedabad Bench. ITAT Ahmedabad B Bench vide their order in IT (SS) A No. 43/Ahd/2004 and IT (SS) A No. 46/Ahd/2004 dated 31-05-2005 have set aside the order of the learned CIT(A) on the above issues with direction that fresh order may be passed after allowing opportunity of being heard to the assessee and the department. The appeal was accordingly heard by the learned CIT(A) afresh on the above grounds of appeals. Before proceeding further, it would be relevant to reproduce the direction and findings of the Tribunal in the order dated 31-05-2005 inPara 18 which are reproduced as under: 18. We have heard the ld. representatives of the parties and perused the record. The first controversy in this case is whether addition can be made on the basis of statement recorded u/s. 132(4). The addition on the basis of the statement of the assessee at the time of search is justified unless it is established that the statement was made on a mistaken belief. If the assessee s case is that his statement has been wrongly recorded or that he made it under mistaken belief of a fact or law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elescoping against the addition sustained on account of unaccounted stock. The submission of the assessee that the CIT(A) ought to have appreciated the facts that Rs. 2811/- left after deleting addition of Rs. 258170/- out of total unaccounted receivable of Rs. 2,60,981/- in the assessee s case, is the amount of balance in Canara Bank and which has already been declared in block return of Srigopal Bhaiya. This submission of the assessee is subject to verification. After considering the totality of the facts of the case and law, we are of the view that when the assessee had made the retraction from the disclosure made during the statement recorded u/s. 132(4), the case is to examine on the basis of material seized and material available and books of account. We notice that both the lower authorities have failed in this regard. We notice hat the CIT(A) has deleted the addition of Rs. 1,83,120/-, Rs. 20,00,000/ - and Rs. 19,30,000/- without examining and recording the relevant facts of the case. Under the circumstances, we find appropriate to send back these matters i.e ground No. 2 of the appeal of the assessee pertaining addition of Rs. 2,60,981/-and ground Nos. 1, 2 and 3 of revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial available on record and the books of account. He has submitted that the valuation report seized during the course of search dated 28-11-1996 shows the total value a Rs. 21,89,300/- and another report was found for a specific purpose for taking loan from the bank. No evidence was found that the assessee made undisclosed investment in the property. He has relied upon the decision of the Hon ble Rajasthan High Court in the case of CIT v Kishan Kumar Others 215 CTR 181 in which it was held as under: Conclusion : In the absence of any evidence or material found as a result of search, Stamp Valuation Authority s rate of property fixed for purposes of registration of sale deeds cannot, by itself, be taken to be the price for which the property was purchased for the purpose of computing undisclosed income under s. 158BB . He has also relied upon the decision of the ITAT Ahmedabad Bench in the case of Shri Bharat Kumar N. Patel v. ACIT in ITA No. 1749/Ahd/2009 dated 29-08-2008 in which it was held that Section 50C is not applicable to the case of the purchaser . He has submitted that since there was no incriminating document against the assessee and the addition wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of intimidation, duress or coercion. The AO was justified in assessing the income of the assessee on the basis of surrender of undisclosed income made by the assessee u/s 132(4) of the Act. The learned DR, therefore, submitted that the learned CIT(A) should not have deleted the above additions on which the department is in appeal. The learned DR submitted that levy of surcharge is justified as per the decision of the Hon ble Supreme Court in favour of the revenue. 10. We have considered the rival submissions, perused the findings of the authorities below and considered the materials available on record. Before proceeding further to decide the respective grounds of appeal on merits, it would be relevant to discuss the provisions contained under Chapter XIV-B of the IT Act for the purpose of computing undisclosed income during the block period. 10.1 Chapter XIV-B starts with sec. 158B and provides the definition of block period and undisclosed income . Undisclosed income is relevant in this case, which is reproduced below as amended by Finance Act, 2002 w.e.f. 1.7.1995: S. 158B(b) undisclosed income includes any money, bullion, jewellery or other valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) On the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);] (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of sec. 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section(4) of sec. 245D, on the basis of such order; (f) where an assessment of un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above provisions, are of the opinion that even if there is an amendment in the above sections, the scheme or purpose of enacting Chapter XIV-B has not undergone a major change in the sense that the block assessment pertaining to a number of years remains distinct from assessment u/s 143(3) pertaining to a single assessment year. The block assessment could be made in respect of undisclosed income if during the block period undisclosed income is recovered as a result of evidence found during the course of search and not as a result of other documents or material which came to the possession of the AO subsequent to the conclusion of search operation unless and until such material or document is relatable to such evidence recovered during the course of the search. The amended definition of sec. 158BB as mentioned above clearly suggests that some evidence is to be found as a result of search operation and it is only thereafter that the remaining part of the provisions come into play and that too the remaining evidence must be relatable to the evidence recovered during the course of the search. The other amendment in sec. 158B(b) which is reproduced above has enlarged the meaning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon to explain the advance taken from a company. The assessee had filed the confirmation letter of loan from the company including income tax file numbers of the creditor. The income-tax authority held that the said loan was a fictitious one and was to be considered as undisclosed income of the assessee during the period under consideration. On the question whether the AO was entitled to question the loan amount which was the subject-matter of regular assessment, while making block assessment. Held , that the AO was not entitled to question in block assessment the loan which was a subject matter of the regular assessment. The AO was wrong in holding that the said sum could be taxed in block assessment although the same featured in the regular books of account. When the loan creditor was an assessee and in whose assessment the loan advanced had been accepted by the Revenue, the AO was wrong in holding that the assessee was liable to pay tax on that loan money taken from the assessee. 10.5 In case of CIT v. Ravi Kant Jain , 250 ITR 141 (Del.), the Hon bleDelhi High Court observed: Block assessment under Chapter XIV-B of the IT Act, 1961, is not intended to be a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on suspicion and surmises are not covered u/s 158B(b). It was further held that the addition u/s 158B(b) must be made on concrete material. 10.8 In the case of P.K. Ganeshwar v. DCIT , 80 ITD 429 (Chennai), ITAT, Chennai Bench C Held - Sec. 158BA of the IT Act, 1961 - Block assessment search cases - Assessment of undisclosed income as a result of search - Whether, where undisclosed income is found not on basis of evidence found as a result of search but on investigation and inquiries made following search, such income could be included as undisclosed income of block period computed under Chapter IV - Held, no - Whether Chapter XIV-B is a special provision for assessment of undisclosed income found as a result of search only and there is no scope for considering items that could be considered under regular assessment - Held, yes. 10.9 Hon ble Calcutta High Court in the case of CIT v. Ashim Krishna Mondal , 270 ITR 160 at pages 163 and 164 observed: The principle that has been laid down for the purpose of making assessment are settled proposition as was referred to by the ld. Tribunal in the case of Sunder Agencies v. DCIT [1997] 63 ITD 245 (Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand Nirmal Kumar , 263 ITR 77 held: Held, that a perusal of the unamended and amended provisions and the circular of the Central Board of Direct Taxes would make it clear that there had been no specific effect that the amendment effected to sec. 158BB in the Finance Act, 2002, with effect from July 1, 1995, would be applicable to the instant case as the block period covered ten years commencing 1986 to 1996. Emphasis had been given to the fact that the evidence must have been found during search and only thereafter the question of gathering any material information would arise based on the search inquiry. Admittedly, during the search in the premises of the assessee nothing was found with regard to the investment in the house. The contention that the valuation report of the Department Valuation Officer was obtained and was confronted to the assessee but he was not able to give any explanation and therefore it should be accepted as evidence could not be accepted in view of the provisions of sec. 158BB and the law laid down by the Bombay High Court in the case of CIT v. Vinod Danchand Ghodawat [2001] 247 ITR 448. 10.12 Hon ble Gauhati High Court in the case of CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds of appeal afresh on examining the material seized, material available on record and the books of account. The learned CIT(A) is, therefore, bound by the order of the Tribunal in the set aside proceedings to decide the above grounds of appeals on the basis of material seized, material available on record and the books of account because the assessee made retraction from the statement. The mere statement u/s 132(4) of the IT Act thus was not considered favorably by the Tribunal in favour of the revenue. The order of the Tribunal is stated to be final between the parties because nobody pointed out if he said order was challenged by the revenue before the Hon ble High Court. It is also settled law that in the set aside proceedings the authorities below are bound to decide as per the direction contained in the order and it is not open to conduct fresh enquiry. The authorities below are precluded from entertaining a new plea. It appears that the authority is confined to the subject mater on remand by the Tribunal. No other question could be considered or to enlarge the scope of the proceedings in contradiction to the findings given by the Tribunal. We are fortified in our view by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that investment of Rs. 68,69,640/- was made during the period from 02-8-2000 to 31-03-2002. It was stated that the entire investment was recorded in the books of account. The assessee submitted that it has already disclosed Rs. 89,68,521/- which has been accepted by the AO and no discrepancy was found by him in the expenditure on construction of Krishna House. No incriminating evidence in any form was found during the course of search proceedings indicating unaccounted investment in the Krishna House. The AO without any evidence estimated the investment in Krishna House at Rs. 91,69,641/- as against Rs. 89,68,521/- invested by the assessee and thereby adopted the undisclosed income of Rs. 23,00,000/- instead of Rs. 21,16,880/-declared by the assessee in the block return. None of the directors has been examined by the AO before making the addition. The learned CIT(A) considering the statement of the assessee deleted the entire addition. His findings inPara 7 of the impugned order are reproduced as under: 7. I have carefully perused the contentions raised by the appellant and also gone through the assessment order. The Assessing Officer has made the above addition on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed investment in the property, the learned CIT(A) has rightly deleted the addition. Ground No. 1 of the appeal of the revenue is dismissed 16. On ground No. 2 of the appeal of the revenue, addition of Rs. 20,00,000/- was made on the basis of retracted statement made by Shri Dinesh Bhaiya. The assessee submitted that the AO has not considered the submission made and evidences filed during the course of assessment proceedings and arbitrary additions have been made. It was explained that the AO has completely ignored the Registered Valuer s Report dated 28-11-1996 (PB-57) found and seized during the search which states the market value of the land at Rs. 21,25,600/-. The assessee was allowed discount of Rs. 85,000/- for immediate payment. Therefore, consideration of the land was Rs. 20,40,000/-. The AO has not considered the statement of Shri Vasant Vhaiya joint holder of the land recorded u/s 132 (4) of the IT Act where total investment in the land was explained at Rs. 22,00,000/- approximately. The AO has neither examined any seller nor any of the buyers of the land before making the addition. The learned CIT(A) considering the submissions of the assessee deleted the entire ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter several years from the date of purchase of the land and according to the explanation of the assessee it was prepared for taking bank loan showing higher valuation. During the search also the valuation report dated 28-11-1996 was seized which shows reasonable rate as explained by the assessee which has been ignored by the AO without any just cause. The AO also relied upon the notice of Stamp Duty Valuation Authority which would not prove the valuation of the property and also could not be considered as evidence or material found during the search to make addition against the assessee as is held by the Hon ble Rajasthan High Court in the case of Kishan Kumar Others (supra). The AO has also at page 25 of the assessment order noted that the above addition is made as per the statement made by Shri Dinesh Bhaiya on behalf of the assessee. It would, therefore, prove that there was no incriminating material or evidence found during the course of search to indicate that the assessee made undisclosed investment or paid any on money to any person. The addition was, therefore, rightly deleted by the learned CIT(A). Ground No. 2 of the appeal of the revenue is thus dismissed. 18. On g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese facts, the Assessing Officer was not justified in making such addition, hence, addition of Rs. 9,32,811/- on account of unexplained investment in Gangadarshan bungalow is deleted. 19. On consideration of the rival submissions we are of the view that the addition has been rightly deleted by the learned CIT(A) in the matter. There was no material found during the course of search to justify the above addition. The learned CIT(A) on the basis of proper appreciation of the facts and material on record rightly deleted the addition. This ground of appeal of the revenue is accordingly dismissed. 20. On ground No. 4 of the appeal of the revenue, the learned CIT(A) deleted charging of surcharge because search took place prior to 01-06-2002 i.e. before insertion of proviso to section 113 of the IT Act. The learned representatives of both the parties admitted that this issue is now covered by the judgment of the Hon ble Supreme Court in the case of Suresh N. Gupta 297 ITR 322 in which it was held that proviso to section 113 of the IT Act is clarificatory even to the search prior to insertion of the provisions. By following the judgment of the Hon ble Supreme Court in the case ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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