TMI Blog2003 (4) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... Act) was issued. In response thereto the assessee filed return of income for the block period on 4th Dec., 2000 declaring an undisclosed income for the block period as Rs. 3,00,000. 3. The AO made various additions, all of which were confirmed in appeal. All these additions are further challenged before us. We shall deal with each addition separately. 4.1 The first ground is against addition of Rs. 7,49,266 in respect of brokerage earned during block period not disclosed in return of income. The AO noted that assessee earned total commission of Rs. 18,73,165 on receipt basis. No regular books of accounts are maintained. Details of expenditure are also not available. The AO, based on appraisal report of search party, treated 60 per cent of brokerage received as expenses and proposed balance 40 per cent as the income from business as commission agent. During the assessment proceedings assessee submitted that in respect of similar business conducted by his father Sri Raghubir Singh, the expenses incurred for asst. yr. 1999-2000 to asst. yr. 2001-02 is 75.67 per cent, 83.17 per cent and 74.25 per cent. Similar expenses should be allowed and only balance income is to be considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before us. In such a situation we find that estimate of assessee is based on some working not rejected by AO, whereas for estimate by AO there is no justification. We are, therefore, inclined to accept the estimate of assessee. On overall facts and circumstances of case, we direct the AO to allow 75 per cent of brokerage/commission as expenses and tax the balance as undisclosed income. 5.1 The next ground of appeal is against addition of Rs. 2,00,000 as estimated income earned from brokerage/commission business carried on by assessee. The AO noted as under: "It was noticed from the seized materials that some brokerage transactions were not clearly explained by the assessee. While explaining these entries, the assessee is able to show the transactions in respect of the parties but he is not clearly able to identify in terms of transactions and the amounts. That means, the assessee is able to show transactions with 'X', in respect of so many number of bags, which is more than the transaction with the same party as seen in the seized material. The assessee says that all these transactions are rightly entered into in various floppies and accounted for on receipt basis. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as offered in respect thereof. The assessee admitted the same as unexplained and offered the same for taxation. During assessment proceedings it was submitted that since income from commission/brokerage business is taxed on substantial sum and since cash and assets found are less than income from business, no further addition is required. The AO found the explanation unreasonable, though in principle he agreed with the same. Accordingly out of cash found of Rs. 3,58,139, a sum of Rs. 2,00,000 was treated as undisclosed income. Learned CIT(A) agreeing with above, further held that since no separate addition is made in respect of unexplained expenditure on marriage of assessee's sister, all other additions are justified. 6.2 Shri Khincha reiterated the arguments put forward before authorities below. The assessment can be either on basis of source or on basis of application. Once the income from brokerage is taxed on source basis, such income will explain the asset/expenditure found. The theory of telescoping is applicable. 6.3 Mr. Radhakrisha would submit that the income from brokerage will explain marriage expenses also and hence after such expenses, not much source is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as asset found. AO held that since assessee has no objection to figure of Rs. 12 lacs, same is added to income from undisclosed sources. 7.2 Mr. Khincha submitted that assessee has strongly objected to working of AO as per letter dt. 15th Dec., 2001. As per said letter, following folly were found in working peak credit: (i) All share transactions are not delivery based. (ii) No evidence if found for payment made for all transactions. (iii) Notings found in seized material are only noting but not actual transactions. (iv) Loss is incurred in share transactions. (v) No dates are found in notings. (vi) For entire block period, what is found is only shares of Rs. 1,64,600 and noting more. Hence, only reasonable estimate is to be made for share transactions and there is no basis for addition of Rs. 12 lacs. Apart from reiterating above submission, Mr. Khincha further submitted that scope of assessment as undisclosed income under s. 158BC is limited to the extent of material found as a result of search and any estimate has no roll in such assessment. 7.3 Mr. Radhakrishna justified action of AO. He further submitted that assessee himself was asked to work out the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch cases. By the very same enactment, s. 113 of IT Act, 1961 was also introduced, which specifically provided for taxing of undisclosed income of block period, determined under s. 158BC of IT Act, 1961, at the rate of sixty percent. When the statute has fixed the rate of taxation by enacting a separate section, then the tax cannot be charged at a rate more than what is specified in the section without amending the section. Under Arts. 269 and 271 of Indian Constitution, tax and surcharge has been separately defined. Hence, tax and surcharge cannot be one and the same. For the years covered by block period the rates of surcharge were as under: Asst. yr. Rate of Surcharge 1990-91 8% 1991-92 8% 1992-93 12% 1993-94 12% 1994-95 12% 1995-96 Nil 1996-97 Nil 1997-98 Nil 1998-99 Nil 1999-2000 Nil 2000-2001 10% For some of these assessment years there was no surcharge applicable and for other assessment years, the rate of surcharge was different. In any case the surcharge was never 10 per cent (as lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dance with, and [subject to the provisions (including provisions for the levy of additional income-tax) of this Act] in respect of the total income of the previous year of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly." Finance Act enacted every year prescribes rate of income-tax for relevant assessment year. Thus, under s. 4(1), tax is payable for the income computed for the financial year relevant to assessment year. As per proviso to s. 4(1), if income-tax is to be charged under any provision in the IT Act itself for income of period other than previous year, tax is chargeable accordingly. Under s. 158BA(2), total undisclosed income is to be charged to tax at rates prescribed in s. 113. Sec. 113 of the Act, which is part of Chapter XII, prescribes levy of tax for a block period which is other than a previous year. This income for a block period is subject to tax rate prescribed in s. 113 itself and not as per s. 4(1) of the Act. In the absence of any provision in s. 113 itself, no surcharge can be levied. 8.5 It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income of that year does not exceed certain limits. In such a situation to bifurcate the income yearwise and then levy surcharge will defeat the very purpose of computing income for block period. The concept of assessment of undisclosed income of entire block period was introduced only to do away with identifying income to a particular year. Also when the concept of block assessment under Chapter XIV-B was introduced, the tax rate prescribed covered not only income-tax but also interest and penalties otherwise leviable. It can, therefore, be interpreted that even surcharge is also included therein and no separate levy of surcharge is warranted. Thus, there is no clear provision as to levy of surcharge in case the assessment is made under s. 158BC on which tax is computed under s. 113 at the relevant time. Finance Act, 2002 amended s. 113 of the Act by inserting a proviso thereto providing that income-tax computed thereunder be increased by a surcharge. This amendment cleared the doubts as to levy of surcharge in case of computation of tax under s. 113 of the Act. The amendment is prospective and not retrospective. This can be interpreted that earlier to such amendment, lev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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