2010 (3) TMI 796 - HC - Income Tax

Block assessment - Receipt entry in bill - error - whether amount mentioned as Rs. 45, 19, 238 is correct or Rs. 1, 715 is correct - held that - Findings have been entered into by the appellate authority and the Tribunal that the inclusion of more than Rs. 45 lakhs under a single receipt is essentially an error. It is also not in dispute that the Assessing Officer himself did not choose to include the same in the pre-assessment notice. We cannot overlook the argument of the respondent that in the course of the proceedings the respondent was apparently able to convince the Assessing Officer of the nature of the error. - Decided in favor of assessee Regarding allowance of Depreciation - Held that - subject to the restrictions imposed in the Explanation to section 158BB there is no embargo against assessee claiming the benefit of dep. It is entitled to in law even in proceedings under Chapter XIV-B to do so. decided in favour of Assessee. Estimation of Income on want of Books of Account. Held that - There is no material or information with him relatable to such evidence also in regard to the income from the broken period in question. What is done is estimation of income on basis of income ascertained for remaining period on basis of probability. decided in favour of Assessee. Regarding unexplained cost of construction. - Held that - There is no relevant matter as such which can be relied on by the appellant to justify finding about cost of construction being what was estimated. decided in favour of Assessee.

Summary

Issues Involved:
1. Deletion of Rs. 45,19,238 as undisclosed income.
2. Claim of depreciation for the assessment year 2002-03 in block assessment.
3. Deletion of Rs. 12,75,035 as undisclosed income for the period April 1, 2001, to May 2, 2001.
4. Deletion of Rs. 1,95,41,744 on account of unexplained cost of construction.

Detailed Analysis:

1. Deletion of Rs. 45,19,238 as Undisclosed Income:
The first issue revolves around the deletion of Rs. 45,19,238, which was initially included as undisclosed income based on a computer printout seized during the search. The assessee argued that this was a computer error, and the actual bill amount was Rs. 1,715. The Tribunal upheld the appellate authority's decision to accept the assessee's claim, noting the lack of evidence to support the higher amount and the absence of this amount in the pre-assessment notice. The court concluded that the appellant failed to establish a substantial question of law and rejected the appellant's contention for remanding the matter for fresh consideration.

2. Claim of Depreciation for the Assessment Year 2002-03 in Block Assessment:
The second issue concerns the assessee's claim for higher depreciation in the block return than in the regular return. The appellant argued that the proper course was to file a revised return. However, the court noted that under Chapter XIV-B, the Assessing Officer must allow the claim for depreciation legally available under the Act. The court upheld the Tribunal's decision, stating that there is no embargo against claiming higher depreciation in block assessment, subject to the restrictions in the Explanation to section 158BB.

3. Deletion of Rs. 12,75,035 as Undisclosed Income for the Period April 1, 2001, to May 2, 2001:
The third issue deals with the deletion of Rs. 12,75,035, which was estimated based on the actual receipts for the remaining 333 days of the year. The Tribunal noted that no materials were seized for the period in question and that income determination in block assessment should be based on seized materials. The court agreed with the Tribunal, stating that the Assessing Officer's estimation was insupportable as it was not based on any evidence unearthed during the search or relatable to such evidence.

4. Deletion of Rs. 1,95,41,744 on Account of Unexplained Cost of Construction:
The final issue pertains to the deletion of Rs. 1,95,41,744, which was added based on the estimated cost of construction. The Assessing Officer used CPWD rates and other criteria to estimate the cost, which was significantly higher than what the assessee had shown. The Tribunal found that the block assessment was made on an estimate basis without any seized material and that such a method is not permitted under the Act. The court upheld the Tribunal's decision, emphasizing that undisclosed income must be determined with reference to evidence unearthed during the search and other materials relatable to such evidence.

Conclusion:
The court dismissed the appeal, answering all substantial questions of law against the Revenue and in favor of the assessee. The findings were based on the lack of evidence supporting the additions and the legal provisions governing block assessments under Chapter XIV-B of the Income-tax Act.