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2020 (5) TMI 167 - AT - Income TaxValidity of block assessment - income reported by the assessee is on presumptive basis u/s 44AE - as argued since the search warrant is in joint names, the assessment should have been made as an AOP and therefore, the present assessment in individual capacity of the assessee is bad in law - HELD THAT:- This ground has no merit because of this reason that as per section 292CC recently inserted in the Income Tax Act, 1961 w.e.f. 01.04.1976, even in case of joint warrant, assessment has to be separate in individual names. Second technical objection is that search itself is illegal and therefore, the consequent block assessment is bad in law - Regarding this technical objection, we find that an Explanation had been inserted in section 132 by the Finance Act, 2017 w.r.e.f. 01.04.1962 to the effect that the reasons to believe recorded by the income tax authorities under this section shall not be disclosed to any person or any authority or the Appellate Tribunal. The assessee also has not produced any material in support of this ground and therefore, we do not find any reason to interfere in the order of CIT (A) on this issue. Income reported on presumptive basis u/s 44AE by assessee - compute cash available with the assessee towards explanation of source of various investment - whether depreciation should be added because the income declared by the assessee is after depreciation and hence, cash available is such declared income plus depreciation? - CIT (A) rejected this claim by saying that as per the assessee himself, depreciation is only a notional charge on profit and does not involve actual cash outgo and hence, depreciation being a notional charge cannot become source of real asset like cash and gold - HELD THAT:-. In our considered opinion, this logic of CIT (A) is not proper. If the income declared by the assessee u/s 44AE only is considered as source of cash and gold found then the amount of depreciation allowable should be added to such accepted source because such income declared u/s 44AE is after reducing allowable depreciation from real cash income and therefore to work out the cash available with the assessee on account of such income should be such income and the amount of allowable depreciation. But there is no finding of AO or CIT (A) about the amount of depreciation allowable on these four trucks during the block period and therefore, we remit this matter back to AO to decide this issue after allowing reasonable opportunity of being heard to the assessee. These grounds are allowed for statistical purposes. Business advance made by the assessee in Anubhav Plantations and VGP Plantations as undisclosed income of block period - main argument is this that these are business advances and since these are not recoverable, it is allowable as business loss against this very addition made by the AO - CIT (A) has rejected this argument by holding that addition has to be made because source of such advances could not be explained by the assessee and regarding claim of it as business loss, no specific finding is given and this claim was rejected by saying that bad debts are allowable u/s 36 (1) (vii) on actual write off - HELD THAT:- We feel that these findings of Chandrahas learned CIT (A) are also not sustainable because if the advances are given by the present assessee, its non recovery can be claimed as business loss by the present assessee only and it should be allowed if other pre requirements for claiming such loss is satisfied by the assessee. Actual write off in books is required to claim bad debts but the assessee is claiming it as business loss and not as bad debt u/s 36 (1) (vii). Such claim as bad debt is neither claimable nor allowable for this reason alone that the requirements of section 36 (2) cannot be satisfied for nonrecovery of trade advances. Hence, we will it proper to remand this matter also to the AO for a fresh decision about the claim of the assessee as business loss. We order accordingly and direct the AO to decide this issue by a speaking and reasoned order after affording adequate opportunity of being heard to the assessee. Ground is also allowed for statistical purposes. Interest charged u/s 158 BFA (1) should be deleted - HELD THAT:- It is a settled position of law that chargeability of interest is consequential and therefore, this ground is rejected. Levy of surcharge - HELD THAT:- In the case of CIT Vs Vatika Township [2014 (9) TMI 576 - SUPREME COURT] it was held that levy of Surcharge by insertion of proviso to section 113 of Income Tax Act by Finance Act 2003 is prospective. In the present case, the block period ends on 06.09.2000 and therefore, surcharge cannot be levied in the present case. This ground is allowed.
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