9911796707
TMI Blog1998 (11) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... o a notice issued under s. 158BC. The AO completed the assessment determining the total undisclosed income of the block period at Rs. 13,96,100. The additions have been made for the asst. yrs. 1994-95 to 1997-98 mainly as credits, disallowance under s. 40A(3) of the IT Act and also estimated disallowance of commission payments. There is also addition of Rs. 10,000 as disallowance of motor car expenses, treating the same as undisclosed income for the asst. yr. 1994-95, even though the disallowance had been made earlier in the regular assessment completed on 4th March, 1997 under s. 143(3) of the IT Act. The addition as undisclosed income of the block period on account of unproved cash credits, was to the extent of Rs. 3,72,000 as under: &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the AO was in a hurry to complete the assessment before the time-barring date. Shri Krishnan pointed out that the AO first issued a letter to the assessee on 15th May, 1997, to explain the source of the credits and to furnish clarification on various matters and that the assessee gave the reply on 28th May, 1997, and again another letter on 13th June, 1997, giving clarification on all the points. The paper book filed before us by the learned representative contains copies of these letters. The assessment was completed on 23rd June, 1997, after getting the approval of the CIT, Central, Madras on 20th June, 1997. The learned representative submitted that the AO must have sent the draft assessment order and the file to the CIT, Central, Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment under s. 158BC. There was the further submission that the disallowance of Rs. 26,045 out of the advertisement expenses had been made without calling for any evidence. His argument was that in short, it was not a proper assessment of the undisclosed income in exercise of the powers under s. 158BC. 5. We have given due consideration to the submissions on both sides and gone through the documents furnished by the assessee's representative in the paper book. At the outset, it appears that the AO has made the assessment in a hurry as the order was to be passed before 30th June, 1997, after getting approval of the CIT, Central, Madras. The AO took up the case for hearing and issued a detailed letter to the assessee on 15th May, 1997, ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to furnish any evidence. He raised a strong plea before us that no clarification was sought from the assessee regarding the purpose for which the expenses had been incurred. In the paper book filed before us the assessee has included copies of the bills from various parties in support of the advertisement expenses, but then, we are of the view that it is for the AO to make proper verification and for the assessee to prove that the entire expenses had been incurred for the purpose of the business The matter should, therefore, go back to the AO for consideration of the entire matter afresh. 7. Though on the whole the assessment is to be redone in a proper manner, we would like to make certain observations about the computation of the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made in a block assessment, as in that case the assessee would be burdened with a higher rate of tax. As the procedure for assessment of the undisclosed income of the block period appears in a separate self-contained code, that assessment should be made strictly in accordance with the provisions in Chapter XIV-B. The addition on this account cannot be, therefore, sustained. The same observation is applicable in respect of the estimated disallowance out of the commission payment.
8. In the above circumstances, we set aside this assessment with the direction to the AO to make a proper assessment of the undisclosed income of the block period after giving the assessee a further opportunity of being heard. X X X X Extracts X X X X X X X X Extracts X X X X
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