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TMI Blog2006 (1) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... ial premises of the assessee situated at Mandi and Delhi on 16-8-1996 which commenced early in the morning. Later on, authorized officers of the Income-tax Department also joined the CBI with a warrant of authorization issued under section 132(1) apparently on the basis of information received from the CBI about the substantial cash found in the residential premises of the assessee and conducted the search and seizure operation under section 132. During the course of search conducted at the residence of the assessee at Mandi and Delhi by the CBI and Income-tax Department, substantial cash as well as other valuables were found besides some incriminating documents showing undisclosed investments/expenses made by the assessee. The cash found from Delhi residence of the assessee was seized by the Income-tax Department whereas the cash found at Mandi residence and initially seized by the CBI was subsequently requisitioned by the Income-tax Department on the next day under section 132A. Out of the incriminating documents found at the residential premises of the assessee, some of the documents were seized by the Income-tax Department whereas most of the documents were seized by the CBI. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income on initial deposits 14,900 (c) Orchard, Surath, Mandi 74,012 32,59,016 IV. Unexplained receipts/deposits/ investments recorded in seized Documents under section 69 48,86,40,368 V. Libel Suit Receipts and legal expenses 32,37,500 VI. Furniture fittings, etc. 25,00,000 VII. House Hold expenses 1,50,00,000 VIII. Foreign travel/Medical expenses 15,00,000 IX. Undisclosed investments/income in Dairy farm 15,00,000 Gross total income for the block period: 55,35,14,169 Less: Income already disclosed in the regular returns filed before the date of search 21,40,788 55,13,73,381 Aggrieved by the aforesaid order of the Assessing Officer passed under section 158BC, the assessee is in appeal before us. 3. In this appeal, as many as 24 grounds were originally raised by the assessee. However, the same having been found to be lengthy as well as of repetitive and argumentative nature, the learned counsel for the assessee has filed the revised grounds in the condensed form which are totally 15 in number. Out of these 15 grounds, ground Nos. 1 & 2 project the grievance of the assessee about the adequate opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll then. He also agreed that no dairy income was disclosed by him in the return of income filed till then. Despite specific opportunities, he also failed to give any details regarding the whereabouts of his employees whose names were stated to be appearing in the diary in abbreviated form to facilitate their identification as well as examination by the Assessing Officer. The Assessing Officer, therefore, did not accept the explanation of the assessee on the face of it and proceeded to examine and analyze the entries found recorded in the relevant seized diary on his own. 6. In his written reply dated 14-8-1997 filed before the Assessing Officer, it was stated by the assessee that the aforesaid diary as well as the other diaries found during the course of search are mere general scrap books used to make odd jottings concerning the orchard activities, petitions from people, information given by PA, briefings for meetings, lectures, etc., and the same did not contain reference to any financial activities. It was also stated by the assessee in the said letter that it would, therefore, not be possible for him to remember and explain the nature of these jottings or to connect them to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the amounts from the assessee as interest bearing loans as appearing in the seized diary against his name written in abbreviated form as 'CK', but also deposited with the CBI subsequently an amount of Rs. 1.05 crores out of the balance claimed to be payable by him to the assessee. Thus, a total addition of Rs. 14,15,23,698 was made by the Assessing Officer to the undisclosed income of the assessee on the basis of entries found recorded in the diary seized by the CBI and identified as document No. 02/M-159/96. 8. Similarly, the Assessing Officer also proceeded to analyse and examine the other documents seized by the CBI representing diaries/note pads and on such analysis/examination, he came to a conclusion that the name found mentioned in the abbreviated form in other diary as 'N', 'NAT', and 'NATA' was the name of Shri Mahender Nahata, Managing Director of M/s. Himachal Futuristic Ltd., a company which had executed telecom contracts worth several crores of rupees during the tenure of the assessee as Minister of Telecommunication. In his examination on oath recorded by the Assessing Officer, Shri Mahender Nahata, however, denied of having any con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of CBI. He invited our attention to a copy of the letter forwarded by the Director of CBI to the Revenue Secretary placed on record to support and substantiate his contention that the said documents were handed over by the Director of CBI to the Revenue Secretary who, in turn, handed over the same to the Income Tax Department without there being any requisition issued under section 132A. He contended that the said documents thus were neither found as a result of search conducted by the Income Tax Department under section 132(1) nor the same were requisitioned by the Income-tax Department under section 132A and therefore, no addition on the basis of the said documents could be made to the undisclosed income of the assessee for the block period as per the provisions of sub-section (1) of section 158BB. 10. The learned counsel for the assessee further submitted that only the cash of Rs. 2.45 crores was found and seized by the Income Tax Department from Delhi house of the assessee whereas only one bundle of twelve loose sheets was found and seized from the Mandi House. He pointed out that none of these twelve documents seized by the Income Tax Department during the search operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used as evidence for computing the undisclosed income of the assessee for the block period. He contended that even though this amendment has been made after the completion of assessment in the present case, the same having been made applicable with retrospective effect from 1-7-1995, can be applied to all the pending assessment proceedings. Relying on the decision of Hon'ble Gujarat High Court in the case of CIT v. Mayur Foundation [2005] 274 ITR 562, he submitted that the Tribunal can take note of such retrospective amendment while disposing off the appeal filed against the assessment order since the appellate proceedings are considered as extension of the assessment proceedings. He also placed reliance on the decision of Hon'ble Kerala High Court in the case of CIT v. M.C. Jacob [1993] 203 ITR 972 in support of this contention. He contended that as a result of this amendment, the Assessing Officer can take into consideration the post-search enquiries as well as result thereof for computing the undisclosed income of the assessee for the block period and since this amendment made with retrospective effect is declaratory in nature, the Tribunal can take note of the same sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole purpose of action under section 132(1) or of issue of authorization under section 132A is to unearth the undisclosed money and this very purpose should not be allowed to be defeated by adopting a strict and literal interpretation of the relevant provisions especially when the relevant evidence i.e. the diaries seized by the CBI was received by the Department Officially through the office of the Revenue Secretary. 14. In the rejoinder, the learned counsel for the assessee submitted that the procedure prescribed under Chapter XIV-B is specially for the purpose of assessing the undisclosed income as a result of search and seizure operation and if there is no seizure, search is meaningless and Chapter XIV cannot be invoked. He submitted that such search has to be by the Income Tax authorities and the operation of similar nature by any other authority is of no relevance. He submitted that no doubt the material gathered by the other authorities can also be used as evidence against the assessee provided the same is obtained by issuing requisition under section 132A. Referring to the provisions of section 158BB(1), he submitted that the same are substantive as well as procedura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer between the diaries and the cash found and in the absence of the same, it cannot be contended now by the learned DR that the diaries were relatable to the cash found and seized during the course of search. 16. The learned counsel for the assessee further submitted that Rule 112 of the Income Tax Rules lays down procedure for recovery of evidence/documents found during the course of search and keeping in view the said Rule as well as the provisions of section 132(13), panchnama cannot be ignored. He submitted that the panchnama, in fact, records the events occurred during the course of search operation and when a remark "nil" was clearly indicated against the entry in the said panchnama about the books of account, document etc. found and not seized, the same was sufficient to show that except the loose documents of twelve Nos. seized by the Income Tax Department, no other document was found or seized by them from the residential premises of the assessee during the course of their search under section 132. He pointed out that the jewellery found during the course of search from the residential premises of the assessee was seized by the CBI, but the same was speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 141, special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income which has been detected as a result of search and its scope and ambit is limited in that sense to materials unearthed during search. Explaining further, Hon'ble Delhi High Court has observed that assessment for block period can only be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer and relatable to the evidence found as a result of search. Hon'ble Delhi High Court further clarified that such evidence found as a result of search should be clearly relatable to section 132 or section 132A. 18. Having regard to the scope and ambit of block assessment under Chapter XIV-B as spelt out in the relevant provisions and further explained in the various judicial pronouncements including the decision of Hon'ble Delhi High Court in the case of Ravi Kant Jain, it would be pertinent to consider and decide as to whether the diaries in question can be considered as the evidence found as a result of search or requisition of books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iaries in question were very much lying in the premises of the assessee when the officials of the Income Tax Department commenced their operation under section 132 and therefore, the said diaries must have been found by them also going by the preponderance of probability. We, however, find it difficult to accept this contention of the learned DR because if the same is accepted, anything and everything which was lying at the premises searched under section 132 would be deemed to have been found during the course of search. In our opinion, there cannot be such a presumption because a search operation to find out the evidence is essentially a physical act and the same has to be performed specifically. There is no scope for assumptions and presumptions nor anything can be implied in the matter of ascertaining the findings of a search operation. Such findings cannot be ascertained on the basis of preponderance of probabilities especially when all the events occurring during the search operations are recorded in a document called as 'panchnama' and the results of search can very well be ascertained from the entries recorded in the panchnama. 23. The contention raised by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that only one bundle of loose papers containing twelve pages was found and seized by the department as per Annexure-A. It is important to note here that in the said panchnama, entries were made by the search team against the columns describing the evidence/material found but not seized. In this regard, Annexure-2 and Annexure-3 were prepared by them giving details of list of valuables including jewellery found during the course of search which had not been seized by them and a reference of these Annexures was made against the entry relating to other valuable articles or things found but not seized. However, against the entry relating to books of account and documents found but not seized, a remark 'NIL' was specifically given clearly indicating that there were no books of account or documents which had been found by the search team but not seized. Similarly, in the panchnama prepared at the Delhi residence of the assessee, 'NIL' entry was made against the column relating the books of account and documents found but not seized whereas in respect of other valuable articles or things found but not seized, a specific reference was made to Annexures 2 and 3 giving detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come which has a direct nexus with the search proceedings in the case of the assessee. It was further held by the Tribunal that there are two elements to be satisfied so as to be treated as undisclosed income for the purposes of Chapter XIV-B i.e., the factum of nondisclosure should be existing, and the said non-disclosure on the part of the assessee should have been blown out as a result of search or requisition of books etc. In the case of Essem Intra-Port Services (P.) Ltd. v. Asstt. CIT [2000] 72 ITD 228 (Hyd.), similar contention as raised by the DR before us was raised on behalf of the Revenue and it was held by the Hyderabad Bench of ITAT that even though "undisclosed income" is defined in an "inclusive" manner, the scope and extent of the term "undisclosed income" for the purposes of Chapter XIV-B is contingent upon the fact that the undisclosed income should borne out of material/evidence found as a result of search or requisition of books of account etc. Keeping in view the ratio of these judicial pronouncements, we find the arguments raised by the learned DR in this context to be devoid of any merits. 27. Another contention raised by the learned DR before us is on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forwarded by the CBI Director to the Revenue Secretary with a request that Income Tax, Enforcement Directorate and Customs may also C give helping hand in the investigation. The investigation so referred to was the investigation being done by the CBI and the help was sought from the concerned three Government departments including Income Tax as well as Enforcement Directorate and Customs. It is worthwhile to note here that there is nothing to show that there was any search by the Enforcement Directorate or the Customs authorities. However, still the photocopies of D the relevant diaries were sought to be made available to them to give helping hand to the CBI in their investigation which again goes to show that the photocopies of diaries forwarded by the CBI Director to the Revenue Secretary had nothing to do with the action of the Income Tax Department under section 132. On the other hand, it appears that the said copies would have been got by the Income Tax Department even otherwise in the normal course irrespective of their action under section 132. Another aspect which is relevant to take note of in this context is that the search and seizure operation was conducted by the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, it is observed that the loose sheets containing twelve pages only were seized by the Income Tax Department from the residential premises of the assessee at Mandi besides cash of Rs. 2.45 crores seized from Delhi house. Further, cash of Rs. 1.16 crores seized by the CBI from Mandi House of the assessee was subsequently requisitioned by the Department under section 132A. In addition to this seizure and requisition, some valuables such as jewellery, furniture items etc. were found but not seized by the Income Tax Department as mentioned in the panchnamas as well as annexures to the said panchnamas. As pointed out by the learned counsel for the assessee before us, the aforesaid loose sheets containing twelve pages seized by the Income Tax Department were not at all used as evidence for the computation of undisclosed income of the assessee and this position, which is also evident from the assessment order has not been disputed by the learned DR. Even no question in any way were relatable to the cash found during the course of search and the same, therefore, cannot be used as the basis for computing the undisclosed income of the assessee even going by the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete ignorance about the cash found from the residence of the assessee under lock and key which, in fact, was recovered only after breaking open the said locks. She, however, confirmed that nobody had come to the house after the assessee left on 4-8-1996 for USA/UK to deliver any cash. After his return from abroad, the assessee was arrested and put in Tihar Jail, New Delhi. In the room of Jail Superintendent, his statement was recorded on 9-10-1996wherein he stated that the cash found from his residence was not available when he and his wife left India for visit to USA and UK. However, in another statement recorded subsequently on 30-10-1996, 1-11-1996 and 4-11-1996, he retracted the statement given on9-10-1996stating that the same having been given by him in a perplexed state of mind should not be taken cognizance of. In the said statement, he admitted the possession of the cash found from his residence and stated that the same was belonging to Congress (I) Party. He, however, declined to give any more details submitting that he will reveal the same only before the Court of Law. During the course of assessment proceedings, the assessee again denied possession as well as ownership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, he contended that the said date i.e., 17-8-1996 dearly falls outside the block period ending on 16-8-1996 as taken by the Assessing Officer in his order under section 158BC and therefore, the addition on account of the said cash treating the same as unexplained could not be made in the impugned assessment since the date of requisition of the said cash i.e., 17-8-1996 was not covered in the block period. He also contended that all the additions including the addition on account of alleged unexplained cash have been made by the Assessing Officer in the block assessment without a specific reference to a particular assessment year and the additions so made are, therefore, not sustainable on this count also. 38. The learned counsel for the assessee also invited our attention to the provisions of sub-section (1) of section 158BB and submitted that the undisclosed income of the assessee for the block period is required to be computed on the basis of evidence found as a result of search or requisition of books of account or documents. In this regard, his contention was that only the books of account or documents requisitioned by the Department under section 132A are allowed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted as bribe or illegal gratification. He contended that if this allegation is to be accepted, the entire investment including cash representing income of the assessee from bribe or illegal gratification would be liable for confiscation leaving the assessee with no income from this source. He also contended that the Government has an overriding title over the assets of the assessee including cash found during the course of search if the same are held to be made out of bribe/illegal gratification and since the loss on account of such confiscation is deductible against the income from bribe, there will be no income left with the assessee which can be taxed as his undisclosed income in the block assessment. 40. The learned DR, on the other hand, submitted that a different stand was taken by the assessee in the matter of cash found from his residential premises situated at Mandi and New Delhi at different stages and the averments made by him in this regard, therefore, were not reliable as held by the Hon'ble Calcutta High Court in the case of Amal Kumar Chakraborty v. CIT [1994] 207 ITR 376. He submitted that as per one of such stands taken by the assessee, the said cash was s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laborately discussed. He also pointed out that the cash found during the course of search was stated to be belonging to the Congress (I) Party by the assessee only before the ADIT (Inv.) and no such stand taken by him before the Assessing Officer. He contended that the assessee thus was clearly failed to explain satisfactorily the cash found in his possession during the course of search and the addition made by the Assessing Officer treating the said cash as unexplained by invoking the provisions of section 69A read with section 132(4A) was fully justified. 42. As regards the contention of the learned counsel for the assessee that the cash found at the Mandi residence of the assessee having been requisitioned by the Income Tax Department from the CBI only on 17-8-1996, the same was outside the block period ending on 16-8-1996, he pointed out from the copy of warrant of requisition under section 132A as well as panchnama placed on record that although the cash was requisitioned by the Income Tax Department from the CBI on 17-8-1996, the same was found and seized by the CBI on 16-8-1996 itself from the residential house of the assessee. He contended that for the purpose of making ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the assessee to explain the source thereof. He submitted that the source of the said cash thus has been treated as unexplained and the addition is made under section 69A without any reference whatsoever to the allegations made by the CBI in their charge-sheet. His contention, therefore, was that the assessee cannot claim any deduction against the said addition made under section 69A and in any case, there being nothing brought on record by the assessee to show that the cash has been finally confiscated by the Government in the block period, no such deduction even otherwise could be allowed to the assessee. 44. In the rejoinder, the learned counsel for the assessee submitted that the block period having already been determined by the Assessing Officer, the same cannot be changed subsequently as contended by the learned DR. He also submitted that there was no other source of income in the hands of the assessee from which he could have earned the substantial cash found during the course of search and therefore, the only way by which the assessee could have amassed such wealth was bribe or illegal gratification. He contended that if the cash is held to be earned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no retraction of the said statement by the assessee. During the course of assessment proceedings, it was, however, pleaded by the assessee in the letter filed before the Assessing Officer that the cash in question was not found from his control and possession and the same being not owned by him, he could be called upon to explain the same nor the same could be added in his hands. This simple averment made by the assessee, however, was not sufficient to retract the statement made by him on oath successfully in the absence of any evidence to support and substantiate the same. Moreover, such averment made by the assessee was not reliable in view of the different stand taken by him at different stage as held by Hon'ble Calcutta High Court in the case of Amal Kumar Chakraborty. It is also pertinent to note here that the said statement was recorded on four different dates and that too after a lapse of sufficient time from the date of search followed by arrest of the assessee and there being nothing on record to show or even suggest/indicate that the said statement was recorded under coercion or pressure, it can reasonably be held that the cash in question found from his residence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the allegation levelled by the CBI against the assessee, as is apparent from their charge sheet, was about the disproportionate wealth amassed by him by corrupt and illegal means or by otherwise abusing his official position as a public servant. However, it is also true that the case of the Revenue against the assessee was never based on such allegation as is evident from the order of the Assessing Officer as well as the submissions made by the learned DR before us. As a matter of fact, addition in respect of the said cash was made by the Assessing Officer under section 69A treating the same as unexplained since there was a failure on the part of the assessee to explain the source thereof. In these circumstances, the plea put-forth by the learned counsel for the assessee for treating the said cash as the income of the assessee from bribe/illegal gratification and for allowing deduction on account of possible confiscation by the Government is far-fetched which cannot be accepted. The decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 supports this view wherein it was held that the value of unexplained gold seized from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case, the diversion is sought to be claimed by overriding title in respect of income stated to be earned from bribe/illegal gratification and since this source itself is illegal, the doctrine of diversion of the said income by an overriding title involving legal obligation cannot be applied at all. This is so because there cannot be such obligation on the recipient of such income to divert the same to any third party before it reaches his hands and the confiscation of the amount of such income will always be an event occurring after receipt of such income by the assessee and that too to the extent of availability at the relevant time subject to allegation of bribe/illegal gratification being proved in the Court of Law. The contention of the learned counsel for the assessee based on the rule of diversion of income by overriding title, therefore, cannot be accepted in the facts of the present case and even his claim for deduction on account of possible loss due to confiscation of the cash also cannot be accepted for the reasons discussed above. Moreover, Explanation to section 37(1) inserted by the Finance (No. 2) Act, 1998 with retrospective effect from1-4-1962completely debars a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts this view whereby any money found in, the possession or control of any person in the course of a search is presumed to belong to such person and if the assessee fails to rebut the said presumption satisfactorily and successfully, he is treated as owner of such cash and such ownership relates back to the date when the said cash was found in his possession or control. 51. The learned counsel for the assessee has also contended before us that the cash found from the Mandi house of the assessee was seized by the CBI and not by the Income Tax Department. He has submitted that the cash so seized was subsequently requisitioned by the Income Tax Department under section 132A which was not permissible going by the provisions contained in sub-section (1) of section 158BB which specifically provide that only the evidence found as a result of search conducted by the Income Tax Department or requisition of books of account or other documents would alone be the basis of computing the undisclosed income of the assessee for the block period along with such other material or information as are available with the Assessing Officer and relatable to such evidence. He has contended that the cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner], in consequence of information in his possession, has reason to believe that- (a) ................ (b) ................ (c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, the [Director General or Director] or the [Chief Commissioner or Commissioner] may authorise any [Joint Director], [Joint Commissioner], [Assistant Director [or Deputy Director], [Assistant Commissioner [or Deputy Commissioner] or Income-tax Officer] (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer)to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee under Chapter XIV-B for the block period and the contention of the learned counsel for the assessee in this regard relying on the omission to specifically mention such assets as evidence to form the basis of computing the undisclosed income in section 158BB(1) is untenable and cannot be accepted. 55. This leaves us with only one aspect of this issue relating to the addition made on account of cash found during the course of search under section 69A and that is whether the addition so made by the Assessing Officer was justified on merits or not. As already observed, the cash was found from the residential premises of the assessee situated at New Delhi, and Mandi during the course of search. The possession of the said cash although was denied by the assessee initially, he accepted the same subsequently in his statement recorded on oath and as already held by us, nothing was brought on record by the assessee either before the Assessing Officer or even before us to retract his statement made on this issue successfully and satisfactorily. The said cash thus was found in the control and possession of the assessee during the course of search and the presumption under section 132(4A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer in his order, even the books of account of the Congress (I) Party were verified by the ADIT(Inv.) which revealed that no corresponding entries in respect of cash found in the possession of the assessee were appearing therein. It is thus clear that no satisfactory explanation in respect of cash found in his control and possession during the course could be offered by the assessee and there was a clear failure on his part to discharge the onus lay on him under section 132(4A) read with section 69A. 57. In the case of Churamal, it was held by the Hon'ble Supreme Court that the possession of the wrist-watches having been indubitably found with the assessee, the onus was on him to prove on evidence that he was not the owner of the said wrist-watches and having failed to discharge the same, the investment made in the said wrist-watches was rightly treated as his income under section 69A. In the case of K.T.M.S. Mohamood, Hon'ble Madras High Court has held that the burden to prove that the cash found in his possession does not belong to his lies on the assessee and if he fails to discharge the same, it can reasonably be presumed that the same belongs to him and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panying evidences. Further vide this office letter dated 19-8-1997 attention of the assessee was drawn to the amount of withdrawals shown based on estimates and guess work. Again a reply was filed on 21-8-1997 in which it was explained that household withdrawals declared are not based on guess work but still assessee failed to file any evidence in support of the same. For e.g. Assessee failed to show as to the drawings declared are out of withdrawals from which bank account and what expenses have been incurred. The assessee in his annual statement of affairs has declared nominal withdrawals per annum and without correlating them as to when and how they have been withdrawn and from where they have been withdrawn. In the absence of these details it is imperative to make an estimate of withdrawals. Keeping in view the lavish style of living enjoyed by the assessee family and also on the basis of list of valuables (which includes a number of colour T.V.s, V.C.R., Music systems, A.C.s and other costly wares) found but not seized during the course of search at Mandi and Delhi and various seized documents namely M161/96 and M158/96 (copies of few pages of these documents have been shown a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. In his statement recorded before ADIT (Inv.) Shri Sukh Ram admitted a number of times that dairy activity is run by him since 1960 and income therefrom has not been disclosed to the Income Tax Department before the date of search. He also admitted having 30 to 35 Jersy/Holstein Cows at his dairy farm for which even a declaration has been filed in the P.M.O. by the assessee in 1987-88 and 1988-89 acknowledging at that time about having 25 Jersy/Holstein Cows. In view of the above, the stand taken by the assessee is not accepted since no evidence in support of the same has been furnished and in view of the statement recorded on oath of the assessee for which no cogent reason has been given to disbelieve the same hence I estimate the income and investments on this activities at Rs. 15 lakhs for the block period as undisclosed income." 61. As is evident from the aforesaid observations recorded by the Assessing Officer in support/justification of the four additions made on estimated basis, all these additions were made by him mainly on the basis of post-search enquiries and the same were not based on any evidence found as a result of search or the requisition of books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings under Chapter XIV-B, he has no power to make estimation of income de hors the evidence found as a result of search. It was also held by the Hon'ble Rajasthan High court that the block assessment under section 158BC is to be framed in the light of material that comes to the possession of the assessing authority during the course of search. To the similar effect is the decision of Hon'ble Calcutta High Court in the case of CIT v. Ashim Krishna Mondal [2004] 270 ITR 160 wherein the order of the Tribunal deleting the addition by the Assessing Officer on estimated basis without there being any material to arrive at the figures of purchase and consumption was upheld by their Lordships observing that such estimation is not permissible in the block assessment. In the case of Radhey Shyam Tanwar v. Asstt. CIT [2002] 77 TTJ (Jodh.) 505, the Jodhpur bench of ITAT has held that section 69 casts heavy burden on the Revenue to establish that the assessee has actually made the alleged unexplained investment and in the absence of any incriminating documents found during the course of search showing the factum of such investment, neither the estimation of quantum nor the addition there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 27.64 lakhs (excluding interest on loan) was g made in the property being D-42, Kaushambi, Ghaziabad, out of which, a sum of Rs. 10 lakhs was contributed by his wife Smt. Ram Devi. The investment claimed to be made by his wife Smt. Ram Devi to the extent of Rs. 10 lakhs was not considered by the Assessing Officer in the assessee's hands. However, his explanation about having invested a sum of Rs. 17.64 lakhs in the said property was not accepted by the Assessing Officer in the absence of satisfactory evidence to support and substantiate the same. He, therefore, added the said amount to the income of the assessee being unexplained investment made in the property. In the document No. M-161/96 representing diary, disbursements made by Smt. Ram Devi on behalf of the assessee for construction of the said property were found to be recorded by the Assessing Officer to the tune of Rs. 39.90 lakhs. Relying on these entries found recorded in the relevant diary as well as the valuation made by the Engineering Wing of the CBI, the Assessing Officer held the total investment made by the assessee in the said property to be Rs. 39.90 lakhs and the difference between the said value and the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as already held by us in the preceding paragraphs of this order, the said diary seized by the CBI from the residence of the assessee could not be considered as evidence found as a result of search conducted under section 132. It, therefore, follows that there was no evidence found as a result of search under section 132 or requisition made under section 132A on the basis of which, the additions in question on account of unexplained investment in the immovable properties were made by Assessing Officer. The said additions thus were made merely on the basis of post-search enquiries without there being any evidence found as a result of g search and this being so, we hold that the additions made by the Assessing Officer on this count were clearly outside the scope of block assessment. The same, therefore, are deleted allowing ground No. 9 of the assessee's appeal. 68. In ground No. 10, the assessee has challenged the addition of Rs. 27,37,500 and Rs. 5,00,000 made by the Assessing Officer on account of award in defamation suit received by the assessee in UK and the estimated expenditure incurred on the said suit respectively. 69. In his return of income filed for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions contained in Chapter XIV-B makes it crystal clear that the Legislature thought it fit to make a distinction between the block assessment and the regular assessment and the Assessing Officer, therefore, was wrong in holding that the sum featured in the regular books of account can be taxed in the block assessment. It was also observed by the Hon'ble Calcutta High Court that the Assessing Officer while dealing with the regular assessment is free to examine the veracity of the return as well as the claims made by the assessee with regard to exemption and/or deduction. In the case of Essem Intra-port Services (P.) Ltd., Hyderabad Bench of ITAT has held that the true nature of undisclosed income, as it is construed in Chapter XIV-B, is that the assessee has not or would not have disclosed to the department and such income should be found out by the department as a result of search or requisition of books of account etc. The Tribunal also held that the factum of non-disclosure on the part of the assessee should, therefore, be existing and such nondisclosure should have been blown out as a result of search or requisition of books etc. In the present case, both these conditions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turns of income filed before the search by way of declaring the interest received on the said saving bank accounts. He has also filed a statement showing the details of such declaration and a perusal of the same clearly shows that all the seven bank accounts were duly disclosed by the assessee in his returns of income filed regularly before the date of search by declaring interest earned on the said accounts mentioning specifically the details of account number, name of the bank as well as branch. As already discussed in the earlier part of this order relying, inter alia, on the decision of Hon'ble Calcutta High Court in the case of Bhagwati Prasad Kedia, the block assessment under Chapter XIV-B is in addition to the regular assessment and the Assessing Officer is not entitled to question or examine the transactions disclosed in the regular return during the course of block assessment proceedings since the same are the subject-matter of the regular assessment. In the present case, all the seven bank accounts were duly disclosed by the assessee in his returns of income filed regularly and this being the admitted position, the addition on account of unexplained cash credits, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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