TMI Blog2006 (2) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... sment under Chapter XIV-B is different from the normal assessment, Therefore, the AO in the present case has framed the assessment while computing the undisclosed income for AY 1992-93 to 1998-99 without any material in possession and purely on conjectures and surmises. Hence the learned CIT(A) has rightly deleted the addition of Rs. 1,20,000. Thus, ground No. 1 of the Revenue is dismissed. Deletion of surcharge u/s 113 - The counsel for the assessee has argued that the search in the present case was carried on 7th April, 2000, i.e., prior to 1st June, 2002. Finance Act, 2002 had brought an amendment in s. 113 and surcharge was levied on block assessment from prospective effect and not from retrospective effect which further clarifies the intention of law-makers that surcharge has been levied w.e.f. 1st June, 2002 and prior to this there was no surcharge. We are convinced with the arguments of counsel for the assessee and the decisions cited by him and are of the view that the search in the present case was carried on 7th April, 2000 and amendment in s. 113 came into effect from 1st June, 2002 which is from the prospective effect. Thus, we are of the view that the amendment in s. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sunil Co. is his wife Smt. Radha Rani and he is managing the affairs and accounts of the shop. The AO vide para 2 of his order observed as under: 2.1 During the course of assessment proceedings it was stated that the assessee is a wholesale commission agent in the Fruit and Vegetable Market at Subzi Mandi, Kota. It was stated that the firm is receiving goods from different parties to be sold in the mandi on behalf of the sender of the goods. 2.2 It has been stated that all sales have not been recorded in the regular books of account. An effort was made to reconcile the figures of the seized material with that of the sales. It reveals that some of the items are not appearing in the books of account. As per Annex. A-l06 reveals that some sales have been entered by the assessee but whereas remaining sales have not been recorded in the regular books of account. Similarly, as per Annex. A-72, items appearing at pp. 48, 42, 38, 28, 21 and 1, p. 6 are also not appearing in the regular books of account, some items appearing in the annexure have not been found recorded in the regular books of account. The assessee's firm is a sister-concern of M/s Gulshan Kumar Satish Kumar. While fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails to do his duty, he cannot be allowed to call upon the assessing authority to prove conclusively what turnover he had suppressed. 2.5 This finding is based on the evidences gathered during the course of search operation. In this group heavy investment have been detected in IVPs/KVPs/MIS etc., in the name of the family members which have not been disclosed in regular books of account and which were admitted as undisclosed income by the family members. On the basis of the above, the undisclosed income for the block period is estimated at Rs. 1,60,000 which is added as undisclosed income. 2.6 On the basis of the seized records I estimate a commission income, which would have been avoided by the assessee, of Rs. 20,000 p.a. Since the assessee is doing the business for the last eight years only, it is presumed that Rs. 1,60,000, i.e., (Rs. 20,000 8), has been avoided by the assessee which is added as the undisclosed income of the assessee for the block period, on the basis of the above referred seized material. 3. After considering the submission and decisions of various Courts cited by learned counsel for the assessee, the learned CIT(A) deleted the additions of Rs. 1,20,000 being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of quantum of income comprising in the various annexures and seized papers as discussed in the assessment order, I am of the opinion that the AO was justified in computing undisclosed income which is Rs. 40,000 for the 2 years, the same is therefore, confirmed. 4. We have heard the parties. The assessee is carrying on the business of M/s Sunil Vegetable Co. since 1st April, 1992 and regular returns of income of the assessee have been filed since then. During the course of search as per Annexs. A-106 and A-72, AO made an observation that some sales have been entered by the assessee whereas remaining sales have not been recorded in regular books of account. The paper seized during the course of search were for financial years ending 31st March, 1999 and 31st March, 2000 i.e., for two years only. The earlier papers were not seized and the AO made the opinion that the assessee used to destroy the papers on a regular course of interval and, therefore, the papers relating to sales outside the books relating to earlier than 2 years as mentioned above, have been destroyed by the assessee. Only 10 to 20 papers were seized for earlier years. But whether those papers relate to assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000 per annum which is Rs. 40,000. No basis for such estimations have been given by the AO in his order vide paras 2.1 to 2.7. The AO was in possession of 10 to 20 papers of earlier years. Whether these papers belonged to assessee's firm or two other firms of the family which were also searched at the same premises, on the same day, no findings have been given by the AO as regards these papers. Since the AO had given his findings as regards Annexs. A-106 and A-72 that some sales have been found entered in regular books of account and whereas some items have not been found in regular books. On the other hand, the AO was of the view vide para 2.3 of his order that no papers for earlier years i.e., for six years, earlier than two years i.e., asst. yrs. 1999-2000 and 2000-01, as mentioned above, has been found and the assessee, in the view of AO must have destroyed those papers for earlier years (refer para 2.2 of AO's order). Therefore, the AO does not have any material before him from where he could arrive at the conclusion that the assessee was carrying on the business in the earlier years than asst. yr. 19992000, which was not recorded in the regular books of account. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the only material available the diary which contains entries for a particular- period relating to sale of liquor not disclosed to the Department. There is no indication anywhere in the seized records to show that even in respect of the other periods the assessee was maintaining such a diary which was for some reason or the other not found in the course of the search. On the facts and circumstances of the case, the suppression of sale has to be limited to the period from 28th Sept., 1988 to 25th Aug., 1989 on the basis of entries of the suppressed sales in the diary found during the course of search which related to the period from 28th Sept., 1998 to 25th Sept., 1999. 2. Dr. R.M.L. Malhotra vs. Asstt. CIT (1999) 64 TTJ (All) 259 where it has been held: One should not forget that it is a search case in which a search party is supposed and expected to find out all the incriminating documents, material as also undisclosed assets. A search assessment, much less a block assessment, therefore, stands on a footing different than a normal assessment much less an assessment based on the best judgment of an AO. During search, firstly, no other diary or other record comparable to the notebook ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Asstt. CIT 22 Tax World 494 (Jp); 11. Sunder Agencies vs. Dy. CIT (1997) 59 TTJ (Mumbai) 610. 8. The decision relied upon by the AO in the case of CST vs. H.M. Esufali H.M. Abdulali 1973 CTR (SC) 317 : (1973) 90 ITR 271 (SC) has been distinguished in the case of Dr. R.M.L. Malhotra vs. Asstt. CIT that the decision by the, Hon'ble apex Court was with regard to sales-tax and Central sales-tax and the assessment was a normal assessment and best judgment assessment under the State Sales-tax Act and Central Sales-tax Act which is quite different from the search assessment under Chapter XIV-B, in the present case. Therefore the decision of the Hon'ble apex Court, in our opinion, is not applicable in the present case. 9. The assessee (sic-AO) vide para 2.5 of his order has tried to strengthen his presumptions of estimating the income that heavy investments have been detected in IVPs/KVPs/MIS etc. in the name of family members which have not been disclosed in the regular books of account and which have been admitted as undisclosed income by the family members. 10. In this regard, though the AO is not specific about the investments as mentioned above but at the same time, if we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch where it has been held that the surcharge on block assessment is not leviable on searches carried prior to 1st June, 2002 as under: 1. Kapil Sharma vs. Asstt. CIT 32 Tax World 106 (Jp). 2. Radhey Shyam Khandelwal vs. Asstt. CIT and vice versa in 32 Tax World 44 (Jp) 3. Om Prakash Sharma vs. Dy. CIT (2004) 83 TTJ (Jp) 246 13. We are convinced with the arguments of counsel for the assessee and the decisions cited by him and are of the view that the search in the present case was carried on 7th April, 2000 and amendment in s. 113 came into effect from 1st June, 2002 which is from the prospective effect. We rely upon the above decisions cited by learned counsel for the assessee that there cannot be any surcharge on assessee on whom searches have been carried out before 1st June, 2002. We also rely upon the decision in the case of K.M. Sharma vs. ITO (2002) 174 CTR (SC) 210 : (2002) 254 ITR 772 (SC) where it has been held as under: A taxing provision imposing liability is governed by the normal presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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