TMI Blog1999 (8) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1994-95 and the other excess of income as per seized books over the income returned by the company as per its books of account relevant for the assessment year 1995-96. Thus there are two grounds of appeal raised, which are reproduced below :--- "1. That on the facts and in the circumstances of the case, the learned Assessing Officer has erred in disallowing commission paid Rs. 15,47,492.00 under section 37(1) of the Income-tax Act in an assessment under section 158BC of Income-tax Act. 2. That on the facts and in the circumstances of the case, the learned Assessing Officer has erred in making addition of Rs. 6,22,400.00 on account of difference in the figures of income as per seized books of account and audited books of account." 3. Ground one relates to the addition of Rs. 15,47,492 which is the commission paid by the assessee to one Ashahi Construction and Housing Finance Company Ltd. The assessee entered into an agreement with Ashahi Construction and Housing Finance Co. Ltd. This agreement was executed on 25-3-1993 under the terms of which the said construction company was appointed as agent. The duty of the agent under the agreement was to canvass an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order. 6. We have considered the rival submissions of the parties and perused the materials available on record as well as the decisions relied on. We have no indecision or uncertainty in our mind in repelling the argument of the ld. departmental representative that but for the search, the agreement dated 25-3-1993 would not have been unearthed. The return for the assessment year 1994-95 was filed on 30-11-1994 wherein the commission was claimed as a deduction as per agreement. That was long before the search on 3-8-1995 in question. The existence of the agreement was therefore embedded in the computation of income. it is not the case that the agreement is a secret document and commission was paid outside the books of account. In fact, part of the commission to the extent of Rs. 10 lakhs was actually paid on 26-7-1975 by D.D. and that has been recorded in the books. The Assessing Officer himself has not taken such a plea, which the ld. departmental representative has taken. The Assessing Officer has disallowed it only on the ground of its inadmissibility under section 37(1) and not otherwise. Therefore, we cannot allow the ld. departmental representative to set up a new argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Bench of the Tribunal observed as under at pages 433-434 :--- "We have considered the arguments of both the sides. In the present appeal, we are considering the assessment of block period as per Chapter XIV-B of the I.T. Act. We have already discussed while deciding ground No. 8 and 9 of the assessee's appeal. In our opinion, under Chapter XIV-B, the assessment of undisclosed income found as a result of search is to be made and any other addition/disallowance which is not covered by such undisclosed income found as a result of search is out of the purview of the Chapter XIV-B. The expenditure incurred on a foreign travel of the assessee was duly mentioned in the books of account. The only dispute is whether the expenditure was incurred for the purpose of business or not. In our opinion, this point has to be examined in a regular assessment and not in the assessment of block period under Chapter XIV-B. Accordingly we delete the addition of Rs. 24,920." 10. In the case in Microland Ltd.'s case, the Bangalore Bench of the Tribunal held at page 490 as under :--- "It will not therefore be possible to say that the income that has been considered in the impugned assessment has got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decisions of the Tribunal, we are of the opinion that the issue in controversy is squarely covered in favour of the assessee. Respectfully following the ratio of the said decisions of the Tribunal, we hold that commission paid has nothing to do with any undisclosed income. As a matter of fact, the search did not reveal any undisclosed income and no incriminating materials were seized from which any undisclosed income could be determined. All that have been seized are books of account and other documents kept in the normal course of conduct of the business. Accordingly, the addition of Rs. 15,47,492 is deleted as it did not represent any undisclosed income. 12. The next ground is in respect of the addition of Rs. 6,22,400. The Assessing Officer found that the net profit as per the seized books is Rs. 43,22,184.84 and the net profit as per audited accounts is Rs. 36,99,782.46. The Assessing Officer after considering the explanation of the assessee in regard to the difference held that provisions of section 158BB are quite specific in the computation of the undisclosed income for the block period and the said income had to be computed on the basis of evidence found as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of the total income of the previous years falling within the block period computed in accordance with the provisions of Chapter IV, 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 Assessing Officer, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate or the losses of such previous years determined --- (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years." "158BA (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to such income are recorded on or before the date of search in the books of account or other documents maintained in the normal course, then the said income shall not be included in the block period. Therefore, the income determined by the Assessing Officer on the basis of the seized books and other documents should not have formed part of the undisclosed income of the block period at all. In either way the income for the assessment year 1995-96, which is part of the block period is nil because on the basis of the Assessing Officer's own computation of Rs. 43,22,184.84 the said income has either to be altogether excluded under section 158BA(3) before computation begins under section 158BB or if it is included under the main sub-section (1) of section 158BB, then it has to be reduced under clause (a) of the same sub-secticn. For the assessment year 1995-96 there is only one computation permitted by law. If the Assessing Officer's computation is correct, then that income has to be excluded or deducted and he has no choice of deduction of any other income either under sub-section (3) of 158BA or under clause (d) of sub-section (1) of section 158BB because there is no element of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivisible part of the computation of income, profit and gains from business and they cannot be divorced merely on account of the intervention of search before the due date of filing of the return. A search by itself does not deprive an assessee the benefit of law to which he is otherwise entitled to. Even in the computation of income for the block period these provisions of Chapter IV covering sections 14 to 56 have necessarily to be applied in terms of sub-section (1) of Section 158BB and, therefore, these adjustments were permissible for determining the income and hence it was wrong on the part of the Assessing Officer to have worked out the income of Rs. 43,22,184.84 without the statutory deductions and additions. The income for assessment year 1995-96 is, therefore, Rs. 36,99,782.46 as per the audited accounts. This amount of Rs. 6,22,400, which arises and results out of the net and final adjustments of additions of income and deductions of expenditure, where neither the income nor the expenditure is unrecorded, is not an undisclosed income in any sense of that words. The addition of Rs. 6,22,400 is unwarranted and deserves to be cancelled. The addition made on this count is acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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