TMI Blog2005 (3) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of search, the assessee affirmed that he received the deposits. A notice under s. 158BD was issued to assessee on 26th Sept., 2000. Block return was filed disclosing 'nil' undisclosed income. The AO during the course of block assessment proceedings asked the assessee to furnish confirmation letters and also to produce all the creditors. The AO did not accept any of the credits as genuine and the entire credits outstanding amounting to Rs. 15,27,660 was treated as unproved and added as undisclosed income of the assessee. 3. The assessee went in appeal before the CIT(A) challenging the assessment on legality that the loan creditors were duly disclosed in trial-balance submitted along with the regular return filed by the assessee and therefore the AO did not have any jurisdiction to make the addition under block assessment under Chapter XIV-B of the IT Act. 4. The CIT(A) did not agree with this contention of the assessee, The assessee has also challenged the addition on merit, and on merit the CIT(A) allowed a relief of Rs 8,01,938 to the assessee and confirmed the balance of the addition. 5. Before us, the learned Authorised Representative submitted that there are thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Bhagwati Prasad Kedia vs. CIT (2001) 167 CTR (Cal) 336 : (2001) 248 ITR 562 (Cal) has held that the AO was not entitled to question loan transaction, which is subject-matter of regular assessment. The AO was wrong in holding that the said sum could be taxed in the block assessment although the same featured in the regular books of accounts. The Hon'ble Delhi High Court in the case of CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del) has held that block assessment is not a substitute for regular assessment. Assessment of block assessment can only be done on the basis of evidence found as a result of search. The Hon'ble Madhya Pradesh High Court in the case of CIT vs. GOM Industries Ltd. (2002) 176 CTR (MP) 527 : (2002) 257 ITR 78 (MP) (head note) amount shown in balance sheet and transaction recorded in books-Finding that there was no concealment of income within the meaning of s. 158B(b)-No substantial question of law-Amount not assessable as income from undisclosed sources. The Hon'ble Mumbai High Court in the case of CIT vs. Shamlal Balaram Gurbani (2001) 168 CTR (Bom) 506 : (2001) 249 ITR 501 (Bom) (head note) income disclosed in the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 held that cash credits recorded in the books of account and accepted by the Department in respective years, in the absence of any incriminating material found during search, could not be made the subject-matter of block assessment. The Delhi 'D' Bench of Tribunal in the case of General Exporter vs. Asstt. CIT (2000) 67 TTJ (Del) 119 (head note). No specific documents produced by Revenue to show that income assessed was a direct result of documents recovered during search-Queries raised in respect of documents replied by the assessee and same not made basis of assessment-Assessee already filed return disclosing income from exports supported by various documents-No further material discovered-There was thus no justification for addition of income from undisclosed sources. The Chandigarh 'A' Bench of the Tribunal in the case of Shanti Rani vs. Asstt. CIT (2003) 126 Taxman 62 (Chd)(Mag) to which Hon'ble AM was the author has held that Chapter XIV - B is separate code to bring to tax only undisclosed income and no income or source thereof which had been disclosed in regular return can be brought under this chapter-Undisclosed income will include only that asset or income which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless some direct evidence comes to the knowledge of Department as a result of search which indicates clearly of undisclosed income. 8. The learned Authorised Representative, further contended relying on the decision of Bangalore Bench of Tribunal in the case of Y. Subba Raju Co. Ors. vs. Asstt. CIT (2004) 85 TTJ (Bang)(SB) 670 : (2004) 270 ITR 174 (Bang)(SB)(AT) that there was no material with the AO for sending satisfying note for taking action under s. 158BD. No undisclosed income was found during the course of search at the residence of the assessee's father. Even no document or material, which may prove that the assessee has undisclosed income, was found during the search, Satisfaction should precede the investigation and not that the investigation should be preceded by the satisfaction, Reliance was also placed to the case of Amity Hotels (P) Ltd. vs. CIT Ors, (2004) 192 CTR (Del) 607 : (2005) 272 ITR 75 (Del). In the absence of the material to form the prima facie belief, the notice issued under s. 158BD was void. The notice under s. 158BD was issued in a routine mechanical manner. Hence, the assessment framed in consequence of a invalid notice must be quashed. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck assessment under Chapter XIV-B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to material unearthed during search. Therefore if the search action does not disclose undisclosed income, the question of any assessment being framed under that chapter is simply improper and outside the purview of that chapter. Clause (b) of s. 158B contains inclusive definition of undisclosed income and reads as under: "(b) 'Undisclosed income' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable articles, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act (or any expense, deduction or allowance claimed under this Act which is found to be false)." 13. If we analyse the aforesaid definition, it provides that undisclosed income includes: (i) Any money, bullion, jewellery or other valuable article or thing or, (ii) Any income based on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Courts and the Benches of the Tribunal as is apparent from the decisions relied on by learned Authorised Representative and produced hereinabove. No contrary decisions were brought to our knowledge by the learned Departmental Representative. A perusal of the assessment order in the impugned case clearly shows that what has been assessed in the block assessment are the cash credits, which were already disclosed by the assessee in the trial balance filed along with the income-tax return filed for the asst. yr. 1996-97. Therefore, in our opinion, these credits cannot be regarded to be the undisclosed income of the assessee within the definition of the undisclosed income given under s. 158B(b) of the IT Act Chapter XIV-B. No other income has been brought on record as may be detected or found during the course of the search. We, therefore, hold that the block assessment framed on the assessee is invalid and without jurisdiction and therefore the block assessment is annulled. We do not debar the AO to take the action under the regular assessment proceedings and the AO may take the action against the assessee for this income in the regular assessment proceedings in accordance with law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed because the very foundation for the assumption of jurisdiction becomes non-existent. Although the judicial authorities are not entitled to go into the sufficiency of the reasons, the existence of the reasons for satisfaction can always be gone into by the judicial authorities. In the instant case, there was no iota of material to show that there was undisclosed income. When such was the case, the satisfaction that the undisclosed income belonged to such other person was wanting. When that was the case, the entire proceedings framed with the issuance of notice under s. 158BD would have to go. In other words, if the basis of notice is not there, the notice itself is wrongly issued and making further assessment on such other person would be wholly outside the purview of the scheme. Thus, issuance of notice by itself is not the display or record of satisfaction which is the basic requirement under s. 158BD (Paras 7.1, 7.2 and 9). In the light of the foregoing discussion, the issuance of notice under s. 158BD was not justified in the instant case. It was not justified merely on the ground that there was no material at all indicating any undisclosed income. The Revenue had fairly ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental Representative did point out that there was material on record seized during the course of the search relating to the finance business of the assessee for arriving at the satisfaction of the AO issuing notice under s. 158BD. This fact has not been denied by learned Authorised Representative that the material relating to the finance business of the assessee was seized during the course of the search at the place of the assessee's father. In view of the this fact, we are of the opinion that there was material to form the prima facie belief for the issue of the notice under s. 158BD and this Court cannot examine the sufficiency of the material. The recording of the satisfaction is not necessary by the AO as has been held by the Special Bench relied on by both the parties. The case of Hon'ble Delhi High Court in the case of Amity Hotel (P) Ltd. will also not assist the assessee as in this case seizure of the material relating to the finance business of the assessee was not denied even by the learned Authorised Representative. We are, therefore, of the view that the power under s. 158BD has not been exercised in a mechanical manner but there are material seized during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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