TMI Blog2010 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... e audit report prepared under Section 142(2A) of the said Act that the addition appears to have been made by the Assessing Officer. – held that - Clearly, Section 69C refers to the “source of the expenditure” and not to the expenditure itself. Consequently, the Assessing Officer was clearly wrong in treating the said expenditure as unexplained expenditure under Section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition - No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable to find any material at the time of search, that the authenticity of the expenditures were doubted. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the judgment should be reported in Digest? BADAR DURREZ AHMED, J (ORAL) 1. The order dated 08.02.2008 passed by the Income-tax Appellate Tribunal in IT(SS) 349/Del/2004 pertaining to the block period 01.04.1990 to 17.10.2000 is the subject matter of the present appeal preferred by the revenue. The revenue has proposed the following questions, which, according to it, are substantial questions of law and require the consideration of this court:- "a) Whether in the facts and circumstances of the case, the Income-tax Appellate Tribunal erred in deleting the additions of Rs 44,38,997/- in spite of admission of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und indicating that the assessee had any undisclosed income. However, the Assessing Officer had directed the assessee to get its accounts audited as per the provisions of Section 142(2A) of the said Act. It is on the basis of the audit report prepared under Section 142(2A) of the said Act that the addition appears to have been made by the Assessing Officer. 4. The case before us has two dimensions. The first being as to whether the Assessing Officer was right in treating the said sum of Rs 44,38,997/- as unexplained expenditure under Section 69C of the said Act. The second aspect is whether the said addition could legitimately have been made in the course of a block assessment. 5. Insofar as the first aspect of the matter is concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the "source of the expenditure" and not to the expenditure itself. Consequently, the Assessing Officer was clearly wrong in treating the said expenditure as unexplained expenditure under Section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition. 7. Coming to the second aspect of the matter, we find that both the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal have held that the addition in a block assessment can only be made on the basis of the material found during the search. No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. There was no material found during search to show that liability was either bogus or had ceased to exist. The addition made in the block assessment is therefore, not justified. The order of CIT(A) deleting the addition is upheld." One part deals with the question of extinguishment of the liability because the period of limitation had expired. The second part deals with the aspect that in the case of block assessment, the undisclosed income can be determined only on the basis of the material found during the search. Inasmuch as no material was found during the search to show that the liability was either bogus or had ceased to exist, the addition could not be made in the block assessment. We are not going into the first aspect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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