TMI Blog2002 (9) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed in the regular assessment. 6.That the learned CIT(A), Amritsar has grossly erred in confirming the additions of Rs. 3,30,967 and Rs. 5,20,445 for assessment year 1997-98 and 1998-99 respectively made by the Assessing Officer on account of unexplained liability claimed by the assessee towards crusher payable. 7.That the learned CIT(A), Amritsar has grossly erred in not appreciating that no further separate additions could be made once the provisions of section 145 were applied and gross profit rate additions were made for assessment years 1997-98 and 1998-99 in block proceedings. 8.That the learned CIT(A), Amritsar has grossly erred in confirming the action of Assessing Officer in charging the interest under section 158BFA. 2. This appeal is directed against the order of CIT(A), dated 28-2-2001 relating to the block period 1-4-1987 to 9-10-1997. 3. Ground No. 3 relates to the addition of Rs. 25,227 made by the Assessing Officer on account of interest earned of Income-tax refund. The Assessing Officer made this addition for the assessment year 1996-97 by observing that the assessee received interest on refund on 29-3-1996 for the assessment year 1995-96 amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed income of the assessee. Reliance was placed on the decision of the Honourable Delhi High Court in the case of L.R. Gupta v. Union of India [1992] 194 ITR 32. 5. In his rival submissions, Shri Gurcharanjit Singh, the learned Sr. D.R. contended that the receipt in question has not been reflected in the books of account of the assessee. This fact remains undisputed. He further contended that it is wrong to say that the income, in question, was in the notice of the department and, therefore, the same cannot be treated as undisclosed income. According to him, the undisclosed income signifies the income, which is not determined or not included in the books of account which are meant to be produced before the Assessing Officer. As such, the receipt has not been accounted for in the books of account and not disclosed to the department. The Assessing Officer was justified in treating the same as undisclosed income and has rightly assessed under section 158BC of the Act. Thus, the action of the Assessing Officer as per law deserves to be upheld. 6. We have considered the rival submissions. In the instant case it is not in dispute that the amount of Rs. 25,227 was given by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997. He further observed that the books of account were neither found during the search nor were produced during block assessment proceedings. As such the income was worked out on the basis of accounts filed alongwith the return. The Assessing Officer noted that Gross Contract Receipts, as reduced by the cost of material provided by the department, as per the Audited Report was Rs. 1,07,42,097. Admittedly the assessee was engaged in contract work related to the construction of the roads. The Assessing Officer applied net profit rate of 8% by stating that the nature of job of the assessee was more or less the same as that of a Civil Contractor. Accordingly, total income was worked out at Rs. 8,59,367. The Assessing Officer further allowed the claim on account of depreciation amounting to Rs. 3,30,097 which was claimed by the assessee by filing a chart alongwith the return. In this manner, the income was determined at Rs. 5,29,270 and the same was considered as undisclosed income for the assessment year 1997-98. 9. Similarly for the assessment year 1998-99, the Assessing Officer estimated the net profit at Rs. 3,69,938 on the total net contract receipt of Rs. 46,24,244. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een deducted on the payments received form the Government Departments and even the Income-tax departments through its TDS Circle was fully aware about the receipt of the assessee and as such income could not have been treated as undisclosed income. Reliance was placed on the decision of the Honourable Bombay High Court in the case of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501, wherein it has been held that where the assessee had not filed his returns for the years 1993-94, 1994-95 and 1995-96 under section 139(1) but the income of the assessee was subject to TDS and the same had been paid and also advance tax had been paid, such income could not be treated as undisclosed income for the purposes of Chapter XIV-B. Reliance was further placed on the decision of Honourable Gujarat High Court in the case of CIT v. Shambulal C. Bachkaniwala [2000] 245 ITR 488, wherein it has been held that while framing the block assessment under section 158BC of the Act, undisclosed income detected as a result of search can be taxed only on the basis of material found during the course of search and the Assessing Officer was not justified in recomputing the total income of the assessee for various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining the undisclosed income under Chapter XIV-B, the provision of section 145 can be applied and income can be estimated because the provisions of section 158BH clarified that "save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this chapter." Reliance was placed on the decision of the ITAT, Delhi Bench in the case of Pioneer Publicity Corp. v. Dy. CIT [2000] 67 TTJ 471 . The learned Sr. D.R. further justified the learned CIT(A) in confirming the action of the Assessing Officer regarding application of net profit rate of 8% by stating that since the assessee had not produced books of account for both the years alongwith the vouchers for the expenses at the time of the search or before the Assessing Officer therefore the Assessing Officer was justified in applying the net profit rate of 8% while computing the net income of the assessee. 13. We have heard the learned representatives of both the parties at length. The assessee belongs to the Narula Group of Cases. It is relevant to point out that in one case of this group i.e., M/s Narula Transport Co., a similar issue was subject matter of appeal before this Bench of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no justification for treating the income as undisclosed. It was vehemently argued that during the search nothing was detected by the department as regards to the contract receipts of the assessee. The only information was obtained from the bank pass book wherein whole of the receipts were deposited by the assessee. In other words, it was submitted that the figures taken by the Assessing Officer was already disclosed by the assessee by ways of deposit in its bank accounts. Hence the deposit cannot be considered as undisclosed. 11.1 Shri Padam Bahl, C.A., the learned counsel for the assessee, also submitted that chapter XIV-B is code in itself provided for special procedure for assessment of search cases and as per sub-section (2) of section 158BB in computing the undisclosed income for the block period, the provisions of sections 68, 69, 69A, 69B and 69C may be applied but nowhere it is provided under this chapter that provisions of section 145 would be applicable in computing the undisclosed income for block assessment. Reliance was placed on the following case laws : 1.CIT v. Dr. M.K.E. Menon 112 Taxman 96 (Bom.) 2.Smt. Usha Tripathi v. Asstt. CIT [2000] 66 TTJ (Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be aggregate of the total income of previous year falling within the block period, computed in accordance with the provisions of Chapter IV of the Act and reduced by the aggregated total income already assessed or declared in any pending return and increased by the loss for such previous year, either assessed or declared in the pending return." It has been further held that : "Even otherwise, the provisions of section 145 can be applied only after rejecting the books of account or documents found during the search as unreliable or on the ground that true income cannot be deduced therefrom and if books of account or the documents found during the search are rejected, then there is no question of any income or undisclosed income on the basis of such books of accounts or documents which is pre-requisite and the only condition of computation of undisclosed income." It is relevant to point out that the aforesaid decision of the Tribunal has been upheld by the Honourable Allahabad High Court as reported in 249 ITR 04. 12.1 At this stage, we may also refer to a decision of Honourable Gujarat High Court in the case of CIT v. Shambhulal C. Bachkaniwala [2000] 245 ITR 488 (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2 As regards to the gross receipts, it is not in dispute that the figures of the total receipts were taken by the Assessing Officer from the bank account of the assessee and nowhere it is claimed by the department that the contract receipts were found unrecorded during the course of search. The Assessing Officer has not disputed the contract receipts, which were shown in the regular bank account and TDS on contract receipts was deducted by the contractual party. In that view of the matter also the decision of this Bench of the Tribunal passed in Narula group of cases, i.e., Narula Transport Co. (supra) is fully applicable and accordingly we direct the Assessing Officer not to consider the income of Rs. 5,29,270 and Rs. 2,62,413 relating to the assessment years 1997-98 and 1998-99, respectively, as undisclosed income for the block period. It is also made clear here that the search in the aforesaid case took place on 9-10-1997 and due date for filing the return for the assessment year 1997-98 was upto 31-10-1997. As such, the due date has not yet been lapsed. Similarly, for the assessment year 1998-99, the due date of filing the return was 31-10-1998. In other words, the due dates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of early payment. The learned CIT(A) confirmed the action of the Assessing Officer by observing as under : "7.3 On a careful consideration of the facts of the case, I do not find any merit in the submission made by the learned counsel. Undoubtedly, there is time gap of about seven months between the rendering of the services and the payments therefor. The payments include the payment to labour. It is a matter of common knowledge that the labourers do not have any sustaining power and in fact such labour always ask for advance. Since the labour does not have any sustaining power and live from hand to mouth on daily wages, it is not possible to believe that such people could be asked to wait for seven months. Therefore the preponderance of probabilities support the case of Assessing Officer. The contention of the learned counsel can only be accepted if there is some evidence to substantiate the claim. The learned counsel has not filed any evidence. The alternative plea referring to the funds available and subsequently surrendered in the returns for the block period cannot be accepted as there is no nexus between the said income and the payment of the outstanding liabilities. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment years 1997-98 and 1998-99 on the ground that the assessee had not maintained any books of account and on the other hand, he was relying on the balance sheet filed by the assessee for making addition on account of alleged bogus liabilities. It was stated that once the books was rejected and the provisions of section 145 were applied and income estimated at 8% of gross profit, then the Assessing Officer could not have gone back and relied on the balance sheet filed by the assessee in making further addition on account of raw material liabilities. It was stressed that once a net profit rate has been applied, all the expenses are deemed to have been allowed to that extent and no further disallowance on account of expenses could have been made by adding unpaid liabilities. Accordingly it was contended that the Assessing Officer was blowing hot and cold in the same breath. He further relied on following case laws : 1.Ess Emm Intraport Services Pvt. Ltd. v. Asstt. CIT [2000] 68 TTJ (Hyd.) 103 2.Ravi Kant Jain v. Asstt. CIT [2000] 67 TTJ (Delhi) 797 3.Sunder Agencies v. Dy. CIT [2000] 63 ITD 245 (Mum.) 4.N.R. Paper Board Ltd. v. Dy. CIT [2000] 234 ITR 733 (Guj.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer only considered part of the liabilities which is not permissible in the eyes of law. In the instant case also it is not in dispute that the income of the assessee was determined by applying the provisions of section 145(1) of the Act. The Assessing Officer while applying the provisions of section 145(1) of the Act determined the income of the assessee by applying a net profit rate of 8 per cent on the gross receipts which were found recorded in the bank account. It is well settled law that when the provisions of section 145(1) are applied the book results are always rejected. In other words, the contents of the books are not accepted. It is also true that the balance sheet can be drawn only from the books of account or the documents but in the instant case, the Assessing Officer while applying the provisions of section 145(1) himself admitted that the documents or the accounts were not reliable. In that view of the matter he was not justified in making the addition merely on the basis of balance sheet filed by the assessee. Moreover, the Assessing Officer ignored the other liabilities wherein there was reduction. It was not open to the Assessing Officer to consider t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 364, the Patna Bench of ITAT had held that : "Although the provisions for charging interest under section 158BFA, in the case of delayed filing of block return, seems to be mandatory, yet, in as much as, interest of penal nature at least to some extent, in such a case it has got to be considered that if the delay be not attributable to the assessee, the assessee cannot be penalised by way of charging interest under section 158BFA." In the present case also it has been submitted that it was beyond the control of the assessee to file the block return within the time limit as allowed by the Assessing Officer because the photocopies of the seized documents were not supplied by the department. In our view there is merit in this contention of the learned counsel for the assessee that the department cannot ask the assessee to do something impossible and at the same time penalise him for not being able to do so. Admittedly the photocopies of the documents were made available to the assessee by the Income-tax Department in October, 1998. Considering all the facts of the present case and also keeping in view the ratio of decision of the ITAT Patna Bench in the case of DCIT v. Late Ratt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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