TMI Blog2005 (7) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... h credits, on the ground that no corresponding document/evidence was found during the course of search ignoring the fact that as per the provisions of section 158BB(1), the Assessing Officer is to compute the undisclosed income for the block period on the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the Assessing Officer ." 2. The facts of the case are that a search and seizure operation was conducted on 4-8-1998 under section 132 at the residential premises and also at the bank locker jointly held by the appellant with her husband. During the course of search, various papers showing investment in purchases/re-making of jewellery were found. The Assessing Officer noticed from the details submitted by the assessee that the assessee had given a loan of Rs. 1,00,000 to her husband and of Rs. 25,000 to M/s. Mathuradas Narandas Sons totalling to Rs. 1,25,000 on which interest income of Rs. 25,500 and Rs. 1,275 respectively was earned and offered for taxation in assessment year 1989-90. When assessee was asked to explain the source thereof, it was submitted before the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the grounds of appeal). This sum was found to be deposited in the bank account with Canara Bank. The explanation of the assessee was not accepted and addition was made as undisclosed income under section 158BC. The CIT(A) deleted the addition on the ground that they do not arise as result of search. 4. Before us, the learned DR relied on the order of Assessing Officer. On other hand, the learned authorised representative of assessee strongly supported the order of CIT(A). 5. Chapter XIV-B was introduced with effect from 1-4-1995 laying down a special procedure for working out undisclosed income cases, where search and seizure operation had taken place. Under the provisions of this Chapter, the undisclosed income detected as a result of the search initiated after 30-6-1995 would be assessed separately in a block assessment, consisting of a block of 10 previous years (later amended to six previous years). Section 158BA clearly states that assessment under Chapter XIV-B can be made only in respect of undisclosed income which may arise as a result of search. Thus, the law permits two types of assessments. One regular assessment and the other is block assessment consisting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501 (Bom.) that such claims cannot be taxed under Chapter XIV-B. On the facts, in the case of CIT v. Ravi Kant Jain [2001] 250 ITR 141, the Hon ble Delhi High Court, where after the search operation, the Assessing Officer referred the seized material/regular books of account to special audit and such special auditor expressed his opinion about certain items of income, it was held that such income cannot fall under Chapter XIV-B. In N.K. Mohnot v. Dy. CIT [1999] 240 ITR 562 (Mad.), where the assessee was called upon to explain advances taken from the company of the assessee and had filed all the details like confirmation and letter from the company including the IT file No., it was held by the Hon ble Madras High Court that such items cannot be taxed under Chapter XIV-B as they will fall in the domain of regular assessment. In CIT v. Vinod Danchand Ghodawat [2001] 247 ITR 448 (Bom.), Hon ble Bombay High Court held that unaccounted investment in any part of gold or silver articles and jewellery found during the course of search were disclosed in WT return, would not fall under Chapter XIV-B. There are other decisions, as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2002 has amended section 158BB to clarify that the block assessment of undisclosed income is to be assessed on the evidence found in the search and material or information gathered in post-search inquiries made on the basis of evidence found in the search." [Emphasis supplied] 7. This circular clarifies and supports the stand that addition of undisclosed income in block assessment can be made only when some evidence has been found in the search and on that basis further enquiries have been carried out to establish concealment of income. Earlier, prior to amendment position was that there should be a direct evidence of undisclosed income so as to enable the Assessing Officer to make addition. After amendment, the position has not much altered. Now a prima facie evidence, if on development by post-search enquiries and investigation, establish as undisclosed income then such item can be covered as undisclosed income under Chapter XIV-B. The relevant provisions under Chapter XIV-B, which describe as to when an income can be covered under Chapter XIV-B are as under : ( i ) Assessment of undisclosed income as a result of search, (Emphasis supplied) 158BA. (1) Notwith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Unexplained expenses Investment in construction Addition cannot be made on basis of Departmental valuer s report obtained subsequent to order of regular assessment Tribunal finding no evidence found during search to establish assessee spent more on renovation of residential house than recorded in books of account Justified Income-tax Act, 1961, sections 131(1)( d ), 158BB(1), 158BC". 9. Similarly, the Hon ble Bombay High Court, in case of CIT v. Vikram A. Doshi [2002] 256 ITR 129, has held that whether Tribunal has found that the transactions which were recorded as undisclosed transactions and assessed in block assessment were disclosed in the returns which was subject-matter of the regular assessment, such transactions could not be considered in the block assessment. Thus, it is amply clear that the items considered by the revenue in the grounds of appeal do not fall for consideration under Chapter XIV-B as they are the subject-matter of regular assessment. No evidence either direct or prima facie was found in the search. Entire addition is based on post-search enquiries independently carried out by the Assessing Officer. Such enquiries had no nexus with the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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