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TMI Blog2010 (10) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in computer etc. claimed by the appellant" 4. Ground Nos. 1 to 4 in the departmental appeal read as under: "1 The CIT(A) has erred in law and on facts in directing to delete the addition of Rs. 1,83,140/- made on account of unaccounted investment in Krishna House 2. The CIT(A) has erred in law and on facts in deleting the addition of Rs. 20,00,000/ - made on account of 'on-money' for purchase of land. 3. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs. 9,32,811/- made on account of unexplained investment in construction and interiors of Ganga Darshan Bungalow. 4. The CIT(A) has erred in law and on facts in directing to delete the surcharge levied u/s 113 of the Act, by holding that the surcharge is not leviable in respect of searches conducted that surcharge is leviable in the case of searches U/s. 132 initiated on or after 01.04.1999". 5. Briefly, the facts of the case are that search u/s 132 of the IT Act was conducted on 06-09-2009 at the premises of the assessee. The assessee had declared undisclosed income of Rs. 1,15,00,000/- during the statement recorded u/s 132(4) of the IT Act. However, the assessee filed block return showin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted part retraction of the assessee from the statement recorded u/s. 132(4) directly or indirectly. The CIT(A) deleted the addition of Rs. 1,83,120/- on account of investment in Krishna House with the observation that the assessee has shown investment of Rs. 89,86,521/- which included Rs. 21,16,880/- declared as unaccounted investment in the block return. On perusal of the details the income declared by the assessee in block return of Rs. 25 lakhs, we notice that the assessee had declared investment in construction and interior of Krishna House Rs. 21,16,880/-comprising amount paid to Ankit Construction of Rs. 15,00,000/-, misc. to be covered if anything found Rs. 6,16,880/- . The assessee made the disclosure of Rs. 25 lakhs in the statement recorded u/s. 132(4) whereas the assessee has declared Rs. 21,16,880/. We notice that the CIT(A) has deleted the addition without verifying and examining the relevant facts about the total investment shown by the assessee for Rs. 89,68,521/-. In absence of material and relevant facts on record the matter cannot be decided at this stage. The other unaccounted income determined by the A. O. Rs. 39,30,000/-were also pertaining to investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions have been rightly deleted by the learned CIT(A). However, two additions were wrongly confirmed by the learned CIT(A) merely on the basis of retracted statement and on estimate basis. The learned Counsel for the assessee as regards the ground of appeal raised in the appeal of the assessee submitted that though the amount of Rs. 2,60,981/- was surrendered in the statement but such statement was retracted and there was no seized material recovered during the course of search to make the addition in the block assessment. On ground No. 3 in the appeal of the assessee, the learned Counsel for the assessee submitted that set off of Rs. 39,211/-may be given to the assessee out of the amount declared in the return of income filed for the block period. As regards departmental appeal, the learned Counsel for the assessee submitted that no seized material or evidence is recovered during the course of search to make any of the additions which have been rightly deleted by the learned CIT(A). He has submitted that no incriminating document except valuation report or notice of the stamp authority has been recovered and on that basis no addition in the block assessment could be made. He has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement was recorded under coercion, intimidation or duress. The assessee has however, failed to prove the same. Therefore, the statement of the assessee is relevant for the purpose of making the additions. He further submitted that the assessee in his return of income filed for the block period has though retracted some part of the surrendered amount but some amount has been surrendered would prove that retraction was invalid. He has submitted that the learned CIT(A) should have accepted the statement of the assessee surrendering undisclosed income in the statement of the assessee and should not have deleted the addition. He has submitted that the learned CIT(A) has rightly confirmed two additions on which the assessee is in appeal because no explanation was filed in this regard. The learned DR submitted that the basis of the additions made by the AO was substantially the statement made u/s 132(4) of the IT Act which should not have been ignored by the learned CIT(A). He has relied upon the decision of the Hon'ble High Court of Chhattisgarh in the case of ACIT v. Hukum Chand Jain 191 Taxman 319 in which it was held that "when the assessee did not retract his statement immediately af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any expenses, deduction or allowance claimed under this head, which is found to be false. Section 158BB (1) provides for computation of undisclosed income of the block period and is reproduced as under: "(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,- (a) where assessments u/s 143 or sec. 144 or sec. 147 have been concluded [prior to the date of commencement of the search or the date of requisition], on the basis of such assessments; (b) where returns of income have been filed u/s 139 [or in response to a notice issued under sub-section (1) of sec. 142 or section 148] but assessments have not been made till the date of search or requisition, on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not being a working partner]; Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;] (c) assessment under section 143 includes determination of income under sub-section (1) or sub-section (IB) of sec. 143. (2) In computing the undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (3) The burden of proving to the satisfaction of the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry had been disclosed in the assessee's wealth-tax return which was accepted by the department. Held, that Chapter XIV-B of the IT Act, 1961 had not application to the facts of the case and the addition made by the department on the ground of undisclosed income was erroneous." 10.4 The Hon'ble Calcutta High Court in the case of Bhagwati Pd. Kedia v. CIT, 248 ITR 562 (Cal.) observed - "The explanation to sec. 158BA of the IT Act, 1961 makes it clear that the Legislature thought it fit to make a distinction between the block assessment and the regular assessment. In the case of regular assessment, the AO is free to examine the veracity of the return as well as the claims made by the assessee, whereas the undisclosed income is taxed by way of block assessment as a result of search and seizure. The logic behind the two different modes of assessment is that concealment of income and claiming deduction or exemption in respect of a disclosed income cannot be treated at par. The former is an offence which goes to the root of the matter and the other is on the basis of the causes shown by the assessee where the AO is free to accept the justification shown or reject the same. There was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income and such undisclosed income must come as a result of search - Held, yes -Whether sec. 158BA does not provide a license to revenue for making roving enquiries connected with completed assessment and is beyond power of AO to review assessments completed unless some direct evidence comes to knowledge of department as a result of search which indicates clearly factum of undisclosed income - Held, yes - Whether scheme of Chapter XIVB gives power to revenue to draw presumption in regard to undisclosed income - Held, no - Assessee claimed 1 to 1.5 per cent out of total sales as "sales promotion expenses" - During search proceedings a book called "gift register" was seized from assessee's business premises - Gift register related to sale promotion expenses - In earlier assessment proceedings covering block period in question, such expenses were disclosed and disallowances were made - Neither any incriminating material revealing undisclosed income came to light nor enquiry regarding sales promotion expenses in proceeding u/s 132(1) was made. Whether addition on account of sales promotion expenses on estimate basis could be justified - Held no." 10.7 In the case of Digvijay Chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, it was not in dispute that the assessee had filed its regular return of income for the AY 1994-95 disclosing the amount in the balance-sheet. If it was a loan, the amount thereof could have been added to the total income u/s 68 only if it was held to be a non-genuine loan. The genuineness could have been gone into only in the course of regular assessment when the assessee had duly disclosed the amount in its balance-sheet. The assessee had discharged its part of the obligation by disclosing the amount in the balance-sheet and by filing the return. It was not the assessee's fault that no assessment was made. It was of no consequence under which head the amount was disclosed in the balance-sheet. If it was an advance from a customer for purchase of property, it could not be treated as income because it was merely an advance towards purchase of property and in no way the income of the assessee. When the amount stood duly disclosed in the regular return of income, the AO could not resort to block assessment proceedings to go into its genuineness and subject it to a higher rate of tax. The addition of Rs. 55 lakhs was not justified." 10.11 Hon'ble MP High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 was Rs. 48 lakhs. No material is there to support such finding of the AO. It is dumb document. Additions deleted." 11. The Hon'ble Rajasthan High Court in the case of Kishan Kumar & Others (supra) also held that u/s 158 BB of the IT Act, computation of undisclosed income is to be made on the basis of evidence found as a result of search or acquisition of books of account or other documents and such other material or information as are available with the AO and relatable to such evidences and it does not include any fictional or presumptive income, to be liable to, or capable of being included in the aggregate of the undisclosed income. Section 50C of the IT Act also does not show that valuation put by the Stamp Valuation Authority is not required to be adopted as the value of the property. The ITAT Ahmedabad Bench in the case of Shri Bharat Kumar N. Patel (supra) also took the view that section 50C of the IT Act would not be applicable to the purchaser. 12. Before proceeding further, we may further mention here that in view of the above, the Tribunal has vide order dated 31-05-2005 restored the mater back to the file of the learned CIT(A) to re-decide the above grounds of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash and jewellery found during the course of search and in his statement recorded u/s 132 (4) of the IT Act he has surrendered certain amount as undisclosed income for the block period. The assessee after conclusion of the search did not retract from his statement and has failed to prove that his statement was recorded under duress, coercion or intimidation. On such facts, it was held that addition could be made on the basis of the income surrendered u/s 132 (4) of the IT Act. I would, therefore, prove that even in this case incriminating material was seized which was confronted to the assessee during the search proceedings and that the assessee agreed to surrender the undisclosed income. Therefore, addition was not made merely on the basis of the sole statement of the assessee. The decision replied upon by the learned DR is, therefore, clearly distinguishable according to the facts of the case which we would discuss in this order as under. 14. Now, we will deal with the departmental appeal. On ground No. 1 of the departmental appeal, the AO made addition of Rs. 1,83,120/- on account of unaccounted investment in Krishna House. The assessee stated that investment of Rs. 68,69,640/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 1,83,140/-. Thus, the addition of Rs. 1,83,140/- on account of investment in Krishna House is deleted". 15. After considering the rival submissions of the parties as noted above, we do not find any justification to interfere with the order of the learned CIT(A) in deleting the addition. The assessee pleaded that investment in the property was much more as compared to the investment disclosed in the statement of Shri Dinesh Bhaiya. No evidence was found that the assessee made undisclosed investment in the property. The AO took initial surrender of Rs. 23,00,000/- for the purpose of making the addition in the statement of the assessee u/s 132 (4) of the IT Act without considering the entirety of the facts of the case including the investment shown in the books of account by the assessee and further surrender made in the return for the block period in a sum of Rs. 21,16,880/-. The learned CIT(A) on the basis of proper appreciation of facts and law rightly deleted the addition. In the absence of any incriminating evidence on record regarding undisclosed investment in the property, the learned CIT(A) has rightly deleted the addition. Ground No. 1 of the appeal of the revenue is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding market rate at which the land could be sold in the market rate. The Assessing Officer has not considered the fact that land was purchased by the appellant for a consideration of Rs. 20,00,000/- by all the six members of the family for Rs. 23,87,520/-. The Assessing Officer has not appreciated that notice issued for government for stamp duty were still pending and no additional stamp duty was paid by any member of the family. Now looking to the above noted facts and contentions raised by the appellant, the Assessing Officer was not justified to make addition of Rs. 20,00,000/- on account of 'on money' for purchase of land. In view of these facts the above addition is deleted". 17. On consideration of the rival submissions and facts of the case, we do not find any justification to interfere with the order of the learned CIT(A). No incriminating evidence was found during the course of search that the assessee made payment of any on money for purchase of the land. The AO relied upon the valuation report dated 14-06-2000 which was prepared after several years from the date of purchase of the land and according to the explanation of the assessee it was prepared for taking bank loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er: "11. I have carefully considered the arguments of both sides. The appellant filed fresh details though arguments remain the same. The documents discussed by the appellant with regard to valuation of Gangadarshan bunglow reveal that the Assessing Officer has not formed his opinion on the basis of consolidated material. The valuation report which was available during the search operation was for a specific purpose written on it, therefore, no adverse inference can be drawn against the appellant. Addition has been arbitrarily made by Assessing Officer on the basis of retracted statement of Dinesh Bhaiya. The appellant's reliance on CBDT Circular No. 286/2/2003-IT(Inv.) Dtd. 10.3.2003 can be appreciated in the context of assessee's position during search and seizure operation. The argument of the appellant that the Assessing Officer could refer the property to the Departmental Valuation Cell has considerable force. Instead of seeking such technical or legal opinion, the Assessing Officer proceeded to make the addition. In the light of these facts, the Assessing Officer was not justified in making such addition, hence, addition of Rs. 9,32,811/- on account of unexplained investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of material seized, material available on record and books of account. In the absence of any specific findings as per the direction of the Tribunal dated 31-05-2005 and as per law for the block assessment noted above, before making the addition on the above issue the AO and the learned CIT(A) should have specified as to what material was found during the course of search to make the above additions. In the absence of any proper explanation and finding in the above grounds, we set aside the orders of the authorities below and restore these two grounds of appeal to the file of the AO with direction to re-decide both the grounds afresh on the basis of material seized, material available on record and the books of account as is directed by the Tribunal earlier vide order dated 31-05-2005 and in accordance with law for the block assessment as noted above.
24. In the result, appeal of the assessee on both the grounds is allowed for statistical purposes.
25. No other point is argued or pressed in both the appeals.
26. In the result, the departmental appeal is partly allowed; whereas the appeal of the assessee is allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X
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