TMI Blog2010 (10) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence was found during the course of search for cessation of such liability - Decided in the favour of the assessee Whether the income declared in the return for assessment year 1999-2000 filed beyond the prescribed time under section 139 and the income declared in the belated return for assessment year 2000-01 filed under section 139(4) should be treated as undisclosed income of the assessee - The assessee furnished the return beyond the date for filing of the belated return under section 139(4) - Held that: where an amount stands disclosed in the regular return of income, the Assessing Officer can go into the genuineness of said amount only in the course of regular assessment and not during the course of block assessment proceedings - the appeal of the revenue stands partly allowed - IT APPEAL NO. 168 (GUWAHATI) OF 2004 - - - Dated:- 7-10-2010 - G.D. AGRAWAL, HEMANT SAUSARKAR AND D.K. TYAGI, B.R. KAUSHIK, JJ. Doly Loyi and S.K. Haldar for the Appellant. A.B. Das for the Respondent. ORDER Per B.R. Kaushik, Accountant Member This appeal has been filed by the Department against the order dated 29-10-2004 of the CIT(A). 2. The grounds of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 44AB was filed on 29-11-1999 but the return was filed only on 31-3-2001. He pointed out that there was search on 28-11-2000 and the block return was filed on 26-3-2002 and the action of the Assessing Officer was, therefore, not in conformity with the provisions of section 158B(b) of the Act in view of the decisions in the cases of CIT v. Shamlal Balram Gurbani [2001] 249 ITR 501/118 Taxman 835 (Bom.) and Dr. (Mrs.) Alaka Goswami v. CIT [2004] 268 ITR 178/138 Taxman 212 (Gau.). 6. We have carefully considered the issue in the light of material placed on record. The submissions of the Ld. D.R. that evidence regarding non-availability of books of account and relevant vouchers by the assessee was gathered during the course of search and the Assessing Officer has, therefore, estimated the net profit during the block assessment was considered correct because the very basis of report under section 44AB filed on 29-11-1999 could not be established in absence of books of account. The return filed by the assessee was also beyond the statutory period and, therefore, considered non est by the Assessing Officer because as against the maximum time allowed for filing the return under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sactions as per details given in the assessment order were very specific and recorded in a diary and could not be considered jottings in loose sheet of papers. 11. The Ld. counsel reiterated the submissions taken before the lower authorities and submitted that nothings in the diary could not be the basis of addition and in any case the transaction related to the erstwhile firm for which the Assessing Officer had initiated action under section 158BC read with section 158BD of the Act. 12. We have carefully considered the issue. The income on account of undisclosed investment and income in the construction and sale of Snehbash Housing Complex had been admittedly considered by the Assessing Officer as belonging to the erstwhile firm of M/s. Snehbash Housing Complex and the seized material was also found from the house of one of its partners. It is also clear from the discussion in the assessment order that the transactions were prior to 28-2-1997. The additions are, therefore, not required to be made in the hands of the assessee. These grounds of appeal are, therefore, rejected. 13. Ground No. 4 is against deletion of addition of Rs. 2,80,000 out of liability against sundry cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He, therefore, allowed only the basic deduction of Rs. 50,000 each for these two assessment years. This issue has been discussed while deciding the ground No. 1 of the appeal as above. The Assessing Officer is directed to allow deduction of income covered by the pre-paid taxes i.e., TDS and advance-tax, if any, in view of decision in the case of Hon ble Jurisdictional High Court in the case of Dr. (Mrs.) Alaka Goswami (supra). To that extent the submission of the Ld. counsel is accepted and the ground of appeal is treated as partly allowed. 18. Ground No. 6 is against the deletion of surcharge. The Ld. CIT(A) observed that the search in the case of the assessee was initiated on 28-11-2000 whereas the proviso to section 113 of the Act was applicable with effect from 1-6-2002. The assessment year relevant to the previous year in which the search was initiated under section 132 of the Act was prior to 1-6-2002 i.e., the date of applicability of the provisions of levy of the surcharge. Therefore, the assessment year 2001-02 was relevant to the previous year (F.Y. 2000-01) during which the search was conducted in the case of the assessee and the surcharge was not leviable. This view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. 4. A search and seizure operation was conducted under section 132 in the residential premises on 28-11-2000 wherein the cash of Rs. 80,410 was found out of which Rs. 60,000 was seized as per Panchnama dated 28-11-2000. Other valuables were also found. The statement of the assessee was also recorded under section 132(4). The assessment order was passed after verification of the records, since no regular books of account, cashbook, ledger etc. were found on the basis of block return dated 26-3-2002 for Rs. 1,13,121. The notice under section 143(2) was issued and served and the assessment was completed after hearing of the assessee. 5. In appeal the learned CIT(A) allowed the appeal of the assessee vide order dated 29-10-2004 after giving reasonable opportunity to the assessee. 6. The Revenue is in appeal before us. 7. The learned Sr. DR relied on the order of the Assessing Officer and submitted that the assessment was completed on the basis of seized documents, statements recorded under section 132(4). Since no regular books of account were maintained, the Assessing Officer has completed assessment on the basis of records before him and therefore, the order of assessment m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts before us we are of the view that the addition was made on the basis of adoption of 8 per cent net profit under section 44AD i.e., the difference between Rs. 11,14,452 minus the net profit shown by the assessee i.e., Rs. 8,09,465 - addition of Rs. 2,90,306 which is not based on any material seized during the search. Moreover, the learned DR has not brought on record that extra profit earned on the basis of seized material during search by the assessee. Therefore, no estimation of higher profit can be justified. 13. In the result, we confirm the order of the learned CIT(A) and delete the addition made by the Assessing Officer which is based on estimate. As regards ground No. 2 14. The Assessing Officer has made addition being undisclosed investment for construction of flats as discussed on pages 15 and 16 i.e., Rs. 5,17,609. The addition was made on the basis of chits found during the search. 15. The learned CIT(A) has discussed this issue in ground No. 8 page 6 while deleting the addition. 16. After persuasion of records and rival submissions before us we are of the opinion that the addition was made by the Assessing Officer on the basis of chits, which are not dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting documents is not justified. The learned DR has not brought on record any collateral evidence in the form of agreement etc. found during the search to substantiate the addition. Our views get support from the orders (Asstt. CIT v. Rakesh Binny Show Room [2005] 147 Taxman 97 (Asr.) (Mag.) and Dy. CIT v. M.L. Dalmiya Co. Ltd. [2006] 98 ITD 93 (Kol.). 21. In the result, we confirm the finding of the learned CIT(A) while rejecting the ground of appeal. As regards ground No. 4: Addition of Rs. 2,80,000 against sundry creditors 22. The Assessing Officer has made the addition for Rs. 2,80,000 as outstanding from parties for want of sufficient evidence put up before him. 23. The learned CIT(A) has discussed this issue on pages 6 and 7 Ground No. 10 while deleting the addition. 24. After perusal of the records it is found that no material was seized during the search regarding the outstanding but which does the assessee in the books of account disclose. Therefore, since no material was seized during the search the addition cannot be made on account of trading liabilities/outstanding without examining the parties concerned. Therefore, there is no basis for addition. 25. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same as discussed on page 8 ground No. 12. 33. After perusal of the facts and rival submissions we are of the opinion that the date of search is the crucial date for levying surcharge under section 113. The search was conducted on 28-11-2000 and section 113 has been introduced in the Statute with effect from 1-6-2002 much after the search. Therefore, no provision under section 113 was applicable. Section 133 has no retrospective effect and, therefore, while relied on the decision 84 ITD 640 (Bom.)(sic), Principal Office, Builcon Towers (P.) Ltd. v. Asstt. CIT [2000] 113 Taxman 74 (Cal.)(Mag.), Microland Ltd. v. Asstt. CIT [1998] 67 ITD 446 (Bang.) and S.P. Goyal case (supra). 34. Therefore, we confirm the order of the learned CIT(A) for deleting the penalty and surcharge levied under section 113 of the Act by the Assessing Officer. 35. In the result, the ground of appeal of the revenue is dismissed. 36. Ground No. 7 being of general nature does not require any specific adjudication and therefore, rejected. 37. In the result, the appeal of the revenue is disposed off as discussed above in the order. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 In this appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from contract work in view of the fact that the evidence of non-availability of books of account was gathered as a result of search ? (2) Whether on the facts and circumstances of the case an amount of Rs. 2,80,000 could be treated as undisclosed income of the assessee because liabilities to that extent shown by the assessee in the financial statement of affair filed during the course of block assessment could not be proven and the corresponding investments notices/found as a result of search were unexplained ? (3) Whether the income declared (a) in the return of income for assessment year 1999-2000 filed on 22-3-2002 beyond the time prescribed under section 139 of the Act i.e., 31-3-2001 and (b) the belated return of income for assessment year 2000-01 filed under section 139(4) of the Act, could be considered undisclosed income in view of the provisions of section 158BB(1)(c) of the Act and in view of the fact that the relevant books of account for assessment year 1999-2000 were neither found during the course of search nor produced by the assessee during the course of block assessment proceedings and in view of the decision in the case of Dr. (Mrs.) Alaka Goswami v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audited accounts. Admittedly the Assessing Officer did not estimate the net profit in the block assessment on the basis of material and evidence found and seized during search operation. He himself has stated that complete set of books of account were not found during search operation. Section 158BB(1) speaks of basis of computation of undisclosed income of the block period as conceived in section 158B(b), which defines undisclosed income. According to these sections, determination of undisclosed income is to be made on the basis of material and evidence found during search. In that view of the matter, I agree with the decision of ld. J.M. on this issue. 6. The second question referred to the Third Member is in regard to addition of Rs. 2,80,000 out of liability against sundry creditors. The relevant facts relating to this dispute are that the Assessing Officer had found that the assessee has disclosed liabilities of Rs. 9,30,000 on account of sundry creditors. List of the sundry creditors, their confirmations, ledger copies of the accounts were produced before the Assessing Officer. On enquiries, the Assessing Officer found that the liabilities to the extent of Rs. 2,80,000 in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce the evidence in support of the liability already existing in his accounts, the same cannot be treated as undisclosed income of the block period, because no evidence was found during the course of search for cessation of such liability. In view of the above, I agree with the finding of the Ld. J.M. with regard to question No. 2. 9. The last question put before the Third Member is whether the income declared in the return for assessment year 1999-2000 filed beyond the prescribed time under section 139 and the income declared in the belated return for assessment year 2000-01 filed under section 139(4) should be treated as undisclosed income of the assessee. According to the Assessing Officer, the return for assessment year 1999-2000 was filed on 22-3-2002, which was beyond prescribed time and thus invalid. According to him further, the return for assessment year 2000-01 was also filed late and the deduction of income was not admissible in view of provisions of section 158BB(1)(c) of the Act, as both these returns were non est. On appeal, the CIT(A) directed the Assessing Officer to delete the income shown in the returns for these two assessment years, i.e., assessment years 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner and such interest, salary etc. was duly disclosed in the audited balance sheet of the partnership firm. The returns of the firm of the respective years were already furnished before the search. On these facts, the ITAT held that the interest, salary and rent which was duly recorded in the balance sheet/return of income of the firm furnished prior to the search cannot be treated as undisclosed income. Such order of the ITAT was upheld by the Hon ble Bombay High Court holding that no substantial question of law arises. However, the facts in the case of the assessee are different. The assessee furnished the return beyond the date for filing of the belated return under section 139(4). The assessee claims to have maintained regular books of account. However, such books of account were neither found at the time of search nor were produced during the assessment proceedings. Therefore, the decision of Hon ble Bombay High Court would not be applicable to the facts of the assessee s case. So far as the decision of Hon ble jurisdictional High Court is concerned, the Ld. A.M. has already directed the Assessing Officer to allow appropriate relief in the light of the decision of Hon ble ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
