TMI Blog2010 (3) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... nce also, in regard to the income from the broken period in question. What is done is estimation of income on basis of income ascertained for remaining period on basis of probability. decided in favour of Assessee. Regarding unexplained cost of construction. - Held that:- There is no relevant matter as such which can be relied on by the appellant to justify finding about cost of construction being what was estimated. decided in favour of Assessee. - 1504 of 2009 - - - Dated:- 30-3-2010 - JOSEPH K. M., JOSEPH FRANCIS M. L. JJ. JUDGMENT K. M. Joseph J.- 1 The respondent/assessee is the proprietrix of a hospital. A search was carried out under section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") in the hospital premises and also the assessee's residence. The search was finally concluded on September 3, 2002. Proceedings were initiated against the respondent for block assessment. Pursuant to the notice issued, the respondent filed a block return showing undisclosed income of Rs. 62,77,417 for the assessment years 1997-98 to 2003-04. The assessment was completed on August 30, 2004, determining an undisclosed income for the block period at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs. 12,75,035 being undisclosed income for the period April 1, 2001, to May 2, 2001, estimated on the basis of actual receipt for the remaining 333 days ? (b) Whether, on the facts and in the circumstances of the case and also in view of the fact that there was no books of account for the period and no case for the assessee that the income for the period is included in the return, the Tribunal is justified in interfering with the estimation of income made by the Assessing Officer and is not the interference against law, logic and absolutely perverse and whimsical ? 4. Whether, on the facts and in the circumstances of the case and also in view of the fact that the cost was determined by the Assessing Officer based on the statement of Shri Kunhammed, the assessee's father, recorded under section 132(4) of the Income-tax Act at the time of search, the Tribunal is justified in deleting the addition of Rs.1,95,41,744 made on account of unexplained cost of construction ?" 3. We heard Shri Jose Joseph, learned counsel for the appellant and Shri T.N. Seetharaman, learned senior counsel appearing for the respondent. 4. As far as the first question of law is concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals) by rejecting this ground of appeal of the Revenue." 7. We notice that the Tribunal has taken note of the contention of the respondent that no in-patients who had the capacity to pay such huge amount as treatment will get admitted to a hospital in a village, mainly specialised in Gynaecology. We also note the contention of the respondent that the hospital was not having such sophisticated machines to conduct such costly high tech treatments. It is pointed out that when this was pointed out to the Assessing Officer during the proceedings, he had reduced the amount while issuing the pre-assessment proposal. But, it was while completing the assessment, the said amount was also added. Learned counsel for the appellant would point out that it may be true that the includibility of the amount of Rs. 45,19,238 was not mentioned in the pre-assessment notice. He would submit that in such circumstances, what the appellate authority should have done, was he should have remanded the matter for a fresh consideration. 8. After having considered the matter, we are of the view that the appellant has failed to establish a substantial question of law in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny assets are requisitioned under section 132A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter." 12. Section 158BB provides for the computation of the undisclosed income of the block period. Sub-section (1)(d) reads as follows : "158BB. Computation of undisclosed income of the block period.-(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 Assessing Officer 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,-" The Explanation in section 158BB reads as follows : "Explanation.-For the purposes of determination of undisclosed income,- (a) the total income or loss of each previous year shall, for the purpose of aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. At any rate, in view of the direction given by the appellate authority as confirmed by the Tribunal, necessarily when the matter is computed, the officer must necessarily bear in mind the provisions of the Explanation. Subject to the same, we see no merit at all in the contention of the learned counsel for the appellant. Hence, we answer the second substantial question of law against the Revenue and in favour of the assessee and we hold that subject to the restrictions imposed in the Explanation to section 158BB, there is no embargo against the assessee claiming the benefit of the depreciation as per the provisions of the Act and the Rules. It is entitled to in law, even in proceedings under Chapter XIV-B to do so, and further, notwithstanding the fact that the amount of depreciation claimed is higher than the amount claimed by the assessee in the regular return filed by her. 15. In regard to the third substantial question of law which is purported to be raised, learned counsel for the appellant would submit as follows : The controversy is raised in respect of the period April 1, 2001, to May 2, 2001. The Assessing Officer noting that no income was disclosed for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be with reference to the seized materials only. When there was no material found for the period April 1, 2001, to May 2, 2001, we do not find any force in the contention of the learned Departmental representative that estimate can be made for that period also. We find force in the contentions of the learned counsel for the assessee in confirming the order of the Commissioner of Income-tax (Appeals) for the reasons stated therein. Thus, this ground of appeal of the Revenue also fails." 16. Section 158BB permits ascertainment of undisclosed income in the case of a search on the basis of evidence found and such other materials or information as are available with the Assessing Officer and relatable to such evidence. In this regard, learned counsel for the appellant would refer to the statement of Shri Kunhammed under section 132(4) of the Act. In answer to a query as to when the hospital commenced its activities, it is, inter alia, stated as follows : "'Manzoor Hospital' commenced its activities in the new building in the year 1996. The land on which the hospital building was constructed has been received by my wife as gift which she subsequently gifted to my daughte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be income for the broken period in question and in a situation where no income is disclosed on the basis that the hospital became fully operational only in 2001 also, the authorities have proceeded to compute the income for the broken period in question, it is submitted. 19. We would think that having regard to the nature of the proceedings under Chapter XIV-B which is geared to ascertainment of the undisclosed income, but based on the evidence unearthed during the search and other materials and information relatable to such evidence, the approach of the Assessing Officer is insupportable. As we have already noted, no evidence was available as a result of the search related to the broken period in question. There is no material or information with him relatable to such evidence also, in regard to the income from the broken period in question. What is done is estimation of the income on the basis of the income ascertained for the remaining period on the basis of probability. We do not think that the provisions of the Act in question support the officer in his endeavour. Accordingly, we find no merit in the contention of the appellant and we answer the said substantial quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in various stages from the year 1994 to March, 2001." 22. It is thereafter by applying the parameters indicated, it was found that even by any conservative estimate, the cost of construction was determined as Rs. 3 crores (rounded off figure). Thereafter, the Assessing Officer reasons that the assessee was utilising gifts received by her for construction work and purchase of immovable properties. She did not have any other source of income. The difference between the estimated cost of construction and the cost of construction actually shown by her up to March 31, 2002, was, inter alia, found to represent the undisclosed income which was determined as Rs. 1,95,41,744. The Tribunal has entered the following finding : "14. We have heard rival submissions and considered the facts and materials on record. In the decisions relied upon by the learned counsel for the assessee, it has been held that in the block assessment, even the DVO's report cannot be relied upon. In this case on hand, the Assessing Officer has not even referred the matter of valuation to the valuation cell, but has made his own valuation by adopting CPWD rates. There is force in the contention of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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