TMI Blog1999 (5) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Cash of ₹ 1,08,500 and some documents were seized. A notice under section 158BC of the Income-tax Act, 1961 was issued to the assessee on 11-4-1997 in response to which the assessee had filed the return of income declaring nil undisclosed income. The Assessing Officer had made additions on various accounts under the following heads :- A. Payment of on-money on purchase of immovable properties B. Unexplained cash found at the time of search C. Unexplained investment in fixed deposit and jewellery found at the time of search D. Unexplained expenses on account of stay at Hotels E. Unexplained expenses incurred for meeting shooting expenses F. Unaccounted expenses for purchase of foreign exchange G. Unexplained expenses for purchase of artifacts at M/s. Ravissant H. Unexplained expenses of various nature met out of undisclosed income on account of low withdrawal for household expenses. 3. The total undisclosed income for respective assessment years had been assessed as under :- Previous Year Assessment Year Total Income Including Undisclosed Income Ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is required to be produced in this regard. 6. we, on consideration of facts and circumstances on this case, admit the additional ground of appeal for consideration. 7. The learned counsel for the assessee contended before us that no incriminating documents were found with the assessee on the date of search. The Assessing Officer has made the additions merely on the basis of presumptions without there being material in support of the findings. It was further contended that the Assessing Officer had made various allegations in the assessment order but has not made any additions on the basis of most of the allegations. In this connection reference has been made to Page No. 9 of the assessment order. Reference has also been made to Page No. 41 of the assessment order to point out that upto assessment year 1990-91 no addition has been made. The learned counsel further contended that the Assessing Officer has resorted to some disallowances exercising his discretion without basing such disallowances on any material or any sound basis. The learned counsel pointed out that the motor car expenses have been disallowed at 1/3rd and similarly additions have been made on account of low w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 15,000 had been made on account of low withdrawals vide order dated 29th December, 1995 passed under section 143(3). The assessee had appealed to the Commissioner of Income-tax (A), and the latter has deleted the addition of ₹ 15,000 vide his order dated 6-5-1997. Similarly, for assessment year 1994-95 the household expenses at ₹ 36,000 have been accepted in regular assessment in an order passed under section 143(3) on 31st of March, 1997. It was accordingly contended that there was no justification for making any additions on account of low withdrawals. 11. Similar arguments were addressed in respect of the motor car expenses and household expenses made for the subsequent assessment years. In assessment year 1992-93, the Assessing Officer has also disallowed 1/3rd of telephone expenses. Relying upon the contentions raised for the disallowance of 1/3rd motor car expenses, the learned counsel contended that there was no justification for making any disallowance in the block assessment when there was no material on record to justify any disallowance. 12. An addition of ₹ 1,50,000 has been made for assessment year 1992-93 on account of foreign visit. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended by the learned counsel that the assessee had furnished detailed explanation before the Assessing Officer in regard to queries raised by the Assessing Officer. The additions have been made on presumptions without getting any confirmations from M/s. Anand Associates, who had made the payment for the stay of the assessee in the hotel. Referring to the addition on account of shooting expenses, the learned counsel contended that the statement found at the time of search contained the notings for expenses made/ought to be made by the production assistant. However, the expenses which have actually been incurred were reflected in the books of account and the expenses which were not supported by vouchers had been ignored. Referring to the addition account of on-money, it was pointed out that the assessee had filed declarations in Form No. 37(i) for obtaining the approval of the appropriate authority and the assessee had received no objection from the appropriate authority. Referring to the purchase of another flat at Pune, the learned counsel contended that the assessee had reflected the purchase price of flat at ₹ 8,31,500 in the Balance Sheet filed alongwith the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther hand, relied upon the assessment order in particular and contended that the Assessing Officer was justified in making the additions on the basis of the material found at the time of search. It was further contended that the Assessing Officer was justified in presuming concealment of income on the basis of the evidence found on the date of search. It was further contended that the Assessing Officer was justified in making additions on account of low withdrawals, motor car expenses and also was justified in restricting the deduction under section 80RR in accordance with law. The learned D.R. pleaded that the decision of the Tribunal in the case of Sunder Agencies (supra) was not applicable. In this case certain loose papers and hotel bills were found on the date of search which constituted material for purposes of assessment. It was further contended that the Assessing Officer has relied upon the relevant material in framing the block assessment. The learned D.R. pointed out that a slip containing the receipt of commission by the Secretary of the assessee had been seized, during the course of search and substantial telephone expenses incurred by the assessee had been detected du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the Assessing Officer may be deleted. 22. We have given our careful consideration to the rival contentions. In this case, there has been a search operation under section 132, at the residential premises of the assessee on 18-12-1996. The purpose of the search, as envisaged under section 132, is to discover the evaded wealth of an assessee. The important tenet of English Jurisprudence for several centuries was a man's home is his castle. For no reason whatsoever could a man's privacy at home be violated; though the land and wind might entire a poor man's heart, the King and his army could not. However, gradually this principles began to wriggle down and search were permitted at first by the Police and subsequently for enforcement of revenue loss. It is in this background one has to consider the assessment authorised under section 158BC in such cases where the search operations have been carried out by the revenue department. The assessment procedure provided under section 158BA, therefore, differs from the regular assessment made under section 143 or under section 144. Section 158BA authorises assessment of undisclosed income as a result of search. Section 158B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever name called. 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 (1B) of section 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 Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of 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 of unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this order we have indicated the additions made in respect of assessment years. It is observed that for assessment years 1987-88 to 1990-91 no addition has been made on account of undisclosed income. The income for assessment years 1989-90 and 1990-91 had been assessed at ₹ 20,000 and ₹ 23,000 respectively which has not been disturbed. 27. For assessment year 1991-92, regular assessment had been made at an income of ₹ 49,300. An addition of ₹ 1,48,099 has been made as undisclosed income of the assessee. The additions are dealt with as under :- 28. There is a disallowance of motor car expenses of ₹ 28,338 the disallowance has been made in a routine manner without reference to any material whatsoever. As already pointed out, block assessment under section 158BC is not meant for making a regular assessment but for an assessment of undisclosed income to be based on material found as a result of search. There is no material found as a result of search that would justify disallowance of 1/3rd motor car expenses. Whether a disallowance on account of motor car expenses is to be made or not is a matter of discretion of the Assessing Officer which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawals as undisclosed income of the assessee for purposes of assessment under section 158BC is not justified and is accordingly deleted. 31. For the same reasons, similar additions made for assessment years 1992-93 to 1997-98, as indicated below, are uncalled for and are accordingly deleted :- 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 Rs. Rs. Rs. Rs. Rs. Rs. Motor Car Expenses 27959 31029 31583 72689 81038 65163 Telephone exps. 5658 6650 12234 2495 3647 5685 Household exps./low withdrawals 53500 115000 144000 132499 189725 47,000 For Assessment Year 1995-96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is deduction u/s 80RR. It was contended before us that the addition made by the Assessing Officer is based on change of opinion. Once the view has been taken in assessment proceedings the same cannot be changed without there being any material discovered as a result of search justifying any change. In our considered view the deduction u/s 80RR is an issue which was considered in the original assessment proceedings. The purpose of block assessment is to assess the undisclosed income discovered on the basis of the search. No material was found in the course of the search in regard to deduction u/s 80RR. Once a view has been taken in regular assessments relating to deduction u/s 80RR it is not permissible for the Assessing Officer to review his decision without there being any material found during the course of search for coming to a different conclusion. In block assessments mere change of opinion from the view taken in assessment proceedings is not permissible. The addition of ₹ 24,202 made for Assessment Year 1992-93 is thus deleted. Similar additions made for Assistantt. Years 1993-94, 1995-96, 1996-97 and 1997-98 are hereby deleted on the basis of the aforementioned r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hoteliers have confirmed that payment of ₹ 20,000 was paid by the assessee. Though the assessee was staying in the Hotel in connection with shooting of the film some personal expenditure cannot be ruled out. Moreover, it was for the assessee to rebut the evidence. That not having been bone the addition of ₹ 20,000 is warranted and the same is hereby confirmed. With regard to the payment of ₹ 63,849 made to Holiday-Inn Ooty, assessee had explained that the bill issued by the hotel was signed by one Sunny on behalf of M/s. Anand Associates. This according to the assessee would establish that bill was actually of M/s. Anand Associates but since the assessee had booked the rooms, bill had been raised in the name of the assessee. Assessing Officer had not found M/s. Anand Associates to be available at the address given by the assessee. However, a new address was given by the assessee, as indicated in the Assessment Order, of M/s. Anand Associates. It seems that Assessing Officer did not issue any notice at the new address given by the assessee of M/s. Anand Associates. The Assessing Officer made the addition on the ground that since bill had been raised in the nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not justified. It is not disputed that the rough notings indicate certain amounts of expenditure in connection with shooting of the film TAMANNA. Rough notings are the basis for the addition. In our view rough notings have to be considered in the light of the circumstantial evidence. Assessee has not incurred any expenditure of capital nature which could not be allowed as a deduction in computing her business income. There is no reason as to why the expenditure incurred by the assessee would not have been booked for claiming a deduction. Therefore the preponderance of probabilities are in favour of the assessee. In absence of corroborating material to support the finding of the Assessing Officer that the notings on loose papers represented the actual expenditure incurred by the assessee in connection with shooting of the film, we find no justification to sustain the addition. We may point out that even otherwise the addition of ₹ 1,04,099 may not be warranted as the addition could be made on the ground the expenditure have been made out undisclosed sources but at the same time corresponding deduction shall have to be made towards the cost of production of the film. TAMANNA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the purchase of the flat, the addition of ₹ 4,24,166 made by the Assessing Officer is unwarranted and is hereby deleted. We now deal with the additions relating to the Assessment year 1996-97. We have already dealt with the disallowance of motor car expenses, telephone expenses, unexplained shooting expenses, low withdrawals as also with deduction under section 80RR. The decision rendered in respect of the other Assessment year is also applicable for the year under appeal. The Assessing Officer is directed to give relief to the assessee on the same basis. The other issue involved in this appeal is relating to ₹ 1,08,500 on account of cash found at the time of search. Assessee had given an explanation at the time of search about the cash. It was explained that sum of ₹ 1,00,000 was out of the cash balance of M/s. Pooja Bhatt Production and the balance amount of ₹ 8,500 was stated belonging to her mother. The Assessing Officer has pointed out that before the start of the search assessee had stated that there was no cash lying in her house. She had also stated that the film was financed partly by the assessee and partly by his uncle Shri Mukesh Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count. It was contended before us that there was no point in not booking the expenditure if it were incurred as the assessee would have got a deduction of such an expenditure. It was therefore, contended that the addition may be deleted. The learned departmental representative on the other hand, relied upon the orders of the revenue authorities. In our considered view, the preponderance of probabilities are in favour of the assessee. The Assessing Officer has made the addition on the ground that the details in the loose papers suggest the expenditure incurred by the assessee on film 'Tamanna' under the banner Pooja Bhatt Production. This expenditure has not been found to be booked in the books of accounts. If the assessee had incurred the expenditure, there is no reason why such expenditure would not have been booked as the assessee in that case would have got a deduction in computation of the income. We, therefore, accept the explanation of the assessee in regard to the addition of ₹ 26,635 and delete the same. Next ground is relating to capital gain on sale of jewellery. On the date of the search, it was found that most of the jewellery disclosed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed by the revenue. The Assessing Officer accordingly made the addition towards the value of diamonds as undisclosed income of the assessee. The learned counsel for the assessee contended that the necessary evidence in the shape of the bill from M/s. Lalchand Dhalamall and Sons dated 15-1-1993 and their bill No. 717 dated 21-1-1993 had been filed with the Assessing Officer. Therefore, there was no justification for the addition. In our considered view, the matter requires verification afresh in the light of the explanation of the assessee. It may be verified by the Assessing Officer that the evidence produced before us had been filed during the course of the assessment proceedings. If the evidence is found to have been filed during the assessment proceedings, the Assessing Officer shall reconsider the issue in the light of the said evidence and explanation of the assessee. We now consider the additional ground of appeal raised by the assessee. Assessing Officer has not deducted the amount already assessed under section 143(3) in regular assessment in computing the undisclosed income of the assessee. It is clearly in contravention of section 158BB. Section 158BB provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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