TMI Blog2006 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... is in accordance with the law as we have discussed hereinabove. We agree with the reason given by the CIT(A) and the Tribunal that since there was no evidence found during the search for the Assessing Officer to make the said additions and the relevant expenses/income had been duly reflected and disclosed in the course of the assessment proceedings by the assessee, the same could not be said to be undisclosed income of the assessee and assessed in proceedings under Chapter XIV-B of the Act. With regard to deletion of Rs. 1 lakh, as being the amount receivable from M/s. D. S. Imports, the deletion was justified since the addition of Rs. 1 lakh had been confirmed in the case of M/s. Standard Brands. Pertinently the CIT(A) also held that the Assessing Officer would be justified in taking appropriate action in the eventuality of the said amount being deleted from the assessment of M/s. Standard Brands. We also agree with the reasoning of the Tribunal with regard to deletion of the addition of Rs. 25 lakhs towards estimated unexplained investment in immovable property in proceedings under Chapter XIV-B of the Act. The respondent has relied on the proviso to section 142A to contend that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tenanted portion. The Assessing Officer notes that the assessee s reply to the notice under Section 158BC of the Act was silent on this payment. Consequently, the sum which was claimed as a revenue expenditure was disallowed and added back to the income of the assessed. 4. In respect of the addition made as concealed income of Rs. 4 lakhs for the assessment year 1994-95, the Assessing Officer had justified the addition on the ground that one Sh. Anil Gupta and Sh. Q. R. Gupta the purchasers from the assessee had agreed to make payment of Rs. 2 lakhs each to a tenant, Sh. Amitabh Bhattacharya for vacation of the tenancy premises. On enquiry it was found that the payments were in fact credited in the assessee's account and the said amount of Rs. 4 lakhs was utilised by the assessee for making payment to one Sh. Sukhbir Saran Aggarwal. The Assessing Officer held that the monies which were meant to be used as charges for getting the property vacated as per the sale deed had been used to square off past dues of the assessee owed to Mr. Sukhbir Saran Aggarwal. The Assessing Officer observed that there was no account of Sh. Amitabh Bhattacharya in any of the years and that as a matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in self-occupied portion on an estimated basis in the assessment year 1997-98. 9. The assessee appealed to the Commissioner of Income-tax (Appeals) (for short CIT (Appeals) ) against the aforesaid additions made by the Assessing Officer in her order dated March 31, 1999. It was argued that there was no incriminating material found or detected during the course of search and, therefore, there was no concealed income as defined under section 158B(b) of the Act. The assessee also argued that the additions in the block assessment were illegal as the amounts/assets stood disclosed in the regular books of account and were included in the profit and loss account and balance-sheet filed along with the regular return of income and consequently the same items could not be covered by the notice issued under section 158BC of the Act. It was argued that in the block assessment under section 158BC, undisclosed income detected on the basis of the material found during the course of search alone can be taxed. The assessee placed reliance on the decision of the Gujarat High Court reported in N. R. Paper and Board Ltd. v. Deputy CIT [1998] 234 ITR 733. It was also argued that block assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer had not doubted the genuineness of the payment. Since the said expense was already reflected in the regular assessment proceedings the addition was held to be outside the purview of section 158BC of the Act. 12. Similarly, in relation to the addition of Rs. 4 lakhs for the assessment year 1994-95 the Commissioner of Income-tax (Appeals) found that the payments received by the assessee from the buyers Sh. Kimat Roy Gupta (it is unclear whether the name is Kimat Roy Gupta or Qimat Rai Gupta) and Sh. Anil Gupta were entirely towards consideration for sale of property and that these receipts were shown by the assessee in the regular assessment proceedings which were duly completed. The Commissioner of Income-tax (Appeals) also found upon verification that the payment made to Sh. Amitabh Bhattacharya for vacating the tenanted portion was duly reflected in the books of Sh. Kimat Roy Gupta and Sh. Anil Gupta and that the assessee had nothing to do with the said payment. 13. The Commissioner of Income-tax (Appeals) held that no evidence having been found in the search to suggest that any amount had been paid by the assessee to Sh. Amitabh Bhattacharya, the addition made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that it had constructed one room and the investment in respect thereof was duly disclosed in the books of account for an amount of Rs. 4,12,879/-. In the absence of any material being found during the search, no addition could be made under section 158BC towards unexplained investment in the property. The Commissioner of Income-tax (Appeals), however, held that the matter regarding reference to the valuation cell and unexplained investment, if any, can be considered in the regular assessment proceedings. He consequently deleted the addition of Rs. 25 lakhs for the assessment year 1997-98 without prejudice to any action that the Assessing Officer may take during any regular assessment proceedings under section 143(3)/144/147 of the Act. 18. Thus, the Commissioner of Income-tax (Appeals) decided the appeal in favour of the assessee on November 16, 2000. 19. Against the order of the Commissioner of Income-tax (Appeals) dated November 16, 2000 the Revenue preferred an appeal before the Tribunal which has been dismissed by the impugned order. 20. The Tribunal agreed with the findings of the Commissioner of Income-tax (Appeals) in relation to the addition of Rs. 4 lakhs in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lastly, coming to the deletion of addition of Rs. 25 lakhs on account of estimated unexplained investment in immovable property, the Tribunal held that the initial onus lay upon the Revenue to show that the assessee had made investment in property over and above what was disclosed in his accounts. The search did not reveal any unexplained investment. The Tribunal held that without any material or basis no estimates could be made particularly since the Assessing Officer was not an expert. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) in relation to this aspect of the matter as well. 24. Before us learned counsel for the appellant has once again tried to justify all the four additions made by the Assessing Officer during the block assessment proceedings. 25. We may at this stage, quote the relevant extracts from section 158BA and section 158BB of the Act: 158BA. (1).... Explanation.-For the removal of doubts, it is hereby declared that- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block p riod shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c); (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. 26. Assessment proceedings undertaken under Chapter XIV-B are only in respect of undisclosed income that is that income which has not been, or would not have been disclosed and which has been uneart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other High Courts dealing with the relevant provisions of the Act. In N. R. Paper and Board Ltd. v. Deputy CIT [1998] 234 ITR 733, the Gujarat High Court considered the scope of Chapter XIV-B of the Act. In this case the assessee had challenged the issuance of notice under section 143(2) of the Act on the ground that the relevant assessment year was a part of the block period in respect of which a notice under section 158BC had already been issued and assessment concluded. It was contended that no further assessment proceedings could be undertaken in respect of the same assessment year for which block assessment proceedings have already been concluded. The High Court by a detailed and considered judgment came to the conclusion that the assessment of undisclosed income is altogether a different matter from regular assessments. Since we are in agreement with the view taken by the High Court in the said case, we quote from the said decision as follows: Under section 158BB of the Act, for computing the undisclosed income of the block period, the Assessing Officer has to compute the total income of the relevant previous years on the basis of the evidence found as a result of search or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee, the evidence obtained on the specific points and all relevant material which he has gathered assessee the total income or loss and determines the sum payable thereon as per that assessment. This exercise under section 143(2) and (3) for regular assessment stands in contrast to the exercise of the Assessing Officer under section 158BB read with section 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of the search conducted by the authorised officer under section 132 of the Act. Therefore, there is no merit in the contention raised on behalf of the petitioners that once the petitioners-assessees total income of the previous year falling in the block period for which regular assessment is pending, is computed while computing the aggregate of the total income of the previous years falling in the block period under section 158BB(1) in the process of finding out the undisclosed income, there would be a second assessment of the total income if the regular assessment of that previous year is allowed to proceed under section 143(3) of the Act. These provisions operate e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a [2001] 248 ITR 350 (Raj), the Revenue challenged the decision of the Tribunal whereby the Tribunal had not accepted resort to a process of estimation by the assessing authority on the ground that the assessing authority had not examined the material that had come in his possession during the course of search while resorting to best judgment assessment. It was the contention of the Revenue that there was no prohibition against making a best judgment assessment under section 158BB, since the Explanation to section 158BB permitted resort to the provisions of sections 144 and 145 of the Act. While agreeing with the contention of the Revenue that the Assessing Officer had jurisdiction to resort to best judgment assessment in proceedings under section 158BB, the High Court proceeded to observe as follows: However, under the scheme of the provisions for block assessment, it is apparent that it relates to assessment of 'undisclosed income' of the assessee excluding the income subjected to regular assessment in pursuance of the returns filed by the assessee for such period. It is also apparent from the perusal of section 158BB that the returns are also required to be filed in purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, in Malayil Bankers v. Asst. CIT [1999] 236 ITR 869, the petitioner had challenged the assessment on the ground that the Assessing Officer had no jurisdiction to complete the assessment under section 143(3) after the issuance of a notice _under section 158BC of the Act. The petitioner had relied on two decisions, one from the Kerala High Court in the case of N. T. John v. CIT [1997] 228 ITR 314 and another of the Punjab and Haryana High Court in the case of Raja Ram Kulwant Rai v. Asst. CIT [1997] 227 ITR 187. The court did not agree with the contention of the petitioner and held as follows: Chapter XIV-B of the Act provides a special procedure for assessment of search cases. Section 158B defines block period as well as undisclosed income. Section 158BA deals with the assessment of undisclosed income as a result of search. This provision empowers the Assessing Officer to proceed to assess the undisclosed income in accordance with the provisions of this Chapter where there was a search under section 132. Sub-section (2) of section 158BA states that the total undisclosed income relating to the block period shall be charged to tax. Therefore, by a plain reading of section 158BA an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in such cases simple and effective would become unwieldly and protracted. The decision cited by learned counsel for the petitioner reported in Kelappan Nair v. Payingaten [1961] KLT 527, held that the Explanation does not explain or add to the scope of the original section. The Explanation in this case is inserted probably in the light of the two decisions referred to by learned counsel for the petitioner and for removal of doubts. It is the declaration of the intention of the Legislature as to the scope of section 158BA. 32. We agree with this view of the Kerala High Court. The two decisions in N. T. John v. CIT [1997] 228 ITR 314 (Ker) and Raja Ram Kulwant Rai v. Asst. CIT [1997] 227 ITR 187 (P H) have been critically examined by the Gujarat High Court in the earlier N. R. Paper and Board Ltd.'s case [1998] 234 ITR 733, and we concur with the decision of the Gujarat High Court that these two decisions do not correctly interpret the law. 33. We may also refer to a decision of the Gauhati High Court in Dr. Mrs. Alaka Goswami and Dr. Anil Kumar Goswami v. CIT [1004] 268 ITR 178. In the course of this judgment, the High Court observed as follows: Chapter XIV-B of the Act lays d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate that they constituted concealed income of the assessee. In that case the Tribunal had upheld the order of the Commissioner of Income-tax (Appeals) on the same ground. This court also affirmed the said view. This court held that since no incriminating material was found in the course of search, the Assessing Officer could not resort to the provisions of Chapter XIV-B of the Act to tax what was said to be undisclosed income or concealed income of the assessee. We find that the said decision consequently applies in the facts of the present case as well. 35. In so far as the deletion of additions of Rs. 4 lakhs in the assessment year 1993-94, Rs. 4 lakhs in the assessment year 1994-95 and Rs 2,92,OOO for the assessment year 1997-98 is concerned, the same are pure questions of fact, on which there are concurrent findings given by the Commissioner of Income-tax (Appeals) and the Tribunal. 36. We find that both the Commissioner of Income-tax (Appeals) and the Tribunal have duly considered and appreciated the relevant facts and found that the said additions were liable to be deleted. Their finding is well supported with reasoning and is in accordance with the law as we have discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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