TMI Blog2017 (12) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions, it appeared to the Tribunal, pertained to the regular business process of the assessee which stood disclosed before the department. It held that simply because some transactions were recorded in some of the seized documents, per se, they do not become undisclosed transactions. The assessee had explained the expenditure as out of huge cash withdrawals made by him. On that basis the Tribunal was of the opinion the transactions under consideration formed part of the regular books of accounts of the assessee and therefore this addition was deleted. Revenue was unable to demonstrate before us that this opinion of the Tribunal, on the facts noted by it, was perverse. We accordingly answer this question and all others related to it in favour of the assessee. - ITA No. 222 of 2000 - - - Dated:- 7-12-2017 - Aniruddha Bose And Arindam Sinha, JJ. Mr. M.P. Agarwal, Adv. Mr. S.N. Dutta, Adv. ..for the appellant Mr.J.P. Khaitan Sr. Adv. Mr. Saumya Kejriwal Adv. Mr. G.S. Gupta, Adv. for the respondent JUDGMENT Arindam Sinha, J. This appeal against order dated 31st December, 1999 passed by the Income Tax Appellate Tribunal E Bench, Kolkata in IT(SS)A no.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial questions of law involved in the case were framed. (a) Whether on the facts and in the circumstances of the case the I.T.A.T. was justified in deleting the addition of ₹ 1,83,923/- for the financial years 1994- 95, 1995-96 and 1996-07 on account of jewellery holding that the same belonged to the 3 wives of the assessee and relying on the 3 returns filed by the 3 wives under the presumptive Tax Scheme but after the completion of block assessments whereas the purchase bills are in the name of the assessee along? (b) Whether on the facts and in the circumstances of the case the I.T.A.T was justified in disapproving the proposed addition of ₹ 22,39,000/- on a/c of undisclosed investment in House Property on the ground that there is no material in this regard. The observations of the I.T.A.T is perverse in vies DVO s report estimating costs of constructions at ₹ 8,31,026/- for Assessment Year 1995-06 and apparent from the balance sheet filed by the assessee and whether the said decision of the I.T.A.T. is at all correct in view of the Judgment reported in 238 ITR (Cal)? (c) Whether on the facts and in the circumstances of the case the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of his powers for block assessment and reserve the balance for making regular assessment thereafter. He must use all his powers during the block assessment so that the computation is complete once for all and each rupee of total income which is in excess of the contingencies provided for in (a) to (f) to sub-section (1) of section 158BB gets taxed as undisclosed income. The regular assessment relates only to the residuary duty of regular assessment which still vests in the Assessing Officer after completion of the block assessment. If block assessment is completed appropriately, in the manner indicated above, then and in that event, by the time such process is over the Assessing Officer will have concluded all his jobs leading up to and included in section 143(3) which relate to computation, and all that will remain will be determination of the sum payable by the assessee on regular assessment on the basis of such computation concluded in the block period. On appeal, the above view was rejected by a co-ordinate Bench of this Court, in Deputy CIT vs. Shaw Wallace and Co. Ltd., reported in (2001) 248 ITR 81, on the following reasoning. Considering the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he returns for assessment years 1997-98, 1998-99 i.e., much after the date of search. Mr. Agarwal submitted, for the purpose of block assessment it was not necessary for Revenue to rely either on sub-section(4A) of section 132 or section 292C, the latter inserted by Finance Act, 2007 with retrospective effect from 1st October, 1975. The assessee had failed to explain the receipts in respect of the jewellery and the amounts therein were included as undisclosed income under section 158B(b). The assessee had opportunity to explain under the provisions of sub-section (3) of section 158BA and clause (d) in subsection (1) of section 158BB. Purported explanation was that though the receipts were in the assessee s name they were in respect of jewellery paid by and belonging to his wives. Such an explanation is not possible under the above provisions. The amounts mentioned in the receipts, being in the name of the assessee, were not disclosed in the assessee s accounts or documents and as such were correctly included as undisclosed income in the block assessment under Chapter XIVB of the Act. Though such an explanation might be offered under section 69 but the provisions thereof were onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chapter XIV-B, an obsolete Chapter of the Act. The said Chapter provided for special procedure for assessment of search cases but by itself was not a complete code. Section 158BH made other provisions of the Act applicable to the Chapter. That would include opportunity of being heard as under sub-section(3) of section 142, made expressly applicable by clause(b) in section 158BC. This opportunity cannot be confined to an endeavour to explain in relation to the books of accounts and documents of the assessee himself. The assessee could well seek to demonstrate and explain that in fact the income alleged to be undisclosed is neither income of the assessee nor undisclosed in the hands of another. He also relied on the proviso under clause (i) in sub-section (1) of section 132B to submit that while the amount of liability determined, on completion of assessment under Chapter XIV-B, could be recovered from seized assets but under the proviso a person concerned could make an application for release of such asset. According to him this militates against the interpretation sought to be given by the Revenue that an explanation regarding block assessment pursuant to search is confined to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andhra Pradesh). This judgment of the High Court of Andhra Pradesh, Mr. Khaitan submitted, is directly on the point. The block period in this case was 1986-87 to 1996-97. He relied on paragraph 10 which is extracted below: From a perusal of this, it becomes clear that the items, such as, money, bullion, jewellery and other residuary items, which constitute the wealth of income, would be treated as an undisclosed income, provided that such items were not disclosed for the purpose of the Act. It means such items were not the subject matter of any returns filed under the Act. Once the items mentioned in the definition were the subject matter of the returns filed under the Act, they cannot be treated as undisclosed income. Another aspect is that the returns need not be those filed by the concerned assessee alone. The provision does not indicate or that the returns insist covering those items must be that of the concerned assessee alone. It is too well established that the provisions of a taxation law, that too of the punitive nature, need to be interpreted in a strict manner. The intention of the legislature is to ensure that no undue hardship is caused to the assessee nor an as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and further that the sum is disclosed income of another, as in this case, cannot be ignored by the Revenue on the contention that such an explanation is not possible under the Chapter. Mr. Khaitan s submission regarding the assessee s opportunity of being heard made expressly applicable by clause (b) in section 158BC and his reliance also on the proviso under clause (i) in sub-section (1) of section 132B, in the matter of an application made by a person concerned for release of seized assets, bear substance. In Smt. Tara Devi Aggarwal (supra) the contention of the assessee was it cannot be said that where an assessee had been assessed to tax it was prejudicial to the interest of Revenue on the ground that no assessment could have been made in respect of income of which a voluntary return was made. While rejecting such contention, in the context of section 33B of Indian Income-tax Act, 1922, the Supreme Court said, inter alia, This contention in our view is unwarranted by the language of section 33B. The words of the section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture stated that in course of search no explanation was offered except saying this related to business expenditure of the assessee. The amounts found had not been entered in the respective cash books. The search having been conducted on 6th/7th August, 1996, the period 1st April, 1996 to 7th August, 1996 was included in the block assessment period. Return for financial year 1995-96 was due to be filed on 31st August, 1996. The cash book of the assessee was made up to 30th April, 1996 as on dates of search. The assessee had stated before the Tribunal that he filed copies of his regularly disclosed bank accounts which clearly showed huge cash withdrawals for making the payments. All such bank accounts were stated to be old accounts and were part of the regular accounts of the assessee for past years, the returns in respect of which had duly been submitted prior to the search. The Tribunal was of the view, inter alia, that if the recordings of the regular books of accounts be not up to date, that does not mean the entries, which can be verified from other primary books, would relate to undisclosed income of the assessee for the purpose of block assessment. The transactions, it a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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