2010 (5) TMI 484 - AT - Income Tax

Tribunal modifies undisclosed investment amount in Income Tax Act appeal

The Tribunal partly allowed the appeal, upholding the validity of the assessment proceedings under sections 158BC and 158BD of the Income Tax Act. The ... Block assessment - undisclosed income – Search - key of the property and the property in was admittedly belonging to the assessee – Assessee could not explain the source of investment – no dispute that investment in the property was also not shown to the Revenue Department prior to the search - assessee explained that investment in property after inheriting cash amount through the Will - assessee in his statement did not explain the execution of Will or inheritance of any amount through the Will - Will is unregistered - authorities justified in making the addition on account of undisclosed income in the block period - investment was also not shown to the Revenue Department prior to the search and the assessee has not established that he had any intention to show the above investment to the Revenue Departmentr. Admittedly, reference to the DVO is made after the search on 18-10-2005 to make the valuation of the property. No evidence is found in the course of search or requisition or in post search enquiries that the assessee made any further investment in the property in question. The DVO filed his report of calculation on 25-11-2005. Thus, the reference to the DVO and his report of valuation cannot be treated as evidence found during the search or requisition u/s 132A of the IT Act. - orders of the authorities modified, restrict the addition to Rs. 4 lacs as against Rs. 15,20,000 made by the authorities – Appeal partly allowed Issues Involved:1. Validity of the assessment made under section 158BC read with section 158BD of the Income Tax Act.2. Legitimacy of the addition of Rs. 15,20,000 as undisclosed investment in the property.Issue-wise Detailed Analysis:1. Validity of the assessment made under section 158BC read with section 158BD of the Income Tax Act:The assessee challenged the validity of the assessment on the grounds that the notice issued under section 158BD/158BC was illegal because it did not mention the status of the assessee. The assessee also argued that the Assessing Officer did not record satisfaction as required under section 158BD of the IT Act. The Tribunal observed that the block assessment order in the case of Shri Devendra Gajendranath Chaturvedi clearly recorded the satisfaction of the Assessing Officer and the seized material was handed over to the Assessing Officer of the assessee. The Tribunal noted that the assessee did not challenge the defect in the notice and initiation of proceedings before the Assessing Officer or the Commissioner of Income Tax (Appeals). The additional ground raised was not purely legal in nature and involved investigation of facts not on record. Consequently, the Tribunal rejected the request for admission of the additional ground of appeal.2. Legitimacy of the addition of Rs. 15,20,000 as undisclosed investment in the property:The Tribunal examined the facts and submissions regarding the addition of Rs. 15,20,000 as undisclosed investment. The assessee admitted ownership of the property but failed to explain the source of investment. The property was not reflected in the balance sheet or disclosed to the Revenue Department prior to the search. The assessee claimed that the property was purchased for Rs. 4,00,000 and the funds were inherited through a Will, which was not registered, and the affidavits of the witnesses to the Will were not filed. The Tribunal found the Will to be doubtful and not reliable as evidence. The reference to the Departmental Valuation Officer (DVO) for valuation of the property was made after the search, and no evidence of further investment was found during the search or post-search enquiries. The Tribunal concluded that the addition of Rs. 15,20,000 could not be justified based on the valuation report alone. However, the assessee failed to explain the source of investment of Rs. 4,00,000, which was not disclosed to the Revenue Department. Therefore, the Tribunal modified the addition to Rs. 4,00,000 as undisclosed income within the block period.Conclusion:The appeal was partly allowed. The Tribunal upheld the validity of the assessment proceedings under section 158BC read with section 158BD and restricted the addition to Rs. 4,00,000 as undisclosed income, modifying the original addition of Rs. 15,20,000.