2015 (12) TMI 368 - HC - Income Tax

Court upholds ITAT decision on block assessment additions, emphasizes evidence tied to search operation

Commissioner of Income Tax Versus Pooja Forge Ltd.

The High Court upheld the ITAT's decision to delete various additions made by the Assessing Officer in block assessment proceedings for the block period ... Additions in the block assessment - CIT(A) deleted the addition confirmed by ITAT - Held that:- Factually, the Revenue has not been able to dispute that the additions sought to be made by the AO were not on account of any material unearthed during the search but as a result of enquiry made subsequently. In the circumstances, the Court finds no legal infirmity in the order of the ITAT deleting the additions in question. - Decided in favour of the Assessee. Issues:- Interpretation of the scope and jurisdiction of the Assessing Officer in block assessment proceedings.- Deletion of specific additions in block assessment proceedings.Analysis:1. The appeal before the High Court was against an order passed by the Income Tax Appellate Tribunal (ITAT) for the block period 1986-87 to 1996-97. The Assessee, engaged in manufacturing and trading, had a search and seizure operation conducted in 1995, leading to proceedings under Section 158BC of the Income Tax Act, 1961. The Assessing Officer (AO) made various additions in the block assessment order, which were challenged by the Assessee.2. The additions made by the AO included personal expenses, alleged job work charges, payments to third parties, and lease rentals. The ITAT deleted these additions, stating that they could only be made in a regular assessment and not in block assessment proceedings since they did not arise from material unearthed during the search operation.3. The High Court framed questions of law regarding the scope and jurisdiction of the AO in block assessment proceedings and the deletion of specific additions. The Court referred to precedents, emphasizing that block assessment is limited to materials found during search or requisition and cannot substitute regular assessment. The Court cited judgments to support this principle, including CIT v. Ravi Kant Jain, which clarified the limited scope of block assessment.4. The Court noted that the additions sought by the AO were not based on material unearthed during the search but on subsequent inquiries. As a result, the Court found no legal infirmity in the ITAT's decision to delete the additions. The Court upheld the ITAT's order, ruling in favor of the Assessee and against the Revenue.5. Ultimately, the Court dismissed the appeal by the Revenue, affirming the ITAT's decision to delete the additions in question. The judgment highlighted the importance of adhering to the statutory provisions governing block assessment and the necessity for evidence to be directly linked to the search operation for valid additions in such proceedings.