2002 (10) TMI 263 - AT - Income Tax

Search-based block assessment of undisclosed income: ad hoc group disclosure can be reduced using verified seized-material working u/s158BC

In a block assessment following search and seizure, the dominant issue was whether undisclosed income could be assessed merely on the ad hoc amount ... Determination of undisclosed income on the basis of evidence found during the search - Search And Seizure - block assessment - HELD THAT:- A search and seizure operation was conducted simultaneously in the group cases related to the assessee and considering the various documents found during the course of search from the possession of different assessees, there was apparently no alternative but to compute the undisclosed income of the entire group in a consolidated manner and declare the same in the hands of different assessees belonging to one group on ad hoc basis. This is also evident from the fact that the assessee himself returned his undisclosed income for the block period on ad hoc basis without giving any break up of the said amount. In such circumstances, when a detailed working made subsequently by the assessee of undisclosed income revealed that the total undisclosed income assessable in the hands of the Assessee was lower than the returned income, we are of the opinion that the same has to be assessed at such lower amount going by the concept of real income especially when the said working was verified and found to be correct by the Assessing Officer. Keeping in view this position clearly emanating from the relevant provisions, the contention of the Assessee in the block return binds him as a result of second proviso to clause (a) of section 158BC and no reduction in the same is permissible appears to be far fetched and we find it difficult to accept the same. As such considering all the facts and circumstances of the case and for the reasons given herein above, we are of the considered opinion that the undisclosed income of the assessee for the block period finally determined only was chargeable in the block assessment and Revenue's case of assessing the same relying merely on the income returned by the Assessee to that extent is not tenable in law. In that view of the matter, we hold that the learned CIT (A) was fully justified in directing the Assessing Officer to adopt the undisclosed income finally determined as against the income originally returned by the Assessee. His impugned order on this issue is therefore upheld. In the result, the appeal of the Revenue as well as the Cross Objection of the Assessee are dismissed. Issues Involved:1. Adoption of revised undisclosed income at Rs. 6,60,633 instead of Rs. 7,00,000.2. Deletion of addition of Rs. 42,500 on account of unexplained investment in shares.Summary:Issue 1: Adoption of Revised Undisclosed IncomeThe Revenue challenged the CIT(A)'s direction to adopt the undisclosed income revised at Rs. 6,60,633 instead of the originally returned Rs. 7,00,000. The Assessee had initially declared an undisclosed income of Rs. 7.00 lakhs but later revised it to Rs. 6,60,633 during assessment proceedings. The Assessing Officer verified and found this revised figure correct but made an additional unwarranted addition of Rs. 42,500 to exceed the returned income. The CIT(A) directed the Assessing Officer to adopt the revised figure of Rs. 6,60,633, considering the provisions of Chapter XIV-B, which provide for the determination of undisclosed income based on evidence found during the search. The Tribunal upheld the CIT(A)'s decision, stating that the undisclosed income should be assessed based on the actual evidence and not merely on the income declared in the return. The Tribunal emphasized that the second proviso to clause (a) of section 158BC does not prevent the Assessee from disputing the returned income during assessment or appellate proceedings.Issue 2: Deletion of Addition of Rs. 42,500The Assessing Officer added Rs. 42,500 to the Assessee's income on account of unexplained investment in shares, based on the Assessee's statement recorded u/s 132(4). The Assessee contended that the investment was made from withdrawals recorded in rough diaries, which had already been subjected to tax. The CIT(A) deleted the addition, accepting the Assessee's explanation. The Tribunal upheld the CIT(A)'s decision, noting that the Assessing Officer had verified and found correct the Assessee's working of undisclosed income, which included the withdrawals used for purchasing the shares. The Tribunal concluded that the Assessing Officer was not justified in making the addition based solely on the Assessee's statement without disputing the explanation provided.Conclusion:The Tribunal dismissed the Revenue's appeal and the Assessee's cross-objection, upholding the CIT(A)'s decisions on both issues. The undisclosed income was correctly determined at Rs. 6,60,633, and the addition of Rs. 42,500 for unexplained investment in shares was rightly deleted.