TaxTMI 
TaxTMI 
2006 (2) TMI 231
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....s that rates prescribed under Central Act would be applicable to income of previous year." 2. In ground No.1, the Revenue has objected to the deletion of additions of Rs. 1,20,000 made by AO on account of estimation of income with reference to papers seized during the course of search. The brief facts of the case are that a search was carried out at the residential and business premises of Sh. Dilbagh Kumar Prop. of Laxman Das Chanan Das and its associate firms and family members, sister-concerns. Sh. Kewal Kumar, husband of the assessee is elder brother of Sh. Dilbagh Kumar. M/s Sunil Vegetable Company is carrying on its business activity at Plot No. 6-7, New Subzi Mandi, Kota. During the course of assessment proceedings it was stated that all the three firms, i.e., (I) M/s Laxman Das Chanan Das (II) M/s Gulshan Kumar Satish Kumar and (III) M/s Sunil Vegetables Co. are carrying on their business activities from the abovementioned address only and there is no other business place. It was stated that the business of Sunil Vegetables Co. was started from 1st April, 1992 and regular returns of income had been filed since then and Sh. Kewal Kumar the husband of the assessee stated t....
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....te the income earned by the assessee-firms in the early years also which have not been disclosed by the assessee because no papers have been found. Undisclosed income for the remaining years is estimated for Rs. 20,000 for each year. The estimation of income of earlier years got strength by the decision of apex Court of the country in the case of CST vs. H.M. Esufali H.M. Abdulali 1973 CTR (SC) 317: (1973) 90 ITR 271 (SC). In this case, while deciding the issue of estimation of suppressed sales on the basis of seized material gathered, it has been observed that, "......it was not possible for the STO to find not precisely the turnover suppressed. He could only make an estimate of the suppressed turnover on the basis of the material before him, so long as the estimate made by him is not arbitrary and has nexus with facts discovered, the same cannot be questioned. In the very nature of things the estimate made may be an overestimate or an underestimate. But, that is no ground for interfering with the best judgment." 2.4 The Supreme Court has also pointed out that the assessee cannot be permitted to take advantage of his illegal acts and that it was his duty to place all the ....
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....n para 2.2 of p. 3. The case was discussed at length with the Authorised Representative with number of citation given by him. I conclude that so far as the income for the back 6 years, i.e., financial years 1992-93 to 1997-98 is concerned, I totally disagree with the AO, in estimating earlier year's undisclosed income, when he has himself conceded the fact that no records whatsoever was found for these 6 years. He has also not brought on record any incriminating documents against the appellant. The contention raised by the Authorised Representative and the various authorities cited and relied upon in his reply, have full force, and no adverse view can be taken against the appellant. The citation given by the AO is not at all applicable to the appellant's case, since the block assessment are to be based on material found or evidence available on record on search. Addition or estimation of undisclosed income on mere conjectures or surmises without any material cannot be sustained in the eye of law. I, therefore, delete the additions of these 6 years, i.e., Rs. 1,20,000 from the total undisclosed income of Rs. 1,60,000 and so far as the income of the years 19....
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....ew that, the AO found the material only for 2 years and, therefore, the AO could estimate the income for 2 years and, therefore, deleted the estimate for rest of years i.e., Rs. 1,20,000 and sustained the additions of commission income for 2 years @ 20,000 per year at Rs. 40,000. The assessee is not in appeal before us for Rs. 40,000 addition. 6. After appreciation of facts, we are of the view that the assessment under Chapter XIV-B is a special procedure of assessment; what is assessed under Chapter XIV-B is only the undisclosed income which can be assessed only on the basis of evidence found as a result of search and the AO cannot apply a rule of thumb while making assessment under Chapter XIV-B and even if he has to estimate the undisclosed income, the same cannot be estimated on arbitrary basis, i.e., assessment has to be framed in the light of material that have come into possession of the AO during the course of the search. The assessee is assessed to income-tax by filing regular return of income, in the block period. The Annexs. A-106 and A-72 are pertaining to asst. yr. 1999-2000 and asst. yr. 2000-01, which reveal that some sales have been entered by the assessee but re....
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....0) 69 TTJ (Pune)(TM) 113 where it has been held that the AO is no doubt, empowered to estimate the undisclosed income earned by the assessee, but the estimate is possible only when there is material or evidence found during the search to unmistakably show that such income has been earned. The AO cannot presume that there must be some other material or evidence which is not found during the search and the assessee must have derived undisclosed income therefrom and further it was held by the Third Member agreeing with AM as under: "The very purpose of a search is to take the assessee by surprise and to assess his income on the basis of the evidence and materials found during the search. Once the rationale behind the search is kept in view it would be clear that the law presumes that the assets or materials found in the course of the search are exhaustive of the undisclosed income of the assessee. The AO is no doubt empowered to estimate the undisclosed income earned by the assessee but the estimate is possible only when there is material or evidence found during the search to unmistakably show that such income has been earned. The AO cannot presume that there must be some ot....
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....the undisclosed income under Chapter XIV-B has to be determined on the basis of evidence, documents, material found during the course of search, and it is beyond power of AO to review assessments completed unless some direct evidence comes to knowledge of Department as a result of search and AO cannot compute undisclosed income on estimated basis, presumptions and surmises and the AO cannot apply a rule of thumb while estimating the undisclosed income, i.e., he cannot estimate the undisclosed income on an arbitrary basis and he can do so only on the basis of material which had come into his possession: 1. Jaya S. Shetty vs. Asstt. CIT (1999) 64 TTJ (Mumbai) 551 : (1999) 69 ITD 336 (Mumbai); 2. Kapoor Sons Steels (P) Ltd. vs. Asstt. CIT (2001) 119 Taxman 113 (Chd); 3. Smt. Sheela Aggarwal vs. Dy. CIT (1999) 106 Taxman 227 (Del); 4. CIT vs. Ravikant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del); 5. Smt. Usha Tripathi vs. CIT (2001) 166 CTR (All) 77 : (2001) 249 ITR 4 (All); 6. CTR vs. Dr. M.K.E. Memon (2001) 168 CTR (Bom) 184 : (2001) 248 ITR 310 (Bom); 7. CIT vs. Rajendra Prasad Gupta (2001) 166 CTR (Raj) 83 :....
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....s, as regards sustenance of this addition by the learned CIT(A). As regards, estimation of Rs. 1,20,000 pertaining to asst. yr. 1992-93 to asst. yr. 1998-99, we are convinced with the arguments of counsel for the assessee and the cases relied upon by him in that the AO does not have any material or evidence with him to make the assessment of undisclosed income and the undisclosed income cannot be computed on estimate basis on presumptions and surmises and assessment under Chapter XIV-B is different from the normal assessment, Therefore, the AO in the present case has framed the assessment while computing the undisclosed income for asst. yrs. 1992-93 to 1998-99 without any material in possession and purely on conjectures and surmises. Hence the learned CIT(A) has rightly deleted the addition of Rs. 1,20,000. Thus, ground No. 1 of the Revenue is dismissed. 12. In ground No.2, the Revenue has challenged the deletion of surcharge under s. 113 of the Act. The counsel for the assessee has argued that the search in the present case was carried on 7th April, 2000, i.e., prior to 1st June, 2002. Finance Act, 2002 had brought an amendment in s. 113 and surcharge was levied on block assess....