TaxTMI 
TaxTMI 
2008 (10) TMI 287
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....ccounts prepared tentatively on the date of search was of Rs. 9,42,475. In response to the notice under s. 158BC of the Act, the assessee filed return declaring undisclosed income at nil. 3. In the course of assessment proceedings, it was noted by the AO that certain documents in the nature of Jamakharch Panas were found and seized in the course of search carried out at the premises of one Shri Prakash Salunkhe. These documents were owned by M/s Ranka Jewellers, Ravivar Peth, Pune. These papers showed a ledger account of one Kirti. According to this account. M/s Ranka Jewellers had made purchases from Kirti against which cash payments were made. The total sales made by Kirti to M/s Ranka Jewellers amounted to Rs. 46,26,668 in asst. yr. 2001-02, Rs. 67,50,000 in asst. yr. 2002-03 and Rs. 45,47,400 in asst. yr. 2003-04. The copies of these accounts were given to the assessee on 29th Sept., 2004. The assessee, vide letter dt. 11th Oct., 2004, denied any relation with such transactions. It was also submitted that such transactions relate to some other person unknown to it. Faced with this explanation, the AO asked M/s Ranka Jewellers to furnish the complete name and address of the p....
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....the assessee. Reliance was placed on provisions of s. 158BB which provides that addition can be made only on the basis of the materials found in the course of search. Reliance was also placed on the various decisions of the Tribunal in support of the proposition that the addition can be made in the block assessment proceedings only on the basis of material found in the course of search at the premises of the assessee. However, the learned CIT(A) confirmed the additions made by the AO on the basis of material seized from the premises of Shri Prakash Salunkhe. Apart from confirming the additions, the learned CIT(A), after going through the transactions in the seized material and seeking the remand report from the AO, enhanced the unaccounted income in respect of unaccounted investment from Rs. 2 lakhs to Rs. 16,36,762. Regarding the gross profit addition of Rs. 17,916, the learned CIT(A) restored the matter to the file of the AO for fresh adjudication after making certain verifications. It was also directed that if the claim of the assessee was found to be correct on factual aspects then the addition would stand deleted. Aggrieved by the said order of the learned CIT(A), the assessee....
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....l be aggregate of the total the aggregate of the total income of the previous income of the previous years years falling within the falling within the block block period computed, in period computed, in accordance with the accordance with the provisions of Chapter IV, on provisions of this Act, on the basis of evidence found the basis of evidence found as a result of search or as a result of search or requisition of books of requisition of books of account or documents and account or other documents such other materials or and such other materials or information as are available information as are available with the AO, as reduced by with the AO and relatable to the aggregate of the total  ....
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....Hon'ble Supreme Court in the case of H.H. Maharajadhiraja Madhav Rao Scindia Bahadur of Gwalior & Ors. vs. Union of India (1971) 1 SCC 85 as dominant and immediate connection. It is the mandate of the amended provisions that the materials or information available with the AO must relate to such evidence. The words 'such evidence' refers only to the evidence found in the course of search at the assessee's premises. Therefore, in our opinion, such other material must be relatable to evidence found in the course of search at the premises of the assessee itself. In other words, it means that there must be a direct nexus between the material found in the course of search at the assessee's premises as well as other material gathered by the AO from extraneous source. If there is no such nexus than the addition would not be justified. 11. In the present case, admittedly, no incriminating material was found relating to the alleged unaccounted sales of jewellery by the assessee to M/s Ranka Jewellers in the course of search carried out at the premises of the assessee. The material relied upon by the AO was found during the search at the premises of the third party namely, Prakash Salunkhe....