TaxTMI 
TaxTMI 
2004 (1) TMI 630
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.... (iii)The ld. Assessing Officer erred in making an addition of Rs. 50,000 on account of repairs carried out in the house. The loans stated to be taken for repairs were separately added to the income and this resulted in addition of the same amount twice. (iv)The ld. Assessing Officer erred in making an ad hoc addition of Rs. 25,000 on account of investment in shares without bringing any specific evidence as to the investment on record. (v)The ld. Assessing Officer erred in not accepting the explanation regarding cash deposit in the bank account and thereby erred in making an addition of Rs. 1,89,462." 3. An additional ground of appeal has been raised vide letter dated 28-5-2003 which is as under: "On the facts and circumstances of the case and in law, the learned Assessing Officer erred in making addition on account of loans and interest thereon of Rs. 87,300 in the block period in spite of the fact that no incriminating material was found relating to these items during the search and these transactions of loans and interest thereon were duly disclosed in the regular returns filed before the date of search and as such this type of addition is outside the purview of Chapter XIV....
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.... ground raised was bona fide and that the same could not have been raised earlier for good reasons. While permitting the assessee to raise an additional ground, the Appellate ACIT should exercise his discretion in accordance with law and reason." It may be mentioned that the powers of the ITAT regarding admission of additional ground of appeal or even admission of a new issue raised for the first time have been clearly defined in the Supreme Court decision in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 . Further, relevant cases on this issue are the Bombay High Court decision in the case of Baby Samuel v. Asstt. CIT [2003] 262 ITR 385 and the Bombay High Court Full Bench decision in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 . Since the additional ground of appeal raised by the assessee raises purely a legal issue which can be decided on the basis of material already available on record, the additional ground is admitted and will be dealt with on merits in due course. 6. The ground Nos. 1 and 2 can be dealt with simultaneously as they are inter-connected. Search and seizure action under section 132(1) was carried out at the resi....
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..... For all the preceding assessment years i.e. 1986-87 to 1994-95, the Assessing Officer resorted to certain estimates on household expenses as per the details given at page 6 of the assessment order. On the above basis, the cumulative addition of Rs. 2,39,100 was made which is spread over different assessment years falling within the block period. The ld. counsel invited our attention to the notings in the exercise book, copy of which is compiled at pages 41 to 48 of Paper Book - II. The ld. counsel pointed out that expenses on clothing and medical treatment have been duly recorded in the exercise book and that it contains full record. The ld. counsel also contended that a block assessment under section 158BC can be framed only on the basis of some incriminating material/document and undisclosed asset found during the course of search. Though no evidence has been found during the course of search, the Assessing Officer erred in making the addition by merely estimating the household expenses resorting to guesswork. It is pointed out that in the exercise book, the expenses of only four months have been recorded whereas the Assessing Officer has estimated household expenses for the en....
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.... were higher than that shown by the assessee, the onus was on the Department to show that it was so: that in the absence of any material brought on record the assessee's version of household expenses could not be discarded and therefore the addition made had to be deleted. (iv) Samrat Beer Bar v. ACIT [2000] 75 ITD 19 (Pune) (TM) - In this case a diary was found during search which contained details of suppressed sales for a particular period. Based on that, the Assessing Officer estimated similar suppression for the remaining period in the block period and made additions. Deleting such additions, the Tribunal held that in the instant case the only material available was the diary which contained entries for a particular period relating to sale of liquor not disclosed to the Department; that there was no indication anywhere in the seized record to show that even in respect of the other periods, the assessee was maintaining such a diary which was for some reason or the other not found in the course of the search. It was observed that the very purpose of search is to take the assessee by surprise and to assess his income on the basis of the evidence and material found during search....
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....e estimates for the entire block period. For this proposition, the ld. CIT DR relied on the ITAT, Pune (TM) decision in the case of Khopade Kisan Rao Manik Rao v. Asstt. CIT [2000] 74 ITD 25. The ld. CIT DR specifically invited our attention to the observations made by the ld. Third Member, which are reproduced below from the Headnote: "Section 158BC(b) provides the manner of assessment of undisclosed income. It provides that the assessment is to be made in the manner laid down in section 158BB and the provisions of sections 142, 143(2) & (3) and 144 shall so far as may be apply. Section 158BB provides that the undisclosed income of the block period shall be computed in accordance with the provisions of Chapter IV on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. Reading section 158BB and section 158BB(b) in conjunction with each other, it becomes abundantly clear that the Assessing Officer has to compute the undisclosed income in accordance with the provisions of Chapter IV and that assessment is to be based on the evidence found as a result of....
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....d first we deal with ground No. 2 which pertains to addition on account of estimation of household expenses, since our finding with regard to this ground will have an impact on the first ground of appeal which agitates the addition of Rs. 90,000 on account of unexplained cash found during the course of search. It must be mentioned that the assessment which is known as block assessment under section 158BC of the IT Act is in respect of the undisclosed income of the assessee. The term 'undisclosed income' has been defined in clause (b) of section 158B of the IT Act. It is an establish legal position that determination of undisclosed income should be based upon some assets, documents, material etc. found during the course of search. Section 158BB authorizes the Assessing Officer to compute undisclosed income of the block period in contradistinction to the normal income which is the subject-matter of only a regular assessment which can be framed under section 143, 144 or 147 of the IT Act. The undisclosed income must directly relate to something found during the course of search. Coming back to the question of estimation of household expenses of the assessee, a rough exercise book was ....
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....phold the action of the Assessing Officer in estimating the household expenses for these two assessment years. Coming to the reasonableness of the estimates made by the Assessing Officer, we find that the expenses have been estimated at the rate of Rs. 10,000 per month. From the details in the exercise book, which have been reproduced above, it is seen that the expenses recorded range between Rs. 5,713 to Rs. 8,666 per month. It is also true that some heads of expenditure like payment of rent, school fee, electricity bills etc., are not reflected in the exercise book. Therefore, in our view, the estimate of Rs. 10,000 per month made by the Assessing Officer is fair and reasonable and does not call for any interference. However, for all the earlier assessment years, there is no basis for any estimation, as observed by us above and therefore we hold that the additions made by the Assessing Officer for the assessment years 1986-87 to 1994-95 are not sustainable. Accordingly, the cumulative addition of Rs. 2,39,100 is deleted. Coming back to the assessment years 1995-96 and 1996-97, as mentioned above, the assessee withdrew a sum of Rs. 2,50,000 from partnership firms. Out of this amou....
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....ouse should have been covered by the addition made on account of the loan and there is hardly any justification for a separate addition. The ld. DR supported the order of the Assessing Officer. After considering the factual position, we hold that no separate addition of Rs. 50,000 is justified. A copy of the letter dated 23-8-1996 is compiled at page 13 of PB-1 and the relevant portion of this letter is reproduced below: "That so far as loans borrowed by me are concerned, I beg to submit that due to short period of time available at my disposal to comply with further requirements in this behalf. I hereby offer the said loan amounts together with interest thereon for addition to my income for the said block period so as to get peace of mind. Please note that I am not keeping well and mentally at present unable to attend my matters and hence make the aforesaid offer. Please note that the said loans were taken by me for meeting expenses for the furniture, fixture and in view of the aforesaid offer, I beg to request you not to make any addition on account of investment in furniture and fixture." Apart from the conditional surrender by the assessee, the fact remains that during the as....
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.... various assessment years as per the details given above. The ld. counsel reiterated the same arguments before us and further submitted that the aforesaid deposits included deposits of Rs. 31,300 in the bank account of assessee's wife, Smt. Vaijayanti and deposits of Rs. 65,000 in the bank account of assessee's minor son, Sumit. The details of these deposits are available at page 15 of PB-I. It is contended before us that the assessee's wife and minor son are independent individuals and no addition can be made in the case of the assessee. It is also submitted that the assessee's wife and minor son received gifts from time to time on social occasions and the assessee's wife also received Rs. 30,000 from her parents. Alternatively, it is submitted that in the bank account of the assessee's wife, there is a withdrawal of Rs. 25,000 on 30-12-1994 and in the bank account of assessee's son, there is a deposit of Rs. 10,000 on 12-1-1995. It is argued that this deposit is fully covered by the earlier withdrawal of Rs. 25,000 and therefore at least to the extent of Rs. 10,000 the addition is wrongly made. The ld. DR supported the Assessing Officer's order. 14. We have considered the rival ....
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....ted to be general in nature and therefore are not required to be dealt with. 16. The ground Nos. 1 to 4 are as under: (i)The ld. Assessing Officer erred in making an addition of Rs. 24,360 on account of cash deposits in the bank account without accepting the explanation of the assessee. (ii)The ld. Assessing Officer erred in making an addition of Rs. 41,250 on account of income shown in the regular return filed. (iii)The ld. Assessing Officer erred in making additions of Rs. 5,100, Rs. 4,081 and Rs. 566 on account of bank interest income for the assessment years 1993-94, 1994-95 and 1996-97. (iv)The ld. Assessing Officer erred in charging the tax on various years in which even the income is below the taxable limit. Accordingly, the assessee was not required to file the returns. 17. Regarding ground No.1, as per discussion contained at para 4 of the assessment order, during the previous year relevant to assessment year 1993-94, the assessee deposited total amount of Rs. 46,350 in his bank account in Bank of Maharashtra. The Assessing Officer considered the explanation regarding the source and accepted that the assessee received a sum of Rs. 12,578 at the time of his mother's d....