TaxTMI 
TaxTMI 
2010 (5) TMI 484
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....ted through above legal heir. 4. The facts in brief are that a search operation u/s 132 of the IT Act was carried out in the case of Shri Devendra Gajendranath Chaturvedi. The key of the property tenement No. 4A, Navendu Co-operative Housing Society, Memnagar, Ahmedabad was seized by the police authorities and the same was handed over to the Income Tax Department u/s 132A of the IT Act. Shri Chaturvedi stated before the police that the above premises were purchased for Rs. 12 lacs from Shri Bhagwandas Parmanand Punjabi i.e. the assessee. However, during the course of block assessment of Shri Devendra Gajendranath Chaturvedi, he denied the above statement as having been taken under coercion by the police and the property belonged to the assessee only. The assessee was therefore, summoned and his statement was recorded u/s 131 on 04-10-2004 wherein the assessee has accepted the ownership of the property. However, the assessee could not explain the source of investment before the ACIT, Central Circle 2(2), Ahmedabad. As the assessee could not substantiate the investment, proceedings u/s 158BD were initiated. It has been stated by the Assessing Officer that the above said property i....
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....isting of three floors and the same was sold to Shri Bhagawandas Punjabi with all the three floors. It was further stated by the Secretary/Vahivatdar that they have not obtained "No Objection Certificate" from the Co-operative Society under Co-operative Society Act, 1961 for any renovation/changes/ construction of other two floors. The Assessing Officer further stated that the property was referred to the Valuation Cell. The Valuation Officer has visited the site and based upon actual measurement the fair cost of investment of the entire property i.e. investment on land and building determined at Rs. 15,20,000 as on date of purchase i.e. 04-07-1998. Further, the assessee filed its submission on 25-11-2005 before the Assessing Officer. It has been stated by the assessee that the said property was purchased at Rs. 4 lacs out of inherited cash amount of Rs. 4,11,000 under Will from Smt. Shardaben R. Shah who expired on 16-02-1998. It has been further stated that the deceased had no children and she was aunt of the assessee's wife. Further, it has been stated that the assessee failed to reflect this property in the returns of income out of ignorance. The Assessing Officer stated that n....
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....Officer may be deleted and income for the block period may be taken as per the return filed. 6. On consideration of the submissions of the assessee and the facts on record, the learned Commissioner of Income Tax (Appeals) confirmed the addition by holding as under: "3.3 I have carefully considered the facts of the case, observations of the AO as well as the arguments put forth by the learned Counsel for the appellant From the facts of the case it is very clear that the property situated at 4A Navendu Co-operative Housing Society Memnagar, Ahmedabad belongs to the appellant and the same was purchased from Shri Bhikhabhai Maijbhai Desai on 04.07.1998. As discussed above, it is clear in this case that the appellant did not show the property in his balance sheet. As per statement of Smt. Amarben Desai, W/o. Late Shri Bhikhabhai M. Desai recorded on 22.11.2005, it was clearly stated by her that the property was purchased by her husband, which already consisted of three floors and the same was sold to Bhagawandas Punjabi with all three floors. The appellant neither during the course of assessment proceedings nor appellate proceedings proved any investment made in the property after....
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....cted. 4. In the result, the appeal is dismissed." 7. The assessee raised the following additional ground of appeal and requested that the same may be admitted for the purpose of hearing: "1. The Appellant challenges the validity of the assessment made by the A.O. u/s. 158BC r.w.s. 158BD of the IT Act as the same is illegal & bad in law. Hence the assessment so made require to be annulled." 7.1 Learned Counsel for the assessee submitted that above additional ground is legal in nature and may be admitted. He has relied upon the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation 229 ITR 383 (SC). He has referred to the findings of the Assessing Officer u/s 158 BC of the IT Act in the block assessment in respect of property in question in the case of Shri Devendra Gajendranath Chaturvedi, the person in whose case search was conducted by police and action was taken by the Income Tax Department u/s 132A of the IT Act and submitted that the Assessing Officer did not believe his statement and directed to consider investment in the hands of the assessee. He has submitted that key of the property in question and statement of Devendra Gajendran....
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....er in the case of Devendra Gajendranath Chaturvedi clearly discerned the satisfaction recorded by the Assessing Officer of the person searched and the seized material handed over to the Assessing Officer of the assessee. The Learned Departmental Representative submitted that the key of the property in question represents immovable property in question which was found to be correct and connected with the assessee. 158BD proceedings have therefore, being correctly initiated against the assessee being the income of other person. Undisclosed income came to the knowledge of the department as per the material found during the search as well as from the statement of Devendra Gajendranath Chaturvedi and post search enquiry conducted from the assessee which was related to the material seized during the course of search. The assessee in the post search enquiry admitted undisclosed investment in the property which was not shown to the Revenue Department prior to the search. Assessing Officer was therefore, satisfied that assessee has undisclosed income within the block period. The Learned Departmental Representative submitted that since the assessee has not challenged the above issue before t....
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....s, determined,- (a) where assessments under section 143 or section 144 or section 147 have been concluded [prior to the date of commencement of the search or the date of requisition], on the basis of such assessments; (b) where returns of income have been filed under section 139 [or in response to a notice issued under sub-section (1) of section 142 or section 148 but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns; [(c) where the due date for filing a return of income has expired, but no return of income has been filed,- (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not charge....
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....undisclosed income of the block period, the provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition. (2) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (3) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments". 7.4 The above provisions would show that in block assessment under Chapter XIV B would apply in case of requisition was made u/s 132A of the IT Act. In the present case, the documents and material found in ....
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.... the assessee. Statement of Devendra Gajendranath Chaturvedi was recorded by the police in which he has admitted to have purchased the property in question from the assessee for Rs. 12 lacs. During the block assessment proceedings in his case, he has denied to have purchased the property and claimed that the property belong to the assessee. The assessee in his statement admitted ownership of the property in question but could not explain the source of investment. The investment in the property was also not shown to the Revenue Department prior to the search. The above facts would show that there was sufficient material available with the Assessing Officer of Devendra Gajendranath Chaturvedi which was requisitioned from the police u/s 132A of the IT Act. The post search enquiries conducted on the evidence and material requisitioned u/s 132A of the IT Act clearly revealed that assessee made undisclosed investment in the property in question which was not disclosed to the Revenue Department prior to the search in the regular return. In the case of Manish Maheshwari (supra) the following conditions were held to be precedent for proceeding u/s 158BD of the IT Act. ....
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....r Special Bench in the case of Smt. Mahesh Kumari Batra v. JCIT 95 ITD 152 held as under : "Any defect with regard to issue of notice under section 158BC cannot render block assessment proceedings to be null and void; such defect will be rectifiable under section 292B." 7.5 The learned Counsel for the assessee relied upon several decisions of the Tribunal which are decisions on merits in their own facts. These are not relevant to the admission of the additional ground of appeal. In the case of P.K. Ganeshwar (supra), Hon'ble Madras High Court held that "since the fixed deposits in fictitious names not detected during search but by investigation following after search, therefore, not includible as undisclosed income". In the case of M.K. Gabriel Babu and others (supra) Hon'ble Kerala High Court considered the scope of section 132 of the IT Act as regards seizure of immovable property.. In the case of Bhagawandas Narayandas (supra), Hon'ble Gujarat High Court considered the issue of limitation for seizure and the things or articles which can be retained u/s 132(5) of the IT Act. In the case of Dawn View Firms Pvt. Ltd. (supra) it was found that conditions of section 158 BD are ....
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....to the DVO is illegal. Learned Counsel for the assessee very fairly admitted that assessee has not shown or disclosed investment in property in a sum of Rs. 4 lacs to the Revenue Department prior to the search and the same is also not shown in the books of account of the assessee. He has relied upon decision of Hon'ble Delhi High Court in the case of CIT v. Ashok Khetrapal 294 ITR 143 (Delhi) in which it was held "when no adverse material found during course of search, no addition by treating investment as undisclosed could be made". He has relied upon the decision of the Hon'ble Delhi High Court in the case of CIT v. Manoj Jain 287 ITR 285 (Del) in which it was held "addition based on estimate of value of property not valid". He has relied upon decision of M P. High Court in the case of CIT v. Khushal Chand Nirmalkumar 263 ITR 77 in which it was held "that a perusal of the unamended and amended provisions and the circular of the Central Board of Direct Taxes would make it clear that there had been no specific effect that the amendment effected to section 158BB in the Finance Act, 2002, with effect from July 1, 1995, would be applicable to the instant case as the block period cover....
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.... As noted above the provisions for block assessment under Chapter XIV- B would apply in case of requisition was made u/s 132A of the IT Act. In the present case, the documents and material found in the search by the police was requisitioned by the Revenue Authorities u/s 132A of the IT Act and was also handed over to the IT Department. The definition of undisclosed income u/s 158B (b) is inclusive of the items referred to in the above provisions. The computation of undisclosed income for the block period could be made in accordance with provisions of this Act on the basis of evidence found as a result of search or requisition of books of account or other documents and such other material or information as are available with the Assessing Officer and relatable to such evidence. The Finance Act 2002, has amended section 158 BD of the IT Act with effect from 01-07-1995, to clarify that the block assessment of undisclosed income is to be based on evidence found in the search and material, or information gathered in post search enquiries made on the basis of evidence found in the search. In the present case, key of the property and the property in question was admittedly belonging to th....