TaxTMI 
TaxTMI 
TaxTMI 
2011 (9) TMI 751
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....re is no undisclosed income. However, the assessing authority proceeded to frame the assessment order in respect of all the four assessees for the block period from 1985-86, 1994-95 and 1-4-1995 to 12-2-1996 setting out the undisclosed income for the aforesaid years and issued a demand for payment of tax at 60% of the undisclosed income under Section 113 of the Act. Aggrieved by the said order the assessees preferred appeals before the Tribunal. The Tribunal on re-appreciation of the entire evidence on record held that the notice issued under section 158BC is void ab initio and consequently the assessment orders passed in a proceeding which commenced by issue of such notice is also illegal and therefore set aside the order of the assessing authority on the ground that there is no undisclosed income during the block period. Aggrieved by the said order of the Tribunal the Revenue has preferred these appeals. 3. The learned senior counsel appearing for the Revenue assailing the impugned order contended that though the proceedings initiated is under Section 158BD the said provision as such did not contemplate a notice to be issued to the assessee. The said provision expressly provides....
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....supported the impugned order. 5. The substantial questions of law which arise for consideration in these appeals are as under:- "(1) Whether the finding of the Tribunal that the notice issued under Section 158BC in respect of the proviso under section 158BD is void, ab initio and therefore the order of assessment passed in pursuance of such notice is also void is it correct? (2) Whether the order passed by the Tribunal holding that there is no undisclosed income as held by the assessing authority calls for interference?" Point No. 1 6. Chapter XIV-B deals with a special procedure for assessment in search cases. Section 158B is the definition Section and Section 158BA deals with assessment of undisclosed income as a result of search. The computation of undisclosed income for the block period is provided under Section 158BB and procedure for block assessment is provided under Section 158BC. If in the course of search and seizure if any undisclosed income of a person other than the person whose premises is searched is recovered, Section 158BB provides for assessment of such undisclosed income of such persons. Section 158BB reads as under:- "158BB,(1) The undisclosed....
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....ection 245D, on the oasis of such order; (f) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment. Explanation. - For the purposes of determination of undisclosed income. (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of (this Act) without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32: Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32: [(b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called [to any partner not being a working partner]: Provided that undisclosed income of the firm so determi....
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....a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income including the undisclosed income for the block period: Provided that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter : Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return; (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143, section 144 and section 145 shall so far as may be, apply; (c) the Assessing....
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....has nor. been done in the case. Therefore, the block assessment made on the firm without following the procedure under Section 158BD was bad in law. In the aforesaid Judgment nowhere it is stated that a notice mentioning Section 158BC being issued in proceedings under Section 158BD, the notice would be void. Therefore the Judgment has no application. 8. Reliance is also placed on the Judgment of the Delhi High Court in the case of CIT v. Pushpa Rani [2004] 136 Taxman 627. In the aforesaid Judgment it was held that unless a search warrant is issued the Assessing Officer cannot invoke the provisions of Section 158BC for initiation of block assessment proceedings under Chapter XIV-B. Search and seizure under Section 132 of the Act is a condition precedent for initiation of proceedings under Chapter XIV-B. They were not dealing with a notice which should be issued under the provisions. Therefore the Judgment has no application in this case. Therefore in the light of what is stated above, the Tribunal was not justified in holding that a notice mentioning purported to have been issued under Section 158BC in a proceedings initiated under Section 158BD is void ab-initio. Point No.2. 9.....
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....iya Developers which agreed to mortgage the land to the Bank which includes the lands of the assessees. They were unable to keep up their word as there was shortage of funds. In those circumstances the assessee stepped in and gave the land belonging to them to honour the commitment made by the Bank Officers Co-operative Society Ltd., in the returns filed earlier. They have shown the cost of the land. The transaction has not been completely concluded. What the Assessing Officer did was to calculate 58% of the total of 28 acres 13 guntas at the rate of Rs.37/- per square feet and arrive at the gross sale receipt and reduced the cost of land and the remaining land was assumed as the undisclosed income. It is well-settled law that in a block assessment the undisclosed income is to be computed from the materials seized. There is no scope for estimation in a block assessment. 12. From the aforesaid facts it is clear that the amount computed by the Assessing Officer is only a mere assumption. It is not borne out from the material seized during search. When the Assessing Officer was calculating the gross sale receipts at the rate of Rs. 37/- per square feet, he forgot to take into conside....