TaxTMI 
TaxTMI 
2014 (11) TMI 482
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.... into error in holding that the amount brought to tax by the AO is not undisclosed income? (ii) Did the Tribunal fall into error in setting-aside the findings of lower authorities that the amounts deposited by the assessees with the bank were not taxable as income?" 2. These appeals pertain to block assessment periods of ten years beginning from 1st April, 1986 to 26th April, 1996 in the case of Shibu Soren, Suraj Mandal, Shailender Mahto and Simon Marandi. In the case of the said respondent-assessees, notice under Section 158BC of the Income Tax Act, 1961 ("Act", for short) was issued. In the case of Jharkhand Mukti Morcha party ("JMM", for short), notice under Section 158BD read with Section 158BC was issued and the block assessment period is from 1st April, 1986 to 27th September, 1996. 3. In the block assessment proceedings of the individual assessee, the Assessing Officer had made the following additions:- ITA No. Name of Assessee Block Period Additions (Rs.) 133/2012 Shibu Soren 01.04.1986 to 26.04.1996 1,16,38,824/- 128/2012 Simon Marandi 01.04.1986 to 26.04.1996 53,53,620/- 127/2012 Shailendra Mahto 01.04.1986 to 26.04.1996....
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....avings Bank Accounts (SB A/cs, for short) and Fixed Deposit Receipt Accounts (FDRs, for short) which are detailed as under:- Account Nos. Name(s) of the Holder 194 Shibu Soren, Rupi, Hemant and Basant 19100 Shibu Soren, Rupi, Hemant and Basant 197 Simon Marandi and Shushila Hansda 19037 Simon Marandi and Shushila Hansda 196 Shailendra Mahto and Abha Mahto 18983 Shailendra Mahto and Abha Mahto 17108 Suraj Mandal 195/spl Suraj Mandal, Shibu Soren, Simon Marandi and Shailendra Mahto 18914 Suraj Mandal, Shibu Soren, Simon Marandi and Shailendra Mahto These SB A/cs and FDRs were in the name of the four individual assessees, jointly and individually. These accounts were placed under prohibitory orders under Section 132(3) of the Act. Subsequently, jurisdiction of the five respondent-assessees was transferred to Additional Commissioner of Income Tax (Central), Circle-6, New Delhi under Commissioner of Income Tax, Delhi, Circle-I as per order under Section 127 of the Act dated 2nd December, 1996. Thereafter, notices under Section 158BC were issued to the individual assessees and notice under Section 158BD read with Se....
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....r assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of every previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period. (underlined portion was inserted by Finance Act (No.2), 1998 w.r.e.f. 1st July, 1995) xxx 158-BB. Computation of undisclosed income of the block period.-(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as....
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.... 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 income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called: Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement; (c) assessment under Section 143 includes determination of income under sub-section (1) or sub-section (1-B) of Section 143. (2) In computing the undisclosed income of the block period, the provisions of Sections 68, 69, 6....
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....o 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 158-BB 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 Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment. xxx 158-BD. Undisclosed income of any other person.-Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132-A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person and the provisions of this Chapter shall a....
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....e view that the only way of disclosing income, on the part of an assessee, is through filing of a return, as stipulated in the Act, and therefore an "undisclosed income" signifies income not stated in the return filed. Keeping that in mind, it seems that the legislature has clearly carved out two scenarios for income to be deemed as undisclosed: (i) where the income has clearly not been disclosed, and (ii) where the income would not have been disclosed. If a situation is covered by any one of the two, income would be undisclosed in the eyes of the Act and hence subject to the machinery provisions of Chapter XIV-B. The second category viz. where income would not have been disclosed, contemplates the likelihood of disclosure; it is a presumption of the intention of the assessee since in concluding that an assessee would or would not have disclosed income, one is ipso facto making a statement with respect to whether or not the assessee possessed the intention to do the same. To gauge this, however, reliance must be placed on the surrounding facts and circumstances of the case." 9. The aforementioned paragraph, interprets Section 158B(b) of the Act and lays core and primary emphasis....
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....lock period would not include income included in regular assessment; and income assessed under Chapter XIV-B shall not be included in the regular assessment of previous years. The aforesaid explanation supports in view that there would be two assessments in the cases of search or when Section 132A is invoked, i.e. normal/regular assessments under Section 143(1) or (3) of the Act; and Chapter XIV-B or block assessment. Further, income included in the block assessment would not be included in the normal assessment and similarly income included in the normal assessment would not be included in the block assessment. We shall be referring to several judgments relied upon by the counsel for the respondent assessee which have decided the controversy whether income should be assessed in the normal assessment or block assessment by primarily relying upon the said explanation. This indeed is the correct interpretation accepted by the Courts. Thus there can be regular and block assessments for the same period. The next question is what could be included or the scope and ambit of block assessment and regular assessment. The answer lies in conjoint and harmonious reading of the Sections 158B(b)....
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....false. In such cases, additions could be made under sub-section (1) to Section 158BB of the Act. 12. At this stage, it will be relevant to also refer to Section 158BA(3) of the Act. Sub-section (3) to Section 158BA of the Act relates to a part of the year which had not ended or when the date of the filing of the return under Section 139(1) had not expired. In such cases, income of the transactions recorded on or before the date of search or requisition of books of accounts or other documents, etc., would not be included in the block period. The said sub-section has to be read along with Section 158B(b) which defines, "undisclosed income". On harmonious construction, it follows that said entry in the books of accounts should not be false, otherwise they would be covered under the head "expense, deduction or allowance which is found to be false". 13. "False" or "falsehood" is a strong word and much narrower than the word or term "incorrect" or "legally unsustainable". "False" or "falsehood" refers to element of mens rea or bad mental intention and would not relate to claims which might be wrong because of legal interpretation or has to be disallowed because of technical defect ....
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....of the explanation is of some relevance. The said clause stipulates that assessment under Section 143 includes determination under Section 143(1) or Section 143(1B). Thus, summary assessments are also treated as regular/normal assessment for the purpose of Section 158BB. Sub-section (2) to Section 158BB states that provisions of Section 68, 69, 69A, 69B and 69C shall apply and references to financial year in the said sections will be construed as reference to relevant previous year in the block period including previous year ending with the date of search. Sub-section (3) states that the burden of proving that undisclosed income has already been disclosed in the return filed before the commencement of search, or the date of requisition of documents, shall be on the assessee. We are not concerned and are not required to deal with sub-section (4) to Section 158BB of the Act. 17. Section 158BC of the Act relates to procedure for block assessment and postulates issue of notice for filing of return for block assessment. The first proviso states that in such cases, no notice under Section 148 was required. Thus, it does away with the requirement of notice under Section 148 and recordi....
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....r initiation of action under Section 158-BD. The bare reading of the provision indicates that the satisfaction note could be prepared by the assessing officer either at the time of initiating proceedings for completion of assessment of a searched person under Section 158-BC of the Act or during the stage of the assessment proceedings. It does not mean that after completion of the assessment, the assessing officer cannot prepare the satisfaction note to the effect that there exists income tax belonging to any person other than the searched person in respect of whom a search was made under Section 132 or requisition of books of accounts was made under Section 132-A of the Act. The language of the provision is clear and unambiguous. The legislature has not imposed any embargo on the assessing officer in respect of the stage of proceedings during which the satisfaction is to be reached and recorded in respect of the person other than the searched person." Facts of he present case and applicable provisions 19. It would be now relevant to refer to the facts of the present cases, the finding of the Tribunal and contentions of the parties. Shailendra Mahto, Suraj Mandal and Simon Mar....
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....bsp; 21. In view of the aforesaid factual position, in the present case sub-clause (ca) of Section 158BB(1) would be applicable as no return of income was filed by the individual asseessee before the due date of filing of return. The income returned accordingly would be treated as NIL inspite of the entries, if any, in the books of accounts or documents. It is correct that Shibu Soren had filed return for the assessment year 1994-95 on 31st March, 1996, but this would be a return under Section 139(4) of the Act which permits filing of a belated return, but it would not be a return under Section 139(1) of the Act. Therefore, this return cannot be treated as a return filed before the due date. Possibly, the respondent assessees could have also claimed applicability of clause (c) to Section 158BB in relation to the year of search, but, the onus to prove that benefit of clause (c) would be applicable is on the individual assessee. 22. We would, now, like to reproduce the legal position as elucidated in A. R. Enterprises, (supra), wherein the Supreme Court has observed :- "Hence, the computation of "undisclosed income" for the purposes of Chapter XIV-B has to be construed in te....
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....sclosed income pertained to the period relevant to the assessment year 1995-96, the due date for filing of the return of which was on or before 31st October, 1995. However, the question of retrospective amendment and whether it would be applicable even for the period prior to 1st July, 1995, when the search had taken place after 1st July, 1995, was not specifically addressed and answered. Before us also neither the assessee nor the Revenue had raised this contention. The order of the Tribunal is also silent in this regard. Whether additions made relate to undisclosed income? Reasoning of the Tribunal and the errors made. 24. As has been noticed above, undisclosed income with reference to the bank accounts pertain to entries made during the period relevant to the assessment year 1994-95, i.e. the year ending 31st March, 1994 or even earlier as in the case of Suraj Mandal. However, for these years regular returns of income were not filed. As held in earlier paragraphs in view of earlier clause "c" and substituted clause "c" and "ca" to Section 158BB(1), the failure to file return of income for the relevant year, the due date of which had expired, would have its consequences and....
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....in a possession of money, bullion, jewellery or any other valuable article or thing which wholly or partly represents income or property which has not been or would not be disclosed. The expression "would not be disclosed" was added by Taxation Laws (Amendment) Act, 1975 with effect from 1st October, 1975. Clause (c) does not deal with books of accounts or documents but with income and property whereas books of accounts and documents are referred to in sub-clauses (a) and (b). Legality of a search cannot be examined by the Tribunal or during the course of assessment proceedings and this court while exercising jurisdiction as an appellate forum has to assume that the search was valid. Validity of search can be examined under writ jurisdiction as an order or warrant of search under Section 132 is an administrative order and is not amenable to correction or challenge in the appellate proceedings under the Act. Further, the search under Section 132 can be assessee based as well as premises based as is clear from clause (i) to Section 132 (1) which authorizes entry and search in any building, place etc. It is obvious that a search can be assessee based. In the present case, accounts of ....
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....B, Nauroji Nagar, New Delhi also. Before deciding this aspects, we feel that second aspect is needed to be decided first and the first aspect will be require to be decided only if is found that addition can be made in the Block assessment in respect of these deposits in the bank even if it is accepted that it is income of the assessee. Hence, we proceed to decide the second aspect first and for doing so, we assume that the money deposited in, Nauroji Nagar branch of PNB represents income of the assessee. 33. Regarding this aspect that no addition can be made in Block assessment with respect to various deposits in Nauroji Nagar branch of PNB even if it is an income of the assessee, we first take note of facts of the present case, which are, relevant for deciding this aspect. It was submitted by the Learned A.R. of the assessee that these bank accounts were duly disclosed by the assesses in the statement recorded by ADI (Investigation) under section 131 of the Income Tax Act, 1961 on 14.03.1996 and on other dates of March 1996. It is submitted that a copy of these statements given by these four persons is available on record and an English version of these statement is also famish....
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....ly that it was done as per the decision of the party which was taken prior to 01.08.1993. This query was also raised as to from where the money came with the party, and in reply, it was submitted that they are running agitation for separate Jharkhand state and for this purpose, they are getting donation in this respect and as per the decision of the party, the money was deposited in their personal accounts. This query was also raised as to whether they have names and addresses of the persons who have given the donation to the party and in reply, it was submitted that there are coupons and receipts and they have the names of MLAs, MPs, etc. who collected these donations from the general public but they do not have individual names of the public. 35. Statement of Shri Shailendra Mahto was also recorded by ADI (Investigation) under section 131 on 18.03.1996. In that statement, in reply to Question No. 3, it was submitted by Shri Shailendra Mahto that there is one bank account with State Bank of India, Parliament Annexe, New Delhi which is in his name and it was opened in the year 1990 when he was elected as MP. It was also submitted that there is one saving bank account No. 18983 w....
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....ited in the year 1993 which may be around Rs. 52 lacs on the date of statement after including interest and this money is belonging to the party, i.e., JMM Party. It was also stated that there is one joint account with same branch of PNB in the joint name of four MPs and Rs. 10,000/- was deposited in the bank account in the beginning. 37. From the above narration of these four statements recorded by ADI (Investigation) in March, 1996, i.e., prior to the date of search, it is clear that all these four MPs have clearly brought out relevant facts and they have duly disclosed the fact of various bank accounts with PNB, Nauroji Nagar, New Delhi and from some of the statements, it is also coming out that even before the statements were recorded, concrete information was available with the department regarding the existence of these bank accounts, amounts and money deposited in these bank accounts along with relevant dates of such deposits because in some of the question itself, details of the bank account along with date and amount of money deposited etc. were stated and query was raised for its source etc. and these facts show that full details were available with the department." ....
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....nce of a search is to unearth material/evidence and ascertain true and correct facts. In spite of the statements recorded under Section 131 of the Act, it is not unusual or uncommon for an assessee to change his stand and stance during the course of the assessment proceedings. Further the truth or veracity of the statements, had to be verified i.e. whether the money belonged to the individual assessees or to a political party JMM. This required evidence like examination and verification of entries in the Bank Accounts; the beneficiaries who were recipients/credited money from the bank accounts; how was the money utilized; whether the individual assessees or their family members were also beneficiaries of utilization etc. This required documents and evidence. This aspect was highlighted and was argued on behalf of the Revenue before the Tribunal as is ascertainable from paragraph 24 of the impugned order wherein the contention of the Revneue was noticed. For the sake of convenience we are reproducing paragraph 24 of the impugned order:- "24. Regarding this contention that the income as already disclosed under section 131 on 14.03.1996 and hence there is no undisclosed income, it ....
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....closed income for the block period. 30. The assessment order in the case of individual assessees record the basis and reasons that the money in the SB A/cs and FDRs did not belong to JMM, who had claimed that the money was received as donations. Reasons given by the Assessing Officer were based on the search material/evidence which included material/evidence collected during and after the search at M/s Anjali Jain & Associates. These can be crystallised as under:- (A) JMM Party did not require money for party activities in Delhi; (B) There was no justification in opening bank account in the individual names, if the money belonged to the party; (C) Shailendra Mahto in his statement under Section 164 of the Code of Criminal Procedure, 1973 before the Metropolitan Magistrate accepted that money in his SB A/cs and FDRs belonged to him and was received for voting in the Parliament in the no confidence motion moved in July, 1993. He also accepted that Suraj Mandal and Shibu Soren had received similar amounts; (D) The purported resolution passed by JMM on 11th July, 1993, was disbelieved for various reasons including (a) there was no reason and cause for JMM to give persona....
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.... by now, a settled position of law that in the case of Block assessment proceedings, addition can be made on the basis of evidence found as a result of search or requisition of books of accounts or other material and such other material or information which are available with the A.O. and are relatable to such evidence found as a result of search- he is also a settled position by now that for the purpose of addition in the block assessment under chapter XIV-B, which will result into levy of higher rate of tax of 60%, incriminating material found in course of search is to be considered and not each and every thing found in course of search. For example, regular books of account maintained by a businessman are also found in course of search but those books are not considered to be incriminating material because existence of regular books is in the knowledge the revenue although its contents are not known to the revenue. But still, in relation to entries in those books, no addition is to be made in the Block assessment and addition, if any, is to be made in regular assessment only. This is also a settled position that whether regular assessment is actually made or not or whether any a....
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....ther the due date of filing of return under Section 139(1) has expired but no return of income has been filed, as non-filing of return may have its own consequence. Nature and source of money on how it was earned, explanation offered etc. would also make a considerable difference. In a given case, depending upon the factual matrix, it could represent undisclosed income. This aspect has not been considered and regarded by the Tribunal though it is noticed that no return under Section 139(1) had been filed by the individual assessees. 33. Thus, there is a fundamental fallacy in the reasoning given by the Tribunal to hold that no addition could have been made in the block assessment proceedings for want of undisclosed income. The Tribunal ignored the position that the four individual assessees had not filed returns of income and therefore, Section 158BB(1) clause(ca) of the Act would be attracted. The said clause has to be harmoniously read with Section 158B(b) of the Act. Further statements of the four individual assessees were recorded on 14th March,1996/19th March,1996, but they, i.e. the "individual assessees" had claimed that the money lying in the SB A/cs or the FDRs belonged....
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....sment of undisclosed income. The aforesaid observations will be applicable for the period even after 1st July, 1995, subject to the legislative intendment to the contrary on the scope and ambit of the block assessment in view of the amended provisions as has been observed by the Supreme Court in A.R. Enterprises (supra). Further, in the case of individual assessees, there were no pending proceedings on the date when the block assessment notice was served and it in this context that the decision of the Supreme Court in A.R. Enterprises (supra) is more apposite. N.R. Paper & Board Ltd. (supra) did not deal with the situation where no return of income had been filed and due date of filing of return for the said period had expired. It is clear that the Gujarat High Court in the said case was not examining the legal consequence and scope and ambit of undisclosed income in such cases, which is clear from the following paragraphs: "If the pending regular assessment proceedings were to be frozen and got substituted by the assessment of the undisclosed income of the block period, the Legislature would have been specific on that aspect and would have made it clear that the pending regular....
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....xable but which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, the existence of the money or asset is known to the Income-tax Department and where the case of the assessee is that the said money or valuable asset is not liable to be taxed, then, in our opinion, the provisions of sub-clause (c) of section 132(1) would not be attracted. An assessee is under no obligation to disclose in his return of income all the moneys which are received by him which do not partake of the character of income or income liable to tax. If an assessee receives, admittedly, a gift from a relation or earns agricultural income which is not subject to tax, then he would not be liable to show receipt of that money in his income-tax return. Non-disclosure of the same would not attract the provisions of section 132 (1) (c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable but where the Department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Departmen....
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....Enterprise (supra) and is broader and wider. Section 158B(b) has to be read with 158BB(1) harmoniously. Apposite would be to refer to the following observations in N.R. Paper & Board Ltd. (supra), which read: "In cases where appeals, revisions and references are decided from regular assessment orders of the previous years included in the block period, the decisions may have the effect of disturbing the assessment made by the Assessing Officer. The provisions of sub-sections (1) and (2) of section 153, prescribing the time limit for making orders of assessment do not apply to assessments, reassessments or recomputations made in consequence of or to give effect to any finding or direction contained in an order made under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference as laid down in section 153(3)(ii) of the Act. Obviously, therefore, the regular assessment already made will have to be brought in tune with such orders or may even have to be done de novo, if so ordered, in which event it would amount to a regular assessment still pending. For example under section 251, the Commissioner of Income-tax (A....
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....sing Officer who comes across evidence and material which was not found or made available in the process of block assessment, cannot ignore the same and he will be duty bound to make the regular assessment taking into account such evidence and material gathered in the enquiry under section 143(3) to ensure that proper assessment of total income is made and tax determined on the basis of such assessment. An assessee who had not disclosed and did not intend to disclose income or property, which fact is detected in the search, cannot acquire immunity from being assessed to still other income or property which did not come to surface as his undisclosed income from the evidence found and material available at the time of the block assessment, but is now found by virtue of the enquiry made under section 143(2)(iii) of the Act for regular assessment showing that the assessee had understated the income or had computed excessive loss or underpaid tax even after taking into account the fact that his undisclosed income for the block period was separately assessed and taxed at the higher rate of 60 per cent was charged thereon. The immunity from levy of penalties attached to the undisclosed in....
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....ly basis for reversing the regular assessment was the report of the special auditor. 39. In CIT vs. Vishal Aggarwal [2006] 283 ITR 236(Del), it was noticed that the assessee had filed returns disclosing gifts and had furnished necessary documents in support. There was search and seizure operation, (it appears subsequently) in the premises of the assessee"s father, but no incriminating material was found relating to the assessee. The Assessing Officer had resorted to Section 158BC (possibly, read with Section 158BD) and treated the gift as concealed income and attempt at laundering money. There was no material or information which was discovered to indicate that the gifts were bogus and/or represented undisclosed income. No such material information or document was found even in the post search enquiry. Further the post search enquiry was unconnected with the searched material or information. Thus, the gifts which had already been declared in the returns filed, it was held were outside the preview of the block assessment. This decision will not help the individual assessee in the present case as we have noticed that they had not filed returns of income. We have already referred t....
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....se has observed that Chapter XIV B was not concerned with the income which has already been disclosed and in respect of which regular assessment proceedings stood concluded, were pending or in respect of which time for filing of return on the date of search/requisition had not expired. In the last set of cases, entries should be duly recorded in the books of account before the date of search. Thus block assessment proceedings cannot be used as an opportunity to re-open, the concluded assessment or reassess return of income by a fresh look at disclosed facts and figures unless they were found to be false in the case of search or requisition. In the present case, no return of income under Section 139(1) of the Act was filed by the individual assessees and, therefore, there was no disclosure of income. Further, facts were unearthed during the search and related subsequent enquiries to show that the stand of the individual assessees in the statements recorded under Section 131 of the Act were not correct and rather false as per the assertions made by the Assessing Officer. In Jupiter Builders Pvt. Ltd. (supra) it has been held that the regular assessment proceedings and block assessmen....
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....2. In CIT vs. Mukesh Luthra [2011] 337 ITR 41 (Delhi), the Revenue was successful in appeal filed before the High Court, as it was held that the addition should have been made in the regular assessment proceedings and not as "undisclosed income" in the block assessment. In the said case, search had taken place on 30th August, 2001 and the block assessment order was passed on 31st October, 2003. Subsequently, during the course of assessment proceedings/orders passed in the case of a third person, it was observed and came to the knowledge of the Revenue that a concern stated to be belonging to that third person was in fact a benami concern of the searched person i.e. the respondent assessee in the appeal before the High Court. Thereafter in the regular assessment order dated 27th February, 2004, substantive addition on account of income earned from the benami concern was made in the hands of the respondent assessee therein and protective assessment was made in the assessment order passed in the case of the third person. On appeal, these additions were deleted by the first appellate authority and the order was confirmed by the Tribunal who held that the issue should have been examined....
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.... relatable to such evidence. During the search, no such material or information came to light to justify the finding about cost of construction that was estimated. In the present case, we have noticed that during the course of the search, as noticed in the block assessment orders, several material/evidence came to light which would show that amounts deposited or entries in the bank accounts belonged to the assessee and not to the party, JMM. Further, individual assessees had not filed returns of income for the relevant period, for which due date under Section 139(1) had long lapsed. 44. In the last, we will deal with three judgments of the Madras High Court. In Commissioner of Income Tax versus G.K. Senniappan, (2006) 284 ITR 220 (Mad), the appeal filed by the Revenue was dismissed on the ground that there was a pre-search survey in which incriminating material was found but this material could not have been utilised in the block assessment proceedings. The reason elucidated being that this material/information was available with the Revenue at the time of search. With all due respect, we have reservations and cannot agree with the aforesaid broad proposition. It is not uncommon....
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....d on the same day, but the High Court held that at the time of the search the factum that the house was constructed/built was known to the Revenue and the factum that cash payments were made came to the knowledge during the course of survey. It was held that the material or information found during the course of survey operation, was not relatable to any material found during the course of search. The High Court relied upon the decision in the case of G.K. Senniappan (supra). Again with respect, we have reservations on the ratio recorded in the said judgment on the question of undisclosed income, which can be made subject matter of block assessment. The fact that search and survey were conducted on the same day showed that they were related. Undisclosed income can be computed also on the basis of such other material or information as are available with the Assessing Officer. This would and should include information and material when search and survey operations are undertaken at the same time, though it may not include survey operations unconnected with the search. There could possibly be other exceptions also. The answer would be case and fact specific. Even otherwise, as noticed....