TaxTMI 
TaxTMI 
1999 (5) TMI 603
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....der section 132 of the Income-tax Act, 1961 at the residential premises of the assessee. Cash of Rs. 1,08,500 and some documents were seized. A notice under section 158BC of the Income-tax Act, 1961 was issued to the assessee on 11-4-1997 in response to which the assessee had filed the return of income declaring nil undisclosed income. The Assessing Officer had made additions on various accounts under the following heads :- "A. Payment of "on-money" on purchase of immovable properties B. Unexplained cash found at the time of search C. Unexplained investment in fixed deposit and jewellery found at the time of search D. Unexplained expenses on account of stay at Hotels E. Unexplained expenses incurred for meeting shooting expenses F. Unaccounted expenses for purchase of foreign exchange G. Unexplained expenses for purchase of artifacts at M/s. Ravissant H. Unexplained expenses of various nature met out of undisclosed income on account of low withdrawal for household expenses." 3. The total undisclosed income for respective assessment years had been assessed as under :- Previous Year Assessment Year To....
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....at upto assessment year 1990-91 no addition has been made. The learned counsel further contended that the Assessing Officer has resorted to some disallowances exercising his discretion without basing such disallowances on any material or any sound basis. The learned counsel pointed out that the motor car expenses have been disallowed at 1/3rd and similarly additions have been made on account of low withdrawals without there being any material to establish that the assessee has incurred more expenditure than disclosed in the books of account. It was contended that no addition can be made in such a manner in `block assessments' under section 158BC. In this connection reliance has been placed on the following decisions :- (1) Sunder Agencies vs Dy. Commissioner of Income-tax (1997( 63 ITD 245 (Mum.( and (2) Parakh Foods ltd. vs Dy. Commissioner of Income-tax (1998( 64 ITD 396 (Pune(. Reliance has also been placed on the decision of the Delhi High Court in the case of L. R. Gupta vs Union of India (1992( 194 ITR 32 (Delhi) in support of the contention that no routine disallowances can be made in the scheme of block assessment. Reference has also been made to the CBDT Circu....
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....nses. Relying upon the contentions raised for the disallowance of 1/3rd motor car expenses, the learned counsel contended that there was no justification for making any disallowance in the block assessment when there was no material on record to justify any disallowance. 12. An addition of Rs. 1,50,000 has been made for assessment year 1992-93 on account of foreign visit. It was pointed out by the learned counsel that the assessee had explained her foreign visits in regular assessments. The stand of the assessee that her foreign visits were for charity purposes and the entire expenditure has been borne out by the organisers had been accepted. It was contended that the Assessing Officer had not based the addition of Rs. 1,50,000 on account of foreign tour expense on any material in support of the addition. 13. In assessment year 1992-93, the Assessing Officer had made addition of Rs. 24,202 on account of restriction of deduction under section 80RR. The learned counsel for the assessee relied upon the following decisions in support of the contention that addition on account of debatable issues not based on any material found during the course of search, is not warranted :- ....
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....out that the assessee had filed declarations in Form No. 37(i) for obtaining the approval of the appropriate authority and the assessee had received no objection from the appropriate authority. Referring to the purchase of another flat at Pune, the learned counsel contended that the assessee had reflected the purchase price of flat at Rs. 8,31,500 in the Balance Sheet filed alongwith the return of income on 2-12-1996 when the date of search is 18-12-1996. A sum of Rs. 31,500 had been shown on account of stamp duty charges. It was contended that no incriminating documents were found to establish that the assessee had paid money other than what was reflected in the agreement for the purchase of immovable property. 18. For assessment year 1997-98, apart from common additions, the Assessing Officer has made addition of Rs. 1,08,500 on account of cash found at the time of search. The learned counsel for the assessee contended that proper explanation regarding the cash found was furnished before the Assessing Officer which has unjustifiably been rejected. It was contended by the learned counsel that there was no justification for making addition of Rs. 1,39,582 on account of purchase ....
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....ment. It was further contended that the Assessing Officer has relied upon the relevant material in framing the block assessment. The learned D.R. pointed out that a slip containing the receipt of commission by the Secretary of the assessee had been seized, during the course of search and substantial telephone expenses incurred by the assessee had been detected during the course of search. Similarly, incurring of hotel expenses by the assessee was also discovered on the date of search. The Assessing Officer on consideration of the totality of the facts and circumstances of this case, had made the additions and disallowances. Referring to the addition on account of low withdrawals, the learned D.R. contended that considering the status of the assessee, the withdrawals disclosed by her for personal expenses were inadequate and accordingly the Assessing Officer was justified in making the addition. Similarly, it was found that the assessee had travelled abroad for which no expenditure had been disclosed. In such circumstances the addition was justified. Referring to the deduction under section 80RR, the learned D.R. contended that deduction was permissible only with reference to the ne....
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....nt authorised under section 158BC in such cases where the search operations have been carried out by the revenue department. The assessment procedure provided under section 158BA, therefore, differs from the regular assessment made under section 143 or under section 144. Section 158BA authorises assessment of undisclosed income as a result of search. Section 158BB provides for computation of undisclosed income of the block period. Section 158BB reads as under :- "158BB. (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 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 Assessing Officer, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined, - (a) where assessments under section 143 or section 144 or section 147 have been concluded, on the basis of such assessments; (b) where returns of income have b....
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....at 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. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI of 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." 23. A perusal of section 158BB reproduced above does not leave us in doubt that in determining the undisclosed income as a result of search the assessment made under sections 143, 144 or 147 have got to be taken into account and reduced from the computation of income under section 158BB. Sub-section (4) of section 158BB also makes it abundantly clear that the process of regular assessment is totally different than the assessment under Chapter XIV-B in search cases. It is in the light of this background we are addressing ourselves to consider the additions made by the Assessing Officer in the case of the assessee. 2....
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....nt under section 158BC is not meant for making a regular assessment but for an assessment of undisclosed income to be based on material found as a result of search. There is no material found as a result of search that would justify disallowance of 1/3rd motor car expenses. Whether a disallowance on account of motor car expenses is to be made or not is a matter of discretion of the Assessing Officer which has been exercised at the time of making the regular assessment. There is no room for making routine disallowances while making assessment under section 158BC when there is no material detected during the course of search for making such disallowances. The addition is accordingly unwarranted and is hereby deleted. 29. An addition of Rs. 59,758 has been made on account of Fixed Deposit Receipts purchased in that year. The FDR is reflected in the Balance Sheet for assessment year 1991-92 filed alongwith the return of income. The statement of Hong Kong Bank account is also available with the authorities. The interest income earned on FDR is reflected in the income and expenditure statement for the year ending March 1992. There was no incriminating document found as a result of sea....
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....ee in the regular assessment made u/s 143(3). There is no reason for disallowance of this claim under the block assessment. This view in supported by the decision of the Mumbai Bench of the Tribunal in the case of B.D.A. Ltd. (supra). Respectfully following the aforementioned decision, I hold that the disallowance is not warranted. Assessing Officer is directed to allow deduction to the assessee. For Assessment Year 1992-93 the addition of Rs. 1,50,000 has been made on account of estimated expenses on foreign visits. The Assessing Officer, had asked the assessee to explain the expenditure incurred by her on attending the charity shows in which she had participated in foreign countries. It was pleaded by the assessee that the entire expenditure on account of fare and stay abroad was provided by the Organisers. The Assessing Officer, however, was not satisfied with the explanation of the assessee. He accordingly made an addition of Rs. 1,50,000. There is no dispute about the fact that assessee had attended the Charity Shows organised in foreign countries. Therefore, the fact that assessee had gone abroad is established. The claim made by the assessee that the entire expenditure....
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....of the bill of M/s. Ravissant. The bill from M/s. Ravissant was found during the course of search. Though the assessee had given explanation the same was not considered satisfactory. In our considered view, assessee having not furnished evidence in rebuttal of the evidence found during the course of the search, addition of Rs. 64,944 was justified. The same is accordingly confirmed. Next ground is relating to Rs. 83,849 on account of expenses relating to hotel stay. In the course of the search, the revenue had found certain documents that assessee had stayed in various hotels. When asked to explain as to why expenditure for the stay in the hotels was not reflected in the books of account, it was explained that the assessee was acting in south Indian film and accordingly the entire expenditure has been borne by the producer namely M/s. Anand Associates. The Assessing Officer has pointed out in the Assessment Order that the hotel bills are in the name of M/s Anand Associates being the producer of the film. The Assessing Officer had made enquiries from the hotels in order to verify the name of the assessee that the bills had been paid by the producer whereas M/s. Anand Associate....
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....at since the bill had been raised in the name of the assessee it was for her to establish that the stay in hotel Holiday-Inn was in connection with shooting for which payments has been made by the producer. In the case of Park Sheritan most of the payments was established to have been made by producer. Since the assessee has not discharged the onus we are of the view that the addition of Rs. 63,849 is justified and the same is accordingly confirmed. Next addition is Rs. 1,04,099 on account of shooting expenses relating to Assessment year 1996-97. During the course of the search, certain documents giving details of daily shooting expenses for the film TAMANNA produced by the assessee had been seized. Assessee had been asked to explain the nature of the expenses. It was claimed by the assessee that basically the statements are prepared by the Accountant or the person authorised to disburse cash at the end of the shooting for the day. In the normal course such expenditure would be recorded in the regular books of account. Assessee had been asked to get the expenditure verified from the books of account. On verification of the accounts vis-a-vis the seized documents the Assessing Of....
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....he addition of Rs. 1,04,099 for the same reasons addition of Rs. 23,435 for the Assessment year 1996-97 is also deleted. There is another addition of Rs. 4,24,166 on account of on money relating to Pune flat. During the block period the assessee had purchased tow residential flats one at Kandivali (East) Bombay in consideration of Rs. 26,10,000 vide agreement dated 26th July, 1994 and the other at Koregao Park Pune for a consideration of Rs. 8,00,000 vide agreement dated 19-5-1995. Assessee had filed an application in Form No. 37-1 for getting the approval from appropriate authority for the Kandivali Flat. The appropriate authority had given no objection. In respect of purchase of flat at Pune, the agreement of purchase had been entered with Ms. Praveen Bobby. The Assessing Officer made an addition of Rs. 4,24,166 on the ground that the value of flat during the relevant period was Rs. 2,000 per sq. ft. and therefore assessee was presumed to have paid sum of Rs. 4,24,166 in excess of the amount disclosed. It was explained on behalf of the assessee that the assessee had filed the return on 2-12-1996 i.e. before the date of search giving the details of the purchase of the proper....
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....aspect of the film. In our considered view, the explanation of the assessee has wrongly been rejected. Mere fact that financial matters are handled by employees of the assessee and her uncle, does not established that the cash belonging to her proprietary concern was not with her at the time of search. M/s. Pooja Bhatt Production was her proprietary concern and there was no reason as to why the cash pertaining to proprietary concern could not be with her at the time of search. Not having full knowledge of the financial transactions is one thing and possession of cash of the proprietary concern is the other thing. In these circumstances, the explanation of the assessee regarding the availability of cash of Rs. 1,00,000 has wrongly been rejected. Similarly, explanation for possession of cash of Rs. 8,500 out of the withdrawals for expenses has also been rejected unjustifiably. Addition of Rs. 1,08,500 being uncalled for is also hereby deleted. Next ground is relating to addition of Rs. 1,39,582 on account of purchase of foreign exchange. The only contention advanced on behalf of the assessee is that the Assessing Officer has made addition on account of low withdrawals and has a....
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....f the assessee is that the jewellery worth Rs. 14,28,230 was disclosed in the balance sheet for the Assessment year 1996-97 and that the entire jewellery was available with the assessee. The addition on the account of capital gains was not justified, contended the learned counsel for the assessee. In our considered view, addition of Rs. 22,895 is justified. Proper opportunity was given to the assessee to explain the whereabouts of the jewellery disclosed in the Wealth-tax return. The assessee did not give satisfactory explanation. In fact it was stated by her that she was not having any other jewellery except what was found on the date of search. There was a justification for the assessee to presume that the assessee has sold the jewellery on which a gain of Rs. 22,895 has been worked out. The addition is accordingly confirmed. The next ground is relating to addition of Rs. 3,50,240. The relevant facts relating to this issue are that the assessee had shown jewellery worth Rs. 18,00,000 in her Wealth-tax return. On the date of search, Assessing Officer found certain diamonds studded in gold jewellery. In the Assessment year 1992-93 assessee disclosed diamond ornaments aggre....