TaxTMI 
TaxTMI 
2006 (9) TMI 127
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....sed an assessment order dated March 31, 1999, whereby the following amounts were added as concealed income in the assessment years mentioned against each of them: AY Concealed Income 1993-94 Rs. 4,00,000/- 1994-95 Rs. 4,00,000/- 1995-96 Rs. 50,000/- 1997-98 Rs. 28,92,000/- 3. The addition as concealed income of Rs. 4 lakhs made by the Assessing Officer in the assessment year 1993-1994 was justified by him on the basis that the assessed had claimed a sum of Rs. 4 lakhs towards project expenses as being the amount paid on 19.4.1992 to one Sh. K. L. Sehgal for vacating a tenanted portion. The Assessing Officer notes that the assessee's reply to the notice under Section 158BC of the Act was silent on this payment. Consequently, the sum which was claimed as a revenue expenditure was disallowed and added back to the income of the assessed. 4. In respect of the addition made as concealed income of Rs. 4 lakhs for the assessment year 1994-95, the Assessing Officer had justified the addition on the ground that one Sh. Anil Gupta and Sh. Q. R. Gupta the purchasers from the assessee had agreed to make payment of Rs. 2 lakhs each to a tenant, Sh. Amitabh Bhattacharya for vacation ....
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....erred to the Valuation Officer. Despite notices and reminders the assessee had deliberately delayed the valuation in not complying with the proceedings. The plea of the assessee that he had sold the property and had no control over the same was not justified at least in respect of self-occupied portion that is 328.5 sq.yds plus superstructure built thereon. It was stated that the assessee had delayed the valuation by stating that in the month of March the Valuation Officer was extremely busy. Under the circumstances the Assessing Officer proceeded to add a sum of Rs. 25 lakhs as an investment in self-occupied portion on an estimated basis in the assessment year 1997-98. 9. The assessee appealed to the Commissioner of Income-tax (Appeals) (for short "CIT (Appeals)") against the aforesaid additions made by the Assessing Officer in her order dated March 31, 1999. It was argued that there was no incriminating material found or detected during the course of search and, therefore, there was no concealed income as defined under section 158B(b) of the Act. The assessee also argued that the additions in the block assessment were illegal as the amounts/assets stood disclosed in the regular ....
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....of Rs. 4 lakhs for the assessment year 1993-94 the assessee stated that the said expense was debited to the profit and loss account and accepted by the Department in the regular assessment. The relevant evidence in the shape of balance-sheet filed along with the original return which was duly audited by the chartered accountant was also produced. The assessee also produced the agreement entered into with the recipient Sh. K. L. Sehgal showing receipt of money and vacation of the tenanted portion. The Commissioner of Income-tax (Appeals) noticed that in the block assessment the Assessing Officer had not doubted the genuineness of the payment. Since the said expense was already reflected in the regular assessment proceedings the addition was held to be outside the purview of section 158BC of the Act. 12. Similarly, in relation to the addition of Rs. 4 lakhs for the assessment year 1994-95 the Commissioner of Income-tax (Appeals) found that the payments received by the assessee from the buyers Sh. Kimat Roy Gupta (it is unclear whether the name is Kimat Roy Gupta or Qimat Rai Gupta) and Sh. Anil Gupta were entirely towards consideration for sale of property and that these receipts we....
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....mmissioner of Income-tax (Appeals) reserved the right of the Assessing Officer to take appropriate action in the event of the amount of Rs. 1 lakh being deleted from the assessment of M/s. Standard Brands in the course of further appeal in the case of the said assessee. 17. In relation to the addition of Rs. 25 lakhs made towards the estimated cost of the self-acquired portion of the property developed by the assessee, the Commissioner of Income-tax (Appeals) held that there was no evidence found during the course of search indicating any unexplained investment in the said property. The assessee stated that it had constructed one room and the investment in respect thereof was duly disclosed in the books of account for an amount of Rs. 4,12,879/-. In the absence of any material being found during the search, no addition could be made under section 158BC towards unexplained investment in the property. The Commissioner of Income-tax (Appeals), however, held that the matter regarding reference to the valuation cell and unexplained investment, if any, can be considered in the regular assessment proceedings. He consequently deleted the addition of Rs. 25 lakhs for the assessment year 19....
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.... Officer. 22. On the issue relating to the addition of Rs. 2,92,000/- claimed as expenditure towards brokerage by the assessee the Tribunal found that the said expenditure had been duly disclosed in the regular books of account as, well as in the regular return filed by the assessee. The Assessing Officer had not found any evidence as a result of the search to show that the payment was not genuine or that it otherwise gave rise to any "undisclosed income" during the block period. Consequently, the deletion of the said addition by the Commissioner of Income-tax (Appeals) was also upheld by the Tribunal. 23. Lastly, coming to the deletion of addition of Rs. 25 lakhs on account of estimated unexplained investment in immovable property, the Tribunal held that the initial onus lay upon the Revenue to show that the assessee had made investment in property over and above what was disclosed in his accounts. The search did not reveal any unexplained investment. The Tribunal held that without any material or basis no estimates could be made particularly since the Assessing Officer was not an expert. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) in relation to th....
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.... 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 chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c); (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relat....
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....n the date of search or requisition. It is evident from clauses (a) and (b) of section 158BB that in assessment proceedings under Chapter XIV-B, assessments completed under section 143 or 144 or 147 cannot be reopened. Consequently, those elements of income which already stand disclosed in the relevant assessment years falling within the block period must be excluded while computing the undisclosed incomes under the Act. It is for this reason that, assessments under Chapter XIV-B have been declared to be in addition, to the regular assessment proceedings for the previous years included in the block period. 29. We may at this stage cite a few decisions of the other High Courts dealing with the relevant provisions of the Act. In N. R. Paper and Board Ltd. v. Deputy CIT [1998] 234 ITR 733, the Gujarat High Court considered the scope of Chapter XIV-B of the Act. In this case the assessee had challenged the issuance of notice under section 143(2) of the Act on the ground that the relevant assessment year was a part of the block period in respect of which a notice under section 158BC had already been issued and assessment concluded. It was contended that no further assessment proceeding....
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....ermined, on the basis indicated in clauses (a) to (f) of section 158BB(1) of the Act or increase it by the aggregate of losses of such previous year determined on the basis of these clauses... Under section 158BB(1), read with section 158BC of the Act, what is assessed is the undisclpsed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under section 143(3), where the Assessing Officer makes an enquiry to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner and on the basis of the evidence produced by the assessee, the evidence obtained on the specific points and all relevant material which he has gathered assessee the total income or loss and determines the sum payable thereon as per that assessment. This exercise under section 143(2) and (3) for regular assessment stands in contrast to the exercise of the Assessing Officer under section 158BB read with section 158BC(b), where he has to assess only the undisclosed income of the block period on the basis of the evidence found and material available as a result of ....
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....g the undisclosed income... The essence of the special procedure of Chapter XIV-B is to provide for an assessment of the undisclosed income detected as a result of the search without affecting the regular assessments made or to be made. The special provisions are devised to operate in the separate field of undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period." This decision has been followed by the Gujarat High Court in CIT v. N. R. Papers and Boards Ltd. [2001] 248 ITR 526 and in CIT v. Shambhulal C. Bachkaniwala [2000] 245 ITR 488 ; [2000] 108 Taxman 515. 30. In CIT v. Rajendra Prasad Gupta [2001] 248 ITR 350 (Raj), the Revenue challenged the decision of the Tribunal whereby the Tribunal had not accepted resort to a process of estimation by the assessing authority on the ground that the assessing authority had not examined the material that had come in his possession during the course of search while resorting to best judgment assessment. It was the contention of the Revenue that there was no prohibition against making a best judgment assessment under section 158BB, since the Explanation to section 1....
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.... authority inviting invocation of sections 158BB and 158BC. The enquiry into the correctness of such returns with reference to material so found has nexus with the object of the special provisions, to adjudge whether the assessee is still honestly disclosing his income correctly after incriminating material has been found in the possession of the Revenue authority before such returns can be rejected and thereafter to frame assessment estimating the income liable to tax to the best of judgment on the basis of the material that is available with him." We respectfully agree with this decision of the Rajasthan High Court. 31. We may also refer to a decision of the Kerala High Court, in Malayil Bankers v. Asst. CIT [1999] 236 ITR 869, the petitioner had challenged the assessment on the ground that the Assessing Officer had no jurisdiction to complete the assessment under section 143(3) after the issuance of a notice _under section 158BC of the Act. The petitioner had relied on two decisions, one from the Kerala High Court in the case of N. T. John v. CIT [1997] 228 ITR 314 and another of the Punjab and Haryana High Court in the case of Raja Ram Kulwant Rai v. Asst. CIT [1997] 227 ITR ....
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....income assessed in regular assessment shall not be included in the block period and income assessed in the block period shall not be included in the regular assessment. The clarificatory amendment is proposed to be inserted retrospectively from the 1st day of July 1995.' If the argument of learned counsel is accepted, ultimately, it will lead to disastrous consequences. The Assessing Officer assessing undisclosed income of block period may have to assess all the ten preceding previous years and part of the current year up to the date of search by reopening them which will have an undesirable effect on the assessees in general. The very purpose of making procedure for assessment in such cases simple and effective would become unwieldly and protracted. The decision cited by learned counsel for the petitioner reported in Kelappan Nair v. Payingaten [1961] KLT 527, held that the Explanation does not explain or add to the scope of the original section. The Explanation in this case is inserted probably in the light of the two decisions referred to by learned counsel for the petitioner and for removal of doubts. It is the declaration of the intention of the Legislature as to the sc....
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....ficer in accordance therewith." We agree with the aforesaid observations of the Gauhati High Court. 34. Lastly, the respondent has relied upon the decision of this court in CIT v. Vishal Aggarwal [2006] 283 ITR 326 in I.T.A. 268/2005 decided on May 5, 2005. In the said decision, like in the present case, the additions made by the Assessing Officer under section 158BC were deleted by the Commissioner of Income-tax (Appeals) on the ground that for the amounts to be considered for the purposes of block assessment, it was important that some material document or information should have been discovered pertaining to the said amounts under consideration during the search operations which would indicate that they constituted concealed income of the assessee. In that case the Tribunal had upheld the order of the Commissioner of Income-tax (Appeals) on the same ground. This court also affirmed the said view. This court held that since no incriminating material was found in the course of search, the Assessing Officer could not resort to the provisions of Chapter XIV-B of the Act to tax what was said to be "undisclosed income" or concealed income of the assessee. We find that the said decis....