TaxTMI 
TaxTMI 
2021 (2) TMI 1141
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....hen the matter reached the ITAT, the assessee raised a legal ground challenging the validity of search conducted u/s 132 of the Act contending that the conditions specified in that section have not been fulfilled and hence the search operation itself is illegal. On merits, the assessee contended the additions made by the AO in the block assessment order, which related to the disallowance of agricultural income shown by the assessee in his returns of income filed prior to search operations. 2.1 The Tribunal disposed of the appeal of the assessee in IT(SS)A No.4/Bang/2005 and the appeal of revenue in IT(SSA) No.15/Bang/2005, vide its order dated 29-06-2006. With regard to the legal issue relating to the validity of the search proceedings, the Tribunal rejected the same by following the decision rendered in the case of C Ramaiah Reddy in IT(SS)A 38/B/97 dated 19-03-2006, wherein it was held that the Tribunal had no jurisdiction to examine the authorisation of search. On the issues urged on merits, the Tribunal restored the issue to the file of the AO for adjudicating the same afresh. The assessee filed a miscellaneous application before the ITAT, which was numbered as MP No.52/Bang....
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....bunal by Hon'ble High Court to decide only the grounds urged on legal issue and since the assessee is not pressing the same now, there is no requirement of adjudicating those grounds. Accordingly, the grounds urged on the legal issue relating to validity of search proceedings are dismissed as not pressed. 4. We shall now take up the appeal of the assessee numbered as IT(SS)A No.8/Bang/2011. The grounds urged by the assessee relate to the following issues:- (a) Whether the was justified in determining the "undisclosed income" at Rs. 2.96 crores. (b) Whether the AO was justified in levying surcharge u/s 113 of the Act. 4.1 The facts relating to the above said issues are stated in brief. During the course of search operations, the search officials found one Balance Sheet belonging to a company named M/s MRP Home Inn Private Limited for the financial year ending 31.3.1998 along with corresponding figure for the year ending 31.3.1997. The relevant documents are placed at pages 55 - 56 of the paper book. The assessee is the managing director of the above said company and his wife is the other director. The said financial statements were to have been signed by t....
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....passed two assessment orders to give effect to the order of the Tribunal. The first order came to be passed on 31.12.2007 in order to give effect to the order of the Tribunal and the second order came to be passed on 03.11.2009 to give effect to the order passed by the Tribunal against the miscellaneous application. The Ld A.R submitted that the assessee had preferred appeal before Ld CIT(A) against the assessment order dated 31.12.2007, but the same has been set aside to the file of the AO by Ld CIT(A), since the AO was required to pass the assessment order again consequent to the order passed by the Tribunal against the miscellaneous application filed by the assessee. In the assessment orders passed to give effect to the direction of the Tribunal, the AO determined "undisclosed income" at Rs. 2.96 crores, i.e., the AO has determined the sources available with the assessee at Rs. 3.00 lakhs only as against Rs. 33.00 lakhs determined in the original assessment order. The AO rejected the claim of the assessee that the quantum of investment was Rs. 130 lakhs only and not Rs. 299 lakhs. 4.2 The assessee challenged the assessment order dated 03-11- 2009 by filing appeal before Ld....
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....f search does not tally with the books of accounts maintained by the assessee. Further, the said document does not contain breakup details of share application money. Accordingly, he submitted that the said document is a dumb document. Further, it cannot be presumed that the assessee herein has invested entire amount of share application money shown in the balance sheet. 4.5 The Ld. A.R. submitted that, even if the said balance sheet is assumed to be correct for a moment, the assessee has explained the sources for making investments in share application money, major part of which is the agricultural income declared in the returns of income filed by the assessee prior to the date of search. It is pertinent to note that the search officials did not unearth any incriminating material to show that the sources by way of agricultural income and other income/receipts were not available with the assessee. Accordingly he submitted that the AO has rejected the claim of availability of sources merely on surmises. He submitted that the returns of income upto AY 1997-98 have been filed prior to the date of search and hence the details of income were already known to the revenue. In any ca....
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....lly with the amount of share application money mentioned in the balance sheet approved in the annual general meeting/filed with the Registrar of Companies. Further, as stated by Ld. A.R., the seized document does not contain breakup details of share application money i.e. the details of persons who has invested the said amount. In the absence of break-up details of investors, we are of the view that the assessing officer has drawn conclusions only on surmises and conjectures that it is the assessee who has invested the money as share application. Further, as pointed out by Ld A.R, the amount of share application money shown in the said balance sheet is Rs. 259 lakhs and not Rs. 299 lakhs as mentioned by the AO. The difference between the two figures have not been reconciled anywhere by the AO. In any case, the assessee has explained that the above said financial statement does not reflect true state of affairs and it has been prepared to furnish it to a financial institution, i.e., the said financial statement is not backed by any original books of accounts. It is an undisputed fact, the search officials also did not unearth any material to show that the transactions shown in th....
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....re-examined with reference to those provisions which are relatable to an assessment u/s. 143(3). This is evident from A.R. Enterprises (supra), where the court held as follows: ". . . Sections 158BD and 158BC, along with the rest of Chapter XIV-B, find application only in the event of discovery of "undisclosed income" of an Assessee. Undisclosed income is defined by Section 158B as that income "which has not been or would not have been disclosed for the purposes of this Act". The legislature has chosen to define "undisclosed income" in terms of income not disclosed, without providing any definition of "disclosure" of income in the first place. We are of the 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 undis....
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....d to in Chapter XIVB is not relateable to the previous year. On the contrary, it is for the block period which may be 6 years or 10 years, as the case may be. Consequently, as already mentioned, while analyzing the scheme of Chapter XIVB, such Chapter is a complete code in respect of assessments of 'undisclosed income'. Not only it defines what is undisclosed income, it also lays down the block period for which undisclosed income can be taxed. Further, it also lays down the procedure for taxing that income. It is very pertinent to note at this stage that for this purpose, specific provision in the form of Section 158BA (2) is inserted making it a charging section. Thus, a diagnostic of Chapter XIVB of the Act leads to irresistible conclusion that it contains all the provisions starting from charging section till the completion of assessment, by prescribing special procedure in relation thereto, making it a complete Code by itself. Looking it from this angle, the character and nature of 'undisclosed income' referred to in Chapter XIVB becomes quite distinct from 'total income' referred to in Section 5. It is of some significance to observe that when a separat....
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....2002 w.e.f. 01.07.1995) states how the undisclosed income of the block period needs to be computed on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the AO and relatable to such evidence on the basis of evidence. In Asstt. CIT v. Hotel Blue Moon [2010] 188 Taxman 113/321 ITR 362 (SC) held that block assessments are not intended to substitute regular assessment and its scope and ambit is limited in that sense to materials unearthed during search. Similarly, it was highlighted in CIT v. R.M.L. Mehrotra [2010] 186 Taxman 137/320 ITR 403 (All.), an assessment based on search alone that does not attribute material evidence found therein or other information available with the AO relating to such materials cannot constitute block assessment. In the light of the above analysis, it is held that the additions made on account of the foreign trips made by the assessees fell outside the jurisdiction of the AO under section 158BC. They were correctly deleted by the ITAT. ............ 34. ........................... The counsel for the Revenue, however....
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....ct. The AO had levied the surcharge u/s 113 of the Act and the Ld CIT(A) has confirmed the same following the decision rendered by Hon'ble Supreme Court in the case of Suresh N Gupta (supra). Since we have deleted the entire undisclosed income in the earlier paragraphs, the question of levying of surcharge has become academic. In any case, it is the submission of the assessee that the decision rendered in the case of Suresh N Gupta (supra) has since been modified by Hon'ble Supreme Court in the case of Vatika Township (367 ITR 466)(SC). Accordingly, in case if any need arise for levying of surcharge in the instant case, the law laid down by Hon'ble Supreme Court in the case of Vatika Township (supra) needs to be followed. 6. We shall now take up the appeal of the revenue in IT(SS)A No.9/Bang/2011. The revenue is aggrieved by the decision of Ld CIT(A) in directing the AO to compute interest u/s 158BFA(1) of the Act upto the date of original assessment order and not upto the date of assessment order passed in the set aside proceedings. Since we have deleted the entire undisclosed income in the earlier paragraphs, this question has become academic. In any case, we deal with this is....
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....me of passing of original assessment order read as under:- "158BFA. (1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of January, 1997, as required by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one and one fourth per cent of the tax on undisclosed income, determined under clause (c) of section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and- (a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or (b) where no return has been furnished, on the date of completion of assessment under clause (c) of section 158BC." A careful reading of above said provisions would show that the interest is chargeable upto the month ending on the date ....