Income Tax Appellate Tribunal - Pune
G.C. Associates vs Deputy Commissioner Of Income Tax on 18 August, 2000
Equivalent citations: (2003)80TTJ(PUNE)539
ORDER
B.L. Chhibber, A.M.
1. The assessee AOP belongs to Bafna group. The group consists of about 98 assessees, consisting of individuals, firms, AOPs, etc. The group is mainly engaged in the business of transport and it has allied businesses. The Department carried out extensive search operations on this group on 12th Sept., 1996, at all business and residential premises of the group. The searches resulted in seizure of cash of Rs. 4,48,089, jewellery, shares, securities, large number of documents, books of accounts, etc. There was no declaration of any undisclosed income made during the course of search. The peculiarity of this group is that barring 10 regular firms and few individuals of this group, which have been filing returns regularly and which have been also subjected to tax audit report, in case of other assessees no returns Were filed and no assessments had taken place before. As far as regular assessee-firms were concerned, returns were filed upto asst. yr. 1995-96 and assessments were also duly made. Apart from these firms, there were 42 AOPs, 23 partnership firms, 3 HUFs, 3 family trusts and 15 individuals. We are mainly concerned with those cases of the assessees consisting of AOPs and partnerships which are owning trucks and running transport businesses. These entities had been maintaining regular accounts right from the beginning, though such accounts had remained incomplete and unadjusted. All the books of accounts maintained by the AOPs and firms were seized during the course of search along with all the primary data, such as vouchers for expenses, truck purchase registers, bank details, etc. The Department also found an upto-date truck history register which was maintained upto-date giving details of every truck purchased, sold and transferred.
2. Some mention may be made regarding the method of truck transport business carried out by these different entities. There are two main concerns, namely, M/s Bafna Auto Carriers and M/s Bafna Motor Transport Co., Pune, which undertook contracts from various firms and industrial companies for transporting their products like scooters, cars, three-wheelers as well as goods. M/s Bafna Auto Carriers is mainly engaged in transporting scooters, cars, three-wheelers whereas Bafna Motor Transport Co., Pune, is engaged in transporting general goods. For transport purposes, Bafna Auto Carriers procures transport vehicles through concerns carrying on the business under the name and style Bafna Translines. M/s Bafna Motor Transport Co., Pune, procures transport vehicles from the concerns carrying on business as M/s Bafna Roadlines.
3. M/s Bafna Translines and M/s Bafna Roadlines get vehicles owned by various sister concerns, which are individuals, HUFs or firms. These vehicles are procured on the basis of terms and conditions discussed and agreed from time to time by the concerned parties.
4. After the search was carried out, notices were issued by the Revenue for filing of the returns. The returns were filed towards the fag-end of the year when the AO had already drafted assessment orders and forwarded the same to the CIT for his approval.
5. In the light of above background, we proceed to dispose of ten grounds raised by the assessee. Ground No. 1 reads as under :
"1. On facts and circumstances prevailing in the case and as per provisions of law it be held that the AO ought to have considered return of income filed for the block period for the purpose of assessment; it may further be held that the return of income filed by the appellant before the completion of the assessment for the block period is valid return, which ought to have been considered by the AO for the purpose of completing the assessment. It may further be held that not taking cognisance of the return filed by the appellant and finalising the assessment without considering such return is bad in law and vitiates the assessment order passed by the AO. The assessment order passed by the AO be held as null and void. Just and proper relied be granted to the appellant in this respect."
6. On p. 2 of the assessment order, the learned AO has noted that since block returns were filed by the assessee beyond time, no cognisance of the same is taken. However, it is found in the last para of the assessment order that he has in fact taken cognisance of the return. In the third para of p. 12 of the assessment order, the learned AO has stated that in the return for the block period, the assessee had shown higher income in some years than what was computed on the basis of material with the Department. Since the assessee was in the possession of all facts and knowledge of his case, the higher income as mentioned below to be substituted in place of the income computed. So stating, he has adopted the income of Rs. 6,54,840 for asst. yr. 1990-91 though as per his computation income was Rs. 6,10,274. Thus, the AO, on the one hand, states that he is ignoring the returns which were filed beyond the time and on the other hand, he did take cognisance of the returns where the returned income was more.
7. Though the ground states that the assessment order passed by the AO was null and void, Shri K.A. Sathe, the learned counsel for assessee, at the time of hearing, did not press this point by stating that the assessment order was not null and void, but he emphasized that the AO should have considered the returns of income for all the years and should have computed the income as per the returns. He submitted that the block return was filed before the finalisation of order and hence, it cannot be said to be invalid. In this behalf, he invited our attention to Section 158BC(a)(1). Shri Sathe submitted that the impression is gathered from the reading of the block assessment order under appeal that the assessee had not co-operated with the Department in completing the assessment. He denied such allegation and has submitted that the difficulties of the assessee in giving the information and filing the revised returns were bona fide. On 19th Oct., 1996, (p. 49 of the paper book. No. 2), the assessee wrote a letter addressed to the ADIT for releasing the books of account, documents and papers for the purpose of audit. The tax audit was to be carried out by 31st Oct., 1996, of several concerns and the auditors were insisting on original books of account for the purpose of their tax audit. The learned counsel admitted that it is true that in case of search and seizure operations, the original books are not returned till proceedings are completed, but a formal request has to be made to return the books for the purpose of audit. For obvious, reasons, the books could not be returned by the Department and the assessees started exploring the possibility of getting xerox copies of all the seized documents made. This voluminous task took a number of days. On 10th Jan., 1997 (p. 51 of paper book No. 2), a written request was made to the learned AO that xerox copies of the books, documents and papers seized by the search party may kindly be allowed to be taken. It was also mentioned that since the work was voluminous, it will require considerable period of time. In spite of these letters which were followed by oral requests from time to time, the work of granting xerox copies could not be completed till April, 1997. On 4th April, 1997, the assesses wrote another letter to the learned AO (p. 53 of paper book No. 2) wherein the assessee indicated that they were anxious to prepare the returns of income for the concerned assessees for a period of about 11 years. The assessees requested the AO that they may be permitted to take xerox copies even on holiday and the time may also be extended for obtaining such xerox copies on working days as well as on holidays so that the matter could be completed within the next few days time. The learned counsel further brought to our notice that the assessees requested the AO that they may be allowed to take xerox copies from 8.00 A.M. without any break. The assessees were prepared to instal four machines for the same so that the matter could be expedited. According to the learned counsel for assessee, this letter in very clear terms shows the anxiety of the assessees in co-operating with the Department by taking maximum efforts to prepare the returns. As the matters turned out, the actual work of granting xerox copies started only in May, 1997, and thereafter, it was being carried on upto July, 1997. Even after taking the xerox copies, the work of finalisation of accounts was very much necessary because in each case the accounts were unadjusted and not closed. P&L a/c and balance sheet of each assessee was to be prepared. This also took some time because the assessment also was taken up by the learned AO in the course of which he started asking for various details. These also were simultaneously required to be attended to. The returns, therefore, could not be filed and the assessees by their letters dt. 18th Aug., 1997 and 22nd Aug., 1997 requested for extending the time for filing the returns. The extension of time, however, could not be granted as there is no provision in Chapter XIV-B of the IT Act. The learned counsel submitted that in large number of cases, the returns could not be filed till the finalisation of draft assessment order. Draft orders were prepared on 9th Sept., 1997, and were served on the assessees on 15th Sept., 1997. It was at that time that in most of the cases, the assessees could file their returns of income accompanied by P&L a/c and necessary details of computation of income. The learned counsel drew our attention to a separate chart giving details of assessees in whose cases returns were filed on different dates after the draft orders were passed. He maintained that it is to be noted that returns in all the cases were filed before the assessment orders were finalised after obtaining the approval of the CIT, Pune. Not only this, the learned AO has duly taken note of these returns. Wherever he found that the income computed as per for a particular assessment year was more than what he had computed in the draft order, he has adopted such income in place of the income computed by him. According to the learned counsel, this shows that the learned AO had an access to the information submitted along with the return and had duly taken note of the same of course only for the purpose of benefit of the Revenue. He, therefore, submitted that the AO may be directed to take cognisance of the entire returns instead of taking cognisance only of the part of returns.
8. Shri Naresh Kumar, the learned Senior Departmental Representative, submitted that the assessee had not co-operated with the Department, had unduly delayed the returns of income and the return was filed only when the draft assessment order had been prepared by the AO. Accordingly, no cognisance could be taken of these matters.
9. We have considered the rival submissions and perused the facts on record. We hold that the assessment order passed by the AO is valid and not null and void as admitted by the learned counsel for the assessee. As regards filing of the belated return, a reference may be made to Section 158BC(a)(i). This provisions shows that the AO is required to serve a notice calling upon the assessee to file block return within a period of not less than 15 days. There is no outer time-limit given in the sub-section; whereas in respect of searches carried out after the first day of January, 1997, the outer limit of 45 days is mentioned. Thus, as far as the assessees are concerned, there was no outer time-limit for filing the returns. Even in respect of cases covered after 1st Jan., 1997, returns filed beyond time are not regarded as non est, but they are subjected to levy of interest and penalty wherever applicable. Thus, if the law does not prescribe any outer limit for filing return and the return has in fact been filed before the assessment is completed and is admittedly available for taking congnizance by the AO such returns cannot be branded as invalid. The AO is, therefore, directed to take cognizance of the entire return instead of taking cognizance of only part of the return. This ground, accordingly, succeeds in part.
Ground No. 210. The ground reads as under :
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that the undisclosed income should have been assessed at. Rs. 21,78,530 as is admitted by the appellant as against Rs. 50,06,797 computed by the AO. The appellant be granted just and proper relief in this respect."
This is general ground challenging various additions made to the undisclosed income returned. This ground has to be read along with other grounds. So, this ground does not call for any specific comments.
Ground No. 311. Ground No. 3 reads as under:
"On facts and circumstances prevailing in the case and as per provisions of law it be held that AO ought to have granted depreciation on value of trucks declared by the appellant. It may further be held that not accepting the value of truck declared by the appellant and substituting the same on ad hoc basis and granting the depreciation on such ad hoc substituted value is contrary to the provisions of law. The appellant be granted just and proper relief as per provisions of law and on facts and circumstances prevailing in the case."
The learned AO has adopted the WDV of Rs. 1,000 in case of the trucks acquired prior to the block period. In respect of the trucks which have been acquired during the course of the block period by transfer from one entity to another, WDV has been adopted at Rs. 1,000 or the WDV of the transferor, whichever is more. This method of computation of WDV is challenged in this ground.
12. During the course of assessment proceedings, the AO proposed to the assessee why WDV of the trucks purchased prior to block period should not be taken at Rs. 1,000 as on the beginning of the previous year relevant to asst. yr. 1987-88. The assessee was also asked to explain as to why WDV of the trucks which have been transferred within the block period should also not, be adopted at Rs. 1,000 in the hands of the transferor. In response to this letter, the assessee relied on the decision of the Supreme Court in the case of Madeva Upendra Sinai v. Union of India and Ors. (1975) 98 ITR 209 (SC) and objected to the adoption of WDV at Rs. 1,000. Rejecting the contention of the assessee, the learned AO stated that during the course of block period, he found that trucks were transferred from one entity to another very frequently. The AO did consider that since the assessee had not filed the returns and no assessments had taken place, depreciation was not actually allowed. According to him, there was no occasion to allow depreciation. In his opinion, provisions of Section 43(6) are applicable only in those cases where returns had been filed and not in cases where returns are not filed as in the case of the assessee. As regards the judgment of the Supreme Court in the case of Madeva Upendra Sinai (supra), according to the AO, the said decision had no application as the same was distinguishable on facts. Firstly, in that case before the Supreme Court, the assessee was being assessed under Portuguese law and tax was levied under the Act not on the basis of net income but on the basis of gross turnover. These facts are not present in the facts of the assessee's case. Secondly, the assessee was regularly assessed to tax, but here the assessee was not filing returns at all and ultimately, the Supreme Court found that WDV may also be the actual cost of the assets of the assessee under Section 43(6)(b) if no depreciation was computed, actually allowed or carried for no fault of the assessee. In the instant case, according to the AO, it is the assessee's fault that he had not filed the returns and, therefore, no occasion to allow depreciation had arisen. Thereafter, the learned AO stated at length how the assessees of Bafna group have been transferring trucks from one entity to another and he drew conclusion regarding tax evasion for which purpose, he relied on the decision of the Supreme Court in the McDowell & Co. v. CIT (1985) 154 ITR 148 (SC). He also invoked Expln. 3 to Section 43(1) which, according to him, was applicable in respect of the assets transferred during the course of block period. According to him, Expln. 3 to Section 43(1) authorised him to adopt WDV which, according to him, was to be determined at Rs. 1,000 or WDV of the transferee.
13. Shri K.A. Sathe, the learned counsel for assessee, vehemently challenged the method of computing of WDV of assets acquired prior to block period at Rs. 1,000 and adoption of WDV at Rs. 1,000 or equal to WDV of the transferor in the cases of transfer during the course of block period. He drew our attention to language of Section 43(6) and submitted that the language of the sub-section is very plain and since in the past no depreciation was even allowed by the AO there cannot be said to be any depreciation actually allowed to any of the assessee. The WDV had to be equal to the actual cost of the concerned truck owned by the assessee. In support of this contention, he relied upon the following judgments :
(a) CIT v. Bennet Coleman & Co. Ltd. (1989) 177 ITR 423-(Bom);
(b) CIT v. Shri Someshwar SSK Ltd. (1989) 117 ITR 443 (Bom); and
(c) CIT v. Dharampur Leather Co. Ltd. (1966) 60 ITR 165 (SC).
He further relied upon the judgment of the Allahabad High Court in the case of Rampur Distillery & Chemical Works Ltd. v. CIT (1965) 55 ITR 338 (All) and especially drew our attention to pp. 348, 349 & 359 of the judgment to emphasize that the interpretation given by the AO is against the clear judgment on the WDV given in the aforesaid judgment of the Hon'ble Allahabad High Court. He also placed reliance on the Board Circular No. 29D (24-XXIV of 1965), dt. 31st March, 1976 (reproduced on p. 538 of Chaturvedi & Pithisaria, Vol. 10). In this circular, the Board have directed that even in case of best judgment assessment where net profit had to be adopted, it should be always subjected to allowance of depreciation. This is because unless depreciation is actually computed and worked out, it cannot be presumed to have been allowed. According to the learned counsel, this suggests that the Board also accepts the fact that allowance of actual depreciation has to be specific for the purpose of computation of WDV. The learner counsel further submitted that the contention of the learned AO that the decision of the Supreme Court in Madeva Upendra Sinai (supra) was distinguishable on facts is not correct, because, in considering the decision, what one has to see is the ratio and not the relevant facts, unless they are shown to have any bearing on the ratio involved. He further took us through the comments of learned CIT while approving the order and submitted that learned CIT seems to be very confused whether the assessee is tax evader or not. He further submitted that the reliance placed by the learned AO and learned CIT on the decision in the case of Madeva Upendra Sinai (supra)(sic) is totally misplaced. The learned counsel further submitted that for limiting the depreciation, the learned AO also referred to Expln. 3 to Section 43(1) for which there is no justification at all. The learned counsel accordingly concluded that method adopted by the AO is legally incorrect and the AO may be directed to allow depreciation on trucks on the basis of WDV on the basis of actual cost to the assessee in case of trucks acquired in the previous year and in the case of trucks acquired before the previous year; actual cost to the assessee less of the depreciation.
14. Shri Naresh Kumar, the learned Departmental Representative, strongly supported the order of the learned AO. He submitted that for the assessment year prior to the beginning of the block period, no returns were filed by the assessee even though regular accounts, were maintained. Consequently, no assessments were completed. He submitted that the insertion of provision of Section 139(10) has changed the entire scenario. Section 139(10) was introduced by the Taxation Law (Amendment and Misc. Provisions) Act, 1986, with retrospective effect from 1st April, 1986. Section 139(10) is an overriding provision. As per Section 139(10), notwithstanding anything contained in other provisions of the 1961 Act, the maximum amount which is not chargeable to tax shall be deemed never to have been furnished unless it falls within any of the exceptions provided in the said section. According to the learned Departmental Representative prior to the insertion of Section 139(10), there were administrative instructions not to accept the returns showing income below the minimum taxable income. In the present case, the assessee was maintaining regular books of accounts and was debiting depreciation in its books of accounts. Presumably for the period prior to the block period, the assessee had computed the income below the taxable limit after taking into consideration depreciation allowable and hence in accordance with the provisions of Section 139(10) no returns were filed. Thus, the assessee as well as the Department, both were of the view that after taking into consideration the effect of depreciation, the income of the assessee was below the taxable limit. Therefore, even though for the said period the returns were not filed by the assessee, the depreciation has been "deemed to have been allowed to the assessee". According to the learned Departmental Representative, any other interpretation would lead to a situation where the assessee would keep on debiting depreciation every year, not filing the return as per Section 139(10) and still claim the WDV without considering the depreciation. Thus, the assessee would get double benefit. The learned Departmental Representative asserted that this could have never been the intention of the legislature and, therefore, insertion of Section 139(10) has rendered the decisions relied upon by the learned counsel for assessee as not applicable since they did not consider the provisions of Sections 139(10). As regard the uniform adoption of Rs. 1,000 as WDV of each truck at the beginning of the block period by the AO the learned Departmental Representative relied upon the order of the AO.
15. We have considered the rival submissions and perused the facts on record. At the very outset, we must state that the adoption of uniform WDV of Rs. 1,000 for each truck, at the beginning of the block period by the AO is non-tenable and it is a poor product of his imagination based on mere presumption. Written Down Value (WDV) has been defined under Section 43(6) to mean in case of assets acquired in the previous year, actual cost to the assessee and in the case of assets acquired prior to previous year, actual cost to the assessee less all the depreciation actually allowed to him, under this Act, or under the Indian IT Act, 1922, etc. In short, if the asset has been acquired in the previous year, WDV is equal to actual cost. In case where asset has been acquired earlier to the previous year, it is equal to actual cost, less depreciation actually allowed. The crucial words are "depreciation actually allowed" which mean that the depreciation may be allowed by the AO in computation of the income of the assessee. If the process of computation by way of assessment is not made, there cannot be said to be any depreciation actually allowed. For example, if an asset is purchased in asst. yr. 1985-86 at Rs. 1,00,000, if the assessment was made in asst. yr. 1985-86 by allowing depreciation at the rate of 40 per cent, its WDV for the asst. yrs. 1986-87 could be only Rs. 60,000. If, however, no assessment has been made for asst. yr. 1986-87 WDV would be actual cost, i.e., Rs. 1,00,000 minus depreciation actually allowed, which is zero, there being no depreciation allowed in asst. yr. 1985-86. Thus, the WDV in that case for asst. yr. 1986-87 would still be Rs. 1,00,000. The words of the statute are very clear and leave no room for any other interpretation. It may be that in his books of account the assessee might have debited any depreciation for the purpose of its own calculation, but such depreciation cannot be said to be depreciation "actually allowed." In the example given above, if for asst. yr. 1985-86, the assessee has not filed return of income, the fact that it has computed its income in its books of account or that it has debited depreciation in its books of account has no relevance so far as computation of WDV under the Act is concerned, because what the assessee debits in the books of account cannot be equated with depreciation "actually allowed under the IT Act." This aspect of the question has been considered in detail by the Allahabad High Court in the case of Rampur Distillery & Chemicals Works Ltd. v. CIT (supra). In the case before the Hon'ble High Court, provisions of Section 10(5)(b) of IT Act, 1922 (which were pari materia to Section 43(6) of IT Act, 1961) were considered. In this context, following observations of the Hon'ble High Court are very relevant :
"What is required to be deducted from the original cost under Section 10(5)(b) is the depreciation which might have been allowed to him under the IT Acts if he was liable to pay income-tax. The question of allowing depreciation arises only when for the purpose of assessing income-tax the profits and gains of the business are to be computed. If no income-tax is payable whether on account of exemption or otherwise, the profits and gains of the business are not required to be computed and there is no occasion for allowing depreciation. There is, therefore, a clear distinction between depreciation actually allowed and depreciation which would have been allowed if the profits and gains of the business had to be computed for assessment of income-tax and under Section 10(5)(b) the written down value is calculated after deducting from the original cost only that depreciation that has actually been allowed in the computation of the profits and gains of the business during proceedings for assessment of income-tax in earlier years. As the assessee's profits and gains from the business had never been computed previously and, therefore, no depreciation had actually been allowed to it, there was nothing to be deducted from the original cost of the assets in order to determine their WDV for the asst. yr. 1950-51. The word "actually" used in Section 10(5)(b) was not redundant and must be given its full effect. Depreciation deemed to have been allowed or which might have been allowed if the profits and gains of business had been assessed to income-tax in previous years is certainly not depreciation "actually allowed" and cannot be deducted from the original cost.
The assessee while calculating its profits and gains of business went on depreciating the value of the assets year after year and it was contended on behalf of the CIT that this amounted to depreciation being actually allowed.
The assessee went on deducting the depreciation from its profits only for the purpose of its calculating what profits were divisible to shareholders. It itself deducted the depreciation every year from the profits and this, deduction by itself does not amount to depreciation being 'allowed' to it under the IT Acts.
The depreciation that is deducted every year from its profits was not deducted under any provision of any IT Act. The only depreciation allowed under any IT Act is the depreciation allowed by any ITO when computing its profits and gains of business for assessment purposes. "Actually allowed" mean allowed by an IT authority; depreciation claimed by the assessee itself in its own accounts is not depreciation allowed to it" (emphasis, italicised in print, supplied).
"Nothing depends upon the fact that the assessee's accounts and returns themselves show reduced values of the assets. There is no question of an estoppel because the IT authorities did not alter their position to their detriment on account of these entries in the accounts and returns. There can be no estoppel against a statute and it was open to the assessee to claim that in calculating the WDV of the assets for the purposes of assessment nothing had to be deducted from their original cost even though it had for its own purposes gone on gradually reducing their book value. As I pointed out, only that depreciation is to be deducted which was actually allowed by the IT authority while calculating for the purpose of assessing income-tax the profits and gains of the assessee's business under an IT Act. Any depreciation claimed by an assessee but not allowed as mentioned above is not deducted. All depreciations entered by the assessee in its accounts of previous years were simply depreciations claimed by it but not actually allowed. It is for an IT authority to compute the profits and gains of the business and it is bound to calculate the WDV as provided in Section 10(5). It is governed by the statute and not by what the assessee has written in the accounts and returns. It is not correct that it could accept any profit of WDV and that it could not accept the book value given in the accounts of the assessee as the WDV. It could not accept the book value as the WDV after the assessee had proved that no depreciation had actually been allowed to it under any IT Act in the previous years and that consequently the book value was not legal WDV. Had there been no proof that the assessee had not actually been allowed any depreciation in the previous years the book value entered by it in its accounts could have been accepted by an IT authority as the WDV but not otherwise."
Referring to the decision of the Calcutta High Court in the case of CIT v. Kamala Mills Ltd., the Hon'ble High Court observed as under :
"We cannot assume that the legislature was not aware of the distinction between 'depreciation allowable to an assessee' and 'depreciation allowed to him' as used in Clause (b) of Section 10(5)....... That the legislature bore always in mind the difference between the expression 'what is actually allowed' and 'what is allowable' could also be gleaned from Section 9(1)(iv) in which the word 'payable' is used and Section 10(5) which defines 'paid' as actually paid....... All these indications are pointers to the conclusion that it is only such depreciations as are in fact granted to an assessee that should enter in the determination of the WDV."
In our opinion, the above observations of the Allahabad High Court in no unmistakable terms interpret Section 43(6) to mean that in case of assets acquired prior to previous year, WDV has to be equal to the actual cost if no depreciation has been allowed to the assessee in the previous case.
16. The contention of the learned AO that the decision of the Supreme Court in the case of Madeva Upendra Sinai (supra) was distinguishable on facts is not correct. In considering the decision, what one has to see is the ratio and not the relevant facts, unless they are shown to have any bearing on the ratio involved. In the case before the Supreme Court, the Hon'ble apex Court was considering the validity of Removable of Difficulties Order. According to the Supreme Court the key word in Clause (b) of Section 43(6) is 'actually'. It is the antithesis of that which is merely speculative, theoretical or imaginery. "Actually" contra-indicates a deeming construction of the word 'allowed' which it qualifies. The connotation of the phrase "actually allowed" is thus limited to depreciation actually taken into account or granted and given effect to, i.e., debited by the ITO against the incomings of the business in computing the taxable income of the assessee; it cannot be stretched to mean "notionally allowed" or merely allowable on a notional basis. Even in the case of assets acquired before the previous year, where in the past no depreciation was computed, actually allowed or carried forward, for no fault of the assessee, the WDV may under Section 43(6) also be the actual cost of the assets to the assessee. The section itself does not make any distinction between the cases where there is any fault on the part of the assessee and cases where there is no fault on the part of assessee. In fact, it was in the context of a good assessee that the Hon'ble apex Court observed that in view of clear provision of Section 43(6) there was no difficulty which had to be removed and, therefore, Removal of Difficulties Order was totally unconstitutional. The case of the assessee further stands fortified by the judgment of Hon'ble Supreme Court in the case of CIT v. Mahendra Mills (2000) 243 ITR 56 (SC), wherein it has been held that "if the assessee does not wish to avail of the benefit of depreciation for some reason, the benefit cannot be forced upon him, It is for the assessee to see if the claim of depreciation is to his advantage."
17. In our opinion, the reliance placed by the learned AO and the learned CIT while approving the order of learned AO on the judgment of the Hon'ble Supreme Court in the case of McDowell & Co. (supra) is totally misplaced. Here the question is not one of deciding whether there was any colourable device employed by the assessee. In the present case, we are concerned with the simple case of interpretation of Section 43(6). In the matters of interpretation of a section, the decision of McDowell & Co. has no relevance. This has been made clear by the Hon'ble Supreme Court itself in CWT v. Arvind Narottam (1988) 173 ITR 479 (SC). The Hon'ble Supreme Court held in the context of interpretation of deeds that where the language of the deed was plain and admitted of no ambiguity, there was no scope for considerations of tax avoidance. What applies to the interpretation or construction of deeds will apply with more force in the context of construction of a statute. We, therefore, hold that the decision of the Hon'ble Supreme Court in McDowell's case is not at all applicable in deciding the issue before us.
18. For limiting the depreciation, the learned AO has also referred to Expln. 3 to Section 43(1). In our opinion, there is no justification in invoking Expln. 3. It is first necessary before invoking the said Explanation that the AO should be satisfied that the main purpose of the transfer of assets from one assessee to other was reduction of a liability to income-tax by claiming depreciation with enhanced cost. In the present case, the reason for transferring of trucks from one entity to another was purely commercial, such as getting national permits within limits for vehicles or for obtaining advantage of IDBI loans. The purpose of transfers was not for purpose of tax evasion. In any case, there could be no tax avoidable. For example, if an AOP has transferred a vehicle to another AOP, the difference between the sale price and WDV has been offered to tax in the year of sale. Thus, on the surplus arisen the AOP will be paying taxes. In order to show that there was enhanced cost, the AO should have applied his mind to the facts of individual transfer and should have found out with reference to individual transaction whether the price at which truck was transferred was equal to the market value. Since depreciation allowable on truck is substantial, it may usually happen that WDV will appear to be a small figure as compared to the figure at which truck is transferred. But merely because there is a large difference between these two figures, is no ground to suspect that the transfer is being made at enhanced cost. We find that there is a total absence of material with the AO to show that such prices were not market prices but artificially enhanced cost. Accordingly, in our opinion, the main requirements of Expln. 3 to Section 43(1) are not satisfied by the AO. Merely because there is a power under the section would not enable the AO to adopt any value which he is pleased in determining the actual cost of WDV. Since in this case the basic conditions are not fulfilled, the provisions of Expln. 3 to Section 43(1) will not apply, and in any case, the adoption of uniform WDV or cost of acquisition at Rs. 1,000 per each truck by the AO has no meaning.
19. Coming to the arguments of the learned Sr. Departmental Representative we find that the same are not tenable, Section 139(10) was introduced from asst. yr. 1986-87. If there existed any executive instructions prior to that period, they had no statutory force. Section 139(10) simply says that if an assessee has filed a return of income showing income below taxable income, the said return shall be ignored. If this is the provision of Sub-section (10), it simply means that existence of the return is not to be accepted. It cannot, therefore, mean that in a case where the assessee had not filed a return of income, his income is to be presumed to be below taxable limit; it cannot mean that any process of assessment has taken place. Unless there is a process of assessment, there cannot be any presumption of allowance of depreciation. It has already been stated above that the words "actually allowed" mean depreciation actually allowed by the AO in making the assessments. If the wording of Section 139(10) precludes existence of the return, assessment cannot be presumed and necessarily it would mean that depreciation was not actually allowed. Thus, the interpretation of Section 139(10) by the learned Departmental Representative has no relevance at all as regards interpretation of Section 43(6). As stated earlier, even notional allowance of depreciation cannot be considered for the purpose of Section 43(6).
20. In the light of above discussion, we set aside the order of the AO; restore the issue to his file and direct him to allow depreciation on each truck acquired in the previous year on the actual cost to the assessee and in case trucks acquired before the previous year, on actual cost to the assessee less the depreciation actually allowed to him, under this. Act as per the provisions of Section 43(6), after getting necessary details from the assessee.
Ground No. 421. Ground No. 4 reads as under:
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that the depreciation determined for any of the years remained unabsorbed in the block period is adjustable and is eligible for set off against the income of the subsequent year covered by the block period. It further be held that in considering unabsorbed depreciation for the purpose of computation of the income covered in the block period, the depreciation should have been allowed in the block period on considering the unabsorbed depreciation pertaining to any of the years within the block period. Just and proper relief be granted to the appellant in this respect."
From the computation of income made by the learned AO, it is seen that the total income computed by him for asst. yrs. 1996-97 and 1997-98 is a negative figure i.e., Rs. 2,69,206 and Rs. 1,18,033, respectively. Total of these losses comes to Rs. 3,87,239. The AO has completely ignored this loss in computing total undisclosed income (vide Annexure 28 to the assessment order). The negative income had arisen on account of depreciation claimed by the assessee.
22. Shri K.A. Sathe, the learned counsel for the assessee, submitted that in computing total undisclosed income for the block, such negative income is also to be considered. In this behalf, he relied upon the decision of Mumbai Bench in BDA Ltd v. Asstt. CIT (1998) 61 TTJ (Mum) 197: (1998) 65 ITD 501 (Mum).
23. Shri Naresh Kumar, the learned Senior Departmental Representative, distinguished the said decision of Mumbai Bench on the ground that in the present case negative income has arisen on account of depreciation while in the case of BDA Ltd. negative income was on account of losses suffered by the assessee. According to the learned Departmental Representative the Act gives different treatments to unabsorbed depreciation and losses and, therefore, what was considered possible for the purpose of loss was, according to him not possible in respect of unabsorbed depreciation.
24. In rejoinder, Shri Sathe, the learned counsel, submitted that the contentions of the learned Departmental Representative are not tenable. In the first place, in view of the decision of the Supreme Court in Garden Silk Wvg. Factory v. CIT (1991) 189 ITR 512 (SC) unabsorbed depreciation has to be considered as part of loss and the distinction made by the learned Departmental Representative in regard to losses and unabsorbed depreciation is without difference and the decision of BDA Ltd. (supra) applies. He further submitted that reference to unabsorbed depreciation in Explanation to Section 158BB is referable to unabsorbed depreciation in regular assessments of concerned years and not to unabsorbed depreciation accounted in the process of computing undisclosed income. The learned counsel drew our attention to Section 32(2), as it then existed and submitted that unabsorbed depreciation of one year was to be considered as part of next year's depreciation and for this reason also, unabsorbed depreciation of one year had to be considered in computing the income of second year in the block. The learned counsel further submitted that even assuming that the Explanation applies and a negative income of one year cannot be set off against profits of subsequent year for computing undisclosed income for the entire block, such negative income in any case has to be computed. Lastly, the learned counsel submitted that even assuming that no unabsorbed depreciation is to be adjusted in computing the undisclosed income of the block, this will have reflection on the WDV of subsequent years. If depreciation of one year remains unabsorbed and cannot be adjusted to the subsequent year or years, to that extent, depreciation cannot be said to be actually allowed and WDV of subsequent years will have to be calculated at a higher figure disregarding the unabsorbed depreciation.
25. Rival submissions of the parties have been considered carefully. In our opinion, there is sufficient force in the contention of the learned counsel for the assessee to the effect that the profits as well as losses should be determined in respect of each previous year falling within the block period subject to the condition that no set off in respect of unabsorbed depreciation under Section 32(2) should be allowed while determining such profits and losses. The profits and losses so determined, then shall be aggregated. This is apparent from the Expln. (a) to Section 158BB. This view is also fortified by the decision of Mumbai Bench of the Tribunal in the case of BDA Ltd. (supra). Therefore, the contention of the assessee that unabsorbed depreciation forms part of the current depreciation in the next year and consequently should be taken into consideration while computing the income of the next year cannot be accepted because of the specific provision contained in Clause (a) of the said Explanation. This provision had been made by the legislature to avoid the double deduction. The determination of negative income will automatically result in set off at the stage of aggregation of profits and losses in respect of the previous years falling within the blocK period. It is because of this reasons, that set off as provided under Section 32(2) has been denied by the legislature under the provisions of Clause (a) of the said Explanation. Accordingly, the order of AO is set aside on this issue and he is directed to determine the profits as well as losses on account of unabsorbed depreciation in respect of each previous year without setting off unabsorbed depreciation of earlier years. The income or loss so determined shall be aggregated as per Section 158BB for computing the undisclosed income. Accordingly, this ground is allowed in part.
Ground No. 526. Ground No. 5 reads as under :
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that the AO is in error in granting depreciation on pro-rata basis for the period from 1st April, 1996 to 12th Sept., 1996. The depreciation should have been allowed in full as per provisions of law and on facts and circumstances prevailing in the case for the said period. Just and proper relief be granted to the appellant in this respect."
In regard to broken period from 1st April, 1996 to 12th Sept., 1996, the learned AO granted depreciation at 5/12th of the allowable depreciation, to which the assessee has objected.
27. Shri K.A. Sathe, the learned counsel for the assessee submitted that depreciation should have been allowed at one-half of the allowable depreciation.
28. Shri Naresh Kumar, the learned Departmental Representative submitted that the broken period not being a previous year, the assessee was not entitled to any depreciation at all and the learned AO was more than fair in allowing at least proportionate depreciation.
29. After hearing both the parties, we find no merit in the contention of the learned Departmental Representative. The expression 'previous year' need not be a period of 12 moths, The depreciation of 'previous year' in Section 3 will bear out this point. In case the business is newly set up or a source of income newly coming into existence in the financial year, previous year of such assessee will be the period beginning with the date of setting up of the business or profession, the date on which the source of income newly comes into and ending with the said financial year. For example, if an assessee sets up its business on first February, 1999, the previous year for asst. yr. 1999-2000 will be two months from 1st Feb., 1999 to 31st March 1999. It such an assessee purchases an asset during that year, depreciation will be allowed at one-half rate. This is clear from the language of second proviso to Section 32(1) according to which if the asset is put to use in the previous year for a period of less than 180 days the assessee is entitled to 50 per cent of depreciation.
30. In case of block assessment, broken period of the last of the previous year is to be considered. The definition of block period shows that broken period is also referred to as the previous year. Such previous year starts on the 1st April of the concerned year and ends with the date of search. Thus, the previous year will be a broken period, but nonetheless, it will be a previous year. In view of the provisions of second proviso of Section 32, broken period also will have to be considered as previous year. Since in the present case, previous year of asst. yr. 1997-98 was considered to be from 1st April, 1996 to 12th Sept., 1996 and since in this previous year assets were used for less than 180 days, depreciation at one-half rate allowable has to be allowed. There is no provision in the Act to allow 5/12th of depreciation allowable. The argument of the Senior Departmental Representative that no depreciation whatsoever is to be allowed is also not tenable as there is a previous year involved and such previous year need not be a period of 12 months.
31. In the light of our above discussion, we direct the AO to allow depreciation at the rate of 50 per cent of the allowable depreciation for the broken period. This ground, accordingly, succeeds.
Ground No. 632. Ground No. 6 reads as under:
"On facts and circumstances prevailing in the case and as per provisions of law it be held that the AO ought to have granted claims of expenses pertaining to trips of trucks, truck expenses and administration expenses on the basis of the P&L a/c submitted by the appellant along with the return and details submitted from time to time in that respect. It may further be held that disallowing part of such expenses and or allowing such expenses on percentage basis is arbitrary, unjust and improper. The appellate be granted just and proper relief in this respect."
The facts leading to the additions have been discussed by the AO at para 11 of his order. In computing the income of the assessees, the learned AO allowed truck expenses, trip expenses and administrative expenses subject to certain disallowances. According to the AO truck trip expenses were not supported by outside vouchers. There was no uniform proportion in these expenses vis-a-vis receipts. According to him, the assessee had inflated these expenses by claiming bogus expenses in part or full under various sub-heads of trip expenses. For this, he relied on the detailed reasons discussed in the case of K.I. Raka, HUF and Bafna Road Lines and Bafna Translines. In view of the defects mentioned by him, he disallowed 10 per cent of such expenses. Out of truck expenses, the AO disallowed 1 per cent on the same grounds. In regard to administrative expenses, same were allowed at 2 per cent of the receipts for asst. yrs. 1987-88 to 1989-90 and from asst. yr. 1990-91, the same were not allowed as according to the AO the assesses-started getting fixed hire charges of truck. All the above disallowances have been challenged by the assessee in this ground.
33. Shri K.A. Sathe, the learned counsel for the assessees, submitted that the various assessees i.e., AOPs, firms, etc. are truck owners who used to give their trucks on hire to Bafna Motor Transport Co., Pune, upto 31st March, 1989 which in turn used to run such trucks on contract basis. The entire freight used to be passed on to the owners and in turn Bafna Motor Transport Co., used to get fixed charges against each truck from the concerned owners on yearly basis. In other words the owners (assessee under consideration) used to bear all the expenses including charges payable by the owners to Bafna Motor Transport Co. For assessment year upto 1989-90 the said system continued. From financial year i.e., 1991-92 onwards the position was as below. For the asst. yrs. 1991-92 and 1992-93 there were four concerns, namely, Bafna Motor Transport Co. Pune, Bafna Auto Carrier, Bafna Roadlines and Bafna Translines. Contracts of transport were being taken by Bafna Motor Transport Co., Pune, and Bafna Auto Carriers. The freight used to be received by these two concerns for and on behalf of Bafna Roadlines and Bafna Translines. The entire freight used to be transferred to these two concerns and these two concerns used to charge services charges for rendering such services as were fixed from time to time. The concerns Bafna Roadlines & Bafna Translines used to incur all the expenses including maintenance, repairs, trip expenses, etc. Salary of drivers and cleaners, however, used to be borne by respective owners for 1991-92 and 1992-93. The said two concerns used to pay the truck owners hire charges which are the rates fixed per truck from time to time. From asst. yr. 1993-94 till date the above two concerns bear the entire expenses including salary of the drivers and cleaners and they have been paying hire charges to the concerned truck owners at the rate fixed from time to time.
34. The learned counsel further submitted that while framing the assessment, the AO had all the seized records which contained the truck hire charges and trip expenses. The trip expenses were properly maintained by the assessee for each trip and each truck. He drew our attention to specimen copy of such trip sheet placed in the paper book. In each trip sheet the driver used to show the expenses incurred by him on that trip. Whatever expenses incurred like unloading and loading charges, driver's Batta, RTO fees, tyre puncture expenses and sometimes if diesel was required to be filled-in, diesel expenses were recorded. The learned counsel submitted that all such expenses were supported by vouchers and it may be appreciated that the assessee was maintaining these records not for tax purposes as such, but for having a control over his organization which was fully dependent on his employees. He further submitted that the assessee's receipts as also major expenses were paid by cheques and in the nature of things, there could not have been supporting vouchers for expenses like Hamali and Naka expenses. As far as truck expenses are concerned, these included the diesel charges, RTO taxes, insurance paid, spare parts, tyres, etc. Major part of these expenses were also paid by cheques and were fully verifiable.
35. The learned counsel further submitted that while allowing expenses, the learned AO went only by records seized and information furnished from time to time during the course of assessment, Since the books seized were not complete in many respects and many adjustments had not been passed, full extent of expenses were not debited in the books of account. While preparing the P&L a/c for the purpose of block return, it was found that in the books that were seized, many adjustments were required to be made. For example, if tyre expenses were incurred, instead of debiting tyre expenses, debit was given to the party concerned with the result that there was no adjustment entry in the books of account regarding tyre expenses. These entries were made only at the time of finalisation of P&L a/cs for the purpose of block return. Eventually, all the block returns in respect of all the assessees were filed before the finalisation of the assessment in each case. In fact, these returns with their P&L a/c were available to the AO and he has taken even cognizance of such returns whenever income disclosed as per the P&L a/c was more than the one computed by the AO. The learned counsel, therefore, prayed that in allowing truck expenses, trip expenses and administrative expenses, the learned AO ought to have taken into account the entire expenses which have been shown to be debited in the P&L a/c. This is. because as compared to the entries found in the books of account as seized were not complete record of expenses incurred by the assessee. Giving an example, the learned counsel submitted that if total expenditure for a particular year was Rs. 1 lakh as per the P&L a/c, it was possible that only Rs. 90,000 would have been debited in the books which were incomplete and seized. The learned counsel further submitted that even assuming for the sake of argument that any ad hoc disallowance of expenses is called for, such as 1 per cent or 10 per cent, firstly, the total expenses as per return of income should be considered. If these expenses are found allowable with reference to supporting data, such expenses should be allowed and disallowances, if any, should be in respect of such expenses, The learned counsel has made this submission without prejudice to the assessee's contention that there is no warrant for disallowance of any part of the expenses of the assessee which were entirely for the purpose of business. _
36. As regards allowance of administrative expenses at 2 per cent, the learned counsel submitted that the actual expenses, whether they are more or less, may be allowed. Administrative expenses include printing, stationary, salaries of persons temporarily employed, etc.
37. Shri Naresh Kumar, strongly supported the order of the learned AO. He submitted that it was found during the search that assessee was inflating expenses incurred for different trucks for every trip made. Bundles 1 to 75 containing the truck trip summary registers were seized. These are primary documents kept by the assessee to record freight receipts and expenses incurred on different trucks for every trip made. The learned Departmental Representative further submitted that from the seized records, it was found that the assessee was indulging in inflation of expenses by an amount of Rs. 500 for each trip of the trucks. In this connection, he drew our attention to the statement of Shri Satish C. Bafna recorded on 10th Oct., 1996. He especially drew our attention to question No. 7 and submitted that it would be seen from the said reply that such expenses are not allowable expenses because such expenses are not supported by vouchers. He further submitted that apparently, the nature of such expenses is such that these are disallowable in view of Explanation to Section 37(1). The learned Departmental Representative made reference to pp. 6 and 8 of the Departmental paper book which were, according to him, were sample trip expenses. According to him, there was an attempt made by the assessee to inflate the expenses by interpolating certain entries.
38. We have considered the rival submissions and perused the facts on record. In ground No. 1 (supra), we have noted that all the block returns in respect of all the assessees were filed before the finalisation of assessment in each case. In fact, these returns with their P&L a/cs were available to the AO and he has taken cognizance of such returns whenever income disclosed as per the P&L a/c was more than the one computed by the AO. In view of the above position, we deem it fit to restore this issue to the file of the AO. Moreover, the seized books were in the possession of the AO. These were not closed/completed and final returns were filed according to adjusted figures in the books. We direct the ITO to go through the seized material, the P&L a/c accompanying each return and then instead of making ad hoc disallowances, restrict the disallowances, if any, on the basis of discrepancies in the seized books of accounts and vis-a-vis the P&L a/c accompanying the block returns.
39. Coming to the arguments of the learned Departmental Representative we find that his reference to pp. 6 and 8 of the Departmental paper book, are truck expenses borne by Bafna Roadlines which is not the assessee before us. These two pages, therefore, are totally irrelevant in considering disallowances under consideration. This fact is clear from the answer given by Shri Satish C. Bafna himself. Similarly, the statement of Shri Satish C. Bafna is also not relevant in the case of the assessee, because the statement concerns the affairs of Bafna Translines.
39.1 In the light of above discussion, we restore this issue to the file of the AO with the direction that he should take into consideration the return filed by the assessee before finalisation of the account as also to give an opportunity to the assessee to explain the nature and extent of such expenses and readjudicate upon the issue after giving an opportunity of being heard to the assessee.
Ground No. 740. Ground No. 7 reads as under :
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that the AO is in error in not considering the claim of interest in its entirety and allowing such claim partly. It may further be held that interest as claimed by the appellant pertaining to the truck loan and for the funds raised for the purpose of business from banks and other persons are fully allowable one while computing the income for the purpose of assessment. The appellant be granted just and proper relief."
The assessee claimed interest on borrowed funds for the purpose of trucks, etc. The AO allowed only a part of claim observing on p. 11 of his order as follows :
"Interest Interest has been allowed on the basis of entries recorded in the truck loan accounts obtained from the banks."
41. Shri K.A. Sathe, the learned counsel for the assessee, submitted that his contentions are the same as were in the case of truck expenses. In the books of account the entire amount of interest was not debited, particularly, interest paid to IDBI and remained to be debited in the books of account which was subsequently debited while preparing the P&L a/c for the purpose of block return. He further brought to our notice that interest as claimed in the P&L a/c is much more than the interest which has been allowed by the learned AO. He further submitted that the item of interest is a permissible outgoing and is fully allowable business expenditure and prayed that the AO may be directed to verify the assessee's claim regarding interest with basic supporting data and to the extent it is supported from the bank statement, etc. 41.1 Shri Naresh Kumar, the learned Departmental Representative relied upon the order of the learned AO.
42. We have considered the rival submissions. We find considerable force in the submissions of learned counsel. In ground No. 1 (supra), we have directed the AO to take into consideration the returns filed by the assessee. It is noted that the interest as claimed in the P&L a/c is much more than the interest which has been allowed by the learned AO. The item of interest is a permissible outgoing and is fully allowable business expenditure. Accordingly, we restore this issue to the file of the AO and he is directed to verify the assessee's claim regarding interest with basic supporting data to the extent it is supported from the bank statements, etc. Needless to say that the AO will provide adequate opportunity to the assessee while adjudicating upon this issue.
Ground No. 843. Ground No. 8 reads as under:
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that the AO is in error in not granting credit on account of advance tax/tax deducted at source by the appellant pertaining to the period covered by the block assessment. The credit in respect of advance taxes paid and or TDS should have been adjusted against the gross amount of tax liability determined by the AO. The appellant be granted just and proper relief in this respect."
The assessee had paid substantial amount of advance taxes and tax had also been deducted at source in some cases. Since the assessee had not filed returns, there did not arise any question of claiming credit for these payments. The AO in the concluding paragraph of his order held "assessed under Section 158BC. No credit for prepaid taxes be given as there is no such provision in Chapter XIV-B governing assessment procedure for the block period".
43.1. Shri Sathe, the learned counsel for the assessee, submitted that since assessee had not filed returns, there did not arise any question of claiming credit for these payments. Now that the assessment is made on the entire business income as undisclosed income, he submitted that the taxes paid in the various years under the block may be given credit suitably. Shri Naresh Kumar, the learned Departmental Representative, submitted that credit for advance tax can be given only in the regular assessment and not in the block assessment.
44. Rival submissions have been considered, but we do not find any force in the submissions of the learned counsel for the assessee. It has already been held by us in the case of Parakh Foods Ltd. v. Dy. CIT (1998) 64 ITD 396 (Pune) that regular assessment proceedings and proceedings under Chapter XIV-B are independent proceedings and both the proceedings can be continued simultaneously. The legislature has also amended the Act retrospectively w.e.f 1st July, 1995, in this regard by insertion of Explanation after Sub-section (2) of Section 158BA, The advance tax is paid by the assessee on the current income which assessee is likely to disclose in regular assessment proceeding. Therefore, it is the tax which can be adjusted against tax due in regular assessment proceeding. Reference can also be made to Section 219 which clearly provides that credit for advance tax is to be given in regular assessment. In our opinion, the same logic would apply to tax deducted at source against the known sources which are not subject-matter of block assessment. Further, there is no provision for adjustment of any advance tax or TDS against the tax due under Chapter XIV-B. Accordingly, we reject the contention of assessee in this regard. Consequently, this ground fails and is dismissed.
Ground No. 945. Ground No. 9 reads as under:
"On facts and circumstances prevailing in the case and as per provisions of law, it be held that that AO is in error in computing the income pertaining to the previous year ended on 31st March, 1996 and for the period from 1st April, 1996 to 12th Sept., 1996 as undisclosed income and not granting relief in terms of provisions of Section 158BB(1)(d) of the Act. It further be held that the entire income so computed for the said period is to be adjusted and to be set off in terms of provisions of Section 158BB(1)(d) of the Act and tax imposable on such income would be regular tax leviable under the general provisions of the Act and not at the rate of 60 per cent chargeable on the basis of undisclosed income. Just and proper relief be granted to the appellant in this respect."
We find that this ground does not arise in the case of the assessee because for the asst. yr. 1996-97 and broken period for 1997-98 there is loss and there is no question of undisclosed income. This fact was admitted by the learned counsel, who submitted that this ground arises in other group cases and not in the case of the assessee, i.e., G.C. Associates and since similar grounds were raised in group cases, this ground was wrongly raised in the case of the assessee. This ground being infructuous is, accordingly, dismissed.
Ground No. 1046. Ground No. 10 reads as under:
"The appellant prays to be allowed to raise, add, amend, modify, rectify, delete any grounds of appeal at the time of hearing."
Obviously, this ground is general in nature and calls for no comments.
47. In the result, the appeal is allowed in part.