Income Tax Appellate Tribunal - Bangalore
Smt. Hemalatha D. Shah vs Deputy Commissioner Of Income Tax on 29 August, 2002
Equivalent citations: (2003)79TTJ(BANG)188
ORDER
Hari Om Maratha, J.M.
1. The assesses is the proprietrix of M/s Sunrise Sanitation. There was a search in this group of cases on 15th Nov., 1999. Subsequently notice under Section 158BC of the IT Act, 1961 (hereinafter referred to as "the Act"), was issued to the assessee in response to which assessee filed return of income in Form No. 2B on 8th June, 2000, declaring undisclosed income at 'nil'. At the time of search, inventory was prepared in respect of stock available with reference to the assessee's business premises. According to Department, it was noticed that there was a deficit stock of Rs. 3,88,246 as compared to the stock available as per books of account. Addition was made on account of gross profit in this case. It is admitted case that the assessee has been maintaining regular books of account but the AO concluded that the assessee had certain stock and not accounted for the same in her books of account. But the purchases are duly accounted for. So, addition of Rs. 36,883 was made as undisclosed income for the asst. yr. 2000-2001 which was confirmed by the CIT(A).
2. Now, the assessee is in appeal before us. Shri G. Lakshminarasimhan, learned counsel for assessee, has taken a plea that the notice issued under Section 158BC is a nullity in the eye of law as no incriminating article or thing was found during the course of search relating to the assessee, The learned counsel has also taken a plea that no valid warrant under Section 132 was issued to the assessee. It is also stated that no statement by the assessee was recorded which could give rise to any concealed income.
On the other hand, the learned Departmental Representative Shri Lamdade supported the orders of the lower authorities.
3. We have heard the rival submissions, perused the evidence on record and gone through the provisions of law and the decisions relied on before us. It is an admitted fact that previously all the returns were filed by the assessee. So, there is no question of concealed income prior to 1st April, 1999. It is also a fact that search was conducted on 15th Nov., 1999, and this assessment, which is under challenge relates to period 1st April, 1990, to 15th Nov., 1999. There are no two things when search is conducted and any thing is found in relation to current financial year for which a return is still to be filed. There cannot be concealment of income. The assessee has relied on a Board circular in this connection. This aspect seems to have been overlooked by the CIT(A) while disposing the appeal filed by the assessee before him. Under the provisions of Chapter XIV-B of the Act, relating to block assessments, only concealed income can be taxed at the higher rate, which is disclosed by way of any thing found and seized during the course of search. It is not clear before us as to what was the basis for applying block assessment to the case of the assessee. The AO has observed in his order as under :
"During the course of search, an inventory was taken in respect of the stock available in the assessee's business premises. There was a deficit of closing stock to the extent of Rs. 3,88,246 as compared to the stock available as per books. The only conclusion, which could be drawn, is that the assessee has held certain stock and has not accounted for in her books of account. Since the purchases are duly accounted for, the gross profit on the unaccounted sales has to be brought to tax as undisclosed income.......at 9.5 per cent of the deficit stock and brought to tax accordingly as undisclosed income for the asst. yr. 2000-2001 (broken period) up to the date of search."
We readily accept the argument of the learned authorised representative Shri Lakshminarasimhan that when the AO admits that purchases are duly accounted for, what is not accounted for to tax by the assessee for that matter. It is also the case of the assessee that during the search on 15th Nov., 1999, inventory was taken in respect of stock in the business premises. The assessee has disclosed in the balance sheet as on 15th Nov., 1999, stock that was inventorised by the DDI at the time of the search. Sales disclosed as per books have been accepted by the Department. We are also at the end of our wits to accept as to how then the deficit stock can arise. Panchnama prepared at the time of the search does not contain anything, which suggests any deficit stock concealed. When the Department has accepted the entire purchases and sales and physical inventory, there is no evidence left to support the deficit stock. Nothing is here on record either from the AO's order or from the CIT(A)'s order. Moreover the search did not result in seizure of any incriminating or adverse material to prove undisclosed sales, coupled with the fact that no admission to that effect was ever made, alleged unaccounted stock and sale thereof by the assessee. The AO also did not examine the assessee, nor did he collect any evidence independently to support his allegation of unaccounted sales and income. In our opinion, the assessment order is based more on surmises and conjectures and hypothesis which is against the letter and spirit of block assessments, which are to be done under the provisions of Chapter XIV-B of the Act, since the provisions of block assessment envisage assessments on concrete, tangible and evidence in support of unaccounted income.
4. It is also an admitted fact that the AO did not issue any show-cause notice to the assessee and that is why, in our opinion, the AO misdirected himself to carry out the assessment in question. Where previous year is not ended or due date for filing of return of income for any previous year has not expired, income or the transaction recorded on or before the date of search or requisition in the books of account or other documents maintained in the normal course of business relating to such previous year shall not be included in the block assessment.
5. The assessee has also taken a legal plea that notice under Section 158BC issued to the assessee is invalid and is not correct since warrant under Section 132 of the Act is issued in respect of premises and any material found at the time of the search or recording of statement under Section 132(4) of the Act entitled the AO to issue notice under Section 158BC. But the assessee has not taken a specific ground of appeal in this regard. So we refrain from adjudicating on this issue. Moreso because the assessee has already got the relief on merits and no additional ground has been pleaded.
6. As a result, we accept the appeal of the assessee on merits.