Income Tax Appellate Tribunal - Lucknow
Smt. Savitri Devi vs Asstt. Cit on 28 March, 2002
Equivalent citations: (2002)76TTJ(LUCK)628
ORDER
P.N. Parashar, J.M. These are three appeals relating to block assessment order under section 158BC of the Income Tax Act, 1961, in the case of the three assessees belonging to the same group.
2. As identical issues are involved in these appeals, common arguments were advanced on behalf of the assessees as well as on behalf of the department and since the appeals were heard together, they are being decided by a common order for the sake of convenience.
3. Shri S.K. Garg, advocate, appeared on behalf of the assessees, whereas Shri D.K. Shrivastava, the learned senior Departmental Representative represented the department.
4. During the course of hearing, a petition was filed on behalf of the assessee for admitting the additional evidence. The documents sought to be admitted for consideration of the Bench were also annexed with the application of the assessee dated 12-12-2001. Objections were invited on this application from the department, which was filed on 4-2-2002. After considering the application for admitting fresh material, Bench passed order on 6-2-2002. which order has been typed on the order sheet dated 6-2-2002.
5. Since the arguments were mainly advanced by the parties in ITA No. 1559/All/1997, this appeal is taken as a leading appeal. The decision on this appeal on similar issue in other appeals will also be applicable in those appeals.
ITA No. 1559/All/19936. The assessee has filed this appeal by taking ten grounds, out of which ground No. 8 challenges the validity of notice under section 158BC(a) and other grounds particularly ground Nos. 2 to 7 and 9 have been taken to challenge various additions made in the block assessment order dated 28-11-1992, for the block period of 10 years ending upto 1-11-1996.
7. Ground No. 1 is against not providing fair, full and reasonable opportunity to the assessee before completing the assessment and ground No. 10 is of general nature.
8. Before taking up various additions included in the grounds of appeal, we consider it proper to take the legal ground first, which is ground No. 8 and which runs as under :
"8. That the learned assessing officer failed to allow statutory time as provided in 158BC(a) of the Income Tax Act."
9. The learned counsel for the assessee, Shri S.K. Garg, submitted that notice dated 5-11-1997, a copy of which is available at p. 1 of the paper book required the assessee to furnish the return in prescribed Form No. 2B for the block period on or before 12-11-1997. According to him, since a period of not less than 15 days has been prescribed under section 158BC for filing the return, the notice issued to the assessee was not a legal notice, because it did not provide statutory period of 15 days for filing the return. On this basis, the contention of the learned counsel for the assessee was that the entire assessment order based on such illegal notice should be quashed, because the assessment proceedings, which followed it and were completed in pursuance of this notice, have to be treated as illegal and void. In this regard, he also placed reliance on the Law Lexicon; page 1986, a copy of which has been filed at pp. 163 to 164. Besides, he also placed reliance on the decision of the Tribunal dated 29-4-1999, rendered in ITA Nos. 1471 and 1472 in the case of Smt. Vimla Devi v. ITO. A copy of this order has also been filed in the paper book at page 165 to 175. The learned counsel also made reference to other decisions.
10. On the other hand, learned Senior Departmental Representative Shri D.K. Shrivastava filed some documents on 6-2-2002, with an application to show that notices under section 158BC was issued earlier also to the assessee and he had sufficient knowledge of the same. In this regard, he invited our attention the report of Shri M.L. Gupta, dated 30-7-2001, copy of notice issued under section 158BC dated 9-5-1997, endorsement of postal authorities on the envelop dated 24-5-1987, showing refusal of the assessee in receiving the notice, copy of notice dated 29-8-1997, copy of power of attorney of M/s Rohit Sethi and Associates, C.A. Delhi dated 1-8-1997, reply of the assessee Smt. Savitri Devi, dated 9-9-1997, against the notice dated 29-8-1997, copy of the order of the Hon'ble High Court dated 20-5-1997, and copy of the statement of Shri Anil Agarwal recorded on 1-11-1996, and 2-11-1996. On the basis of these documents, which have been filed on record, the learned senior Departmental Representative submitted that the assessee had fun knowledge and a valid and proper notice was issued to her on 9-5-1997, giving 16 days time for filing the return and again vide second notice dated 29-8-1997, the assessee was provided another opportunity to file return within 16 days of the service of notice. The learned senior Departmental Representative also submitted that on behalf of the assessee, Shri Rohit Seth filed power of attorney on 1-8-1997, and reply was also filed against the notice dated 29-8-1997, on 9-9-1997.
11. In reply, Shri Garg, learned counsel submitted that the assessing officer of Delhi who issued earlier notices had no power or jurisdiction to issue the notice under section 158BC and, therefore, the notice issued from the assessing officer of Delhi cannot be treated to be valid notices.
It may be pointed out that the cases on which the reliance has been placed by the learned counsel for the assessee in support of his arguments are distinguishable on facts and, thus, are not applicable to the present matter.
12. We have carefully considered the facts and circumstances relating to this matter, the material to which our attention was invited and the rival submissions. As clarified in the letter dated 30-4-2001 of the Deputy Commissioner, Circle 2(3), Kanpur, jurisdiction over the case of the assessee was earlier transferred by the Commissioner, Kanpur from assessing officer Wd 1(5), Kanpur to New Delhi in May, 1997. A notice under section 158BC was issued to the assessee on 4-5-1997 (sic) and thereafter, second notice was issued on 28-9-1997, which was served on the assessee on 3-9-1997, but in consequence of order of Hon'ble Allahabad High Court further proceedings pursuant to transfer of jurisdiction were not to be taken up and in the meantime, the CIT Kanpur, again transferred the jurisdiction over the case of the assessee from Income Tax Officer, Ward Kanpur to Circle 2(3) of Kanpur vide his order dated 31-10-1997, and accordingly a fresh notice under section 158BC was issued by the Deputy Commissioner, Circle 2(3), Kanpur, which was served on 6-11-1997.
13. After considering the above factual aspect, we find sufficient force in the submissions of the learned senior Departmental Representative that in compliance to the statutory provisions as contained under section 158BC, a valid notice on 29-8-1997, was issued by the assessing officer having jurisdiction over the case at that time and this notice was validly served upon the assessee, who also filed her reply in pursuance thereof. It is true that in the notice dated 5-11-1997, the statutory period of not less than 15 days was not given for filing the return but in view of the earlier notices, issued and served in compliance to the mandatory requirements of section 158BC, this notice loses much of its significance. In any case, since compliance of the provisions contained under section 158BC had already been made and valid notice was served upon the assessee, to which she also submitted reply, we are unable to accept the contention of the learned counsel for the assessee on this issue, which is decided against her Consequently ground No. 8 stands rejected.
Ground No. 114. So far as this ground is concerned, the submission of the learned counsel for the assessee was that the assessing officer passed the assessment order in haste and proper opportunity was not given to the assessee. On going through the assessment order, we find that the assessee duly participated in the assessment proceedings and filed reply dated 21-11-1997. Thereafter reply dated 24-11-1997 was also filed. On 25-5-1997, the assessee has filed copies of bank statements. Copies of these replies are on record. In view of these circumstances, we are unable to uphold the contention of the learned counsel for the assessee that proper and fair opportunity was not given to the assessee while completing the assessment order. Hence, this ground also stands rejected.
Ground No. 415. This ground challenges the addition of Rs. 4,36,480 made on account of enhanced price in the purchase of property No. 7/71-A, Tilak Nagar and treating the same as unexplained investment.
16. The relevant observations of the assessing officer on this point are being reproduced below :
"The property is situated in a posh locality of Kanpur and is beautifully constructed. Substantial investment seems to have gone into its acquisition. The assessee has not given any evidence to support the real purchase price. It is normal practice that in the purchase of ready built-up properties, there is ratio of payment i.e., on record 60 per cent and unrecorded 40 per cent of total price. Thus a sum of Rs. 4,36,480 being the payment made over and above the assessee's investment of Rs. 6,48,000 shall be added in the hands of the assessee as unexplained investment."
17. Learned counsel for the assessee, Shri Garg submitted that the assessing officer was not justified in presuming that the ratio of payment for purchase of ready built-up property on record was 60 per cent and unrecorded at 40 per cent of the total price. The learned senior Departmental Representative, however, supported the observations and findings of the assessing officer.
18. We have carefully considered this issue. The assessing officer has just presumed that the recorded payment in all the cases of purchase of properties is only at 60 per cent of the total price. This presumption is not based on any settled, known and recorded practice. The transaction relating to purchase of property in the present case was executed through a registered sale deed in which sale consideration has also been mentioned. Neither during the course of search nor otherwise, any document or other evidence was found to show that there was any underhand payment. The assessing officer has also not cited any comparable cases to show that the value shown in the sale deed was understated and actual price of the building was higher. No reference to valuation Officer was made either. In absence of any material or evidence, the presumption of the assessing officer cannot take place of proof and, therefore, such approach cannot be upheld.
19. On similar issue in the case of Ms. Pooja Bhatt v. Assistant Commissioner (2000) 73 ITD 205 (Mum-Trib), Mumbai Bench of the Tribunal has observed as under :
"As regards another addition of Rs. 4,24,166 on account of on money relating to certain property, the assessee had filed the return before the date of search giving the details of the purchase of the property including the expenditure of Rs. 31,500 towards stamp duty, etc. The addition made by the assessing officer was unwarranted as having been made merely on the basis of suspicion. The transaction of purchase of the flat was effected by means of an agreement and the amount of consideration was also indicated in the agreement. There could be a strong suspicion of payment of on money in respect of the property deals but no addition could be made on the basis of mere suspicion. It is established principle of law that suspicion howsoever, strong it may be does not take the place of proof. Since there was no material found during the course of search suggesting payment of on money in regard to the purchase of the flat the addition made of Rs. 4,24,166 made by the assessing officer was unwarranted and deleted."
20. At the time of arguments also, the learned Senior Departmental Representative could not show us any authority or any material to support such a presumption as has been raised in this case. Thus, after considering the entire relevant material, we are unable to uphold this addition of Rs. 4,36,480, which is deleted by us. Ground No. 4 is rejected.
Ground Nos. 2 and 321. These two grounds are directed against the addition of Rs 6,48,000
22. The assessing officer has worked out this addition on account of investment in acquisition of property, namely, 1/3rd portion of property No. 7/71, Tilak Nagar, Kanpur. During the course of assessment proceedings, the assessee filed reply dated 22-11-1997, in which the position of investment made by the assessee was shown as under :
S. No. Date Amount Mode
1.
5-7-1993 40,000 Cheque
2. 7-8-1993 50,000
-do-
3. 8-10-1993 60,000
-do-
4. 3-12-1994 75,000
-do-
5. 20-4-1995 50,000 Cheque issue yourself
6. 20-4-1995 1,50,000
-do-
7. 1-11-1995 1,00,000
-do-
8. 31-10-1995 1,23,000
-do-
23. Before us, the submission of the learned counsel for the assessee. Shri S.K. Garg was that no incriminating material was found during the course of search relating to investment in the house property and the addition has been made just on the basis of balance sheet and reply filed by the assessee herself during the course of assessment proceedings. The learned counsel for the assessee made reference to section 158B(b) and submitted that the addition made on account of purchase of property is not covered within the definition of "undisclosed income" and, therefore, this addition cannot be sustained in the block assessment order made under section 158BC. In support of his arguments, learned, counsel also invited our attention to the following documents :
(i) Return filed by the assessee for assessment year 1989-90 on 29-6-1990 (page 160 of the paper book).
(ii) The statement of income filed by the assessee for assessment year 1989-90 with the return of income (page 161 of the paper book).
(iii) Balance sheet of the assessee for 1989-90 as on 31-3-1989, filed with the return (page 162 of the paper book).
(iv) Assessment order for assessment year 1988-89, dated 12-7-1989 (page 158 of the paper book).
(v) Balance sheet for assessment year 1988-89, (page 154 of the paper book).
(vi) Return filed for assessment year 1988-89 on 4-7-1989, showing income of Rs. 18,300 (page 153 of the paper book).
(vii) Return filed for assessment year 1994-95 on 15-2-1995 (page 150 of the paper book).
(viii) Statement of income for assessment year 1994-95 filed with the return. (page 151 of the paper book).
(ix) Details of advance payment given to Shri Durgadas Anand Keshavchand Anand seller of 1/3rd undivided share of 7/71A, Tilak Nagar, Kanpur. (page 152 of the paper book).
(x) Return for assessment year 1995-96 filed on 19-3-1996, at income of Rs 44,377 (page 147 of the paper book).
(xi) Statement of income for assessment year 1995-96 (page 148 of the paper book)
(xii) Details of payment given to Durgadas Anand for Keshav Chand Anand seller 1/3rd undivided shares of property No. 67/71, Tilak Nagar (page 149 of the paper book).
(xiii) Assessment order for assessment year 1995-96, dated 10-10-1996 (page 146 of the paper book).
(xiv) Return filed for assessment year 1997-98 on 24-1-1997 (page 125 of the paper book).
(xv) Balance sheet as on 31-3-1997, for showing income for assessment year 1997-98 (page 126 of the paper book).
(xvi) Return filed for assessment years 1996-97 on 24-11-1997 (page 134 of the paper book).
(xvii) Statement of income for assessment year 1996-97 showing purchase of property filed with the return (page 135 of the paper book).
(xviii) Assessment order for assessment year 1996-97, dated 8-3-1999, passed by section 43(1A) by Shri M.L. Gupta (page 145 of the paper book).
(xix) Assessment order for assessment year 1997-98, dated 8-3-1999, passed under Shri M.L. Gupta.
(xx) Copy of affidavit filed before the assessing officer on 26-11-1997 (pages 122 to 124 of the paper book).
(xxi) Details of payments made in 1993-94 by the assessee through challans (page 12 of the paper book).
(xxii) Reply of the assessee dated 19-11-1997 (pages 89 to 11 (sic) of the paper book) Besides the above, the learned counsel for the assessee also made reference to the copies of accounts, certificates of bank, details of accounts of seller and other documents to show that the assessee had furnished entire information regarding investment made by her in purchase of the property and she was filing her return showing her income every year.
24. The main contention of the assessee before us was that Chapter XIV-B of the Income Tax Act, 1961, lays down a special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. According to him, under section 158BB(1) read with section 158BC of Income Tax Act, 1961, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous years required to be assessed in the normal regular assessment under section 143(3). He further elaborated his submission by saying that the power of regular assessment are kept intact and enquiry under section 143(3) for regular assessment is not stopped. The learned counsel also pointed out that Explanation inserted by the Finance Act, 1998, with effect from 1-7-1995, clears all doubts on the issue and states that the assessment made under this chapter shall be in addition to regular assessment and the assessing officer has to deduct from the computation of block period income, the income returned and assessed already in the regular assessment order. In support of his submissions, the learned counsel placed reliance on the following case laws :
(1) N.R. Paper & Board Ltd. & Ors. v. Dy. CIT (1998) 234 ITR 733 (Guj);
(2) Malayil Bankers v. Asstt. CIT (1999) 236 ITR 869 (Ker);
(3) Shaw Wallace & Co. Ltd. v. Asstt. CIT (1999) 236 ITR 13 (Cal);
(4) Caltradeco Steel Sales (P) Ltd, & Ors. v. Dy. CIT (2000) 243 ITR 643 (Cal);
(5) CIT v. Shambhulal C. Bachkaniwala (2000) 245 ITR 488 (Guj);
(6) Dy. CIT v. Shaw Wallace & Co. Ltd. (2001) 248 ITR 81 (Cal);
(7) CIT v. Dr. M.K.E. Memon (2001) 248 ITR 310 (Bom);
(8) Bhagwati Prasad Dedia v. CIT (2001) 248 ITR 562 (Cal);
(9) Sunder Agencies v. Dy. CIT (1997) 63 ITD 245 (Mum-Trib);
(10) Indore Construction (P) Ltd. v. Asstt. CIT (1999) 71 ITD 128 (Ind-Trib);
(11) Esteem Intra Port Services (P) Ltd. v. Asstt. CIT (2000) 72 ITD 228 (Hyd-Trib);
(12) Pooja Bhatt v. Asstt. CIT (supra); and (13) Ravi Kant Jain v. Asstt. CIT (2000) 67 TTJ 797 (Del-Trib).
25. The contention of the learned Senior Departmental Representative, on the other hand was that since the assessee had not disclosed the investment in the returns filed by her, the assessing officer was fully justified in making the addition on account of investment in the purchase of the property. He placed reliance on. the order of the assessing officer and supported his findings.
26. We have carefully considered the entire material relating to this issue. The following facts remain undisputed :
I. A search warrant in the joint name of Savitri Devi and Anil Kumar Agrawal was issued on 2-11-1991, for conducting search of locker No. 292 in the Central Bank of India, Vishnupuri, Kanpur.
II. The search was conducted in the group of A. N. Agrawal's cases on 1-11-1996.
III. The first notice was issued to the assessee on 9-5-1997, by Assistant Commissioner Central Circle 20. This notice remained unserved.
IV. The second notice was issued by the Assistant Commissioner, Delhi, on 29-8-1997 This notice was served, but the jurisdiction of the Income Tax Officer, Delhi, was challenged by the assessee, since the Hon'ble High Court passed order dated 20-5-1997, in Writ No. 386/1997. The jurisdiction' was again transferred to the Income Tax Officer Investigation Circle 2(1), Kanpur.
V. The notice for filing return was again issued on 5-5-1997, and was served on the assessee on 6-11-1997, and was served on the assessee on 6-11-1997 through which the assessee was required to file her return in Form No. 2B by 11-12-1997.
VI. The return on From No. 2B was filed by the assessee on 25-11-1997, declaring undisclosed income at NIL. Thus, the proceedings for block assessment were actually started by issuance of notice on 5-11-1997, and were completed and culminated by assessment order dated 28-11-1997, i e. within only 23 days.
VII. The assessee had been filing her returns for earlier years and was being regularly assessed as pointed out by the learned counsel for the assessee on the basis of documents referred to above.
VIII. So far as the assessment years 1996-97 and 1997-98 are concerned, the return for these two years were filed on 24-11-1997, i.e., after the date of search.
IX. During the course of search, no incriminating material was found for basing the undisclosed income. This fact is found established from the following information/comments made by Shri M.L. Gupta, dated 30-7-2001 (page 1 of department's paper book). The information is as under :
"A perusal of the seized material at Kanpur do not, however, indicate any incriminating papers on the basis of which the additions of undisclosed income are found to have been made in the block assessment order."
27. In the light of the above facts, the position remains that no evidence, documentary or otherwise, was found during the course of search relating to investment made in the purchase of house property and the addition of Rs 6,48,000 made on account of unexplained investment in property No 7/71 Tilak Nagar, is not based on any material discovered or found during the course of search. It may be pointed out that no material or document was either found relating to investment in the house property by the efforts of raiding party or in pursuance of any inquiry conducted thereafter and the entire information was supplied by the assessee herself and the same was shown by her in her, account books and bank account etc. Thus, the addition has been made not or, the basis of any discovery made by the department or search party put on the basis of the reply and the balance sheet filed by the assessee herself during the course of assessment proceedings.
28. It may be pointed out that during the course of search statement of Shri Anil Agarwal was recorded on 2-11-1994, and in that statement also, he had clearly informed that the house was purchased in 1995 by him and by his mother. He only disclosed the fact, which was already disclosed by the assessee. In this regard, reference may also made to the reply of the assessee dated 19-11-1997, relevant portion of which is reproduced as under :
"The above property is situated at No. 7/71-A, Tilak Nagar, Kanpur.
That the aforesaid property was owned by the three real brothers:
1. Sri Suraj Kumar Anand s/o Late Shri Ram Saran Dass Anand.
2. Sri Durga Dass Anand s/o above.
3. Sri Keshav Chandra Anand s/o above.
(i) All the above three real brothers agreed to sell the property No. 7/71, Tilak Nagar, Kanpur i.e., 1/3rd portion each of their ownership.
That the 1/3rd portion belonging to Sri Suraj Kumar Anand was purchased by Smt. Savitri Devi w/o Sri Amar Nath Agrawal and Sri Anil Kumar Agrawal s/o Sri Amar Nath Agrawal in their individual capacity jointly for Rs. 6,00,000 and the payments have been made by crossed cheques from their account works and shown in balance sheet which can be examined.
(ii) That the payments for 1/3rd portion of the building has been equally made, i.e., half of the amount by Smt. Savitri Devi and her son Sri Anil Kumar Agarwal.
(iii) That the sale deed of 1/3rd portion of the building has been executed by Suraj Kumar Anand s/o Late Shri Ram Saran Dass Anand on 4-11-1995 (photostat copy for perusal).
(iv) That the other 1/3rd portion which is owned by Sri Durga Dass Anand s/o Sri Ram Saran Dass Anand was also agreed upon to sell to Sri Amar Nath Agrawal, husband of Smt. Savitri Devi, in his individual capacity for Rs. 7,50,000. Rs. 7,00,000 were paid by Sri Amar Nath to Sri Durga Dass Anand by cheque, by draft and cash as demanded by the vendor.
No sale deed has been executed so far because he is living at Delhi. However, agreement to sale deed has been executed on 24-10-1997. Registered sale deed will be made within two months time, when he has promised to come from Delhi to execute the sale deed. All payments have been shown in account and exhibited in our balance sheet which is being filed."
29. The assessee has also furnished the copy of account of Keshav Chand Anand in which position of payment made in 1993 and 1994 is reflected as under :
Rs.
"1.
5-7-1993 C. No. 424049 on 40,000
2. 7-8-1993 C. No. 901343 on 50,000
3. 8-10-1993 C. No. 901375 on 60,000
4. 3-12-1994 C. No. 728839 on 75,000 Total Advance payment as on 31-3-1997 2,25,000 Note : 1. No. Registry.
2. Rs. 2,25,000 shown in assessment year 1996-97 in the capital account Savitri Devi. "
30. In the sale agreement also, the position of payment made through cheque as advance has been shown on page 4 of the agreement as under :
Cheque No. Date Amount Rs.
513148 20-5-1992 1,00,000 424049 5-7-1993 40,000 901343 7-8-1993 50,000 901367 7-8-1993 50,000 901375 8-10-1993 60,000 907602 (DD) 25-2-1994 50,000 901362 5-7-1993 1,00,000 4,50,000
31. On page 6, para 1 of the agreement, it is clearly mentioned that a sum of Rs. 4.50 lakhs has been paid by the second party through cheques and demand drafts towards sale consideration of Rs. 6 lakhs. A sum of Rs. 1,50 lakhs was to be paid at the time of execution of registered sale deed. In the registered sale deed (copy available at page 31 to 107 of the paper book). All these details regarding payments made in advance through cheques have been given.
32. The assessee, vide her reply dated 24-11-1997, has submitted the following information :
"2. That the detailed explanation regarding investment in property No. 7/71, Tilak Nagar, Kanpur, by Anil Kumar Agrawal (assessee) have been filed on 21-11-1997, along with mode of payment, etc. xxxx xxxx xxxx The balance sheets filed for the accounting period for the year 1995-96 and 1996-97 have been filed. The credits and deposits along with their confirmatory certificates with G.I.R./P.A. No. of account, place of assessment and permanent address, etc. are being furnished, which can be verified".
33. In the copies of the bank account filed by the assessee, the transactions of payment through cheque are duly reflected.
34. The statement of income from 1-4-1996, to 31-3-1997, available at page 126 of the paper book also includes the following information :
Property 7/71 -A, Tilak Nagar :
Rs.
Old balance 5,33,000 Renovation 2-11-1996 30,000 Rs. 6,13,000
35. The assessee had also filed balance sheet with her return for assessment year 1996-97, which contained the following details :
"Property 7/71, Tilak Nagar, Kanpur Purchaser 1161(Und) 3,00,000 Stamp 1,16,530 Misc. Exp.
3,470 Brokerage (Jimmi Patel) 3,000 4,23,000 Renovation 31-3-1996 1,10,000 5,33,000"
36. With her return for assessment year 1997-98, the statement of income was submitted.
37. It may be pointed out that even in assessment year 1994-95, the details of payment for this property were submitted by the assessee, which are as under :
Rs.
"1.
5-7-1993, Ch. No. 424049 on SBI 40,000
2. 7-8-1993, Ch. No. 901343 on SBI 50,000
3. 8-10-1993, Ch. No. 901375 on SBI 60,000 1,50,000
38. All the above mentioned details go to establish that the assessee made the payment for purchasing the property through cheques and reflected the same duly in her accounts.
39. It appears that the assessing officer, who has perhaps passed the assessment order in utter haste has not considered this relevant material, while making addition. The simple fact that the returns for assessment years 1996-97 and 1997-98 were filed later on will not alter the situation so far as the disclosed income of the assessee is concerned. It may be mentioned here that there was no obligation on the part of the assessee to disclose investment made in the relevant year or to file balance sheet with the return so far as assessment years included in the block are concerned.
40. After considering the entire material referred to above and relevant circumstances, we are of the definite view that the addition made on account of investment in the house property cannot be sustained as the same is not covered and included in the "undisclosed income".
41. In the case of Shri B.K. Agrawal v. Asstt. CIT (ITA No. 1699/All/1994), dated 31-5-2001, we have considered a similar point and have observed that in the scheme of Chapter XIV-B of the Act. Section 158BA, which is a charging section, will prevail over the other section included in Chapter XIV-B. It may be pointed out that sub-section (1) of section 158BA, empowers the assessing officer to proceed to assess the undisclosed income in accordance with the provisions of Chapter XIV-B.
42. In the case of Smt. Gulakandi Devi Agrawal v. Asstt. CIT (2000) 66 TTJ (Nag) 844, considered the similar issue and observed as under :
"6. I have gone through the order of the assessing officer and the decisions cited supra. In the order of the Tribunal, Nagpur Bench, Nagpur, in the case of Smt. Jatan Bai Baid, Raipur (supra), the Tribunal held that before coming into play the section 158BB, the undisclosed income should be determined first. This undisclosed income should be found out as a result of search because the heading of this section itself is "special procedure of assessment of search cases, "Section 158BB(1) states that "undisclosed income of the block period shall be the aggregate of the total income of the previous year falling within the block period computed in accordance with the provisions of Chapter IV on the basis of evidence found as a result of search or requisition of books of account of documents". Here in the instant case of the assessee, the income was estimated on the basis of the estimate filed by the assessee though belated along with the return of income for the assessment year 1990-91. When the assessee filed this computation, along with it, the proof of payment of advance tax was filed, and at that time the search had not taken place. If the assessee had paid the advance tax and the existence of the income was known to the revenue, merely because the assessee failed for some reason or other, it cannot be treated as an undisclosed income that came into knowledge of the department as a result of search and seizure operation that took place at the residential premises of the assessee."
43. In the case of Salvi Divakar Shankar v. Asstt. CIT (2000) 72 ITD 552 (Pune) also, the same Bench again considered the issue and observed as under :
"The assessing officer had taken a very narrow view in interpreting undisclosed income. It appeared, according to him, that if the assessee has not filed a return, it means that there is no disclosure for the purpose of the Act as envisaged under section 158B(b). Such a restrictive view is not at all warranted by the provisions of law.
Section 158B(b) defines undisclosed income to include income or property which has not been or would not have been disclosed for the purposes of the Act. In this connection, it is significant to note that a non-disclosure has been mentioned in a general way. It has nowhere been stated that the disclosure has to be seen with reference to the assessee's return in whose case block assessment is being made. A disclosure for the purpose of the Act would be wide enough to include a case where employer submits his return of tax deduction from salaries under section 206 in which the incomes earned by the various employees have been disclosed."
44. It may be pointed out that in that case also disclosure was not made by the assessee by filing the return before the date of search.
45. In the case of Sou. Vidya MadanIal Malani v. Asstt. CIT (2000) 74 ITD 341 (Pune), the search was carried out in the case of the assessee on 10-1-1996, and the returns for assessment years 1994-95 and 1995-96 were filed after the date of search, i.e., on 13-2-1996. After considering the provisions of section 158BA and 158BB, the Bench has held as under :
"11. In view of the above legal position, the question is whether the income of Rs. 31,670 declared by the assessee for assessment year 1994-95 should be considered as undisclosed income under section 158B. Perusal of the statement of income filed along with the returns for assessment years 1992-93 and 1993-94 shows that sources of income of the assessee were tailoring business as well as preparation and sale of Papad and pickles. Therefore, these sources were well known to the department. There is no material on the record to show that assessee intended to hide her income for assessment year 1994-95 and assessment year 1995-96. The income declared by the assessee and accepted by the assessing officer for assessment year 1994-95 was just slightly higher than the taxable limit. In view of these facts, it cannot be said that assessee would not have disclosed such income to the department assessee cannot be punished merely because he/she tailed to file his/her income before the due date or before the date of search. There may be cases that due to various circumstances, beyond the control of the assessee the return could not have been filed on or before due date and the search might have taken place just after the due date. In such case, it would be unreasonable to hold that assessee would not have disclosed such income particularly when assessee is legally permitted to file the valid return under section 139(4), i.e., after the expiry of the due date specified under section 139(1). Though such income would fall under clause (c) of section 158BB, but would be outside the scope of section 158B. Therefore, such income cannot be taxed under section 158BA. Therefore, in our considered opinion, where there is a conflict between the provisions of section 158BB and section 158BA read with section 158B the provisions of section 158BA must prevail being charging section and non obstante clause. Accordingly, in genuine cases, where income does not fall within the provisions of section 158B, the same cannot be brought to tax under section 158BA even though such income may be computed as undisclosed income under section 158BB(c)."
46. In the case of Pooja Bhatt (supra), it was found that no substantial material was found from the assessee to come to the conclusion that there was substantial tax evasion. It was held that block assessment under section 158BC is to be based on material found as a result of search.
47. In the case of Smt. Sita Devi Daga v. Asstt. CIT 1998) 67 ITD 151 (Ind), it was held that the income returned by the assessee cannot be treated as income from undisclosed sources under section 158BC.
48. The Tribunal Mumbai Bench in the case of Pooja Bhatt, also considered the scope of section 158BB and has observed as under :
"23. A perusal of section 158BB reproduced above does not leave us in doubt that in determining the undisclosed income as a result of search the assessment made under section 143, 144 or 147 have got to be taken into account, and reduced from the computation of income under section 158BB. Sub-section (4) of section 158BB also makes it abundantly clear that the process of regular assessment is totally different than the assessment under Chapter XIV-B in search cases. It is in the light of this background we are addressing ourselves to consider the additions made by the assessing officer in the case of the assessee."
49. In view of the legal position as discussed, it is clear that the addition in a block assessment on any ground or on any account can be made only on the basis of material found during the course of search and not otherwise. it the assessee has suppressed his/her income earned and has not disclosed any material particular, then addition can be made in the course of regular assessment or reassessment by undertaking proper enquiries after issuance of notice under sections 142 and 143.
50. In view of the above, we are unable to uphold the approach of the assessing officer Consequently, the addition made by her cannot be sustained, which stands deleted. Ground Nos. 2 and 3 are allowed in favour of the assessee.
Ground No. 551. This ground is directed against the addition of Rs. 60,000.
52. The assessee, has filed certain papers during the course of hearing before us vide order-sheet dated 6-2-2002, it has been directed that the fresh evidence filed by the assessee shall be considered subject to the objections of the department. The department has filed detailed objections dated 4-2-2002. We have considered the same. It may be pointed out that the assessee has also disclosed the information relating to the investment in shares in assessment year 1988-89 as is evident on perusal of balance sheet found at p. 154 The additional evidence, which has been filed before us on this issue in the form of bank certificate and copies of statement of income, which material is available at page 1 to 13 annexed with the application dated 12-12-2001, cannot he considered by us at this stage for deciding this issue. As the material was not produced by the assessee nor was considered by assessing officer, we consider it proper to restore the issue to the assessing officer for deciding the issue afresh in the light of the material produced before us and after making proper inquiry and as per law. For this purpose, the assessee shall be given proper opportunity. The issue is decided accordingly.
Ground No. 953. This ground challenges the addition of Rs. 1,40,000 made on account of investment in the renovation over and above the disclosed amount.
54. The contention of the learned counsel for the assessee before us was that the investment was made by withdrawing the amount from the bank. On perusal of the assessment order, we find that this addition has not been made on the basis of any document or evidence found during the course of search earlier. The assessee has filed return for assessment year 1996-97 and assessment year 1997-98 later on. On perusal of details given at page 13 of the paper book, it is found that expenditure of Rs. 1,10,000 was incurred by the assessee or renovation of house in assessment year 1996-97 and further amount of Rs. 30,000 was incurred in assessment year 1997-98. The expenditure was made on withdrawing the amount from bank. The details of the same are given at page 13 of paper book. Since regular assessment for these two years has been made by the assessing officer under section 143 of the Income Tax Act, 1961, addition if any on account of renovation or repairs could at the most have been made in such regular assessments. However, since no material was found during the course of search relating to this item and further since the details of expenditure/investment have been furnished by the assessee herself with the returns for these two assessment years (balance sheets), the addition of Rs. 1,40,000 cannot be justified in the block assessment order as there is no basis for making this addition. Thus, this addition stands deleted Consequently, ground No. 9 is allowed.
Ground No. 755. This ground comprised of the addition included in ground Nos. 2, 4, 5 and 9. Since the issue relating to the addition included in these grounds have been considered and decided by us as above, the ground No. 7 stands decided accordingly.
56. In the result, the appeal is partly allowed.
ITA No. 1557 and 158/All/1994
57. The assessee (appellants) have taken identical grounds i.e., Nos. 1 to 9 in these two appeals. Since the facts and circumstances as well as the issues in these two appeals are also identical to the facts and circumstances and issues of ITA Nos. 1559/All/1994, except there being difference in figures of amount, relating to various additions, following our findings on various grounds in ITA No. 1559/All/1994, we decide the grounds taken in these two appeals and direct that our findings as given on various grounds in that appeal (ITA NO 1559/All/1994) shall apply 'mutatis mutandis' on the grounds included in these two appeals also for all purposes and the assessing officer in directed to act accordingly.
58. In the result, these two appeals are also partly allowed.