Income Tax Appellate Tribunal - Ahmedabad
Patel Rajeshwmar Kantilal & Co. vs Assistant Commissioner Of Income Tax on 5 February, 1998
Equivalent citations: (1998)62TTJ(AHD)189
ORDER
B.L. Chhibber, AM This appeal by the assessee is directed against the order passed by the Assistant Commissioner, (Inv). Circle (1), Surat, under section 158BC of the Income Tax Act, 1961 (hereinafter referred to as `the Act)for the block period of assessment years 1989-90 to 1995-96 and 1-4-1995 to 14-2-1995.
2. The assessee is a registered firm having income from business as courier. There was a search under section 132 of the Income Tax Act on 18-10-1995 at the business premises at 15, 2nd Phowalwadi, Dhuleshwar Road, Bombay-2. A notice under section 158BC was issued by the Assessment Commissioner (Inv.), Cir-1(1), Surat. Return of income for the block period was filed on 14-2-1996 disclosing the total undisclosed income of Rs. 25 lakh. The assessing officer after scrutiny of the material found during the course of search worked out the total undisclosed income at Rs. 45,75,190 as under :
Rs.
A. For the period 1st April, 1995 to 6th Dec., 1995 16,81,931 B. For the period 1st April, 1995 to 31st March, 1995 26,84,652 C. Cash found during the earlier search on 8th Oct., 1994 1,77,000
3. Though a number of grounds have been raised before us the assessee disputes mainly the addition of Rs. 26,84,652 referred to supra. During the course of assessment proceedings it was submitted before the assessing officer that the impugned addition of Rs. 26.84 lakh for the period 1-4-1994 to 31-3-1995, falling within the block period could not be made because there was no material found during the course of search warranting such an addition. The assessee during the course of assessment proceedings, had drawn attention of the assessing officer to Circular No. 717, dated 14-8-1995 on the subject Finance Act, 1995-Explanatory Notes on the provisions relating to Direct Taxes-reported in (1995) 215 ITR (St) 70. Certain portion referring to the block assessment as discussed in the said circular, referable to the procedure for making block assessment and published on page 98 of the above referred ITR is reproduced hereinbelow "Though the block period can be extended upto ten years in a case where the assessee has not disclosed undisclosed income in any one or more of the previous years in the block periods and the assessing officer also does not find any material indicating undisclosed income in any one or more of the previous years comprised in the block period, it will not be necessary to do the exercise of computing the undisclosed income for the relevant years and the exercise may be limited to the years in respect of which the undisclosed income has been found. "
The assessing officer has reproduced the above circular at p. 12 of his order and has duly considered the assessee's submission as follows :
"The assessee's reliance on this circular is appreciated. Concealed income of the block period is being calculated accordingly. In the instant case the incriminating papers had been found pertaining to assessment year 1995-96 as well as for the period 1-4-1995 to 6-12-1995. Hence, estimation is being done for this period only."
4. Shri S.N. Soparkar, the learned counsel for the assessee submitted that though the learned assessing officer took note of the contents of the above noted circular, he failed to realise that only two papers for a sum of Rs. 10,000 and Rs. 20,000 referable to this period, i.e., Dec., 1994 were found by the search party and were relating to the transactions on which commission could be treated as the income of the assessee. The commission on such transaction would work out to less than Rs. 100 only, on account of the same. Further, the transactions were referable to other branches, and as submitted by the assessee duringthe course of assessment proceedings, on account of a large number of branches (almost 33 branches all over the country); the said transactions being referable to one of the branches the assessee drew attention of the assessing officer to the fact that the income referable to those transactions would have been reflected in the said particular branch. According to the learned counsel, the learned assessing officer has avoided the explanation of the assessee and taking support of these two papers conveniently tried to overrule the gist of the circular and made the impugned addition on presumptions and assumptions. In support of his contention, he relied upon the decision of the Hon'ble Tribunal, Mumbai Bench in the case of Sundar Agencies v. Dy. CIT (1998) 1 DTC 166 (Mum-Trib) : (1998) 63 ITD 245 (Mum-Trib).
5. S.S. Panvar, the learned Departmental Representative strongly supported the order of the learned assessing officer. He extensively read through the order of the learned assessing officer and submitted that the assessing officer was well within his rights to estimate the income on the basis of two papers though those papers belonged to a particular branch. He, therefore, submitted that the order of the learned assessing officer deserves to be confirmed.
6. We have considered the rival submissions and perused the facts on record.
In our considered opinion the case of the assessee squarely stands covered by the Circular No. 717 Explanatory Notes of the CBDT referred to supra. It is pertinent to note that though the learned assessing officer has taken note of the said circular and has also "appreciated" its contents, but yet made an astronomical addition of Rs. 26.84 lakh on pure presumptions and assumptions. In the case of Sundar Agencies (supra) the Hon'ble Tribunal, Mumbai Bench has held as under :
"Whether within pale of Chapter XIV-B assessment could be made only in respect of undisclosed income and such undisclosed income must come as a result of search-Heldyeswhether section 158BC does not provide a licence to revenue for making roving enquiries connected with completed assessment and is beyond power of assessing officer to review assessments completed unless some direct evidence comes to knowledge of department as a result of search which indicates clearly factum of undisclosed incomeHeld, yeswhether scheme of Chapter XIV-B gives power to revenue to draw presumption in regard to undisclosed incomeHeld, no."
In our considered opinion, in addition to the circular of the CBDT referred to supra, the above decision also restrains the assessing officer from drawing presumption while passing an order under section 158BC of the Income Tax Act, with regard to the undisclosed income.
7. In the light of the above discussion, we delete the impugned addition of Rs. 26,84,652.
8. In the result, the appeal is allowed in part.