Aerens Infrastructure & Technology Ltd., New Delhi V. DCIT, New Delhi

ITSSA 15/DEL/2011

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7257 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 13-06-2017
• Assessment Year: misc
• Appeal Filed On: 05-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Assessee Lawyers: I P BANSAL
• Keywords: Gift; Income from undisclosed sources; Search and seizure; Loose papers; Opportunity of being heard; Earning of tax free income; Retrospective amendment; Question of law; Difference of opinion; Block assessment; Sham transactions; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Set aside; CHAPTER XIVB
• Section: 143(3); 143(1); 250; 143(2); 139(1); 139(4); 158BC; 158B(b); 158B(a); 43; 13; 158BD; 22; 147; 145; 148; 263; 132; 144; 154; 139

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI (THROUGH VIRTUAL HEARING) BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER IT (SS) A NO. 40/DEL/2009 BLOCK ASSESSMENT PE RIOD : 01.04.1995 TO 18.03.2002 IT(SS) A NO.15/DEL/2011 BLOCK ASSESSMENT PERIOD: 1 0 .05.2001 TO 18.03.2002 AERENS INFRASTRUCTURE & TECHNOLOGY (P) LTD., A - 15, 1 ST FLOOR, ANNEXE MAIN, HAUZ KHAS, NEW DELHI. PAN: AAACR1959G VS ACIT, CENTRAL CIRCLE - 17, NEW DELHI. IT(SS)A NO.35/DEL/2008 BLOCK ASSES SMENT PERIOD: 01.04.1995 TO 18.03.2002 M/S SONA FARMS PVT. LTD., A - 15, 1 ST FLOOR, ANNEXE MAIN, HAUZ KHAS, NEW DELHI. VS. ACIT, CENTRAL CIRCLE - 8, NEW DELHI. ITA NO.3845/DEL/2009 ASSESSMENT YEAR : 2002 - 03 PRAKARTI GREEN (I) LTD., A - 15, 1 ST FLOOR, ANNE XE, MAIN HAUZ KHAS, NEW DELHI. PAN: AACCP5386P VS. ACIT, CENTRAL CIRCLE - 8, NEW DELHI. (APP ELL A NT S ) (RESPONDENT S ) IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 2 A SSESSEE BY : SHRI I.P. BANSAL, ADVOCATE & SHRI VIVEK BANSAL, ADVOCATE RE VENUE BY : SMT. SUSHMA SINGH, C IT - DR DATE OF HEARING : 14.01.2021 DATE OF PRONOUNCEMENT : . 0 1 . 20 2 1 ORDER PER R. K. PANDA, AM : IT (SS)A NO.40/DEL/2009 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24 H FEBRUARY, 2009 OF THE CIT(A) - II, NEW DELHI, REL ATING TO THE BLOCK ASSESSMENT PERIOD 01 ST APRIL, 1995 TO 18 TH MARCH, 2002. IT (SS)A NO.15/DEL/2011 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18 TH FEBRUARY, 2011 OF THE CIT(A) - 4, DELHI, RELATING TO THE BLOCK ASSESSMENT PERIOD 10 TH MAY, 200 1 TO 18 TH MARCH, 2002. IT (SS)A NO.35/DEL/2008 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 7 TH JANUARY, 2008 OF THE CIT(A) - 10, NEW DELHI, RELATING TO THE BLOCK ASSESSMENT PERIOD 01 ST APRIL, 1995 TO 18 TH MARCH, 2002. ITA NO.3845/DEL/2009 FIL ED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22 ND JULY, 2009 OF THE CIT(A) - II, NEW DELHI, RELATING TO THE ASSESSMENT YEAR 2002 - 03. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP IT(SS)A NO.40/DEL2009 AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY AND A PART OF AERENS GROUP OF CASES. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE COMP ANY ON 18 TH MARCH, 2002. DURING THE COURSE OF ASSESSMENT IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 3 PROCEEDINGS, THE AO NOTED THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, IT WAS SEEN THAT THE GROUP HAD ADOPTED DECLARATION OF AGRICULTURAL INCOME AS A METHOD TO INTRODUCE UNACCOUNTED INCOM E INTO BUSINESS. THE ASSESSEE GROUP IS HAVING A NUMBER OF COMPANIES, BUT, NONE OF THE COMPANIES ARE SHOWING ANY PROFIT. IN COMPLIANCE TO NOTICE U/S 158BC OF THE IT ACT, 1961, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. THE AO NOTED THAT T HIS GROUP IS A REAL - ESTATE AGENT AND ALSO BUILDERS AND AT PRESENT A NUMBER OF PROJECTS ARE IN OPERATION AT VAISHALI, GURGAON AND OTHER PLACES. HE ANALYSED THE PROVISIONS OF SECTION 158B(A) AS AMENDED BY FINANCE ACT, 2002 W.E.F 1 ST JULY, 1995 AND, ACCORD INGLY HELD THAT THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAVI KANT JAIN REPORTED IN 250 ITR 141 IS NOT APPLICABLE NOW SINCE AFTER THE AMENDMENT THE AO HAS BEEN EMPOWERED TO EXAMINE DEDUCTION OR ALLOWANCE OR EXPENSES CLAIMED UNDER THAT WHICH IS FOUND TO BE FALSE . HE OBSERVED THAT ON THE BASIS OF MATERIAL FACT DURING THE COURSE OF SEARCH AND POST SEARCH ENQUIRIES, IT HAS BECOME EVIDENT THAT THE ASSESSEE , IN FACT, IS NOT ENJOYING AGRICULTURAL INCOME, BUT, IT IS INCOME FROM PROPERTY BUSINESS OF THE GROUP. HE ALSO REFERRED TO THE DECISION OF THE HON BLE RAJASTHAN HIGH COURT REPORTED IN 259 ITR 240, ACCORDING TO WHICH, THE AO CAN MAKE ENQUIRY ON THE POINTS WHICH HAS ALREADY BEEN DECIDED IN REGULAR ASSESSMENT. 3. THE AO EXAMINED THE AS SESSMENT RECORDS OF THE ASSESSEE AND OBSERVED THAT INITIALLY THE INCOME FROM AGRICULTURE WAS SHOWN FROM M/S AGARWAL AGRO INDUSTRIES, A PROPRIETARY CONCERN OF SHRI D.D. AGGARWAL , BROTHER - IN - LAW OF SHRI IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 4 S.K . GUPTA, WHO WAS ACTUALLY A SMALL SHOPKEEPER AS WELL AS EMPLOYEE OF ONE OF THE GROUPS. SUBSEQUENTLY, HE BECAME THE DIRECTOR IN SOME OF THE COMPANIES OF THE GROUP, BUT, WAS STEPPING IN AND OUT AT THE BEHEST OF SHRI S.K . GUPTA. SUBSEQUENTLY, THE GROUP FORMED ANOTHER COMPANY, NAMELY, M/S RO HAN AGRO PRIVATE LT D. W ITH AN INITIAL INVESTMENT OF RS.2000 / - ONLY WITH AN OBJECT OF DOING AGRICULTURAL OPERATIONS. ACCORDING TO THE AO, THIS COMPANY WAS USED AS A CONDUIT TO LAUNDER THE UNACCOUNTED MONEY OF THE GROUP . AGAIN, DURING, F.Y. 1999 - 2000 M/S ROHAN AGRO PVT. LTD. BECAME M/S AERENS INFRASTRUCTURE & TECHNOLOGY LTD. WITH SHRI S.K. GUPTA, THE REAL OWNER TAKING REI NS OF THE COMPANY. 4. HE NOTED THAT AT THE TIME OF SEARCH AND SEIZURE OPERATION, IT WAS FOUND THAT THERE WAS SOME AGRICULTURAL ACTIVITY IN THE LANDS OWNED AT VILLAGE BHONDSI, DISTRICT GURGAON, BUT, THE YIELD IS MINIMUM AS THE LAND IS BARREN AND RAIN IRRIGATED BEING SITUATED IN SOUTH HARYANA. VIDEOGRAPHY WAS ALSO DONE IN THE PRESENCE OF DIRECTORS/EMPLOYEES WHICH FORMS PART OF THE RECORD. WHEN ENQUIRED ABOU T THE SO - CALLED AGRICULTURAL OPERATIONS FOR WHICH AGRICULTURAL INCOME IS SHOWN, IT WAS STATED THAT THE ASSESSEE HAD CLOSED DOWN THE AGRICULTURAL ACTIVITIES. WHEN ENQUIRED FROM THE EMPLOYEES ABOUT THE AGRICULTURAL OPERATIONS, THEY STATED THAT IT WAS JUST S UFFICIENT TO MEET ITS REQUIREMENTS. THE AO REFERRED TO THE STATEMENT S RECORDED DURING THE COURSE OF SEARCH AND SEIZURE OPERATION OF MR. MOHAN S INGH, CHIEF SUPERVISOR WHEREIN HE HAD CATEGORICALLY STATED THAT THE LAND IS BARREN ONE AND B ANJAR AND AT SOME OF THE PLACES WHEAT, MUSTARD, ETC., ARE PRODUCED. SIMILARLY, IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 5 SHRI SU RESH BH ARDWAJ IN HIS STATEMENT RECORDED STATED THAT THERE WAS NO HORTICULTURAL OPERATIONS, BUT SOME CROP WAS GROWN THERE. SIMILAR, STATEMENT WAS GIVEN BY SHRI S H ALALUDDIN. THE AO ALSO REF ERRED TO THE STATEMENT OF RAM S INGH , S/O SHRI RATTAN LAL, SARPANCH OF VILL. KANWARSIKA , SOHNA WHO, IN HIS STATEMENT HAS STATED THAT THERE WAS CROPS OF WHEAT, ETC. SIMILARLY, MR. JA NG BAHADUR SINGH, GM OF ANCH OR RESORT, WHEREIN THE ASSESSEE HAS CLAIMED TO HAVE DONE THE AGRICULTURAL OPERATIONS, HAD STATED THAT THERE WERE NO AGRICULTURAL OPERATIONS AND HAD AGREED WITH THE VIDEOGRAPHY SHOWN TO HIM. HE ALSO REFERRED TO THE STATEMENT OF SHRI MA Q SOOD KHAN AND SHRI KAMAL KUMAR, WHO HAD ALSO STATED THAT THERE WAS NO AGRICULTURAL ACTIVITY DONE. 5. THE AO FURTHER NOTED THAT THE BUNCH OF LOOSE PAPERS FOUND AND SEIZED FROM THE RESIDENCE OF SHRI S.K. GUP TA, MARKED AS ANNEXURE R - 1/ A - 1 INDICATE THAT THERE IS NO AGRICULTURAL INCOME AT SOHNA AND BHONDSI. IN VIEW OF THE AB OVE, THE AO HELD THAT THERE ARE NO AGRICULTURAL ACTIVITIES. HOWEVER, THE ASSESSEE HAD SHOWN INCOME FROM AGRICULTURE THE DETAILS OF WHICH ARE AS UNDER: - ASTT. YEAR SALES SECURITY PAID LEASE MONEY PAID 1996 - 97 68,12,768 26,500 40,87,663/ - 1997 - 98 1,58,70 ,648/ - 57,28,250/ - 95,22,790/ - 1998 - 99 2,64,09,130/ - 1,26,87,815/ - 158,40,000/ - 1999 - 00 4,47,59,735/ - 1,52,57,762/ - 2,68,55,835/ - 2000 - 01 6,48,44,767/ - 1,92,75,130/ - 2,89,06,860/ - 2001 - 02 8,68,96,983/ - 1,83,05,130/ - 5,21,38,190/ - 2002 - 03 7,12,80,587/ - IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 6 6. HE, HOWEVER, NOTED THAT OUT OF THE SALES MENTIONED ABOVE, THE SAME HAS BEEN FURTHER BIFURCATED GIVING THE INFORMATION OF CASH SALES, SALES TO GROUP COMPANIES AND GROUP ASSOCIATES, THE DETAILS OF WHICH ARE AS UNDER: FIGURES IN LAKHS 1996 - 97 19 97 - 98 1998 - 99 1999 - 00 2000 - 01 2001 - 02 CASH SALES. 77.61 146.28 204.26 336.96 316.44 56.98 SALES TO GROUP COMPANIES & ASSOCIATES 15 - 98 9 - 55 6,64 18 - 80 16,46 67,55 7. IN VIEW OF THE ABOVE, THE AO CONFRONTED THE ASSESSEE REGARDING THE GENUINENESS OF THE AGRICULTURAL INCOME SHOWN BY IT. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSERVING THAT THE ASSESSEE IN FACT IS NOT ENGAGED IN AGRICULTURAL ACTIVITIES, BUT, WAS INTRODUCING ITS UNACCOUNTED INCOME, THE AO DETERMINED THE INCOME OF THE A SSESSEE FOR THE BLOCK PERIOD AT RS.24,55,95,031/ - THE YEARWISE DETAILS OF WHICH ARE AS UNDER: - ASSESSMENT YEAR INCOME ASSESSED 1996 - 97 68,12,768/ - 1997 - 98 1,58,70,648/ - 1998 - 99 2,64,09,130/ - 1999 - 2000 4,47,59,735/ - 2000 - 01 6,48,44,767/ - 2001 - 02 8,68, 96,983/ - TOTAL 24,55,95,031/ - 8. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). BEFORE THE APPEAL COULD BE TAKEN UP THE CIT - 11 ( CENTRAL) PASSED AN ORDER ON 11 . 10.2004 U/S.263 CANCELLING THE BLOCK ASSESSMENT AND DIRECTING THE A.O. TO MAKE A FRESH ASSES SMENT AFTER MAKING IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 7 NECESSARY VERIFICATIONS AND ENQUIRIES. ON THE BASIS OF THIS ORDER, THE CIT(A) DISMISSED THE ASSESSEE S APPEAL AGAINST ORIGINAL PROCEEDINGS HOLDING THAT THE ASSESSMENT ORDER DID NOT SURVIVE BECAUSE OF THE ORDER OF THE CIT - II(CENTRAL) PASS ED U/S 263 AND, THEREFORE, DID NOT EXAMINE THE APPEAL ON MERITS. THE ORDER OF THE C1T(A) WAS PASSED ON 27.10.2004. THE ASSESSEE IN THE MEANTIME CARRIED THE ORDER OF THE CIT PASSED U/S 263 IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 3.3. 2005 SET ASIDE THE ORDER PASSED BY THE CIT U/S 263 WITH THE RESULT THAT THE ORIGINAL ASSESSMENT MADE ON 31.3.2004 GOT REVIVED. THE ASSESSEE THEREAFTER MOVED AN APPLICATION U/S 154 BEFORE THE CIT(A) REQUESTING HIM TO DECIDE THE APPEAL ON MERITS. THIS REQUES T WAS REJECTED BY THE CIT(A) BY ORDER DATED 10.1,2006. HOWEVER, THE ASSESSEE FILED A BELATED APPEAL BEFORE THE TRIBUNAL WITH A REQUEST FOR CONDONATION AND AGAINST THE ACTION OF THE C1T(A) IN REJECTING ITS APPLICATION MADE U/S 154 OF THE I.T. ACT, THE TRIBU NAL VIDE ORDER DATED 2.4.2008 CONDONED THE DELAY OF THE ASSESSEE AND DIRECTED THE CIT(A) TO DISPOSE OF THE APPEAL ON MERITS. ACCORDINGLY THE CASE OF THE ASSESSEE W AS BEEN RESTORED TO THE FILE OF TH E CIT(A). 9. DURING THE COURSE OF PROCEEDINGS BEFORE THE C IT(A), IT WAS SUBMITTED THAT THE AGRICULTURAL ACTIVITIES WERE CLOSED ON 31.3.2001 AND THE NAME OF THE COMPANY WAS CHANGED FROM M/S ROHAN AGRO PVT. LTD. TO M/S ARENS INFRASTRUCTURE TECHNOLOGY LTD. AND THE MAIN OBJECT S OF THE COMPANY WERE ALSO CHANGED FROM AGRICULTURAL OPERATIONS TO REAL ESTATE AND DEVELOPMENT OF BUSINESS W.E.F. 13.9 . 2001. IT WAS SUBMITTED THAT ON THE DATE OF SEARCH, I.E., ON 18 . 3.2002 THE ASSESSEE COMPANY IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 8 IS ENGAGED IN THE BUSINESS O F REAL - ESTATE AND RELATED ACTIVITIES, BUILDERS AND DEVELO PERS AS WELL AS INFRASTRUCTURE DEVELOPMENT, ETC. IT WAS SUBMITTED THAT DURING THE BLOCK PERIOD AGRICULTURAL OPERATIONS WERE CARRIED OUT AT VILL. BHONDSI AND SOHNA WHICH WAS OWNED BY FIVE HUFS AND OTHERS. M/S ROHAN AGRO PVT,LTD. ENTERED INTO JOINT VENTURE WITH VARIOUS LAND OWNERS AND CARRIED OUT AGRICULTURAL OPERATIONS TILL 31.3.2001. OVER THE PERIOD OF TIME LAND OWNERS FURTHER G A VE THEIR LAND FOR CULTIVATION. T HEREBY IN THE F.Y, 2000 - 01 THE LAND UNDER CULTIVATION HAS GONE UP TO APPROX. 130 ACRES. LAND OWN ERS PROVIDED THE BASIC INFRASTRUCTURE ACTIVITIES AND DEVELOPMENT OF PLANTS AND AGRICULTURAL OPERATIONS WERE CARRIED OUT BY THE ASSESSEE, BOTH ASSESSEE COMPANY AND LAND OWNERS CARRIED OUT MARKETING JOINTLY. REGULAR BOOKS OF ACCOUNTS WE RE MAINTAINED AND THE INCOME - TAX RETURNS WE RE FILED. THE NATURE OF INCOME AND ITS TAXABILITY HAS BEEN SCRUTINISED IN VARIOUS YEARS BY THE IT DEPARTMENT. THROUGHOUT IT WAS ACCEPTED AS AGRICULTURAL INCOME AND NO MISTAKE WAS FOUND IN THE BOOKS OF ACCOUNTS. DUE TO STOPPAGE OF AGRIC ULTURAL ACTIVITIES, NO AGRICULTURAL PRODUCTS WERE FOUND AS ON THE DATE OF SEARCH. IT WAS SUBMITTED THAT T HERE IS ANOTHER COMPANY UNDER THE NAME OF M/S AERENS MOTELS AND RESORTS PVT. LTD. WHICH RUNS A RESORT ON BHONDSI LAND AND THE STATEMENTS OF EMPLOYEES O F THE SAID COMPANY WERE RECORDED AND UTILIZED AGAINST THE ASSESSEE. 10. AS REGARDS THE ALLEGATIONS OF THE AO THAT THERE WERE NO AGRICULTURAL ACTIVITIES IS CONCERNED, IT WAS SUBMITTED THAT AGRICULTURAL ACTIVITIES ALL ALONG WERE CARRIED OUT BY THE ASSESSEE A ND SALE OF AGRICULTURAL PROCEEDS WERE SHOWN BY THE ASSESSEE IN ITS IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 9 AUDITED BOOKS OF ACCOUNTS AND IN THE INCOME - TAX RETURN, WHICH WAS DULY ASSESSED UNDER SCRUTINY . IT WAS SUBMITTED THAT THE ASSESSEE HAD FURNISHED THE FOLLOWING EVIDENCES BEFORE THE AO INCL UDING THE OTHER DETAILS : - I) LAND REVENUE RECORDS VIZ, GARDAWARI. IT IS VERY CLEARLY STATED IN THE RECORDS THAT THE SAID LAND WAS UNDER CULTIVATION AND PLANTS EXISTED. II) A MAJOR PORTION OF SALE IS TO COLONIZERS AND BULK BUYERS AND THE PAYMENTS HAVE BEE N RECEIVED BY ACCOUNT PAYEE CHEQUES. THE CUSTOMER WISE DETAILS WERE SUBMITTED BEFORE THE AO. III) THE ASSESSEE HAS BEEN CARRYING OUT THESE AGRICULTURAL ACTIVITIES FOR THE LAST NUMBER OF YEARS. THESE HAVE BEEN DULY DECLARED TO INCOME TAX DEPARTMENT FROM TI ME TO TIME. IV) JOINT VENTURE AGREEMENT WITH THE LANDOWNERS. V) DETAILS OF IRRIGATION AND OTHER FACILITIES. VI) DETAILS OF GOVERNMENT APPROVAL FOR GREEN HOUSE. VII) THE TEST REPORT OF SOIL AND WATER CARRIED OUT BY THE ASSESSEE RECENTLY AND ALSO AT VARIOUS TIME DURING BLOCK PERIOD. THE REPORT STATES THAT THE LAND HAD NORMAL SOIL AND WATER AND WAS SUITABLE FOR AGRICULTURAL PURPOSE. VIII) A GREEN H LOUSE WAS CONSTRUCTED DURING THE FINANCIAL YEAR 1995 - 96, 97 - 98 AND 98 - 99. THE FULL DETAILS OF THE AMOU NT SPENT WERE PRODUCED BEFORE THE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 10 AO. THE PARTY WHO CONSTRUCTED THE GREEN HOUSE ALSO GOT THE SUBSIDY FROM DISTRICT HORTICULTURE OFFICER. COPIES OF THE BILL OF CONSTRUCTION OF THE GREEN HOUSE AND CONFIRMATION FROM DISTT. HORTICULTURE OFFICER, GURGAON, WERE SUBMITTED. IX) THE DETAILS OF THE AGRICULTURAL APPLIANCES PURCHASED BY THE ASSESSEE COMPANY, IT WAS SUBMITTED THAT THE LAND OWNERS HAD PROVIDED THE BASIC INFRASTRUCTURE FACILITIES. X) ASSESSEE HAD ALSO SUBMITTED - BEFORE THE. A.O, THE DETAILS OF OWNER SHIP OF LAND, WHICH WERE PURCHASED IN 1992. THE LAND WAS DEVELOPED BY THE OWNERS FOR AGRICULTURAL OPERATIONS I.E. IRRIGATION FACILITIES, POWER CONNECTION, PIPELINES ETC. XI) REGARDING THE IRRIGATION, ELECTRICITY EXPENSES, IT WAS EXPLAINED TO THE A.O. THA T THE ASSESSEE WAS RUNNING PUMPS ON DG SETS AND ALSO USING THE CANAL WATER SUPPLIED BY IRRIGATION DEPARTMENT OF HARYANA GOVT. XII) AS ON THE DATE OF SEARCH, SOME PLANTS WERE STILL LYING THERE WHICH WERE OWNED BY THE OTHER PARTIES. A VIDEO FILM OF THE SAME WAS MADE BY THE ASSESSEE ON 21.2.2002. 11. IT WAS ACCORDINGLY SUBMITTED THAT THE EVIDENCES CONCLUSIVELY PROVE THAT THE ASSESSEE HAS CARRIED OUT AGRICULTURAL OPERATIONS AND THE ALLEGATIONS OF THE AO ARE BASELESS AND INCORRECT. THE ASSESSEE FURTHER SUBMI TTED THAT THE JOINT VENTURE AGREEMENT WITH LAND OWNERS WAS CANCELLED ON 01.04.2001 W.E.F. 31.03.2001. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 11 THUS, ON 18 TH MARCH, 2002, I.E., THE DATE OF SEARCH, THERE IS NO AGRICULTURAL OPERATIONS. HOWEVER, MOST OF THE QUESTIONS WERE PUT TO THE PERSONS WITH RE SPECT TO THE TIME OF SEARCH WHICH HAS MORE RELEVANCE TO THE PERIOD OF AGRICULTURAL OPERATIONS. SO FAR AS THE STATEMENTS RECORDED OF DIFFERENT PERSONS WHICH IS THE BASIS FOR MAKING ADDITION IS CONCERNED, IT WAS SUBMITTED THAT THE AO HAD INCORRECTLY INTERPR ETED THEIR STATEMENTS AND REJECTED THE CLAIM OF AGRICULTURAL INCOME. REGARDING THE STOCK REGISTER OF PLANTS, IT WAS CLARIFIED THAT SINCE THE PLANTS ARE GROWN IN THE FIELD AND THE GROWTH AND PROPAGATION IS THROUGH THE NATURAL PROCESS , IT IS NOT FEASIBLE TO MAINTAIN ANY STOCK REGISTER. IT WAS SUBMITTED THAT COMPLETE RECORD OF SALE OF PLANT WAS MAINTAINED AND WAS VERIFIED BY THE OFFICERS DURING THE SEARCH AND ASSESSMENT PROCEEDINGS. 12. IT WAS SUBMITTED THAT T HE CLOSING STOCK WAS TAKEN PHYSICALLY AND VALU ED AS PER ACCOUNTING STANDARDS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD CLAIMED AGRICULTURAL INCOME AS EXEMPT INCOME U/S 10 OF THE IT ACT. AFTER THE SCRUTINY OF THE CASE, THE SAME WAS ACCEPTED. HOWEVER, IN THE BLOCK ASSESSMENT ORDER, THE AO HELD THAT THE SAID INCOME IS NOT EXEMPT U/S 10 OF THE ACT ON THE GROUND THAT THE INCOME DID NOT ARISE OUT OF AGRICULTURAL OPERATIONS. HE FURTHER STATED THAT EVEN IF IT IS HELD TO BE HORTICULTURE INCOME, IT IS TAXABLE INCOME. IT WAS SUBMITTED THAT THIS IS A CLE AR CASE OF CHANGE OF OPINION BY THE AO SINCE EARLIER THE DEPARTMENT HAD HELD THAT THE INCOME IS EXEMPT, THEREFORE, THE AO, IN THE BLOCK ASSESSMENT ORDER COULD NOT HAVE TREATED THE SAME AS UNDISCLOSED INCOME. IT WAS SUBMITTED THAT AS TO IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 12 WHETHER THE INCOME IS EXEMPT U/S 10 IS A MATTER OF ASSESSMENT U/S 143(3) AND IS NOT A SUBJECT MATTER OF UNDISCLOSED INCOME. IT WAS ACCORDINGLY ARGUED THAT NO SUCH ADDITION CAN BE MADE UNDER CHAPTER XIVB OF THE IT ACT. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE OF TH E CIT(A) TO THE PROPOSITION THAT ONCE AN INCOME HAS ALREADY BEEN EXAMINED BY THE AO IN DETAIL WHILE COMPLETING THE ASSESSMENT U/S 143(3) OR 144 OR 147, IT HAD TO BE PRESUMED THAT THE AO HAD GONE INTO ALL ASPECTS OF SUCH INCOME AND THE SAME COULD NOT BE REO PENED DURING ASSESSMENT BEING MADE FOR THE BLOCK ASSESSMENT PERIOD. IT WAS ACCORDINGLY ARGUED THAT THE BLOCK ASSESSMENT PROCEEDINGS UNDERTAKEN BY THE AO SHOULD BE CANCELLED BOTH ON LEGAL GROUNDS AS WELL AS ON MERITS. 13. HOWEVER, THE LD.CIT(A) WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO. SO FAR AS THE LEGAL OBJECTION RAISED BY THE ASSESSEE CHALLENGING THE 158BC PROCEEDINGS ARE CONCERNED, HE HELD THAT DUE TO EXTENSION OF MEANING OF UNDISCLOSED INCOME W. E.F. 01.07.1995, THE SCOPE OF THE WORD UNDISCLOSED INCOME HAS BEEN WIDENED ENORMOUSLY. BY AMENDING THE CLAUSE (B) OF 158B THE WORDS ANY EXPENSES, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE HAD BEEN INCORPORATED TO WIDEN TH E SCOPE OF UNDISCLOSED INCOME. THEREFORE, ALTHOUGH THE ASSESSEE COMPANY WAS FILING THE RETURN OF INCOME REGULARLY DISCLOSING AGRICULTURAL INCOME, THE TRUTH ABOUT THE AGRICULTURAL OPERATIONS SAID TO HAVE BEEN CARRIED OUT BY THE ASSESSEE COMPANY CAME TO NOT ICE ONLY CONSEQUENT TO THE ACTION U/S 132 OF THE IT ACT. ACCORDING TO THE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 13 CIT(A), THE ASSESSEE CONVENIENTLY TRIED TO PROJECT THAT IT STOPPED THE AGRICULTURAL OPERATIONS IN MARCH, 2001 . HAD SUCH AGRICULTURAL ACTIVITIES BEEN CARRIED FOR SO MANY YEARS AS CL AIMED BY THE ASSESSEE, THERE WOULD HAVE BEEN SOME EVIDENCE TO SUGGEST THAT THE LAND WAS USED FOR AGRICULTURAL PURPOSES. HOWEVER, THE EVIDENCES GATHERED DURING AND AFTER THE SEARCH REVEALED THAT THE LAND IS NOT SUITABLE FOR ANY AGRICULTURAL ACTIVITY. THE LAND IS ALSO NOT SUITABLE FOR RAISING ANY CROP, ETC. THE ASSESSEE FAILED TO SUBSTANTIATE THE BASIC REQUIREMENT SUCH AS IRRIGATION, CLIMATE, AVAILABILITY OF AGRICULTURAL INPUTS, LABOUR AND MARKETING FACILITIES, ETC., FOR UNDERTAKING AGRICULTURAL OPERATION S TO SUCH LARGE EXTENT. RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT REPORTED IN 214 ITR 801 , THE LD.CIT(A) UPHELD THE VALIDITY OF BLOCK ASSESSMENT MADE BY THE AO. SO FAR AS THE MERIT OF THE CASE IS CONCERNED, HE ALSO UPHELD THE ACTION OF THE AO. 14. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS: - 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDICTION U/: 158BC MORE SO WHEN STATUTORY JURISDICTIONAL CONDITIONS WERE NOT COMPLIED WITH AND THEREFORE, IMPUGNED ORDERS ARE BAD IN LAW. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN TREATING THE AMOUNT O RS.24,55,95,031/ - AS NON AGRICULTURAL INCOME AND HAS FURTHER ERRED IN HOLDING THAT JOINT VENTURE AGREEMENT ENTER ED BY THE APPELLANT ARE NOTHING BUT A DEVICE TO CHANNELISE THE INCOME IN THE FORM OF AGRICULTURE INCOME, MORE SO WHEN SUCH ADDITION COULD NOT BE MADE UNDER THE LAW IN PROCEEDING U/S 158BC. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 14 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT ASSESSEE COMPANY DID NOT PERFORM ANY BASIC OPERATION SO AS TO QUALIFY FOR EXEMPTION U/S 10 OF IT ACT. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHING THE IMPUGNED ASSESSMENT ORDER PASSED BY LD. AO AND IN NO DELETING VARIOUS ADDITIONS/DISALLOWANCES MADE BY LD. AO AS THE ASSESSMENT ORDER IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS AND MORE SO BY RECORDING INCORRECT FACTS AND FINDI NG AND THAT TOO WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 5. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 15. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLENGED THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION MADE BY THE AO IN THE BLOCK ASSESSMENT ORDER. REFERRING TO VARIOUS PAGES OF THE PAPER BOOK, THE LD. COUNSEL SUBMITTED THAT DURING THE SIX ASSESSMENT YEARS RELEVANT TO THE BLOCK PERIOD, THE ASSESSEE HAS SHOWN AGRICULTURAL INCOME ON YEAR TO YEAR. THE ASSESSMENT YEAR - WISE AGRICULTURAL SALE OF THE ASSESSEE AS PER REGULAR BOOKS OF ACCOUNT ARE AS UNDER: - ASSESSMENT YEAR INCOME ASSESSED 1996 - 97 68,12,768/ - 1997 - 98 1,58,70,648/ - 1998 - 99 2,64,09,130/ - 1999 - 2000 4,47,59,735/ - 2000 - 01 6,48,44,767/ - 2001 - 02 8,68,96,983/ - TOTAL 24,55,95,031/ - 16. HE SUBMITTED THAT ON THE ABOVE SALE S , THE ASSESSEE HAS ALSO CLAIMED EXPENDITURE AND THE BALANCE AGRICULTURAL I NCOME WAS CLAIMED TO BE EXEMPT IN THE RETURNS FILED IN THE REGULAR COURSE. REFERRING TO VARIOUS PAGES OF THE PAPER BOOK, IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 15 THE LD. COUNSEL SUBMITTED THAT THE AO HAD PASSED ORDER U/S 143(3) FOR A.Y. 1996 - 97, 1997 - 98, 1998 - 99 AND 2000 - 01 ACCEPTING THE AGRICUL TURAL INCOME. HE SUBMITTED THAT THE ORDER FOR A.Y. 2000 - 01 , COPY OF WHICH IS PLACED IN THE PAPER BOOK AT PAGE 478 OF VOL.3 WAS PASSED ON 18 TH MARCH, 2003 I.E., AFTER THE DATE OF SEARCH OF 18 TH MARCH, 2002. HE SUBMITTED THAT IN RESPECT OF EACH OF THE ABOV E MENTIONED ASSESSMENT YEAR THE ACCOUNT OF AGRICULTURAL INCOME IS PART OF THE AUDIT REPORT SUBMITTED ALONG WITH THE RETURN FILED IN THE REGULAR COURSE. THE LD. COUNSEL FOR THE ASSESSEE , REFERRING TO VARIOUS PAGES OF THE PAPER BOOK DREW THE ATTENTION OF TH E BENCH TO THE GROSS SALES ASSESSMENT YEAR - WISE, THE DETAILS OF WHICH ARE AS UNDER: - S. NO. A.Y. DETAILS OF SALES OF AGRICULTURAL PRODUCTS AS PER AUDIT REPORT REMARKS DATE OF AUDIT REPORT 1. 1996 - 97 PG. 170 RS. 68,12,768.25/ - GROSS SALES 25 - 06 - 1996 2. 1997 - 9 8 PG. 109 RS. 1,58,70,648/ - GROSS SALES 02 - 09 - 1997 3. 1998 - 99 PG. 95 RS. 2,64,09,130.50/ - GROSS SALES 02 - 09 - 1998 4. 1999 - 2000 PG. 84 RS. 4,47,59,735/ - GROSS SALES 02 - 09 - 1999 5. 2000 - 01 PG. 69 RS. 6,48,44,767.75/ - GROSS SALES 02 - 09 - 2000 6. 2001 - 02 PG. 56 RS. 8, 68,96,986/ - GROSS SALES 01 - 09 - 2001 17. REFERRING TO PAGE 2 OF THE BLOCK ASSESSMENT ORDER, HE SUBMITTED THAT IT WAS THE CONTENTION OF THE ASSESSEE RIGHT BEFORE THE AO THAT AGRICULTURAL INCOME , NOW BEING SUBJECTED TO BLOCK ASSESSMENT , IS CONTRARY TO THE D ECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF RAVI KANT JAIN (SUPRA) , ON THE GROUND THAT THE INCOME WHICH IS SUBJECT OF REGULAR ASSESSMENT CANNOT BE CONSIDERED AS UNDISCLOSED IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 16 INCOME OF THE BLOCK PERIOD. HOWEVER, THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE AO ON THE GROUND THAT AFTER AMENDMENT TO SECTION 158B(B), THE DEFINITION OF UNDISCLOSED INCOME WAS WIDENED WITH RETROSPECTIVE EFFECT TO EXAMINE DEDUCTION/ALLOWANCE/EXPENSES IF THEY ARE FOUND TO BE FALSE. HE SUBMITTED THAT ALTHOUGH SIMILAR ARGUMENT WAS ADVANCED BEFORE THE CIT(A), HE HAS ALSO REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT SUCH CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED IN VIEW OF THE EVIDENCE GATHERED DURING AND AFTER THE SEARCH WHICH REVEALED THAT THE LAND DOES NO T SUIT FOR ANY AGRICULTURAL ACTIVITY. HE SUBMITTED THAT THE REJECTION OF THE CONTENTION IS WRONG SINCE THE AGRICULTURAL ACTIVITIES WERE STOPPED A YEAR AGO FROM THE DATE OF SEARCH AND AMPLE EVIDENCE WAS SUBMITTED BY THE ASSESSEE TO PROVE THAT IN FACT AGRIC ULTURAL ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE DURING THE BLOCK PERIOD AND SUCH FACT WAS SUPPORTED FROM THE REGULAR ASSESSMENT ORDERS BY WHICH AGRICULTURAL INCOME WAS ACCEPTED AFTER MAKING ENQUIRIES. THE LD. COUNSEL, REFERRING TO PAGES 4 8 5 TO 5 16 OF THE PAPER BOOK, DREW THE ATTENTION OF THE BENCH TO THE VARIOUS REPLIES FILED BEFORE THE AO SUBMITTING VARIOUS EXPLANATIONS/EVIDENCE, ETC., TO SUBSTANTIATE THE AGRICULTURAL ACTIVITIES. FURTHER, NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARC H TO SAY AND HOLD THAT THE AGRICULTURAL INCOME EARNED BY THE ASSESSEE WAS IN ANY MANNER FALSE OR INCORRECT. 18. THE LD. COUNSEL SUBMITTED THAT IT IS WELL ESTABLISHED LAW THAT THE PROVISION RELATING TO ASSESSMENT OF BLOCK PERIOD ARE DIFFERENT AND DISTINCT FROM THE PROVISION IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 17 REGULATING THE ASSESSMENT OF INCOME DISCLOSED IN THE RETURN FILED IN THE REGULAR COURSE. HE SUBMITTED THAT AS PER THE WELL ESTABLISHED LAW, REGULAR ASSESSMENT PROCEEDINGS AND BLOCK ASSESSMENT PROCEEDINGS CAN SIMULTANEOUSLY GO AND WHAT I S ASSESSABLE IN THE REGULAR PROCEEDINGS IS DISCLOSED INCOME AND WHAT IS SUBJECT MATTER OF BLOCK PROCEEDINGS IS INCOME WHICH IS UNDISCLOSED. HE SUBMITTED THAT IF AN EVIDENCE IS FOUND AND GATHERED LATER TO SEARCH WHICH INDICATED TOWARDS NON - GENUINENESS OF T HE INCOME DISCLOSED IN THE REGULAR RETURN, THEN THE PROPER COURSE FOR THE REVENUE WOULD BE TO ASSESS THAT INCOME BY ANOTHER MODE, I.E., INITIATION OF REASSESSMENT PROCEEDINGS IN RESPECT OF THAT INCOME. FOR THE ABOVE PROPOSITION, THE LD. COUNSEL RELIED ON VARIOUS DECISIONS. 19. REFERRING TO THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF CA LTRADECO STEEL SALES (P) LTD. VS. DCIT, REPORTED IN 243 ITR 643, HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT PROCEEDINGS U /S 143(3) WILL GO SIMULTANEOUSLY WITH THE PROCEEDINGS IN THE PURSUANCE OF THE NOTICE U/S 158BC. REFERRING TO THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN THE CASE OF ITO VS. SMT. MUKTA BEN J. PATIRA (2015) 231 TAXMAN 502, HE SUBMITTED THAT THE HON BLE HIGH COURT, AFTER REFERRING TO THE PROVISIONS OF SECTION 158B(B) HELD THAT IN A CASE WHERE INCOME RECEIVED BY THE ASSESSEE WAS DECLARED IN THE RETURN FILED BEFORE SEARCH AND THE RETURN WAS ON THE RECORD OF THE DEPARTMENT BEFORE THE DATE OF SEARCH, THEN, T HE INCOME COULD NOT BE CONSIDERED AS UNDISCLOSED IN VIEW OF SECTION 158B(B). REFERRING TO THE DECISION OF THE HON BLE ALLAHABAD HIGH COURT IN IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 18 THE CASE OF ANAND P RAKASH AGRAWAL VS. CIT, 225 TAXMAN 40 , HE SUBMITTED THAT IN THAT CASE, POST SEARCH, IT WAS FOU ND THAT THE GIFT CHEQUES RECEIVED BY THE ASSESSEE WERE SHAM TRANSACTIONS. THE HON BLE HIGH COURT HELD THAT THOSE GIFT CHEQUES WERE DISCLOSED IN THE RETURN SUBMITTED U/S 139. THEREFORE, THE AMOUNT CANNOT BE ASSESSED IN BLOCK PROCEEDINGS U/S 158BC AND THE SAID AMOUNT COULD BE ADDED ONLY IN THE PROCEEDINGS U/S 147. REFERRING TO THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. N LEELA KUMAR, 224 T AXMAN 106, HE SUBMITTED THAT THE HON BLE HIGH COURT, AFTER MAKING REFERENCE TO THE PROVISI ONS OF SECTION 158B(B) AND ALSO THE PROVISIONS OF SECTION 139(1), HELD THAT EVEN IF THE INCOME WAS DISCLOSED IN THE RETURN FILED U/S 139(4), THE SAME CANNOT BE CONSIDERED TO BE UNDISCLOSED. REFERRING TO THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF PROMAIN LTD. VS. DCIT, 170 ITD 188, HE SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS CONSIDERED THE IMPACT OF RETROSPECTIVE AMENDMENT MADE IN SECTION 158 B(B) OF THE ACT AND HELD THAT EVEN AFTER AMENDMENT BEFORE COMING TO ANALYSE WHAT I S UNDISCLOSED INCOME, IT IS NECESSARY TO BE SEEN THAT SUCH INCOME HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. IN A CASE WHERE ANY SUCH ARTICLE OR THING OR INCOME HAS ALREADY BEEN DISCLOSED TO THE DEPARTMENT PRIOR TO THE SEAR CH, IT CANNOT BE TERMED THAT THE SAME HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. IT WAS ACCORDINGLY HELD THAT WHATEVER ITEM OR ARTICLE HAVE BEEN SHOWN TO THE DEPARTMENT PRIOR TO THE SEARCH CANNOT BE TREATED AS UNDISCLOSED I NCOME. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 19 20. REFERRING TO THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PINAKI MISRA, 88 TAXMANN.COM 521, HE SUBMITTED THAT THE AO HAS NO JURISDICTION TO MAKE ADDITIONS U/S 158BC IN RELATION TO AMOUNTS WHICH WERE ALREADY DISCLOSED IN REGULAR ASSESSMENT BY THE ASSESSEE. IT HAS BEEN HELD IN THE SAID DECISION THAT BLOCK ASSESSMENT HAS TO BE CARRIED OUT ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH AND NOT AS A RESULT OF OTHER DOCUMENTS OR MATERIAL WHICH COME TO THE POSSESS ION OF THE AO SUBSEQUENT TO CONCLUSION OF SEARCH OPERATION. HE ACCORDINGLY SUBMITTED THAT SINCE THE ASSESSEE IN THE INSTANT CASE HAD DISCLOSED SUCH AGRICULTURAL INCOME IN THE RETURN OF INCOME FILED ALONG WITH AUDITED ACCOUNTS AND MOST OF THE ASSESSMENTS W ERE COMPLETED U/S 143(3) ACCEPTING SUCH AGRICULTURAL INCOME AFTER DUE ENQUIRIES AND VERIFICATION, THEREFORE, THE ACTION OF THE AO IN TREATING THE AGRICULTURAL INCOME AS UNDISCLOSED INCOME WHICH HAS BEEN UPHELD BY THE CIT(A) IS UNJUSTIFIED AND ILLEGAL. HE ACCORDINGLY SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) SHOULD BE DELETED. 21. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). SHE SUBMITTED THAT THE ASSESSEE HAS CLAIMED THAT IT HAD GIVEN I TS LAND TO M/S ROHAN AGRO PVT. LTD., RENAMED AS M/S AERENS INFRASTRUCTURE & TECHNOLOGY (P) LTD., ON LEASE FOR AGRICULTURAL OPERATIONS WHICH WAS SHOWN AS AGRICULTURAL INCOME. IT RECEIVED LEASE RENT @ 60% OF GROSS RECEIPT BEFORE DEDUCTING EXPENSES OF ANY KI ND. SHE SUBMITTED THAT DURING SEARCH, VIDEOGRAPHY WAS DONE IN PRESENCE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 20 OF DIRECTORS AND EMPLOYEES WHICH SHOWED THAT THE LAND WAS BARREN AND NO AGRICULTURAL ACTIVITY COULD BE CONDUCTED. SHE SUBMITTED THAT THE STATEMENT ON OATH OF SOME EMPLOYEES, NAMELY, M R. MADAN LAL, SURESH BHARDAWAJ, SHAHBUDIN, RAM SINGH, JANG BHAHADUR SINGH BAWA & MAQSOOD KHAN WERE RECORDED WHICH CONFIRMED ABOVE FINDINGS. SHE SUBMITTED THAT IN THE CASE OF M/S A E RENS INFRASTRUCTURE AND TECHNOLOGY LTD IT WAS HELD THAT THERE WAS NO AGRICU LTURAL OPERATIONS AND ENTIRE INCOME SHOWN BY IT WAS FROM UNDISCLOSED SOURCES SHOWN IN THE GARB OF AGRICULTURAL INCOME. ACCORDINGLY 60% OF RECEIPTS AS LEASE RENT RECEIVED FROM M/S A E RENS INFRASTRUCTURE AND TECHNOLOGY LTD WERE TAXED IN HANDS OF THE ASSESSEE . REFERRING TO THE ASSESSMENT ORDER, SHE SUBMITTED THAT THE A O HAS CATEGORICALLY HELD THAT THERE WAS NO GENUINE LEASE AGREEMENT AND RENT RECEIVED BY IT WAS NOT RENT RECEIVED FROM LEASE OF AGRICULTURAL LAND FOR AGRICULTURAL OPERATIONS. REFERRING TO PARA 5 OF THE ORDER OF THE CIT(A) SHE DREW THE ATTENTION OF THE BENCH TO THE SAME AND SUBMITTED THAT THE LD.CIT(A) HAS DISCUSSED IN DETAIL AS TO HOW ABOVE INCOME OF THE ASSESSEE CONSTITUTED UNDISCLOSED INCOME. THE LD. CIT - DR, REFERRED TO THE FOLLOWING DECISIONS A ND SUBMITTED THAT WHERE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF AGRICULTURAL INCOME CLAIMED TO HAVE BEEN EARNED BY IT, NO EXEMPTION COULD BE ALLOWED IN RESPECT OF SUCH INCOME: - 1. CIT VS RAJA BENOY KUMAR SAHAS ROY [1957] 32 ITR 466 (SC) 2. BHAIRAVNATH AGROFIN (P.) LTD. VS CIT (354 ITR 276)(RAJ.) 3. H.H. MAHARAJA VIBHUTI NARAIN SINGH VS STATE OF UTTAR PRADESH(65 ITR 364) (SC) IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 21 4. CIT VS RAMAKRISHNA DEO (35 ITR 312)(SC) 22. REFERRING TO THE FOLLOWING DECISIONS, THE LD. DR SUBMITTED THAT WHEN THE EMPLOYEES/DIRECTORS A ND OTHER PERSONS OF THE ASSESSEE COMPANY HAVE GIVEN STATEMENT ON OATH THAT THE ASSESSEE WAS NOT CARRYING OUT ANY AGRICULTURAL ACTIVITIES AND THE ADDITION WAS MADE ON ACCOUNT OF STATEMENT OF SUCH PERSONS, IT COULD NOT BE SAID THAT THE ADDITION WAS NOT BASED ON ANY EVIDENCE: - 1. CIT VS MUKUNDRAY K. SHAH [2007] 290 ITR 433 (SC) 2. VIDEO MASTER VS JCIT 66 TAXMANN.COM 378 ITR 374 (SC) 3. B KISHORE KUMAR VS CIT (234 TAXMAN 771) 4. BHAGIRATH AGGARWAL VS CIT (351 ITR 143) 5. CIT VS M. S. AGGARWAL [2018] 93 TAXMANN.COM 247 (DE LHI) 6. SMT DAYAWANTI VS CIT 390 ITR 496 (DELHI) 7. M/S PEBBLE INVESTMENT AND FINANCE LTD VS ITO (2017 - TIOL - 238 - SC - IT) 8. RAJ HANS TOWERS (P.) LTD. VS CIT (230 TAXMAN 567 ) 9. PCIT VS AVINASH KUMAR SETIA [2017] 81 TAXMANN.COM 476 (DELHI) 10. ACIT VS A.R. ENTERPRIS ES [2013] 29 TAXMANN.COM 50 (SC) 23. THE LD. DR ALSO REFERRED TO THE VARIOUS OTHER DECISIONS IN HER WRITTEN SYNOPSIS AND SUBMITTED THAT THE AO WAS FULLY JUSTIFIED IN MAKING THE ADDITION BY TREATING THE BOGUS AGRICULTURAL INCOME AS UNDISCLOSED INCOME OF TH E ASSESSEE. 24 . WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES , PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND, THE AO, IN THE INSTANT CASE, DETERMINED THE UNDISCLOSED INCOME OF THE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 22 ASSESSEE FOR THE BLOCK PERIOD AT RS.24,55,95,031/ - TREATING THE SALES DECLARED BY THE ASSESSEE FROM AGRICULTURAL OPERATIONS TO BE THE UNACCOUNTED INCOME OF THE ASSESSEE FROM OTHER SOURCES. WHILE DOING SO, HE HELD THAT THE ASSESSEE WAS NOT DOING ANY AGRICULTURAL ACTIVITIES FOR WHICH THE ASSESSEE IS NOT ENTITLED TO ANY EXPENDITURE AND, THEREFORE, THE ENTIRE SALES MADE BY THE ASSESSEE HAS TO BE TREATED AS INCOME OF THE ASSESSEE. THE AO WHILE DOING SO ALSO HELD THAT THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF RAVI KANT JAIN (SUPRA) IS NOT APPLICABLE NOW IN VIEW OF THE AMENDMENT BROUGHT INTO THE STATUTE TO PROVISIONS OF SECTION 158B(B). WE FIND, THE LD.CIT(A) UPHELD THE ACTION OF THE AO. IT IS THE SUBMISSION OF THE LD. COUNSEL THAT THE ASSESSEE HAD ALREADY DISCLOSED THE AGRICULTURAL INCOME IN HIS RETURN OF INCOME FILED BEFORE THE SEARCH AND IN MOST OF THE YEARS SUCH AGRICULTURAL INCOME HAS BEEN ACCEPTED IN THE ORDERS PA SSED U/S 143(3) . IT IS HIS SUBMISSION THAT SINCE THE INCOME HAS ALREADY BEEN DISCLOSED IN THE REGULAR RETURN, THE SAME CANNOT BE ASSESSED AS UNDISCLOSED INCOME DURING THE BLOCK PERIOD. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, A DDITION, IF ANY, CAN BE MADE BY THE AO ONLY IN THE REGULAR RETURN. 25. WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE . 26. A PERUSAL OF PARA 15 OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSEE HAD DECLARED THE FOLLOWING AGRICULTURAL INCOME: - IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 23 A STT. YEAR SALES SECURITY PAID LEASE MONEY PAID 1996 - 97 68,12,768 26,500 40,87,663/ - 1997 - 98 1,58,70,648/ - 57,28,250/ - 95,22,790/ - 1998 - 99 2,64,09,130/ - 1,26,87,815/ - 158,40,000/ - 1999 - 00 4,47,59,735/ - 1,52,57,762/ - 2,68,55,835/ - 2000 - 01 6,48,44,767/ - 1,92,75,130/ - 2,89,06,860/ - 2001 - 02 8,68,96,983/ - 1,83,05,130/ - 5,21,38,190/ - 2002 - 03 7,12,80,587/ - 27. A PERUSAL OF PARA 31 OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAD DETERMINED THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD AT RS.24 ,55,95,031/ - , THE DETAILS OF WHICH ARE AS UNDER: - ASSESSMENT YEAR INCOME ASSESSED 1996 - 97 68,12,768/ - 1997 - 98 1,58,70,648/ - 1998 - 99 2,64,09,130/ - 1999 - 2000 4,47,59,735/ - 2000 - 01 6,48,44,767/ - 2001 - 02 8,68,96,983/ - TOTAL 24,55,95,031/ - 28. THUS, A PERUSAL OF THE ABOVE TWO TABLES SHOWS THAT THE AO HAS DETERMINED THE UNDISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD AT RS.24,55,95,031/ - WHICH WAS AGRICULTURAL SALES DECLARED BY THE ASSESSEE IN THE RETURNS FILED IN REGULAR COURSE AND SOME OF WHICH HAVE ALREADY BEEN ACCEPTED U/S 143(3) OF THE ACT. A PERUSAL OF THE ASSESSMENT ORDER FOR A.Y. 1996 - 97 SHOWS THE AO HAS OBSERVED AS UNDER: - RETURN DECLARING INCOME OF RS. 1430636/ - & CLAIMING THE SAME EXEMPT U/S 10 OF I.T ACT FILED. THE CASE WAS SELECTED FOR SAMPLE SCRUTINY IN RESPONSE TO NOTICE U/S 143(2) SHRI R.C GUPTA CA ATTENDED WITH SHRI. D.D. AGARWAL DIRECTOR & PRODUCED BOOKS OF ACCOUNT & VOUCHERS. THE ASSESSEE CO. HAS STARTED BUSINESS OF GROWING PLANTS ON AGRICULTURAL LAND BELONGING TO DIFFERENT IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 24 PER SONS & -- INTO AGREEMENTS WITH THEM TO PART WITH SHARE & INCOME TO THEN IN USE OF THEIR AGRICULTURAL LAND AS PER FORMS OF AGREEMENT WITH THEM INDIRECTLY. IT HAS BEEN STATED THAT EARLIER THE BUSINESS WAS DONE IN PARTNERSHIP FIRM IN NAME OF M/S AGARWAL AGR O INDUSTRIES IN WHICH SALE WAS RS. 40 LAKHS & OUT OF WHICH 2494000/ - WERE GIVEN TO LAND OWNER AS TAX. DURING THE YEAR THE SALE ARE SHOWN AT RS. 6812768/ - OUT OF WHICH RS. 4087663/ - HAVE BEEN PAID AS LAND USE CHARGES TO VARIOUS LAND OWNERS AS PER TERMS OF A GREEMENTS WITH THEM. HAVING REGARD TO FACTS MENTIONED ABOVE & DISCUSSION WITH THE CA & DIRECTOR THE TOTAL INCOME OF RS. 1430636/ - IS EXCEPTED. THE SAME BEING AGRICULTURAL INCOME, IT IS EXEMPT U/S 10 OF I.T. ACT. ASSESSED. ISSUE NECESSARY FORMS. 28.1 FOR A .Y. 1997 - 98 , THE AO, IN THE ORDER PASSED U/S 143(3) HAS OBSERVED AS UNDER: - RETURN DECLARING AGRICULTURAL INCOME OF RS. 53,74,212/ - FILED. THE CASE WAS SELECTED FOR SCRUTINY. IN RESPONSE TO NOTICE U/S 143(2). SHRI R.C. GUPTA. CA. ATTENDED AND SHRI RAJESH JAIN. ACCOUNTANT ATTENDED FROM TIME TO TIME AND FILED DETAILS. IN THE AGRICULTURAL INCOME THERE IS SUBSTANTIAL INCREASE IN COMPARISON TO A.Y. 1996 - 97 FOR WHICH IS STARTED THAT ADDITIONAL LAND HAS BEEN UNDER TAKEN IN THE CULTIVATION, RATES OF PLANT HAVE INC REASED BECAUSE ON TIME FACTOR, NUMBER OF ORNAMENTAL PLANTS FETCHING HIGHER VALUE HAS BEEN INCREASED AND MODES OF PLANTING HAVE BEEN UNDERTAKEN IS MORE SCIENTIFIC AND LATEST WAYS. DETAILS OF ADDITIONAL IN THE ASSETS HAVE ALSO BEEN FILED ALONG WITH OTHER DET AILS. ---- EXAMINATION OF ALL THE ABOVE FACTS AND DETAILS FURNISHED BY THE ASSESSEE THE AGRICULTURAL INCOME OF RS. 53,74,222/ - IS ACCEPTED. ASSESSED. ISSUE NECESSARY FORMS. 28.2 SIMILARLY, FOR A.Y. 1998 - 99, THE AO IN THE ORDER PASSED U/S 143(3) HAS OBSER VED AS UNDER: - IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 25 RETURN IF INCOME WAS FILED ON 30.11.1998 DECLARING OF NIL. THE SAME WAS PROCESSED U/S 143(1) ON THE RETURNED INCOME. NOTICE U/S 143(2) DATED 9.8.99 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE THROUGH REGD POST. IN COMPLIANCE OF THE VARIOUS STATUTORY NOTICE --- GUPTA, CHARTED ACCOUNTANT, ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND THE CASE WAS DISCUSSED WITH HER. BOOKS OF ACCOUNT PRODUCED WERE TEST - CHECKED. ISSUE DEMAND NOTICE AND CHALLAN. 28.3 EVEN IN THE ASSESSMENT ORDER FOR 2000 - 01, W HICH WAS PASSED ON 18 TH MARCH, 2003, I.E., AFTER THE DATE OF SEARCH ON 18 TH MARCH, 2002, THE AO HAS OBSERVED AS UNDER: - RETURN OF INCOME WAS FILED ON 30.11.2000 DECLARING AN INCOME OF RS. 21566680/ - FOR THE ASSESSMENT YEAR 2000 - 2001. THE SAME WAS PROCESS ED U/S 143(1) ON 31 - 3 - 2001. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE NOTICE SHRI. R.C. GUPTA ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE PARTICULARS. CASE WAS DISCUSSED WITH H IM. BOOKS OF ACCOUNT PRODUCED WERE TEST CHECKED. AFTER DISCUSSION INCOME OF RS. 21566680/ - IS --- EXEMPT FROM INCOME TAX U/S 10. AFTER DISCUSSION THE RETURNED INCOME IS ACCEPTED. ASSESSED AT RS. NIL. 28.4. THUS, IT IS CLEAR THAT THE UNDISCLOSED INCOME SO DETERMINED BY THE AO WAS ALREADY DISCLOSED BY THE ASSESSEE IN HIS REGULAR RETURNS. THEREFORE, THE QUESTION THAT ARISES AS TO WHETHER WHEN THE INCOME WAS ALREADY DISCLOSED IN THE REGULAR RETURN, CAN THE SAME BE ASSESSED AS UNDISCLOSED INCOME IN THE BLOCK RETURN. IT IS THE CASE OF THE REVENUE THAT AFTER THE AMENDMENT OF THE PROVISIONS OF SECTION 158B(A) BY THE FINANCE ACT, 2002 W.E.F. 01.07.1995 THE AO IS EMPOWERED TO IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 26 EXAMINE THE DEDUCTION OR ALLOWANCE O R EXPENSES CLAIMED UNDER THAT WHICH IS FOUND TO BE F ALSE. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE INCOME WAS ALREADY DISCLOSED IN THE REGULAR RETURNS PRIOR TO THE SEARCH, THE SAME INCOME CANNOT BE CONSIDERED AS UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT PROCEEDINGS AND THE SAME HA S TO BE ASSESSED IN THE REGULAR COURSE BY INITIATING RE - OPENING OF ASSESSMENT. 29. WE FIND, IDENTICAL ISSUED HAD COME UP BEFORE THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PINAKI MISRA, 88 TAXMAN 521. IN THAT CASE, A SEARCH AND SEIZURE OPERATION U /S 132 OF THE ACT WAS CONDUCTED AT THE RESIDENCE OF SHRI PINAKI MISRA IN NOVEMBER, 1996. DURING THE COURSE OF SEARCH, VARIOUS DOCUMENTS, ETC., WERE FOUND AND SEIZED. IN RESPONSE TO NOTICE U/S 158BC, THE ASSESSEE FILED THE RETURN DECLARING UNDISCLOSED INC OME AT RS.27,65,528/ - . THE AO COMPLETED THE ASSESSMENT FOR THE BLOCK PERIOD DETERMINING THE INCOME AT RS.2,68,80,387/ - . IN THE SAID ORDER, THE AO MADE VARIOUS ADDITIONS WHICH THE TRIBUNAL IN SOME CASES DELETED AND IN SOME OTHER CASES, THE MATTER WAS RES TORED BACK TO THE FILE OF THE AO FOR FURTHER ENQUIRIES. ON APPEAL BY THE REVENUE, THE HON BLE JURISDICTIONAL HIGH COURT HAS OBSERVED AS UNDER: - ANALYSIS AND FINDINGS 22. ON THE QUESTION OF LAW PRESENTLY BEFORE THE COURT, THE PRIMARY CONSIDERATION IS WHET HER THE AO HAD THE JURISDICTION TO MAKE THE ADDITIONS TO THE ASSESSMENT UNDER SECTION 158BC OF THE ACT. TO ANALYZE THIS, IT IS NECESSARY TO ADDRESS THE GROUNDS OF EACH SUCH ADDITION MADE, AND ASSESS IF THE AO HAD JURISDICTION IN CONDUCTING THE BLOCK ASSESSMENT WITHIN THE MEANING OF SECTION IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 27 158BC , OR IF THIS WAS INDEED NOT WITHIN THE PURVIEW OF THE AO'S JURISDICTION. SECTION 158BC READS AS FOLLOWS: 'WHERE ANY SEARCH HAS BEEN CONDUCTED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER SECTION 132A , IN THE CASE OF ANY PERSON, THEN, - (A) THE ASSESSING OFFICER SHALL - (I) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED AFTER THE 30TH DAY OF JUNE, 1995 BUT BEFOR E THE 1ST DAY OF JANUARY, 1997 SERVE A NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS; (II) IN RESPECT OF SEARCH INITIATED OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ANY ASSETS REQUISITIONED ON OR AFTER THE 1ST DAY OF JANUARY, 1997 SERVE A NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH TIME NOT BEING LESS THAN FIFTEEN DAYS BUT NOT MORE THAN FORTY - FIVE DAYS, AS MAY BE SPECIFIED IN THE NOTICE A RETURN IN THE PRESCRIBED FORM1 AND VERIFIED IN THE SAME MANNER AS A RETURN UNDER CLAUSE (I) OF SUB - SECTION (1) OF SECTION 142 , SETTING FORTH HIS TOTAL INCOME INCLUDING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD: PROVIDED THAT NO NOTICE UNDER SECTION 148 IS REQUIRED TO BE ISSUED FOR THE PURPOSE OF PROCEEDING UNDER THIS CHAPTER: PROVIDED FURTHER THAT A PERSON WHO HAS FURNISHED A RETURN UNDER THIS CLAUSE SHALL NOT BE ENTITLED TO FILE A REVISED RETURN; (B) T HE ASSESSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142 , SUB - SECTIONS (2) AND (3) OF SECTION 143 2 [, SECTION 144 AND SECTION 145 ] SHALL, SO FAR AS MAY BE, APPLY; (C) THE ASSESSING OFFICER, ON DETERMINATION OF THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN ACCORDANCE WITH THIS CHAPTER, SHALL PASS AN ORDER OF ASSESSMENT AND DETERMINE TH E TAX PAYABLE BY HIM ON THE BASIS OF SUCH ASSESSMENT; (D) THE ASSETS SEIZED UNDER SECTION 132 OR REQUISITIONED UNDER SECTION 132A SHALL BE DEALT WIT H IN ACCORDANCE WITH THE PROVISIONS OF SECTION 132B .' 23. THE GUJARAT HIGH COURT HAD, IN AN EARLIER DECISION, IN N.R. PAPER & BOARD LTD. V. DCIT (1 998) 234 ITR 733 (GUJ) RULED THAT BLOCK ASSESSMENTS AND REGULAR ASSESSMENTS DEAL WITH DIFFERENT PURPOSES. THE AIM AND OBJECTIVE OF BLOCK ASSESSMENTS IS THE ASSESSMENT OF UNDISCLOSED INCOME OF THE BLOCK PERIOD AS A RESULT OF SEARCH. THE OBJECTIVE OF A REGUL AR OR NORMAL ASSESSMENT IS TO DETERMINE THE TRUE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR ON THE BASIS OF THE RETURN UNDER SECTION 139 AND OTHER DOCUMENTS AND DECIDE THE ASSESSEE'S TAX LIABILITY. 24. T HE STRUCTURE AND PATTERN OF CHAPTER XIV - B AS ORIGINALLY ENACTED W.E.F. 1ST JULY, 1995 AND AS MODIFIED/CHANGED THROUGH AMENDMENTS, FROM TIME TO TIME (IN THE RELEVANT PROVISIONS), CONTINUES TO RETAIN ITS PURPOSE, IN THAT, A BLOCK ASSESSMENT PERTAINING TO A N UMBER OF YEARS REMAINS DISTINCT FROM AN ASSESSMENT UNDER SECTION 143(3) PERTAINING TO A SINGLE ASSESSMENT YEAR. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 28 FURTHER, THE AMENDMENT TO SECTION 158B (B) HAS ENLARGED THE MEANING OF THE TERM 'UNDISCLOSED INCOME' BY INCLUDING THEREIN 'ANY EXPENSES, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT, WHICH IS FOUND TO BE FALSE'. HOWEVER, THIS CANNOT BE CONSTRUED TO MEAN THAT WHATEVER HAS BEEN LEFT OUT IN A RE GULAR ASSESSMENT CAN BE REASSESSED OR RE - EXAMINED WITH REFERENCE TO THOSE PROVISIONS WHICH ARE RELATABLE TO AN ASSESSMENT U/S 143(3). THIS IS EVIDENT FROM A.R. ENTERPRISES (SUPRA),WHERE THE COURT HELD AS FOLLOWS: '... SECTIONS 158BD AND 158BC , ALONG WITH THE REST OF CHAPTER XIV - B, FIND APPLICATION ONLY IN THE EVENT OF DISCOVERY OF 'UNDISCLOSED INCOME' OF AN ASSESSEE. UNDISCLOSED INCOME IS DEFINED BY SECTION 158B AS THAT INCOME 'WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT'. THE LEGISLATURE HAS CHOSEN TO DEFINE 'UNDISCLOSED INCOME' IN TERMS OF INCOME NOT DISCLOSED, WITHOUT PROVIDING ANY DEFINITION OF 'DISCLOSURE' OF INCOME IN THE FIRST PLACE. WE ARE OF THE VIEW THAT THE ONLY WAY OF DISCLOSING INCOME, ON THE PART OF AN ASSESSEE, IS THROUGH FILING OF A RETURN, AS STIPULATED IN THE ACT, AND THEREFORE AN 'UNDISCLOSED IN COME' SIGNIFIES INCOME NOT STATED IN THE RETURN FILED. KEEPING THAT IN MIND, IT SEEMS THAT THE LEGISLATURE HAS CLEARLY CARVED OUT TWO SCENARIOS FOR INCOME TO BE DEEMED AS UNDISCLOSED: (I) WHERE THE INCOME HAS CLEARLY NOT BEEN DISCLOSED AND (II) WHERE THE I NCOME WOULD NOT HAVE BEEN DISCLOSED. IF A SITUATION IS COVERED BY ANY ONE OF THE TWO, INCOME WOULD BE UNDISCLOSED IN THE EYES OF THE ACT AND HENCE SUBJECT TO THE MACHINERY PROVISIONS OF CHAPTER XIVB. THE SECOND CATEGORY, VIZ. WHERE INCOME WOULD NOT HAVE BE EN DISCLOSED, CONTEMPLATES THE LIKELIHOOD OF DISCLOSURE; IT IS A PRESUMPTION OF THE INTENTION OF THE ASSESSEE SINCE IN CONCLUDING THAT AN ASSESSEE WOULD OR WOULD NOT HAVE DISCLOSED INCOME, ONE IS IPSO FACTO MAKING A STATEMENT WITH RESPECT TO WHETHER OR NOT THE ASSESSEE POSSESSED THE INTENTION TO DO THE SAME. TO GAUGE THIS, HOWEVER, RELIANCE MUST BE PLACED ON THE SURROUNDING FACTS AND CIRCUMSTANCES OF THE CASE.' 25. A BLOCK ASSESSMENT IS TO BE CARRIED OUT ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND NOT AS A RESULT OF OTHER DOCUMENTS OR MATERIAL, WHICH COME TO THE POSSESSION OF THE AO SUBSEQUENT TO THE CONCLUSION OF THE SEARCH OPERATION UNLESS AND UNTIL SUCH MATERIAL HAS A RELATIONSHIP OR CONNECTION WITH CERTAIN MATERIAL OR EVIDENCE FOUN D DURING THE COURSE OF SEARCH. IT WAS HIGHLIGHTED IN CIT V. RAVI KANT JAIN (250 ITR 141 - DELHI) HOW THE PROCEDURE OF CHAPTER - XIV - B IS INTENDED TO PROVIDE A MODE OF ASSESSMENT OF UNDISCLOSED INCOME, WHI CH HAS BEEN DETECTED AS A RESULT OF SEARCH. THE SCOPE AND AMBIT OF A BLOCK ASSESSMENT IS LIMITED TO MATERIALS UNEARTHED DURING SEARCH AND THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITI ON OF BOOKS OF ACCOUNT OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO. THE BOMBAY HIGH COURT IN THE CASE OF CIT V. VINOD DANCHAND GHODAWAT (247 ITR 448 (BOM.) ALSO HELD , SIMILARLY THAT WHERE THE ASSESSEE HAD MADE DISCLOSURE IN THEIR WEALTH TAX RETURN, WHICH WAS ACCEPTED IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 29 BY THE DEPARTMENT, ADDITIONS MADE BY THE DEPARTMENT ON THE GROUND OF UNDISCLOSED INCOME WAS ERRONEOUS. 26. A LARGER, FIVE MEMBER BENCH OF THE SUPREME COU RT REITERATED THE DISTINCTNESS OF THE PROCEDURE BETWEEN NORMAL ASSESSMENTS AND BLOCK ASSESSMENTS, WITH SPECIFIC REFERENCE TO THE CHARGING SECTION (OF THE INCOME TAX), THE REFERENCE TO 'PREVIOUS YEAR' AS THE INCOME FOR WHICH TAX IS LEVIED AND THE SPECIAL PR OCEDURE FOR ASSESSMENT OF UNDISCLOSED INCOME RELATABLE TO MATERIALS SEIZED DURING A SEARCH, IN COMMISSIONER OF INCOME TAX V VATIKA TOWNSHIP [2014] 367 ITR 466 (SC) IN THE FOLLOWING TERMS: 'UNDISCLOSED INCOME REFERRED TO IN CHAPTER XIVB IS NOT RELATEABLE TO THE PREVIOUS YEAR. ON THE CONTRARY, IT IS FOR THE BLOCK PERIOD WHICH MAY BE 6 YEARS OR 10 YEARS, AS THE CASE MAY BE. CONSEQUENTLY, AS ALREADY MENTIONED, WHILE ANALYZING THE SCHEME OF CHAPTER XIVB, SUCH CHAPTER IS A COMPLETE CODE IN RESPECT OF ASSESSMENTS OF 'UNDISCLOSED INCOME'. NOT ONLY IT DEFINES WHAT IS UNDISCLOSED INCOME, IT ALSO LAYS DOWN THE BLOCK PERIOD FOR WHICH UNDISCLOSED INCOME CAN BE TAXED. FURTHER, IT ALSO LAYS DOWN THE PROCEDURE FOR TAXING THAT INCOME. IT IS VERY PERTINENT TO NOTE AT THIS STA GE THAT FOR THIS PURPOSE, SPECIFIC PROVISION IN THE FORM OF SECTION 158BA (2) IS INSERTED MAKING IT A CHARGING SECTION. THUS, A DIAGNOSTIC OF CHAPTER XIVB OF THE ACT LEADS TO IRRESISTIBLE CONCLUSION THA T IT CONTAINS ALL THE PROVISIONS STARTING FROM CHARGING SECTION TILL THE COMPLETION OF ASSESSMENT, BY PRESCRIBING SPECIAL PROCEDURE IN RELATION THERETO, MAKING IT A COMPLETE CODE BY ITSELF. LOOKING IT FROM THIS ANGLE, THE CHARACTER AND NATURE OF 'UNDISCLOS ED INCOME' REFERRED TO IN CHAPTER XIVB BECOMES QUITE DISTINCT FROM 'TOTAL INCOME' REFERRED TO IN SECTION 5 . IT IS OF SOME SIGNIFICANCE TO OBSERVE THAT WHEN A SEPARATE CHARGING SECTION IS INTRODUCED SPEC IFICALLY, TO ASSESS THE UNDISCLOSED INCOME, NOTWITHSTANDING A PROVISION IN THE NATURE OF SECTION 4 ALREADY ON THE STATUTE BOOK, THIS MOVE OF THE LEGISLATURE HAS TO BE ASSIGNED SOME REASON, OTHERWISE, THE RE WAS NO NECESSITY TO MAKE A PROVISION IN THE FORM OF 158BA (2). IT COULD ONLY BE THAT FOR ASSESSING UNDISCLOSED INCOME, CHARGING PROVISION IS 158BA (2) ALONE.' 27. THIS COURT IS ALSO OF THE OPINION THAT THE PROPER APPROACH, COMMENDED THROUGH THE DECISION IN SHAILENDRA MAHTO (SUPRA) BY THE REVENUE, IS INAPT. WHERE THE LAW IS CLEAR THAT UNLESS MATERIAL EXTRANEOUS TO THE RETURNS AND DOCUMENT ARE SEIZED OR DISCERNED AS RELATABLE TO STATEMENTS MADE, ETC. ADDITIONS COULD NOT HAVE BEEN MADE, HAVING REGARD TO THE STATE OF LAW APPLICABLE TO THE FACTS OF THE CASE. FURTHERMORE, DURGA PRASAD MORE (SUPRA) UNDOUBTEDLY PROPOUNDS AN IMPORTANT PRINCIPLE OF LAW RELATING TO EVIDENCE. ITS APPLICATION HOWEVER IS WHEREVER THERE IS MATERIAL THAT CAN VALIDLY BE USED TO COMPLETE A N ASSESSMENT (IN THIS CASE A BLOCK ASSESSMENT). AGAIN, AS IN THE CASE OF SHAILENDRA MAHTO, THAT AUTHORITY HAS NO APPLICABILITY FOR THIS CASE. 28. AS FAR AS THE QUESTION REGARDING THE JURISDICTION OF THE THIRD MEMBER TO DOUBT THE REASSESSMENT ON THE BASIS T HAT INCOME TO BE ADDED WAS NOT AN ISSUE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 30 IS CONCERNED, THIS COURT IS OF THE OPINION THAT SUCH AN OBJECTION SHOULD NOT BE ARTICULATED THIS DAY AND AGE. IT IS AXIOMATIC A CLICHD PROPOSITION OF LAW THAT A STATUTORY AUTHORITY CONFERRED WITH QUASI JUDICIAL POWE RS HAS UNDOUBTED JURISDICTION TO (A) DECIDE ISSUES CONCERNING ITS JURISDICTION IN A PARTICULAR MATTER AND (B) TO APPLY THE CORRECT LEGAL PRINCIPLES. INDEED, TO SAY THAT A TRIBUNAL CANNOT DECIDE A FOUNDATIONAL ISSUE, BECAUSE OF A PERCEIVED PROCEDURAL ISSUE WOULD EXPOSE THE LEGAL SYSTEM TO INSURMOUNTABLE BARRIERS - THE FOREMOST OF THEM BEING THAT THE LITIGANT WOULD BE DRIVEN TO SUPERIOR COURTS EACH TIME THE ISSUE CROPS UP IN THE COMPETENT TRIBUNAL. HARDLY ANY AUTHORITY IS REQUIRED FOR THIS, BUT DICTA ABOUND ON THE SUBJECT (REF. SMT UJJAMBAI V. STATE OF UP AIR 1962 SC 1621; HARI VISHNU KAMATH V. AHMAD ISHAQUE AND ORS . AIR 1955 SC 233; T.C. BASAPPA V. T. NAGAPPA AND ANOTHER AIR 1954 SC 215). FURTHERMORE, THERE IS STATUTORY AUTHORITY IN THE FORM OF SECTION 254 (1) AND (2) OF THE INCOME TAX ACT READ WITH SECTION 255 (4), WHICH PROVIDES THUS: ' SECTION 255(1) ************* ****** (4) IF THE MEMBERS OF A BENCH DIFFER IN OPINION ON ANY POINT, THE POINT SHALL BE DECIDED ACCORDING TO THE OPINION OF THE MAJORITY, IF THERE IS A MAJORITY, BUT IF THE MEMBERS ARE EQUALLY DIVIDED, THEY SHALL STATE THE POINT OR POINTS ON WHICH THEY DIFFER, AND THE CASE SHALL BE RE FERRED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL FOR HEARING ON SUCH POINT OR POINTS BY ONE OR MORE OF THE OTHER MEMBERS OF THE APPELLATE TRIBUNAL, AND SUCH POINT OR POINTS SHALL BE DECIDED ACCORDING TO THE OPINION OF THE MAJORITY OF THE MEMBERS OF THE AP PELLATE TRIBUNAL WHO HAVE HEARD THE CASE, INCLUDING THOSE WHO FIRST HEARD IT.' IN THE PRESENT CASE, WHEN THE THIRD MEMBER NOTICED WHAT HE CONSIDERED TO BE A LACK OF CLARITY ABOUT THE BLOCK PROCEEDING AND THE REVENUE'S ABILITY TO ADD INCOME IN THE ABSENCE O F ANY SEIZED MATERIAL, HE WAS DUTY BOUND TO REFER THAT POINT FOR DECISION, WHICH HE DID. THE SUBSEQUENT CLARIFICATION BY THE BENCH, AND LATER FINAL DECISION, THEREFORE, CANNOT BE FAULTED. 29. THIS COURT NOW PROPOSES TO DISCUSS THE SPECIFIC ISSUES, WHICH WE RE REFERRED OR RESTORED TO THE AO, HAVING REGARD TO THE FINAL ORDER MADE BY THE ITAT. IT IS APPARENT THAT IN MR. PINAKI MISRA'S CASE, OUT OF THE18 HEADS OF ADDITION, 11 WERE RESTORED FOR FURTHER INQUIRY AND ORDERS, OF AO, ON REMAND. THE ITAT ITSELF HAD DEL ETED SUBSTANTIAL INCOME RELATING TO THREE HEADS IN THE CASE OF MR. MISRA. IN THE CIRCUMSTANCES, THE COURT PROPOSES TO DISCUSS ONLY THE HEADS OF INCOME THAT WERE SPECIFICALLY ADDRESSED DURING ARGUMENTS OF COUNSEL FOR THE PARTIES. 30. THIS COURT, THEREFORE, WOULD DEAL WITH THE SPECIFIC AMOUNTS BROUGHT TO TAX BY THE AO, BUT DELETED BY THE ITAT. THE FIRST OF THESE ARE ADDITION OF THE AMOUNTS OF `1,72,000/ - AND OF `2,50,000/ - IN RESPECT OF SHRI S.K. CHAKRABORTY, (IN PINAKI MISRA'S CASE) AND THE ADDITION OF ` 5,0 0,000/ - MADE TO THE INCOME OF SANGEETA MISRA, FOR THE ALLEGED INCOME EARNED FROM TRIAD ASSOCIATES. THE AO MADE AN ADDITION OF `1,72,000/ - BEING THE AMOUNT STANDING TO THE CREDIT OF SHRI IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 31 S.K. CHAKRABORTY BUT THE SAME WAS REFLECTED IN MR. MISRA'S BALANCE SHE ET, HIS BANK ACCOUNT, DULY SUPPORTED BY THE CONFIRMATION OF SHRI S.K. CHAKRABORTY; AND AN ORIGINAL AMOUNT WAS ACCEPTED IN THE ORIGINAL PROCEEDINGS U/S 143(3) ACCORDING TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR (HEREINAFTER ALSO REFERRED TO AS 'AY') 1989 - 90 DATED 11.09.1990. IN PARALLEL, THE AO MADE AN ADDITION OF `5,00,000/ - FOR THE AY 1992 - 93 ON ACCOUNT OF ALLEGED ESTIMATED INCOME INCURRED FROM M/S TRIAD ASSOCIATES BY THE ASSESSEE'S WIFE. FURTHER, SHRI CHAKRABORTY HAD CONFIRMED ON BEHALF OF THE ESPI INDU STRIAL CORPORATION ON 23.11.1989 CERTIFYING THAT A SUM OF `2,50,000/ - WAS RECEIVABLE FROM THE ASSESSEE. AS SUCH, THE AO HAD MADE A FURTHER ADDITION OF ` 2,50,000/ - ON THE GROUND THAT THE SAID AMOUNT GIVEN BY SHRI CHAKRABORTY WAS NOT RECORDED BY THE ASSESSE E IN HIS BOOKS OF ACCOUNT. ON THE POINT OF JURISDICTION REGARDING THE ADDITION OF `2,50,000/ - , THE AO DID NOT COME ACROSS ANY MATERIAL DURING THE COURSE OF SEARCH AND AS IS CLEAR FROM THE ASSESSMENT ORDER, THE ADDITION OF ` 2,50,000/ - WAS MADE ON THE BASIS OF THE STATEMENT MADE SUBSEQUENT TO THE SEARCH AND WHICH EVEN OTHERWISE, WAS NOT PRESENTED TO THE ASSESSEE FOR REBUTTAL. THE ASSESSEE DID NOT MAKE IT DURING THE SEARCH; IT WAS DISCLOSED AND GONE INTO DURING THE REGULAR ASSESSMENT.THUS, THIS ADDITION IS BA SED ON A CONFIRMATION THAT WAS SOUGHT AFTER THE SEARCH, AND HENCE, COULD NOT FORM PART OF THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 31. THE AMOUNTS WERE ALREADY DISCLOSED IN THE REGULAR ASSESSMENT OF THE ASSESSEE IN 1989 - 90, AND SIMILARLY EVEN IN THE CA SE SANGEETA MISRA, AND ARE THUS, OUTSIDE THE PURVIEW OF THE DEFINITION OF 'UNDISCLOSED INCOME'. THUS, THE AO HAS NO JURISDICTION TO MAKE THE AFOREMENTIONED ADDITIONS UNDER SECTION 158BC OF THE ACT. THUS , THE ADDITION OF `1,72,000/ - BY THE AO HAS BEEN MADE DEVOID OF JURISDICTION, SINCE THE SAME WAS ALREADY DISCLOSED, AND HAD NOT BEEN UNEARTHED DURING THE SEARCH UNDERTAKEN FOR THE BLOCK ASSESSMENT. 32. THE NEXT ITEM OF THE ADDITION OF `50,00,000/ - MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES. THE COURT NOTICES AT THE OUTSET, THAT THIS WAS ON THE BASIS OF THE AO'S AD - HOC ESTIMATE OF DAILY EXPENDITURE INCURRED BY SHRI PINAKI MISRA VIS - - VIS THE FOREIGN VISITS @ `2,500/ - PER DAY, AND ADDITION OF `2 5,00,000/ - ON ACCOUNT OF FOREIGN TRAVEL EXPENSES OF MS. SANGEETA MISRA. THE MATERIAL ON THE RECORD - FILED DURING THE REGULAR ASSESSMENT WAS THAT BY HIS LETTER DATED 16.12.1997 SHRI MISRA SUBMITTED THAT HE WAS AN ADVISOR OF SHRI CHANDRASWAMY SINCE 1984, AND HAD UNDERTAKEN 22 FOREIGN TRIPS ALONG WITH HIM TO ADVISE ON LEGAL MATTERS, THOUGH HE HAD NOT RECORDED ANY PROFESSIONAL RECEIPTS FROM SHRI CHANDRASWAMY. A STATEMENT OF SHRI CHANDRASWAMY HAD BEEN RECORDED, WHERE HE DISCLOSED THAT THE ASSESSEE HAD ACCOMPANIE D HIM. THE ADDITION WAS MADE PRIMARILY ON THE BASIS OF THE ASSESSEE'S OLD PASSPORT, WHICH WAS REQUISITIONED FROM THE PASSPORT OFFICE AND WHICH SHOWED THE NUMEROUS FOREIGN TRIPS UNDERTAKEN BY THE ASSESSEE DURING THE BLOCK PERIOD. THIS WAS DONE WHEN THE ASSE SSEE WAS REQUIRED TO FURNISH COPIES OF HIS PASSPORT, AND HE STATED THAT HE HAD SURRENDERED HIS OLD PASSPORT TO THE ISSUING AUTHORITY FOR ISSUE OF A FRESH DIPLOMATIC PASSPORT. THE FOREIGN TRAVELS IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 32 EVIDENCED BY THE EXPIRED PASSPORT WERE BY VIRTUE OF THE REQUI SITION FROM THE PASSPORT OFFICE, AND NOT FROM THE SEARCH. AT THE SAME TIME, THE ASSESSEE'S COMPUTATION OF EXPENDITURE ON TICKETS (`3,66,000/ - ) IS ON THE LOWER SIDE AS AGAINST THE FIGURE OF `50,00,000/ - AS WORKED OUT FOR BY THE REVENUE. WHAT IS APPARENT IS THAT THE AO OMITTED THE STATEMENT OF CHANDRASWAMY THAT THE ASSESSEE'S EXPENSES WERE BORNE BY HIS DEVOTEE. YET, WHETHER THE REQUISITION OF THE PASSPORT FROM THE PASSPORT OFFICE FALLS SQUARELY WITHIN SECTI ON 158BC , REQUIRES EXAMINATION. THE ADDITIONS MADE ON THE FOREIGN TRIPS INCURRED BY MS. SANGEETA MISRA ARE ALSO TO BE EXAMINED IN THE SAME LIGHT. 33. IN MAHESH BHATT V. ASSTT . COMMISSIONER OF INCOME TAX (2004)87 TTJ (MUMBAI) 734 THE COURT HIGHLIGHTED HOW THE INCOME TAX ACT PROVIDES ADDITIONS OR DISALLOWANCES IN A BLOCK ASSESSMENT HAVE TO BE BASED ON EVIDENCES FOUND AT THE TIME OF SEARCH AND NOT MERELY ON THE BASIS OF PRESUMPTIONS AND ASSUMPTIONS BY TAKING INFERENCE FROM THE SET OF MATERIAL AVAILABLE ON RECORD. IT WAS SIMILARLY HELD IN SUNDER AGENCIES V DCIT (1997) 63 ITD 245 (MUM) THAT THE SCHEME OF CHAPTER XIV - B DOES NOT EMPOWER TO THE REVENUE TO PRESU ME OR DRAW ASSUMPTIONS IN REGARD TO THE UNDISCLOSED INCOME. THE AO CAN ONLY PROCEED ON THE BASIS OF MATERIAL DETECTED AT THE TIME OF SEARCH AND THE EVIDENCE GATHERED UNDER SECTION 132(4) ONLY, AND NOT O THERWISE. IF SEEN IN THIS LIGHT, THE ESTIMATES OF COSTS ON THE FOREIGN TRAVELS OF THE ASSESSEE AND HIS WIFE WERE NOT MADE DURING THE COURSE OF THE SEARCH PERTAINING TO THE BLOCK ASSESSMENT, BUT THROUGH SURMISES BASED ON THE DETAILS FOUND IN THE PASSPORTS O F THE TWO ASSESSEES AFTER REQUISITIONING THEM FROM THE PASSPORT OFFICE. THUS, THE INFERENCE OF ESCAPED INCOME IS BASED UPON MATERIALS GATHERED FROM EXTRANEOUS SOURCES AND NOT FROM SEARCH. SECTION 158BB (SUBSEQUENT TO AMENDMENT BY THE FINANCE ACT , 2002 W.E.F. 01.07.1995) STATES HOW THE UNDISCLOSED INCOME OF THE BLOCK PERIOD NEEDS TO BE COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQ UISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE ON THE BASIS OF EVIDENCE. IN ASSISTANT COMMISSIONER OF I NCOME TAX AND ANR. V. HOTEL BLUE MOON (2010) 229 CTR (SC) 219 HELD THAT BLOCK ASSESSMENTS ARE NOT INTENDED TO SUBSTITUTE REGULAR ASSESSMENT AND ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIALS UNEARTHED DURING SEARCH. SIMILARLY, IT WAS HIGHLIGHTE D IN COMMISSIONER OF INCOME TAX V. R.M.L. MEHROTRA (2010) 230 CTR (ALL) 288, AN ASSESSMENT BASED ON SEARCH ALONE THAT DOES NOT ATTRIBUTE MATERIAL EVIDENCE FOUND THEREIN OR OTHER INFORMATION AVAILABLE WI TH THE AO RELATING TO SUCH MATERIALS CANNOT CONSTITUTE BLOCK ASSESSMENT. IN THE LIGHT OF THE ABOVE ANALYSIS, IT IS HELD THAT THE ADDITIONS MADE ON ACCOUNT OF THE FOREIGN TRIPS MADE BY THE ASSESSEES FELL OUTSIDE THE JURISDICTION OF THE AO UNDER SECTION 158BC . THEY WERE CORRECTLY DELETED BY THE ITAT. 34. THE ADDITIONS OF `9,50,000/ - (IN THE CASE OF MR. PINAKI MISRA AND `6,00,000/ - MADE (IN THE CASE OF MS. SANGEETA MISRA) BY THE AO ON ACCOUNT OF PROFESSIONA L RECEIPTS ARE TO BE NOW EXAMINED. THE TWO GROUNDS ON IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 33 WHICH THESE ADDITIONS WERE MADE AND THAT TOO ON ESTIMATE BASIS, WERE THE NON - PRODUCTION OF BOOKS OF ACCOUNT AND THE 23 FOREIGN TRIPS MADE BY MR. MISRA ALLEGEDLY FOR THE PROFESSIONAL SERVICES RENDERED T O SHRI CHADRASWAMY. IN RESPECT OF ASSESSMENT YEARS 1994 - 95 TO 1996 - 97, `2,50,000/ - EACH WAS ADDED WHEREAS THE FIGURES FOR AY. 1997 - 1998 WAS `2,00,000/ - I.E. TOTALING `9,50,000/ - , AND AN AGGREGATE OF `6,00,000/ - IN CASE OF SANGEETA MISRA, ALLEGEDLY ON ACCOU NT OF DIFFERENCE IN PROFESSIONAL RECEIPTS AND CASH IN HAND. HOWEVER, THERE DOES NOT SEEM TO BE ANY OBSERVATION ON THE ASSESSEE'S ARGUMENTS THAT NO INCRIMINATING MATERIAL HAD BEEN FOUND AT THE TIME OF SEARCH PERTAINING TO THE SUPPRESSION OF PROFESSIONAL REC EIPTS. THE COUNSEL FOR THE REVENUE, HOWEVER, IN THE COURSE OF THE PRESENT PROCEEDINGS WAS UNABLE TO PINPOINT ANY MATERIAL, WHICH HAD BEEN FOUND DURING THE COURSE OF THE SEARCH VIS - A - VIS THE POINT AT ISSUE, THEREBY, THE AFORESAID FIGURES ARRIVED AT CANNOT B E BROUGHT TO TAX AS 'UNDISCLOSED INCOME' IN THE BLOCK ASSESSMENT, WITHIN THE MEANING OF SECTION 158BB(1) . THEREFORE, IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH, THE POST SEARCH ENQU IRIES MADE BY THE AO WOULD BECOME FUTILE SINCE THIS WOULD ONLY BE RELEVANT FOR A REGULAR ASSESSMENT U/S 143(3) AND NOT IN RESPECT OF A BLOCK ASSESSMENT. 35. THE NEXT ITEM IS ADDITION OF `28,70,000/ - MADE BY THE AO TOWARDS SUPPRESSED RENT. THE SEARCH TOOK P LACE ON 01.11.1996. FURTHER, THE PROPERTY IN QUESTION I.E. 145, JOR BAGH, NEW DELHI IS OWNED BY A COMPANY NAMED M/S. JUPITER ESTATES PVT. LTD. AND THE ASSESSEE ALONG WITH HIS FAMILY WERE RESIDING IN THIS PROPERTY SINCE JUNE, 1989. THE TENANCY WAS FORMALLY RECOGNIZED BY MEANS OF A LEASE DEED BETWEEN THE PARTIES DATED 01.06.1989 ENTERED INTO BY THE ASSESSEE AND THE SAID COMPANY. ADDITIONALLY, THE ASSESSEE (MR. MISRA) HAD ALSO MADE A SECURITY DEPOSIT AND EXTENDED AN INTEREST FREE LOAN TO THE COMPANY OF AN AGGR EGATE AMOUNT OF `58,00,000. WHAT CAN BE OBSERVED FROM THE ASSESSMENT ORDER, IS THAT THE ADDITION WAS MADE ON A PRESUMPTION THAT THE RENT CHARGED (AT THE RATE OF `2500/ - PER MONTH) WAS LESS THAN THE FIXED RENT. HOWEVER, THIS EXERCISE OF THE AO OUGHT TO HAVE BEEN CARRIED OUT WITHIN THE MEANING OF REGULAR ASSESSMENT UNDER SECTION 143(3) . WHEN ALL MATERIAL RELATING TO THE SO CALLED 'SUPPRESSED RENT' WAS AVAILABLE WITH THE AO, IN THE FIRST INSTANCE WHEN THE AS SESSMENT FOR THE RELEVANT YEAR WAS COMPLETED AND NO ADDITION WAS MADE, THE EXERCISE BY THE AO, IN DEDUCING THAT THE ASSESSEE MUST HAVE EARNED SOME INCOME (BASED ON THE EXPENDITURE ESTIMATED FOR HIS FOREIGN TRAVEL AND THE ESTIMATE OF HIS PROFESSIONAL INCOME ) WHICH WAS THE SUPPRESSED RENT, AND DETERMINED, IS TWICE REMOVED FROM REALITY. THE ERROR IN THIS KIND OF ASSESSMENT WAS COMPOUNDED, GIVEN THAT NO MATERIAL RELATING TO SUCH 'SUPPRESSED RENT' WAS DISCERNED DURING THE SEARCH OR FROM THE SEIZED MATERIALS. THU S, THIS ASSESSMENT FALLS OUTSIDE THE JURISDICTION OF THE AO, SINCE THE BLOCK ASSESSMENT CONDUCTED IS NOT BASED ON RELATABLE EVIDENCE AS REQUIRED UNDER SECTION 158BB(1) , BUT ON PRESUMPTIONS MADE BY THE AO , AS WAS HIGHLIGHTED IN R.M.L. MEHROTRA (SUPRA), HOW AN ASSESSMENT BASED ON SEARCH ALONE THAT DOES NOT ATTRIBUTE MATERIAL EVIDENCE FOUND THEREIN OR OTHER IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 34 INFORMATION AVAILABLE WITH THE AO RELATING TO SUCH MATERIALS CANNOT CONSTITUTE BLOCK ASSESSMENT. 36. T HIS BRINGS THE DISCUSSION TO TWO GIFTS AGGREGATING `90,00,000/ - RECEIVED BY THE ASSESSEE (MR. MISRA) FROM SHRI JHANWAR LAL KOTHARI, AND THE GIFT TO THE ASSESSEE'S WIFE OF AN AMOUNT OF `38,71,507/ - BY SHRI R.K. JATIA. IN THE AY 1993 - 93, MR. MISRA RECEIVED T WO NRI GIFTS AGGREGATING `90,00,000/ - FROM SHRI J. L. KOTHARI TO PURCHASE A COMPANY BY THE NAME OF WHITE LILLY ESTATES PVT. LTD. WHICH OWNS A PROPERTY AT 202 - GOLF LINKS, NEW DELHI. BY HIS REPLY - DATED 02.08.1997 (TO A SHOW CAUSE NOTICE) MR. MISRA CONTENDED THAT THE SAID GIFTS WERE RECEIVED OUT OF NRE ACCOUNT OF SHRI JHANWAR LAL KOTHARI AND ACCORDINGLY THEY DID NOT ATTRACT THE PROVISIONS OF THE GIFT TAX ACT , 1958. HE ALSO FURNISHED COPIES OF THE AFFIDAVIT O F SHRI KOTHARI DATED 30.04.1994 AND THE GIFT DEED WHERE IT WAS STATED THAT THE GIFTS HAVE BEEN MADE OUT OF NATURAL LOVE AND AFFECTION. HE ALSO FURNISHED COPY OF NRE ACCOUNT NO. 5010009008 MAINTAINED WITH SANWA BANK LTD. IN THE NAME OF SHRI J.L. KOTHARI FRO M WHERE THESE GIFTS HAVE BEEN MADE. THESE GIFTS WERE DULY REFLECTED IN THIS BANK ACCOUNT. THE ASSESSEE (MR. MISRA) ALSO FURNISHED A COPY OF THE LETTER FROM NAKOMTHON BANK DATED 26.05.1994 WHICH STATED THAT SHRI KOTHARI WAS THEIR VALUED CUSTOMER AND THE BAN K PROVIDED CREDIT FACILITIES IN THE FORM OF OVER DRAFT, SHORT TERM LOAN UPTO A MODERATE 7 FIGURES IN BAHT. THE ASSESSMENT ORDER SHOWS THAT THE ADDITION WAS MADE ENTIRELY ON THE BASIS OF THE POST SEARCH ENQUIRIES, AND AS A MATTER OF RECORD, THE ASSESSEE HAD DISCLOSED THE GIFTS IN HIS RETURN FOR AY 1994 - 95. SIMILARLY, THE GIFT TO MS. SANGEETA MISRA WAS SCRUTINIZED PREVIOUSLY IN AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT, THE RECEIPT OF THE GIFT WAS DULY DISCLOSED IN THE RETURN FOR AY 1992 - 93 AND THE GIFT HAD BEEN ACCEPTED ON SCRUTINY OF THE DOCUMENTS AND EVIDENCE. AS SUCH, SINCE THE GIFTS HAVE ALREADY BEEN DISCLOSED TO THE REVENUE PRIOR TO THE SEARCH, THEY CANNOT FORM PART OF THE BLOCK ASSESSMENT WITHIN T HE MEANING OF SECTION 158BB(1) , AND CANNOT BE THUS, BROUGHT TO TAX AS 'UNDISCLOSED INCOME', AS WAS REITERATED IN HOTEL BLUE MOON (SUPRA) WHICH HELD THAT THE SCOPE OF BLOCK ASSESSMENT IS LIMITED TO MATERI AL FOUND DURING THE SEARCH, AND THEREBY, CANNOT INCLUDE MATERIAL ALREADY REVEALED. THIS WAS SIMILARLY HIGHLIGHTED IN CIT V. JUPITER BUILDERS P. LTD . ((2006) 287 ITR 287 ( DEL)) AND COMMISSIONER OF INCOME TAX V. SHRI VISHAL AGGARWAL (2006 (283) ITR326(DEL)) THAT WHERE AN INCOME AND ASSETS ARE DISCLOSED IN THE BOOKS OF ACCOUNT AND NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH AND SEIZURE, ADDITION IN T HE BLOCK ASSESSMENT IS NOT VALID. THEREFORE, THE GIFTS RECEIVED BY THE ASSESSEES FROM JHANWAR LAL KOTHARI, AS WELL AS THE GIFT FROM SHRI R. K. JATIA FELL OUTSIDE THE PURVIEW OF BLOCK ASSESSMENT, AND THE AO HAS NO JURISDICTION TO BRING TO TAX THE SAID SUMS. 37. IN THE LIGHT OF THE FOREGOING DISCUSSION AND CONCLUSIONS, THE QUESTION OF LAW FRAMED IN THESE APPEALS HAS TO BE AND IS ANSWERED IN FAVOUR OF THE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 35 ASSESSEES AND AGAINST THE REVENUE. THE APPEALS FAIL AND ARE, THEREFORE, DISMISSED. 30. WE FIND, THE HON B LE CALCUTTA HIGH COURT IN THE CASE OF CALTRADECO STEEL SALES (P) LTD. VS. DCIT, REPORTED IN 243 ITR 643, WHILE HOLDING THAT THE PROCEEDINGS U/S 143(3) WILL GO SIMULTANEOUSLY ALONG WITH THE PROCEEDINGS IN PURSUANCE OF THE NOTICE U/S 158BC HAS OBSERVED AS UN DER: - 8. THE HEADING OF CHAPTER XIV - B IS 'SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES' AND SECTION 158BC DEFINES 'BLOCK PERIOD' AND 'UNDISCLOSED INCOME'. THE PROVISIONS OF OTHER SECTIONS OF THIS C HAPTER ALSO RESTRICT THE ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH AND THAT WILL BE ASSESSED IN THE BLOCK PERIOD, THAT IS, PREVIOUS YEARS RELEVANT TO TEN ASSESSMENT YEARS PRECEDING THE PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE ACT, WHILE REGULAR ASSESSMENT UNDER SECTION 143(3) IS ON THE BASIS OF THE RETURN FILED AND INCOME DISCLOSED BY THE ASSESSEE. 9. THEREF ORE, THE LIMITED QUESTION BEFORE US IS WHEN THERE IS A PROCEEDING OF ASSESSMENT UNDER CHAPTER XIV - B OF THE ACT PENDING, CAN THE ASSESSING OFFICER PROCEED TO ASSESS THE INCOME OF THE SAME YEAR WHICH FORMS PART OF THE BLOCK PERIOD ? IN OUR VIEW, WHEN CHAPTER XIV - B OF THE ACT PERTAINS TO UNDISCLOSED INCOME AND THE ASSESSMENT UNDER SECTION 143(3) PERTAINS TO DISCLOSED INCOME, THERE SHOULD BE NO DISPUTE ON THE FACT THAT BOTH THE PROCEEDINGS CAN GO ON SIMULTANE OUSLY AS BOTH ARE FOR DIFFERENT TYPES OF INCOME, THOUGH FOR THE SAME PERIOD, ONE PROCEEDING IS FOR UNDISCLOSED INCOME AND THE OTHER PROCEEDING UNDER SECTION 143(3) IS FOR DISCLOSED INCOME. 10. IF ANY INC OME IS ASSESSED AND TAXED UNDER THE REGULAR PROCEEDING, THAT IS, UNDER SECTION 143(3) OF THE ACT, THAT CANNOT BE TAXED UNDER THE SPECIAL CHAPTER IN PURSUANCE OF THE NOTICE UNDER SECTION 158BC , THE ASSESSING OFFICER CAN PROCEED UNDER SECTION 158BC TO TAX THE INCOME WHICH HAS NOT BEEN DISCLOSED. THUS, THE PROCEEDINGS UNDER SECTION 143(3) WILL GO ON SIMULTANEOUSLY ALONG WITH THE PROCEEDING IN PURSUANCE OF THE NOTICES UNDER SECTION 158BC OF THE ACT. 11. IN VIEW OF THIS UNDISPUTED FACT, WE FIND NO JU STIFICATION TO STAY THE PROCEEDINGS IN PURSUANCE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT. 12. HOWEVER, IT IS MADE CLEAR THAT THE ASSESSING OFFICER SHOULD NOT ASSESS THE UNDISCLOSED INCOME IN THIS P ROCEEDING WHICH IS THE SUBJECT - MATTER OF PROCEEDINGS IN PURSUANCE OF THE NOTICE UNDER SECTION 158BC OF THE ACT. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 36 3 1 . WE FIND, THE HON BLE GUJARAT HIGH COURT IN THE CASE OF ITO VS. SMT. MUKTABEN J. PATI RA (2015) 231 TAXMAN 502, AFTER REFERRING TO THE PROVISIONS OF SECTION 158BB HAS HELD THAT IN A CASE WHERE INCOME RECEIVED BY THE ASSESSEE WAS DECLARED IN THE RETURN FILED BEFORE SEARCH AND RETURN WAS ON THE RECORD OF THE DEPARTMENT BEFORE THE DATE OF SEAR CH THEN THE INCOME COULD NOT BE CONSIDERED AS UNDISCLOSED IN VIEW OF SECTION 158BB. THE RELEVANT OBSERVATIONS OF THE HON BLE HIGH COURT READ AS UNDER: - 7.1 THE TRIBUNAL HAS OBSERVED THAT IN THE PRESENT CASE, THE INTENTION OF THE ASSESSEE IS CLEARLY REFLE CTED IN SO MUCH AS SHE HAD ALREADY FILED THE RETURN BEFORE THE DATE OF SEARCH. IN VIEW OF THE AFORESAID PROVISIONS OF THE ACT, IT IS BORNE OUT THAT THE RESPONDENTS FILED THEIR RETURNS, THOUGH BEYOND THE DUE DATE SPECIFIED U/S 139(1) OF THE ACT, BUT BEFORE THE DATE OF SEARCH ON 08.09.1995. THE RETURNS OF THE INCOME OF THE ASSESSEE WERE ALREADY ON THE RECORDS OF THE DEPARTMENT BEFORE THE DATE OF SEARCH AND THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE TRIED NOT TO DISCLOSE THEIR INCOMES FROM THE PARTNERSHIP F IRM. 8. THE RELIANCE ON THE DECISION IN THE CASE OF A.R. ENTERPRISES (SUPRA) PLACED BY THE LEARNED ADVOCATE FOR THE APPELLANT SHALL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THE SAID CASE BEFORE THE APEX COURT, THE RETURNS WERE FILED AFTER THE DATE OF SEARCH WHEREAS IN THE PRESENT CASE THE RETURNS FOR TWO YEARS WERE ALREADY FILED BEFORE THE DATE OF SEARCH. IT IS REQUIRED TO BE NOTED THAT WHEN SECTION 158BB(3) IS READ WITH SECTION 158B(B), WHICH DEFINES UNDISCLOSED INCOME, FOR INCOME TO BE CO NSIDERED AS DISCLOSED INCOME, IT SHOULD HAVE BEEN DISCLOSED IN THE RETURN FILED BY THE ASSESSEE BEFORE THE SEARCH OR REQUISITION. 3 2 . WE FIND, THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF ANAND PRAKASH AGRAWAL VS. CIT, 225 TAXMAN 40 HAS ALSO DECIDED A N IDENTICAL ISSUE. IN THAT CASE , IT WAS FOUND POST SEARCH THAT THE GIFT CHEQUES RECEIVED BY THE ASSESSEE WERE SHAM TRANSACTIONS. THE HON BLE HIGH COURT HELD THAT SINCE THOSE GIFT CHEQUES WERE DISCLOSED IN THE RETURN SUBMITTED U/S 139, THE AMOUNT CANNOT BE ASSESSED IN BLOCK IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 37 PROCEEDINGS U/S 158BC AND THE SAID AMOUNT COULD BE ADDED ONLY IN THE PROCEEDINGS U/S 147. THE RELEVANT OBSERVATION OF THE HON BLE HIGH COURT READ AS UNDER: - 21. THE MATERIAL CAME INTO EXISTENCE DURING POST SEARCH ENQUIRY WHEN IT BECA ME KNOWN THAT THE GIFT CHEQUES SHOWN IN THE RETURN FILED UNDER SECTION 139 OF THE ACT WERE NOT REGULAR TRANSACTIONS BUT WERE PURELY ARRANGED TRANSACTIONS TO AVOID INCOME TAX. 22. SUCH INCOME DISCLOSED IN THE RETURN FILED UNDER SECTION 139 OF THE ACT COULD NOT BECOME 'UNDISCLOSED INCOME , MERELY BECAUSE IN POST SEARCH ENQUIRY, IT CAME KNOWN THAT THE GIFT CHEQUES WAS A SHAM TRANSACTION. AN AMOUNT WHICH HAS ALREADY BEEN INCLUDED IN THE REGULAR ASSESSMENT CANNOT BE ASSESSED AGAIN IN THE COURSE OF BLOCK ASSESSM ENT. THE GIFT CHEQUES, HAVING BEEN DISCLOSED IN THE RETURN UNDER SECTION 139 OF THE ACT COULD NOT BE RE - ASSESSED IN BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BC. THE AUTHORITIES WERE JUSTIFIED IN NOT INCLUDING THE GIFT CHEQUES IN BLOCK ASSESSMENT PROCE EDINGS. THE MATERIAL FOUND IN POST SEARCH ENQUIRIES COULD FORM A 'REASON TO BELIEVE' THAT INCOME HAD ESCAPED ASSESSMENT BY ISSUANCE OF A NOTICE UNDER SECTION 143(2) OF THE ACT. SINCE THE PERIOD UNDER SECTION 143(2) OF THE ACT HAD EXPIRED, THE ASSESSING OJJ ICER HAVING GENUINE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND CONSEQUENTLY, COULD ISSUE A NOTICE UNDER SECTION 148 OF THE ACT. SUCH NOTICES SO ISSUED WERE PERFECTLY JUSTIFIED AND WAS WITHIN THE POWERS OF THE ASSESSING OFFICER. THE SUPREME C OURT IN RAJESH JHAVERI STOCK BROKERS (P.) LTD. CASE (SUPRA) CLEARLY HELD THAT THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147 OF THE ACT WOULD MEAN CAUSE OF JUSTIFICATION TO KNOW THAT INCOME HAD ESCAPED ASSESSMENT. AT THE STAGE OF ISSUE OF NOTICE, THE ON LY QUESTION IS, WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD FORM THE REQUISITE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. WE ARE OF THE OPINION THAT IN THE GIVEN CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN FORMING AN OP INION, THAT INCOME HAD ESCAPED ASSESSMENT AND WAS, THEREFORE, JUSTIFIED IN ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 3 3 . WE FIND, THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. N LEELA KUMAR, 224 TAXMAN 106, AFTER MAKING REFERENCE TO THE PRO VISION OF SECTION 158BB AND ALSO THE PROVISIONS OF SECTION 139(1), HELD THAT EVEN IF THE INCOME WAS IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 38 DISCLOSED IN THE RETURN FILED U/S 139(4) THE SAME CANNOT BE CONSIDERED TO BE UNDISCLOSED. THE RELEVANT OBSERVATIONS OF THE HON BLE HIGH COURT READ AS UNDER : - 12. IF THE INCOME IS REFLECTED IN THE BOOKS OF ACCOUNT PRIOR TO THE FIRST SEARCH AND NO RETURN IS FILED WITHIN THE PRESCRIBED DUE DATE UNDER SECTION 139(1) AND IF A SECOND SEARCH TAKES PLACE BEFORE THE DUE DATE FOR FILING THE RETURN AS PRESCRIBED UNDER SECTION 139(4) OF THE ACT, MERELY BECAUSE THE RETURN WAS NOT FILED UNDER SECTION 139(1) DISCLOSING THE SAID INCOME, IT CANNOT BE CONSTRUED AS UNDISCLOSED INCOME. THOUGH THE WORD 'DUE DATE' HAS BEEN DEFINED UNDER SECTION 139(1) AS IS CLEAR FROM THE WORDS G IVEN IN EXPLANATION (2) OF SECTION 139 (1) OF THE ACT, THE DUE DATE IS ONLY FOR THE PURPOSE OF SECTION 139(1). THE DUE DATE REFERRED TO IN SECTION 158BB OF THE ACT, INCLUDES THE DUE DATE PRESCRIBED UNDER SECTION 139(1) AS WELL AS SECTION 139(4) OF THE ACT. WHILE CONSTRUING SECTION 158BB OF THE ACT, WE CANNOT IMPART THE DUE DATE PRESCRIBED UNDER SECTION 139(1) OF THE ACT AND COMPUTE UNDISCLOSED INCOME, IF SUCH AN UNDISCLOSED INCOME IS NOT SHOWN IN THE RETURN FILED AS PRESCRIBED UNDER THE ACT. THEREFORE, THE STAND OF THE ASSESSING AUTHORITY THAT THOUGH THE INCOME WAS DISCLOSED IN BOOKS OF ACCOUNT PRIOR TO THE DATE OF FIRST SEARCH, AS THE SAID INCOME IS NOT DISCLOSED UNDER SECTION 139(1) OF THE ACT OR IN A RETURN FILED UNDER SECTION 139(4) BEFORE THE DATE OF SE COND SEARCH WHICH CONSTITUTES UNDISCLOSED INCOME WHICH IS CONTRARY TO THE AFORESAID STATUTORY PROVISIONS. RIGHTLY, THE TRIBUNAL HAS SET ASIDE THE SAID FINDING. 3 4 . WE FIND, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PROMAIN LTD. VS. DCIT, 170 IT D 188, AFTER CONSIDERING THE IMPACT OF RETROSPECTIVE AMENDMENT MADE IN SECTION 158B(B) OF THE ACT, HELD THAT EVEN AFTER AMENDMENT, BEFORE COMING TO ANALYSIS WHAT IS UNDISCLOSED INCOME, IT IS NECESSARY TO BE SEEN THAT SUCH INCOME HAS NOT BEEN OR WOULD NOT B EEN DISCLOSED FOR THE PURPOSE OF THIS ACT. IN A CASE WHERE ANY SUCH ARTICLE OR THING OR INCOME HAS ALREADY BEEN DISCLOSED TO THE DEPARTMENT PRIOR TO THE SEARCH, IT CANNOT BE TERMED THAT THE SAME HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT AND IT IS HELD THAT WHATEVER ITEM OR ARTICLE HAVE BEEN SHOWN TO THE DEPARTMENT PRIOR TO THE SEARCH IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 39 CANNOT BE TREATED AS UNDISCLOSED INCOME. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER: - 6.2 WE, AFTER CONSIDERING THE ABOVE PROVISIO NS, ARE OF THE OPINION THAT EVEN IF THERE IS AN AMENDMENT IN THE ABOVE SECTIONS, THE SCHEME OR PURPOSE OF ENACTING CHAPTER XIV - B HAS NOT UNDERGONE A MAJOR CHANGE IN THE SENSE THAT THE BLOCK ASSESSMENT PERTAINING TO A NUMBER OF YEARS REMAINS DISTINCT FROM A SSESSMENT U/S 143(3) PERTAINING TO A SINGLE AY. THE BLOCK ASSESSMENT COULD BE MADE IN RESPECT OF UNDISCLOSED INCOME IF DURING THE BLOCK PERIOD UNDISCLOSED INCOME IS RECOVERED AS A RESULT OF EVIDENCE FOUND DURING THE COURSE OF SEARCH AND NOT AS A RESULT OF OTHER DOCUMENTS OR MATERIAL WHICH CAME TO THE POSSESSION OF THE AO SUBSEQUENT TO THE CONCLUSION OF SEARCH OPERATION UNLESS AND UNTIL SUCH 'MATERIAL OR DOCUMENT IS RELATABLE TO SUCH EVIDENCE RECOVERED DURING THE COURSE OF THE - SEARCH. THE AMENDED DEFINITION OF SEC. 158BB AS MENTIONED ABOVE CLEARLY SUGGESTS THAT SOME EVIDENCE IS TO BE FOUND AS A RESULT OF SEARCH OPERATION AND IT IS ONLY THEREAFTER THAT THE REMAINING PART OF THE PROVISIONS COME INTO PLAY AND THAT TOO THE REMAINING EVIDENCE MUST BE RELATABLE TO THE EVIDENCE RECOVERED DURING THE COURSE OF THE SEARCH. THE OTHER AMENDMENT IN SEC. 158B(B) WHICH IS REPRODUCED ABOVE HAS ENLARGED THE MEANING OF THE TERM 'UNDISCLOSED INCOME' BY INCLUDING THEREIN 'ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE.' WHAT HAS TO BE SEEN IS THAT THE VALUABLE ARTICLES, DOCUMENTS OR TRANSACTIONS WHICH REPRESENT WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. THEREFORE, BEFOR E COMING TO ANALYZE WHAT IS UNDISCLOSED INCOME, IT IS NECESSARY TO BE SEEN THAT SUCH INCOME HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. IF ANY SUCH ARTICLE OR THING OR INCOME HAS ALREADY BEEN DISCLOSED TO THE DEPARTMENT PRIOR TO THE SEARCH, IT CANNOT BE TERMED THAT THE SAME HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. THEREFORE, WHATEVER ITEMS OR ARTICLES HAVE BEEN SHOWN TO THE DEPARTMENT PRIOR TO THE SEARCH CANNOT BE TREATED AS UNDISCLOSED INCOME . 3 5 . SINCE, IN THE INSTANT CASE, THE AMOUNTS WERE ALREADY DISCLOSED IN THE REGULAR ASSESSMENT OF THE ASSESSEE FROM A.Y. 1996 - 97 TO 2002 - 03, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNTS A LREADY DISCLOSED IN SUCH REGULAR ASSESSMENTS ARE OUTSIDE THE PURVIEW OF THE DEFINITION OF UNDISCLOSED INCOME. THE AO, IN OUR OPINION, HAS NO JURISDICTION TO MAKE THE AFORESAID ADDITIONS U/S 158BC OF THE IT ACT. IN THIS VIEW OF THE IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 40 MATTER, WE HOLD THAT TH E ORDER OF THE CIT(A) I S NOT IN ACCORDANCE WITH THE LAW. SINCE THE ASSESSEE SUCCEEDS ON THIS LEGAL GROUND, THE GROUNDS CHALLENGING THE ADDITION ON MERIT BECOME ACADEMIC IN NATURE AND, THEREFORE, ARE NOT BEING ADJUDICATED. WE, THEREFORE, SET ASIDE THE ORDE R OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. IT(SS)A NO.15/DEL/2011 3 6 . THE ASSESSEE IN THE PRESENT APPEAL HAS CHALLENGED THE ORDER OF THE CIT(A) CONFIRMING THE PENALTY OF RS.15,03,04,158/ - LEVIED BY THE AO U/S 158BFA(2) OF THE ACT. 3 7 . AF TER HEARING BOTH THE SIDES, WE FIND THE AO LEVIED PENALTY OF RS.15,03,04,158/ - U/S 158BFA(2) BEING 100% OF THE TAX LEVIABLE ON THE UNDISCLOSED INCOME DETERMINED BY HIM. WE FIND, THE LD.CIT(A) UPHELD THE PENALTY SO LEVIED BY THE AO. WE HAVE ALREADY DECIDE D THE APPEAL FILED BY THE ASSESSEE FOR THE BLOCK PERIOD AND THE UNDISCLOSED INCOME MADE BY THE AO AND SUSTAINED BY THE CIT(A) HAS BEEN DELETED. THEREFORE, THE VERY BASIS ON WHICH PENALTY WAS LEVIED DOES NOT SURVIVE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. IT(SS)A NO.35/DEL/2008 3 8 . THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. THAT THE LD. CIT (APPEAL) HAS ERRED IN HOLDING THAT THE AMOUNT OF RS.1.55.67.215 SHOULD BE ASSESSED IN THE HANDS OF THE APPELLANT AS INCOME FROM UN - DIS CLOSED SOURCES EVEN THOUGH THE SAME HAD BEEN DISCLOSED IN THE REGULAR RETURNS OF INCOME. 2. THAT THE LD. CIT (APPEAL) HAS ERRED IN HOLDING THAT THE AGRICULTURAL INCOME OF M/S. AERENS INFRASTRUCTURE AND TECHNOLOGY LTD. IS NOT GENUINE. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 41 3. THAT THE LD. CIT (APPEAL) HAS ERRED IN TREATING THE AGRICULTURAL INCOME OF RS.1.55.67.215 DECLARED BY THE APPELLANT AS UNDISCLOSED INCOME ALTHOUGH IT IS INCOME WHICH IS TOTALLY EXEMPT UNDER SECTION 10(1) AND COULD NOT HAVE BEEN ASSESSED AS INCOME FROM UNDISCLOSED SOURCES. 4. THAT THE LD. CIT (APPEAL) HAS FAILED TO APPRECIATE THAT WHEN THE ENTIRE SALE PROCEEDS FROM AGRICULTURE HAVE BEEN TREATED AS UNDISCLOSED INCOME IN THE HANDS OF M/S. AERENS INFRASTRUCTURE AND TECHNOLOGY LTD., THE SHARE OF THE APPELLANT RECEIVED OUT OF SU CH INCOME CANNOT AGAIN BE INCLUDED IN THE ASSESSMENT OF THE APPELLANT AS IT WOULD AMOUNT TO TAXING THE SAME INCOME IN THE HANDS OF TWO ASSESSEES. 5. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCI PLES OF CONTEMPORARY JURISPRUDENCE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD/ALTER ANY/ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 39 . AFTER HEARING BOTH THE SIDES, WE FIND, THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS OF APPEAL IN IT(SS)A NO.40/DEL/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HA VE BEEN ALLOWED . FOLLOWING SIMILAR REASONINGS, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS. TH E GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. ITA NO.3845/DEL/2009 4 0 . THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMIN G THE ACTION OF LD. AO IN TREATING THE AMOUNT OF RS. 80 , 98 , 411 / - AS NON AGRICULTURAL INCOME AND HAS FURTHER ERRED IN HOLDING THAT JOINT VENTURE AGREEMENT ENTERED BY THE APPELLANT ARE NOTHING BUT A DEVICE TO CHANNELISE THE INCOME IN THE FORM OF AGRICULTURE INCOME. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 42 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT ASSESSEE COMPANY DID NOT PERFORM ANY BASIC OPERATION SO AS TO QUALIFY FOR EXEMPTION U/S 10 OF IT ACT. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT QUASHING THE IMPUGNED ASSESSMENT ORDER PASSED BY LD. AO AND IN NOT DELETING VARIOUS ADDITIONS/DISALLOWANCES MADE BY LD. AO AS THE ASSESSMENT ORDER IS NOT SUSTAINABLE ON VARIOUS L EGAL AND FACTUAL GROUNDS AND MORE SO BY RECORDING INCORRECT FACTS AND FINDING AND THAT TOO WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. 4. THAT THE LD. CIT (APPEAL) HAS ERRED IN HOLDING THAT THE AGRICULTURAL INCOME OF RS. 80,98,411/ - SHOULD BE ASSE SSED IN THE HANDS OF THE APPELLANT AS INCOME FROM OTHER SOURCES. 5. THAT THE LD. CIT (APPEAL) HAS ERRED IN NOT APPRECIATING THAT THE AGRICULTURAL INCOME OF OTHER GROUP COMPANIES/ ASSESSES ARE DULY ACCEPTED BY THE DEPARTMENT UNDER REGULAR SCRUTINY ASSESSME NT. 6. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPLES OF CONTEMPORARY JURISPRUDENCE. 7. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT TH E TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 4 1 . AFTER HEARING BOTH THE SIDES, WE FIND, THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTICAL TO THE GROUNDS OF APPEAL IN IT(SS)A NO.40/DEL/2009. WE HAVE ALREADY DECIDED THE I SSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN ALLOWED. FOLLOWING SIMILAR REASONINGS, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITIONS. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. IT (SS) A NO S . 4 0/D/2009, 15/D/2011 & 35/D/ 20 0 8 ITA NO.3845/DEL/2009 43 4 2 . IN THE RESULT, ALL THE APPEAL S FILED BY THE RESPECTIVE ASSESSEES ARE ALLOWED . THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON .0 1 .20 21 . ( SUCHITRA KAMBLE ) ( R. K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: J ANUARY, 2021. DK COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI