The ACIT, Circle-7, Ahmedabad V. Sudhir M. Khurana, Ahmedabad

ITSSA 326/AHD/2011

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7199 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-06-2017
• Assessment Year: misc
• Appeal Filed On: 08-04-2011
• Court: TRIBUNAL

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ IT(SS)A NO.326/AHD/2011 [ASSTT.YEARS: BLOCK ENDING 25.7.2002] ITO, WARD-2(2)(5) AHMEDABAD. VS. SHRI SUDHIR M. KHURANA L/H. SHRI ASHISH S. KHURANA 60, SANSKAR BHARTI SOCIETY NARANPURA AHMEDABAD 380 013. PAN : ABNPK 6855 H ( APPLICANT ) (RESPONDENT) REVENUE BY : SHRI M.S.KHAN, CIT-DR ASSESSEE BY : NONE ! '#$ % &' / DATE OF HEARING : 12/07/2019 ()* % &' / DATE OF PRONOUNCEMENT: 30/07/2019 +, / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-XIV, AHMEDABAD DATED 19.1.2011 PASSED FOR BLOCK PERIOD ENDING 25.7.2002. 2. THOUGH THE REVENUE HAS TAKEN THREE GROUNDS OF AP PEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE, VIZ. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.69,21,970/- WH ICH WAS ADDED BY THE AO WITH AID OF SECTION 68 OF THE INCOME TAX ACT, 1961. IT(SS)A NO.326/AHD/2011 2 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH UNDER S ECTION 132 OF THE ACT WAS CARRIED OUT IN KHURANA GROUP ON 25.7.20 02. THIS GROUP WAS ENGAGED IN THE ACTIVITIES OF EXECUTING GO VERNMENT CONTRACTS, BUILDING CONSTRUCTION AND CONTRACT WORK FOR CORPORATE BODIES. A NOTICE UNDER SECTION 158BC WAS ISSUED UPO N THE ASSESSEE AND IN RESPONSE TO THE NOTICE, THE ASSESSE E HAS FILED RETURN OF INCOME DECLARING UNDISCLOSED INCOME AT NI L. THE BLOCK ASSESSMENT WAS PASSED ON 28.7.2004 AT A TOTAL INCOM E OF RS.69,21,970/-. DISPUTE APPEARS TO HAVE TRAVELLED UPTO THE TRIBUNAL AND REMITTED BACK TO THE AO FOR FRESH ASSE SSMENT. IN PURSUANCE OF THE TRIBUNALS ORDER, THE LD.AO HAS RE -DETERMINED THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD VIDE ORDER DATED 29.12.2009. ACCORDING TO THE AO, THE ASSESSEE HAS RECEIVED UNSECURED LOANS IN THE ASSESSMENT YEARS 2006-97, 20 07-98, 1998-99 AND 1999-200. IT HAS ACCOUNTED FOR INTERES T EXPENSES ON THESE UNSECURED LOANS. HE TREATED THESE LOANS AS N ON-GENUINE AND MADE ADDITION UNDER SECTION 68 OF THE ACT. DIS SATISFIED WITH THE ADDITION, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). HE POINTED OUT THAT THERE ARE DISCREPANCIE S IN NOTICING THE FACT BY THE AO. IT FILED WRITTEN SUBMISSIONS BEFOR E THE CIT(A) WHICH HAS BEEN PLACED AT PAGE NO.77 OF THE PAPER BO OK FILED BEFORE THE TRIBUNAL. THE LD.CIT(A) HAS REPRODUCED THE RELEVANT PART OF THE SUBMISSIONS, WHICH EXPLAINED THE DISCRE PANCY AND HOW THE ADDITION HAS BEEN MADE. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THIS EXPLANATION FROM THE ORDER OF THE LD.CIT(A) . IT READS AS UNDER: THE FACTS LEADING TO THIS APPEAL ARE IN RESPECT OF INCOME OF CASH CREDITS IN NAME OF FIFTEEN DEPOSITORS AND INTEREST THERE ON DURING THE BLOCK PERIOD IS CONSIDERED BY A.O. AS A DEEMED INCOME U/S 68 OF THE ACT. THE A.O. HAS MADE OBSERVATIONS THAT THE ASSESSEE HAS TAKEN LOANS DURING THE BLOCK PERIOD YE ARS 1996-97 TO 1999-2000 AND A.R. HAS POINTED OUT THE ERROR IN THE A.O.'S WORKIN G AND HAS FILED THE CORRECT WORKING IT(SS)A NO.326/AHD/2011 3 AS PER A.O. AND AS PER ASSESSEE IN TABLE A AND B GI VEN IN WRITTEN SUBMISSION DATED 14 TH DECEMBER 2010 WHICH IS REPRODUCED HERE UNDER. TABLE (A) ASST. YEAR NEW LOANS TAKEN (RS.) INTEREST (RS.) 1996-97 19,37,689 /- 5,74,747 /- 1997-98 31,39,116 /- 4,90,752 /- 1998-99 1,81,834 /- 4,81,638 /- 1999-2000 18,000 /- 1,08,200 /- TOTAL 52,66,633 /- 16,55,337/- (NOTE: THERE IS A MISPRINT IN THE FIGURE FOR THE PE RIOD 1996-97, THE FIGURE RECORDED BY THE A.O. IS 19,37,683/- WHERE AS THE CORRECT FIGURE IS 19,27,683. HOWEVER THE AGGREGATE AMOUNT OF RS.52,66,633/- IS CORRECT. MORE OVER THE A.O. HAS INCORRECTLY WRITTEN THE YEAR AS A.Y. INSTEAD OF THE CORRECT DES IGNATION GIVEN TO BE F.Y.) THE PARTICULARS REGARDING THE NEW DEPOSITS ACCEPTED DURING THE BLOCK PERIOD AND THE INTEREST ON THE DEPOSITS CONTINUING BEFORE THE BLOC K PERIOD YEARS AND INTEREST ON DEPOSITS ACCEPTED DURING THE BLOCK PERIOD FURNISHED BY THE APPELLANT TO THE A.O. IS AS UNDER: FINANCIAL YEAR NEW LOANS TAKEN (RS.) INTEREST (RS.) 1996-1997 15,50,000/- 9,52,430/- 1997-1998 27,50,000/- 8,79,868 /- 1998-1999 0/- 6,63,472 /- 1999-2000 0/- 1,26,200/- 2000-2001 0/- 0/- 2001-2002 0/- 0/- 2002-2003 0/- 0/- TOTAL 43,00,000 /- 26,21,970/- THE RECONCILIATION OF THE FIGURES TAKEN BY A.O. AND THE FIGURES GIVEN BY THE APPELLANT IS AS UNDER: AMOUNT TAKEN AS DEPOSIT BY A.O. FOR F.Y. 1996-97 TO 1999-2000 IT(SS)A NO.326/AHD/2011 4 AS PER THE TABLE (A): RS.52, 66,633/- THE CORRECT FIGURE OF NEW DEPOSIT AS PER BOOKS AND GIVEN TO A.O. AS PER TABLE (B): RS. 43,00,000/- THE DIFFERENCE IS ON ACCOUNT OF INTEREST AMOUNT CRE DITED WITHIN BLOCK PERIOD AND CONSIDERED AS NEW DEPOSIT RS. 9 ,66,633/- THIS FIGURE IS RECONCILED HEREUNDER: THE GROSS INTEREST AMOUNT FOR F.Y.1996-97 TO 1999-2 000 AS PER TABLE (B) IS RS.26,21,970/- LESS: INTEREST ON DEPOSITS ACCEPTED DURING THE BLOC K PERIOD AND INTEREST PAID IN THE BLOCK PERIOD AND ALSO CONSIDER ED BY AO AS AN INTEREST OF THE BLOCK PERIOD RS.9,66,633/- BALANCE INTEREST RELATING TO DEPOSITS PRIOR TO BLOC K PERIOD AND INTEREST PAID DURING THE BLOCK PERIOD. RS.16,55,3 37/- (NOTE: THIS BALANCE IS ON THE DEPOSIT BEYOND BLOCK PERIOD OF RS.32,00,000 WHICH CANNOT BE ADDED AS AN UNDISCLOSED INCOME FOR THE BLOCK PERIOD ASSESSMENT.) THE FINAL FACTUAL POSITION REGARDING THE INCOME SH OWN BY THE APPELLANT IN THE RETURN AND THE INCOME ASSESSED BY THE AO IS GIVEN HEREUNDER: PARTICULARS ASSESSEE A.O. EXCLUDED INCLUDED EXCLUDED INCLUDED DEPOSIT DURING THE BLOCK PERIOD 43,00,000/- NIL ' NIL 43,00,000/- INTEREST THEREON DURING BLOCK PERIOD 9,66,633/- NIL NIL 9,66,633/- TOTAL 52,66,633/- NIL NIL 52,66,633/- INTEREST ON DEPOSITS BEYOND BLOCK PERIOD 16,55,337/- NIL NIL 16,55,337/- TOTAL 69,21,970/- NIL NIL 69,21,970/- IT(SS)A NO.326/AHD/2011 5 4. THE LD.CIT(A) HAS CONSIDERED EXPLANATION OF THE ASSESSEE AND DELETED THE ADDITION BY HOLDING THAT ALLEGED UN SECURED LOANS WERE DULY ACCOUNTED FOR IN THE REGULAR BOOKS OF ACC OUNTS AND SHOWN IN THE BALANCE SHEET AND WERE PART OF THE AUD ITED ACCOUNTS OF THESE ASSESSMENT YEARS. THE ASSESSEE HAS FILED REGULAR RETURNS OF INCOME FOR THESE PERIOD AND THESE DETAILS WERE N OT UNEARTHED DURING THE COURSE OF SEARCH. THESE WERE ALREADY IN THE KNOWLEDGE OF THE DEPARTMENT, HENCE, ADDITION FOR THEM CANNOT BE FURTHER INQUIRED INTO IN THE ASSESSMENT UNDER SECTION 158BC OF THE ACT. THE FINDING OF THE CIT(A) IN THIS CONNECTION READS AS UNDER: 4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND A LSO CONSIDERED THE ARGUMENTS PLACED BY THE A.R. THE ARG UMENTS THAT THE ASSESSMENT FRAMED UNDER SECTION 158 BC OF T HE ACT DO NOT HOLD VALID HAS A FORCE AS PER THE LEGAL DECI SIONS POINTED BY THE A.R. RELYING ON THE FOLLOWING CASES: KALYAN MEMORIAL & CHARITABLE TRUST V.ACIT IN IT APPEAL NO. 233/AGRA/2006 DELIVERED ON MAY 20, 2009 BY ITAT AGRA BENCH THIR D MEMBER. NEMICHAND KOTHARI V. CIT-& ANR. (GAUHATI HC) REPORTED AT (2003) 185 CTR (GAU) 635 CITV. KISHORILAL CONSTRUCTION LTD. 5 TAXMAN.COM 6 0 (DELHI) CITV. SMT.- P. K. NOORJAHAN(SC) THE ASSESSEE'S CONTENTIONS THAT THE DEPOSITS ARE NO T IN THE NATURE OF UNDISCLOSED INCOME AS REQUIRED U/S 158 BC OF THE ACT IS ACCEPTABLE FROM THE EVIDENCES ON RECORD WHIC H CLEARLY INDICATES THAT THE CASH CREDITS IN THE NAME OF FIFT EEN DEPOSITORS ARE FOUND RECORDED IN THE BOOKS OF ACCOU NT PRIOR TO THE DATE OF SEARCH AND THIS FACT IS NOT DISPUTED BY THE A.O. EVEN THE PRESENTATIONS BEFORE THE SETTLEMENT COMMIS SION IN THE GROUP CASES, IT IS MADE CLEAR THAT THE REFERENC E TO THESE CASH CREDITS WAS TAKEN IN TO CONSIDERATION BY THE S ETTLEMENT COMMISSION UNDER ITS INQUIRY AND THE SETTLEMENT COM MISSION IT(SS)A NO.326/AHD/2011 6 HAS IN THE ORDER EXCLUDED THESE AMOUNT FOR INCLUSIO N IN THE GROUP COMPANIES' ASSESSMENT. THIS ALSO SUPPORTS THE FACT THAT IT BEING THE DISCLOSED INCOME IS OUTSIDE THE P URVIEW OF SETTLEMENT COMMISSION. THE ARGUMENTS OF THE A.R. TH AT INCOME TAX PROVISIONS IN RESPECT OF UNDISCLOSED INC OME IS CONTAINED UNDER CHAPTER IV B WHICH IS ITSELF A SEPAR ATE CODE FOR THE PURPOSE OF CHARGEABILITY AND COMPUTATION OF INCOME IS ALSO ACCEPTABLE. I AM OF THE OPINION THAT THE PROVISIONS OF BLOCK PERIOD ASSESSMENT EXCLUSIVELY DEALS WITH T HE INCOME WHICH IS DETECTED DURING THE BLOCK PERIOD OF THE SE ARCH AND WHICH IS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNT .1 HAVE FOUND THAT THE CASH CREDITS UNDER APPEAL ARE UNDISP UTEDLY FOUND RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. I THEREFORE HOLD THAT THE ASSESSMENT ORDER PASSED U/S 158 BC OF THE ACT BY MAKING ADDITION OF DISCLOSED INCOME I S NOT SUSTAINABLE AND IS NULL AND VOID. I THEREFORE DELET E THE ENTIRE INCOME ADDITION ON THIS COUNT. 5. THE OTHER GROUND OF INTEREST CHARGED U/S 158 BFA IS CONSEQUENTIAL IN NATURE AND DISPOSED OFF ACCORDINGL Y. THE GROUND REGARDING CONCEALMENT PENALTY PROCEEDINGS U/ S 158BFA BEING PRE MATURE IS DISPOSED OFF AS PER LAW. 5. IN RESPONSE TO THE NOTICE OF HEARING, NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER, A PAPE R BOOK CONTAINING ALL THE DETAILS AND WRITTEN SUBMISSIONS FILED BEFORE LOWER AUTHORITIES HAVE BEEN FILED. 6. WITH THE ASSISTANCE OF THE LD.CIT-DR WE HAVE GON E THROUGH THE RECORD CAREFULLY. THE LD.CIT-DR CONTENDED THAT THE ASSESSEE FAILED TO DISCHARGE ONUS CAST UPON HIM BY VIRTUE OF SECTION 68, AND THEREFORE, THE ADDITION MADE BY THE AO OUGHT TO HAV E BEEN UPHELD BY THE CIT(A). ON OTHER HAND, THE CASE OF THE ASS ESSEE, AS PLEADED IN THE WRITTEN SUBMISSIONS, IS AS UNDER: I. THE CASH CREDIT APPEARING IN THE BOOKS OF A CCOUNT DURING THE RELEVANT P.Y. AS INDICATED IN THE TABLE ABOVE WERE ALREADY RECORDED IN BOOKS OF ACCOUNT IN THE RELEVAN T P.Y. IT(SS)A NO.326/AHD/2011 7 II. THE CASH CREDIT WERE DISCLOSED TO THE IT DE PARTMENT WITH THE COPY OF P & L A/C AND BALANCE SHEET FILED W ITH RETURN OF INCOME AT THE RELEVANT TIME, INDICATING T HERE IN THE INTEREST CHARGED ON THE DEPOSIT AND THE CASH CREDIT APPEARING IN THE NAME OF CREDITORS. III. THE IT DEPARTMENT HAS MADE THE ASSESSMENT FOR THE RELEVANT P.Y. AS PER LAW. IV. THE CASH CREDIT WHICH HAS BEEN NOW ASSESSED TO TAX IS NOT FOUND DURING THE SEARCH ASSESSMENT AS AN UNDISC LOSED CASH CREDIT. IT IS NOT THE CASE OF THE DEPARTMENT T HAT THE CASH CREDITS WERE OUTSIDE OF THE BOOKS OF ACCOUNT A ND NOT DISCLOSED TO THE DEPARTMENT. V. THE ASSESSMENT ORDER ALSO CONFIRMS THAT THE CASH CREDITS WERE ALREADY RECORDED IN THE BOOKS OF ACCOU NT IN THE RELEVANT P.Y. THERE IS NO DISPUTE REGARDING THESE F ACTS. VI. IT WAS ALSO SUBMITTED BY LETTER DATED 24/12 /2009, THE DEPOSITORS IN RELATION TO BLOCK PERIOD ASSESSMENT W ERE FOR THE PERIOD MORE THAN 7-12 YEARS PAST. IN THESE CIRCUMSTANCES FILED EVIDENCES WHICH WERE AVAILABLE TO JUSTIFY THE REQUIREMENTS TO ESTABLISH THAT THE CASH CREDITS WERE IN THE NATURE OF CAPITAL RECEIPTS NOT FALLING IN THE C RITERIA OF SEC. 68 OF THE ACT TO DEEM THE SAME AS UNDISCLOSED INCOM E. VII. THE APPELLANT FILED EVIDENCES IN SUPPORT O F THE CREDIT ENTRIES IN THE BOOKS AS THE CAPITAL RECEIPTS ATTACH ED WITH THE LETTER DATED 24/12/2009 (COPY ENCLOSED). VIII. IT WAS ALSO POINTED OUT TO THE A.O THAT I N THE FIRST APPELLATE GROUND THE LEARNED CIT (A) ON THE BASIS O F AVAILABLE RECORDS AND ON THE BASIS OF REMAND REPORT S FILED BY THE THEN A.O. DELETED THE INCOME ADDITION IN RESPEC T OF 12 PARTIES WHILE CONFIRMING THE INCOME ADDITION IN RES PECT OF 3 PARTIES AGGREGATING RS. 11,00,000/- FOR THE REASON THAT THERE WAS NO CONFIRMATION FROM THE PARTIES AND THAT THE A PPELLANT DID NOT MENTION THE PAN AND ADDRESS OF THESE PARTIE S. HOWEVER, THE ABOVE REQUIREMENTS WERE FURNISHED BEFO RE THE ITAT WHICH ADMITTED THE SAME AS ADDITIONAL EVIDENCE S FOR VERIFICATION BY THE A.O. IN SET ASIDE ASSESSMENT. D URING THE REASSESSMENT PROCEEDINGS THE APPELLANT FILED THE CO PY OF THE IT(SS)A NO.326/AHD/2011 8 EVIDENCES INCLUDING THE CONFIRMATION, THE ASSESSMEN T ORDER OF THE PARTY AND OTHER RELEVANT EVIDENCES. THE AO HAS ALSO CONSIDERED THE SAME IN THE ASSESSMENT ORDER. THE C OPIES OF THE EVIDENCES FILED ARE ENCLOSED HEREWITH. 7. THE SHORT QUESTION BEFORE US IS, WHETHER UNSECUR ED LOANS ACCOUNTED FOR BY THE ASSESSEE IN THE REGULAR BOOKS OF ACCOUNTS PRIOR TO THE SEARCH CONDUCTED UPON HIM CAN BE RE-AP PRECIATED OR RE-EXAMINED IN THE BLOCK ASSESSMENT. IN ORDER TO ADJUDICATE THIS QUESTION WE HAVE TO UNDERSTAND THE METHOD OF DETERM INING UNDISCLOSED INCOME IN A BLOCK ASSESSMENT AND SCOPE OF BLOCK ASS ESSMENT. SECTIONS 158B(B) AND 158BB PROVIDE THE DEFINITION OF UNDISCL OSED INCOME AND ITS COMPUTATION FOR THE BLOCK PERIOD. THESE PROVISIONS READ AS UNDER: 158B(B) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY, BU LLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S OR TRANSACTIONS, WHERE SUCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OT HER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR P ROPERTY WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR T HE PURPOSES OF THIS ACT OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. 158BB COMPUTATION OF UNDISCLOSED INCOME OF THE BLOC K PERIOD.-- (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHAL L BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, IN ACCORDANCE WITH THE P ROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESUL T OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCE, AS REDUCED BY THE AGGRE GATE OF THE TOTAL INCOME, OR AS THE CASE MAY BE, AS INCREASED B Y THE AGGREGATE OF THE LOSSES OF SUCH PREVIOUS YEARS, DET ERMINED,- (A) WHERE ASSESSMENTS UNDER SECTION 143 OR SECTION 144 OR SECTION 147 HAVE BEEN CONCLUDED (PRIOR TO THE DATE OF COMMENCEMENT OF THE SEARCH OR THE DATE OF REQUISITI ON), ON THE BASIS OF SUCH ASSESSMENTS; (B) WHERE RETURNS OF INCOME HAVE BEEN FILED UNDER S ECTION 139 (OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SE CTION (1) IT(SS)A NO.326/AHD/2011 9 OF SECTION 142 OR SECTION 148) BUT ASSESSMENTS HAVE NOT BEEN MADE TILL THE DATE OF SEARCH OR REQUISITION, O N THE BASIS OF THE INCOME DISCLOSED IN SUCH RETURNS; (C) WHERE THE DUE DATE FOR FILING A RETURN OF INCOM E HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED,- (A) ON THE BASIS OF ENTRIES AS RECORDED IN THE BOOK S OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF THE SEARCH O R REQUISITION WHERE SUCH ENTRIES RESULT IN COMPUTATIO N OF LOSS FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK PER IOD; OR (B) ON THE BASIS OF ENTRIES AS RECORDED IN THE B OOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF THE SEARCH O R REQUISITION WHERE SUCH INCOME DOES NOT EXCEED THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK PERIOD: (CA) WHERE THE DUE DATE FOR FILING A RETURN OF INCO ME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, AS NIL, IN CASES NOT FALLING UNDER CLAUSE (C); (D) WHERE THE PREVIOUS YEAR HAS NOT ENDED OR THE DA TE OF FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) O F SECTION 139 HAS NOT EXPIRED, ON THE BASIS OF ENTRIES RELATI NG TO SUCH INCOME OR TRANSACTIONS AS RECORDED IN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE DATE OF THE SEARCH OR REQUISITION RELATI NG TO SUCH PREVIOUS YEARS; (E) WHERE ANY ORDER OF SETTLEMENT HAS BEEN MADE UND ER SUB-SECTION (4) OF SECTION 245D, ON THE BASIS OF SU CH ORDER; (F) WHERE AN ASSESSMENT OF UNDISCLOSED INCOME HAD B EEN MADE EARLIER UNDER CLAUSE (C) OF SECTION 158BC, ON THE BASIS OF SUCH ASSESSMENT. EXPLANATION.-- FOR THE PURPOSES OF DETERMINATION OF UNDISCLOSED INCOME,- (A) THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR SHALL, FOR THE PURPOSE OF AGGREGATION, BE TAKEN AS THE TOTAL I NCOME OR LOSS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT WITHOUT GIVING EFFECT TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORBED DEPRECIATION UNDER S UB- SECTION (2) OF SECTION 32 : IT(SS)A NO.326/AHD/2011 10 PROVIDED THAT IN COMPUTING DEDUCTIONS UNDER CHAPTER VI-A FOR THE PURPOSES OF THE SAID AGGREGATION, EFFECT SH ALL BE GIVEN TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CH APTER VI OR UNABSORBED DEPRECIATION UNDER SUB-SECTION (2)OF SECTION 32; (B) OF A FIRM, RETURNED INCOME AND TOTAL INCOME ASS ESSED FOR EACH OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD SHALL BE THE INCOME DETERMINED BEFORE ALLOWING DEDU CTION OF SALARY, INTEREST, COMMISSION, BONUS OR REMUNERATION BY WHATEVER NAME CALLED TO ANY PARTNER NOT BEING A WOR KING PARTNER: PROVIDED THAT UNDISCLOSED INCOME OF THE FIRM SO DET ERMINED SHALL NOT BE CHARGEABLE TO TAX IN THE HANDS OF THE PARTNERS, WHETHER ON ALLOCATION OR ON ACCOUNT OF ENHANCEMENT; (C) ASSESSMENT UNDER SECTION 143 INCLUDES DETERMINA TION OF INCOME UNDER SUB-SECTION (1) OR SUB-SECTION (1B) OF SECTION 143. (2) IN COMPUTING THE UNDISCLOSED INCOME OF THE BLOC K PERIOD, THE PROVISIONS OF SECTIONS 68, 69, 69A, 69B AND 69C SHA LL, SO FAR AS MAY BE, APPLY AND REFERENCES TO 'FINANCIAL YEAR' IN THOSE SECTIONS SHALL BE CONSTRUED AS REFERENCES TO THE RELEVANT PR EVIOUS YEAR FALLING IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH OR OF THE REQUISITION. (3) THE BURDEN OF PROVING TO THE SATISFACTION OF TH E AO THAT ANY UNDISCLOSED INCOME HAD ALREADY BEEN DISCLOSED IN AN Y RETURN OF INCOME FILED BY THE ASSESSEE BEFORE THE COMMENCEMEN T OF SEARCH OR OF THE REQUISITION, AS THE CASE MAY BE, SHALL BE ON THE ASSESSEE. (4) FOR THE PURPOSE OF ASSESSMENT UNDER THIS CHAPTE R, LOSSES BROUGHT FORWARD FROM THE PREVIOUS YEAR UNDER CHAPTE R VI OR UNABSORBED DEPRECIATION UNDER SUB-SECTION OF SECTIO N 32 SHALL NOT BE SET OFF AGAINST THE UNDISCLOSED INCOME DETERMINE D IN THE BLOCK ASSESSMENT UNDER THIS CHAPTER, BUT MAY BE CARRIED F ORWARD FOR BEING SET OFF IN THE REGULAR ASSESSMENTS. 8. EXPOUNDING THE SCOPE OF THE BLOCK ASSESSMENT AND INCLUSION OF UNDISCLOSED INCOME, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. RAVI KANT JAIN (2001) 167 CTR (DEL) 566 : (2001) 25 0 ITR 141 (DEL) HAS OBSERVED THAT THE SPECIAL PROCEDURE OF CHAPTER XIV-B IS INTENDED TO IT(SS)A NO.326/AHD/2011 11 PROVIDE A MODE OF ASSESSMENT OF UNDISCLOSED INCOME, WHICH HAS BEEN DETECTED AS A RESULT OF SEARCH. AS THE STATUTORY PR OVISIONS GO TO SHOW, IT IS NOT INTENDED TO BE A SUBSTITUTE FOR REGULAR ASSE SSMENT. IT IS IN ADDITION TO THE REGULAR ASSESSMENT ALREADY DONE OR TO BE DONE. THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATIO N AS ARE AVAILABLE WITH THE AO. EVIDENCE FOUND AS A RESULT OF SEARCH I S CLEARLY RELATABLE TO SECTIONS 132 AND 132A. SIMILARLY HON'BLE RAJASTHAN HIGH COURT HAS EXPLAINED THE SCOPE OF BLOCK ASSESSMENT AND DETERMI NATION OF UNDISCLOSED INCOME IN CIT V. RAJENDRA PRASAD GUPTA (2001) 166 CTR (RAJ) 83 : (2001) 248 ITR 350 (RAJ). THE FOLLOWING OBSERVATIONS ARE WORTH TO NOTE: HOWEVER, UNDER THE SCHEME OF THE PROVISIONS FOR BL OCK ASSESSMENT, IT IS APPARENT THAT IT RELATES TO ASSES SMENT OF 'UNDISCLOSED INCOME' OF THE ASSESSEE EXCLUDING THE INCOME SUBJECTED TO REGULAR ASSESSMENT IN PURSUANCE OF THE RETURNS FILED BY THE ASSESSEE FOR SUCH PERIOD. IT IS ALSO APPAREN T FROM THE PERUSAL OF SECTION 158BB THAT THE RETURNS ARE ALSO REQUIRED TO BE FILED IN PURSUANCE OF THE NOTICE UNDER SECTION 158B C(A) AND THE ASSESSMENT IS TO BE FRAMED ON THAT BASIS IN THE LIG HT OF MATERIAL THAT HAS COME INTO POSSESSION OF THE ASSESSING AUTH ORITY DURING THE COURSE OF SEARCH WHICH IS THE FOUNDATION OF THE PROCEEDINGS. THAT BEING SO, THE CORRECTNESS OR OTHERWISE OF THE RETURNS FILED IN PURSUANCE OF THE NOTICE UNDER SECTION 158BC(A) HAS TO BE EXAMINED WITH REFERENCE TO THE MATERIAL IN THE POSS ESSION OF THE ASSESSING AUTHORITY HAVING NEXUS TO ASSESSMENT OF ' UNDISCLOSED INCOME' WHICH IS WITH THE ASSESSING AUTHORITY, AND PREMISE OF SUCH PROCEEDINGS. IF THE RETURNS FILED BY THE ASSES SEE DO NOT ACCORD WITH THE MATERIALS WHICH ARE ALREADY IN THE POSSESSION OF THE AUTHORITY, IT CAN BE ESTIMATED TO THE BEST JUDG MENT BY THE ASSESSING AUTHORITY ON THE BASIS OF THE MATERIAL IN HIS POSSESSION. HOWEVER, THE ASSESSING AUTHORITY IS NOT CONFERRED W ITH POWER TO MAKE ESTIMATION OF INCOME DE HORS THE MATERIAL IN H IS POSSESSION, WHILE MAKING REGULAR ASSESSMENT ORDER UNDER SECTION 158BB. IT HAS TO BE BORNE IN MIND THAT PROCEEDINGS UNDER SECT IONS 158BB AND 158BC ARE THAT OF UNDISCLOSED INCOME. THEREFORE , THE PROCEEDING CARRIES WITH IT A PRESUMPTION THAT RETUR NS FILED IN PURSUANCE OF SUCH PROCEEDINGS ARE OF UNDISCLOSED IN COME AND NOT IT(SS)A NO.326/AHD/2011 12 NECESSARILY IN ACCORDANCE WITH THE BOOKS OF ACCOUNT S. ITS VERIFICATION HAS TO BE SEARCHED OUTSIDE REGULAR BOO KS WITH REFERENCE TO MATERIAL THAT HAS BEEN FOUND DURING SE ARCH. THAT MAKES IT IMPERATIVE TO ADJUDICATE THE RETURN WITH R EFERENCE TO MATERIAL THAT HAS COME IN THE POSSESSION OF THE ASS ESSING AUTHORITY DURING THE COURSE OF SEARCH PROCEEDINGS A ND ON WHICH BASIS THE BELIEF ABOUT THE EXISTENCE OF UNDISCLOSED INCOME IS ENTERTAINED BY THE ASSESSING AUTHORITY INVITING INV OCATION OF SECTIONS 158BB AND 158BC. THE ENQUIRY INTO THE CORR ECTNESS OF SUCH RETURNS WITH REFERENCE TO MATERIAL SO FOUND HA S NEXUS WITH THE OBJECT OF THE SPECIAL PROVISIONS, TO ADJUDICATE WHETHER THE ASSESSEE IS STILL HONESTLY DISCLOSING HIS INCOME CO RRECTLY AFTER INCRIMINATING MATERIAL HAS BEEN FOUND IN THE POSSES SION OF THE REVENUE AUTHORITY BEFORE SUCH RETURNS CAN BE REJECT ED AND THEREAFTER TO FRAME ASSESSMENT ESTIMATING THE INCOM E LIABLE TO TAX TO THE BEST OF JUDGMENT ON THE BASIS OF THE MAT ERIAL THAT IS AVAILABLE WITH HIM. 9. THE HON'BLE BOMBAY HIGH COURT HAD ALSO AN OCCASI ON TO EXAMINE THE CONCEPT OF BLOCK ASSESSMENT IN CIT V. VINOD DAN CHAND GHODAWAT (2000) 163 CTR (BOM) 432 : (2001) 247 ITR 448 (BOM) , WHEREIN IT WAS FOUND THAT AN ASSESSEE HAD CONSTRUCTED A BUNGALOW A ND INCURRED AN EXPENSE OF RS. 4,16,000. THEREAFTER SEARCH WAS CARR IED OUT AND THE AO REFERRED THE VALUATION OF THE BUNGALOW TO THE DEPAR TMENTAL VALUER WHO DETERMINED THE VALUE OF THE PROPERTY AT RS. 6,66,00 0 AND THE AO ADDED THE DIFFERENCE TO THE INCOME OF THE ASSESSEE AS UND ISCLOSED INCOME. THE TRIBUNAL HAS DELETED THE ADDITION ON THE GROUND THA T ADDITION WAS NOT MADE ON THE BASIS OF THE MATERIAL GATHERED DURING T HE COURSE OF SEARCH, RATHER ALL THESE INFORMATIONS WERE AVAILABLE TO THE AO AT THE TIME OF REGULAR ASSESSMENT. HE OBTAINED THE DVO'S REPORT SU BSEQUENT TO THE REGULAR ASSESSMENT, THEREFORE, ADDITION IS MADE BEY OND THE SCOPE OF BLOCK ASSESSMENT. THE HON'BLE BOMBAY HIGH COURT UPH ELD THE DELETION MADE BY THE TRIBUNAL. 10. THE TRIBUNAL MUMBAI BENCH IN THE CASE OF SUNDE R AGENCIES V. DY. CIT (1997) 59 TTJ (MUMBAI) 610 : (1997) 63 ITD 245 (MUMBAI) HAS MADE EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJ ECT AND WE CANNOT IT(SS)A NO.326/AHD/2011 13 DO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIONS MADE IN THAT DECISION; 11. THERE ARE ADEQUATE SAFEGUARDS PRESENT AGAINST ANY POSSIBLE MISUSE OF THE PROVISION OF SEARCH AND SEIZURE. CHAP TER XIV-B WAS INTRODUCED IN ORDER TO MAKE PROCEDURE OF ASSESSMENT OF SEARCH AND FOR REQUISITION CASES MORE EFFECTIVE. UNDER THE PROVISI ONS OF THIS CHAPTER THE UNDISCLOSED INCOME DETECTED AS A RESULT OF SEAR CH INITIATED OR REQUISITION MADE AFTER 30TH JUNE, 1995 BE ASSESSED SEPARATELY AS INCOME OF THAT BLOCK OF TEN PREVIOUS YEARS. THE PRO VISION WAS INTRODUCED TO STREAMLINE THE PROCEDURE CONCERNING T HE SEARCH MATTERS. IT IS ABUNDANTLY CLEAR FROM THE PERUSAL OF THE PRES CRIPTION OF SECTION 158BA THAT WITHIN THE PALE OF CHAPTER XIV-B ASSESSM ENT COULD BE MADE ONLY IN RESPECT OF THE UNDISCLOSED INCOME. SUCH UND ISCLOSED INCOME MUST COME AS A RESULT OF SEARCH. THIS SECTION DOES NOT PROVIDE A LICENCE TO THE REVENUE FOR MAKING ROVING ENQUIRIES CONNECTE D WITH THE COMPLETED ASSESSMENT. IT IS BEYOND THE POWER OF THE AO TO REVIEW THE ASSESSMENTS COMPLETED UNLESS SOME DIRECT EVIDENCE C OMES TO THE KNOWLEDGE OF THE DEPARTMENT AS A RESULT OF SEARCH W HICH INDICATES CLEARLY THE FACTUM OF UNDISCLOSED INCOME. WITHOUT S UCH EVIDENCE OR MATERIAL THE AO IS NOT EMPOWERED TO DRAW ANY PRESUM PTION AS TO THE EXISTENCE OF UNDISCLOSED INCOME. A PRESUMPTION IS A N INFERENCE OF FACT DRAWN FROM OTHER KNOWN OR PROVED FACTS. IT IS RULE OF LAW UNDER WHICH COURTS ARE AUTHORISED TO DRAW A PARTICULAR INFERENC E FROM A PARTICULAR FACT, UNTIL AND UNLESS THE TRUTH OF SUCH INFERENCE IS DISPROVED BY OTHER EVIDENCE. WE FIND THAT THE SCHEME OF CHAPTER XIV-B DOES NOT GIVE POWER TO THE REVENUE TO DRAW THE PRESUMPTION IN REG ARD TO THE UNDISCLOSED INCOME. THE AO COULD PROCEED ON THE BAS IS OF MATERIAL DETECTED AT THE TIME OF SEARCH AND THE EVIDENCE GAT HERED. UNDER SECTION 132(4), THE AUTHORISED OFFICER MAY, DURING THE COURSE OF SEARCH OR SEIZURE, EXAMINE ON OATH ANY PERSON WHO IS FOUND TO BE IN POSSESSION OR CONTROL OF ANY BOOKS OF ACCOUNT, DOCU MENTS, MONEY, IT(SS)A NO.326/AHD/2011 14 BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION MAY THE REAFTER BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE ACT. 12. FROM THE ABOVE IT IS CLEAR THAT UNDISCLOSED INC OME IN BLOCK ASSESSMENT HAS TO BE DETERMINED ON THE BASIS OF THE SEIZED MATERIAL. THUS FOR ASSESSING AN ASSESSEE FOR A BLOCK PERIOD T HERE SHOULD BE A SEARCH CONDUCTED UNDER SECTION 132. THE SEARCH ONLY WOULD INFUSE JURISDICTION TO AN AO OVER THE ASSESSEE. THE NEXT S TEP FOR THE AO IS TO SERVE A NOTICE UPON THE ASSESSEE UNDER SECTION 158B C INVITING IT FOR FURNISHING THE RETURN. WHEN THE RETURN IS BEING FUR NISHED THE AO WAS REQUIRED TO ISSUE NOTICE UNDER SECTION 142(1) OR UN DER SECTION 143(2) ETC. AND COMPUTE THE UNDISCLOSED INCOME OF THE ASSE SSEE. IF SUCH RETURN WAS NOT FILED THEN ON THE BASIS OF THE SEIZED MATER IAL AO WOULD COMPUTE THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. 13. THE SCHEME OF THE BLOCK ASSESSMENT INDICATES TH AT ASSESSEE HAS TO COMPUTE ITS UNDISCLOSED INCOME FOR THE PURPOSE OF F ILING A BLOCK RETURN ON THE BASIS OF SEIZED MATERIAL. IF HE FAILED TO CO MPUTE THE TRUE UNDISCLOSED INCOME ON THE BASIS OF THE SEIZED MATER IAL AND THE AO DETERMINED A DIFFERENT UNDISCLOSED INCOME THAN THE ONE DISCLOSED BY THE ASSESSES, THE ASSESSEE WOULD BE LIABLE TO PENAL TY UNDER SECTION 158BFA(2). 14. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FA CTS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT THE ASSESSE E HAS ACCOUNTED FOR THIS CASH CREDIT IN THE REGULAR BOOKS OF ACCOUNTS, AND THESE WERE PART OF THE BALANCE SHEET AND OTHER DETAILS. THE ASSESSEE HAS ALSO FILED RETURN UNDER SECTION 139(1) . ACCORDING TO THE FINDING OF THE LD.CIT(A) THIS FACT WAS ADMITTED BY THE AO. THEREFORE, THESE CASH CREDITS CANNOT BE INQUIRED IN THE PROCEEDINGS UNDER SECTION 158BC OF THE ACT. THE AO SHOULD HAVE IT(SS)A NO.326/AHD/2011 15 PASSED A REGULAR ASSESSMENT UNDER SECTION 143(3) OR UNDER SECTION 147 OF THE ACT. THE LD.CIT(A) HAS RIGHTLY APPRECIATED THE CONTROVERSY AND NO INTERFERENCE IS CALLED FOR IN TH E FINDING OF THE LD.CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 30 TH JULY, 2019. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER