R.P. Jain, V. DCIT, Central Circle-8,

ITSSA 50/DEL/2004

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2533 (ITAT-DELHI)
• Duration Of Justice: 12 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 26-09-2016
• Assessment Year: misc
• Appeal Filed On: 12-02-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IPS BINDRA
• Assessee Lawyers: DR RAKESH GUPTA; SOMIL AGGARWAL S
• Keywords: Unexplained cash credit; Search and seizure; Accommodation entries; Block assessment; Benefit of exemption
• Section: 143(3); 68; 132; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER IT (SS) A NO. 50 /DEL/ 2004 BLOCK PERIOD : 01.04.1990 TO 11.01.2001 SH. R.P. JAIN, 28, NEW ROHTAK ROAD, NEW DELHI VS. DCIT, CENTRAL CIRCLE - 8, NEW DELHI PAN : ACDPJ8968F (APPELLANT) (RESPONDENT) APPELLANT BY DR. RAKESH GUPTA & SH. SOMIL AGGARWAL, ADVOCATES RESPONDENT BY SH. I.P.S. BINDRA, CIT(DR) DATE OF HEARING 26.09.2016 DATE OF PRONOUNCEMENT 30.11.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 31/10/2003 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) - II, NEW DELHI , FOR BLOCK PERIOD FROM 01/04/1990 TO 11/01/2001 RAISING FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, NEW DELHI HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE PROCEEDI NGS INITIATED UNDER CHAPTER XIV B OF THE INCOME TAX ACT, AS WELL AS OF THE FRAMING OF THE ASSESSMENT UNDER THE AFORESAID PROVISIONS OF THE INCOME TAX ACT. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT BEFORE MAKING THE ASSESSMENT, THE LEARNED DCIT DID NOT PROVIDE DUE AND VALID OPPORTUNITY AND THE ADDITIONS WERE MADE WITHOUT GIVING SPECIFIC SHOW CAUSE NOTICE IN ACCORDANCE WITH LAW, CALLING UPON THE ASSESSEE TO EXPLAIN SUCH OF THE ADDITIONS 2 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 AS WERE PROPOSED TO BE MADE WHILE COMPUTING AN UNDISCLOSED INCOME. 2. THAT THE LEARNED DCIT HAS FAILED TO APPRECIATE THAT, WHAT IS TO BE ASSESSED UNDER THE BLOCK ASSESSMENT, IS AN UNDISCLOSED INCOME , AS DEFINED U/S 158 B(B) OF THE INCOME TAX ACT AND THAT THE COMPUTATION UNDER SECTION 158 BB OF THE INCOME TAX ACT IS TO BE M ADE ONLY OF SUCH INCOME, WHICH IS AN UNDISCLOSED INCOME AS DEFINED U/S 158 B(B) OF THE INCOME TAX ACT. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT NO APPROVAL IN ACCORDANCE WITH LAW, WAS EITHER OBTAINED OR GRANTE D AS NO OPPORTUNITY BEFORE GRANTING AN APPROVAL, WAS PROVIDED TO THE ASSESSEE IN ACCORDANCE WITH THE PRINCIPLES LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF S.L. KAPUR VS JAGMOHAN REPORTED IN AIR 1981 PAGE 135. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WHILE DISPOSING OFF THE AFORESAID APPEAL, HAS ERRED, IN ONLY PARTLY DELETING THE ADDITIONS INSTEAD OF DELETING THE ENTIRE SUMS OF ADDITIONS AND HELD AS AN UNDISCLOSED INCOME. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS THUS ERRED IN SUSTAINING AN ALLEGED UNDISCLOSED INCOME OF THE ASSESSEE AND CONCLUDING SUCH AN UNDISCLO SED INCOME AGGREGATED TO RS.4,82,72 0/ - 5. THAT IN SUSTAINING THE AFORESAID AGGREGATE ADDITION OF RS.4,82,720/ - , THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS THUS ERRED IN SUSTAINING THE FOLLOWING ADDITIONS: - 5.1 A N ADDITION OF RS. 1,48,829/ - BEING THE PURPORTED SUM REPRESENTING THE UNEXPLAINED CASH CREDITS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE CREDITS APPEARING IN THE BANK ACCOUNT REPRESENTED AGENCY COMMISSION FROM LIC, REIMBURSEMENT ETC, WHICH HAS DULY BEEN EXPLAINED VIDE ASSESSEE S LETTER DATED 16TH JUNE, 2003. 5.1.1 THAT THE FINDING THAT ASSESSMENT HAD SUBMITTED EXPLANATION ONLY IN RESPECT OF RS. 5,78,279/ - IS MISCONCEIVED WHEREAS, THE ASSESSEE HAD DULY FURNISHED EXPLANATION IN RESPECT OF THE ENTIRE AMOUNTS AGGREGATED TO RS.6,18,979/ - AND THE ADDITION THUS SUSTAINED OF RS.1,48,829/ - IS UNSUSTAINABLE. 3 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 5.2 A N AD DITION OF RS. 1,65,317/ - OUT OF AN ADDI TION MADE OF RS.2,05,317/ - REPRESENTING THE CASH DEPOSIT IN SAVINGS BANK ACCOUNT NO.A - 44 WITH VAISH COOPERATIVE OTHERS BANK LTD. 5.2.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE APPELLANT HAD FURNISHED CASH FLOW STATEMENT FROM 1.4.90 TO 31.3.97 SHOWING RECEIPTS, PAYMENTS AND THE BALANCE AND AS SUCH, IT COULD NOT BE HELD THAT ANY SUCH SUM, AS HAS BEEN SUSTAINED, COULD BE HELD AS AN UNDISCLOSED INCOME. 5.2.2 THAT THE FINDING OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) THAT ALL THE EVIDENCE PUT TOGETHER ONLY INDICATES THAT ONLY ACCOMMODATION ENTRIES WERE MADE IN THE NAME OF MISS SAWHNEY, IS HIGHLY PRESUMPTUOUS. THERE WAS NO JUSTIFICATION TO HAVE HAD REJECTED THE TESTIMONY WITHOUT BRINGING ANY MATERIAL AN D IN ANY CASE, IN DOING SO, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT NO SUCH BURDEN LAY UPON THE ASSESSEE AND THE FINDING THAT SHE WAS NOT CAPABLE OF PURCHASE OF SILVERWARE, IS TOTALLY UNSUPPORTED BY ANY MATERIAL AND I S ALSO BASED ON NO MATERIAL 5.3 I N SUSTAINING AN ADDITION OF RS. 1,59,328/ - . IN DOING SO, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE INCOME OF THE ASSESSEE WAS BELOW THE TAXABLE LIMIT IN THE RELEVANT ASSESSMENT YEAR AND AS SUCH, MERELY BECAUSE THE RETURNS OF INCOME HAD NOT BEEN FILED IN RESPECT OF INCOME EARNED BY THE ASSESSEE. COULD NOT BE HELD TO BE AN UNDISCLOSED INCOME AND IN ANY CASE THE ENTIRE SUM OF INCOMES SO EARNED AND COULD NOT BE DISCLOSED IN THE RETURNS O F INCOME. 5.3.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT WHAT IS NOT REQUIRED TO BE DISCLOSED, COULD NOT BE HELD TO BE THE UNDISCLOSED. THE ADDITION THUS SUSTAINED OF RS 1,59,328/ - AS SUCH, DESERVED TO BE DELETED . 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN DIRECTING AN ADDITION TO BE MADE OF RS.50,000/ - . IN SUSTAINING THE ADDITION, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAD N OT BEEN PROVIDED ANY OPPORTUNITY WHAT SO EVER BY THE LEARNED ASSESSING OFFICER AND THAT, ALSO BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WHEN IT WAS SUBMITTED THAT THE INVESTMENT OFRS.50.000/ - WAS, MADE BY THE APPELLANT S WIFE OUT OF THE CASH WIT HDRAWN BY HER FROM HER BANK ACCOUNT, WHICH WAS DULY INCLUDED IN THE CASH FLOW 4 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 STATEMENT SUBMITTED BY HER. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, THERE WAS NO JUSTIFICATION, NOT TO HAVE ACCEPTED THE EXPLANATION BEFORE HOLDING THE SUCH SUM AS AN UND ISCLOSED INCOME. 7. THAT FURTHER THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE LEVY OF INTEREST U/S 158BFA, WHICH OUGHT TO HAVE BEEN DELETED/WAIVED. IT IS, THEREFORE, PRAYED THAT THE ADDITION SUSTAINED BE DIRECTED TO BE DELETED ALTOGETHER AND IT IS FURTHER PRAYED THAT THE INTEREST LEVIED U/S 158 BFA OF THE INCOME TAX ACT, BE HELD AS NOT LEVIABLE OR IS LIABLE TO BE WAIVED . 2. FROM THE RECORD, WE FIND THAT AN APPLICATION DATED 16/12/2009 WAS SUBMITTED BEFORE THE TRIBUNAL FOR ADMITTING ADDITIONAL GROUND AS UNDER: THAT THE IMPUGNED ASSESSMENT ORDER IS ILLEGAL AND VOID AB INITIO INASMUCH AS THE SAME WAS PASSED BY LEARNED ASSESSING OFFICER WITHOUT ASSUMIN G JURISDICTION AS PER LAW MORE SO WHEN NO VALID SEARCH WARRANT WAS ISSUE IN THE NAME OF THE ASSESSEE AND NO MANDATORY NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE IN ACCORDANCE WITH LAW AND LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE QUASHED THE ASSESSMENT ORDER. SINCE THE ABOVE GROUND OF APPEAL IS PURELY LEGAL, DOES NOT REQUIRES FRESH FACTS TO BE INVESTIGAGED AND GOES TO THE ROOT OF THE MATTER, IT IS PRAYED THAT IT MAY PLEASE BE ADMITTED IN VIEW OF THE HON BLE SUPREME COURT DECISION IN THE CASE OF NTPC LIMITED 229 ITR 383. 3. THE F ACTS IN BRIEF OF THE CASE AS CULLED OUT FROM THE ORDER OF THE LOWER AUTHORITI ES ARE THAT THE ASSESSEE WAS A D IRECTOR IN M/S . EURO CHAMBERS (INDIA) PRIVATE L IMITED AND DERIVED INCOM E FROM LIC COMMISSION, CONSULTANCY, INTEREST ETC . DURING RELEVANT PERIOD. A SEARCH ACTION UNDER SECTION 132 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) WAS CARRIED OUT ON 11/01/2001 AT THE PREMISES OF THE ASSESSEE. SUBSEQUENTLY , NOTICE UNDER SECTION 158BC OF THE ACT WAS ISSUED ON 15/02/2002 FOR FILING RETURN OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD FROM 01/04/1990 TO 11/01/2001. IN RESPONSE THE ASSESSEE FILED RETURN OF INCOME DECLARING NIL UNDISCLOSED INCOME. IN BLOCK ASSESSMENT 5 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 PROCEEDING COMPLETED UNDER SECTION 158 BC OF THE ACT ON 31/03/2003, THE UNDISCL OSED INCOME WAS ASSESSED AT RS.18, 81,867/ - . AGGRIEVED , THE ASSESSEE FILED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS), WHO ALLOWED PART RELIEF TO THE ASSESSEE. AGGRIEVED WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED ABOVE. 4. AT THE OUTSET, THE LEAR NED AUTHORIZED REPRESENTATIVE (AR) DID NOT PRESS THE ADDITIONAL GROUND SUBMITTED BY ASSESSEE THROUGH AN APPLICATION DATED 16/12/2009, AND THUS THE ADDITIONAL GROUND OF THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 5. THE GROUND NO. 1 RELATES TO UPHOLDING THE VALIDITY OF THE PROCEEDINGS INITIAT ED UNDER CHAPTER XIVB OF THE ACT AND FRAMING OF ASSESSMENT UNDER SECTION 158BC OF THE ACT . IN GROUND NO. 1.1 , THE ASSESSEE HAS RAISED THE ISSUE OF NOT PROVIDING DUE AND VALID OPPORTUNITY AND IN ABSENCE OF ANY SPECIFIC SHOW CAUSE NOTICE FOR MAKING ADDITIONS . BOTH THE ISSUES WERE NOT SPECIFICALLY CHALLENGED BY THE LEARNED AUTHORIZED REPRESENTATIVE BEFORE US, AND THE SAME ARE DISMISSED AS INFRUCTUOUS. 6. IN GROUND NO. 2 , THE ASSESSEE HAS RAISED ISSUE THAT UNDER SECTION 158 BB OF THE ACT , ONLY UNDISCLOSED INCO ME AS DEFINED UNDER SECTION 158B(B) OF THE A CT CAN BE ASSESSED AND COMPUTED . NO SEPARATE ARGUMENTS IN RESPECT OF THIS GROUND WERE TAKEN BEFORE US AND ISSUE RAISED HAS BEEN DISCUSSED WHILE DEALING THE SPECIFIC ADDITIONS, ACCORDINGLY THE ARGUMENTS MADE WITH ASSESSEE IN RESPECT OF THE GROUND ARE CONSIDERED, WHILE DEALING THE GROUND S CHALLENGING THE VARIOUS ADDITIONS. 6 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 7. THE GROUND NO. 3 OF THE APPEAL WAS NOT PRESSED BEFORE US AND THUS WE DISMISS THE SAME AS INFRUCTUOUS. 8. THE GROUND NO. 4 OF THE APPEAL IS G ENERAL IN NATURE AND COVERED BY OTHER GROUNDS SPECIFICALLY RELATED TO ADDITIONS CHALLENGED . 9. THE LEARNED AUTHORIZED REPRESENTATIVE ARGUED ADDITION OF RS. 1,48, 829/ - REFERRING GROUND NO. 5, 5. 1 AND 5.1.1 AND ADDITION OF RS.1,65, 317/ - REFERRING TO GROUN DS 5.2, 5.2.1 AND 5.2.2 RESPECTIVELY. 10. IN GROUNDS NO. 5, 5.1 AND 5.1.1 THE ASSESSEE HAS CHALLENGED ADDITION OF RS.1,48, 829/ - SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) . THE FACTS IN RESPECT OF THE ISSUE IN DISPUTE ARE THAT THE ASSES SI NG OFFICER MADE ADDITION OF RS.6, 1 8, 979/ - UNDER SECTION 68 OF THE ACT ON ACCOUNT OF CREDIT ENTRIES APPEARING IN THE SAVING ACCOUNT NO. 999 FOR THE PERIOD FROM 01/04/1990 TO 31/03/1997. OUT OF AMOUNT OF RS. 6, 18, 979/ - , THE LD. COMMISSIONER OF INCOME - TA X ( APPEALS), UPHELD FOLLOWING ENTRIES AMOUNTIN G TO RS.1,48, 829/ - : - ENTRIES TOTALLING TO RS. 8,000/ - , REPRESENTING DIVIDEND INCOME FROM M/S OLYMPUS INDIA PRIVATE L IMITED - ENTRIES TOTALLING TO BE RS. 79,430/ - REPRESENTING CHEQUES RECEIVED FROM M/S . TRAVEL PALS(I) PRIVATE L IMITED FOR OFFICE FACILITY AND ASSISTANT CHARGES AND REIMBURSEMENT OF TELEPHONE AND OTHER EXPENSES. - DEPOSIT OF RS. 20,000 / - ON 27/02/1999 REPRESENTING CHEQUES RECEIVED FROM LIC - BALANCE ENTRIES OF RS.40, 700/ - IN RESPECT OF WHICH NO EXPLANA TION WAS SUBMITTED BY THE ASSESSEE 7 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 11. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REFERRED TO GROUND NO. 2 OF THE APPEAL AND SUBM ITTED THAT THIS ADDITION OF RS.1,48, 829 / - COULD NOT BE MADE IN THE BLOCK ASSESSMENT PROCEEDING AS THIS A DDITION WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH. 11.1 IN THIS CONNECTION THE LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. JUPITER B UILDERS(P) LTD, (2006) 287 ITR 287(DELHI). 11.2 ON THE OTHER HAND, THE LEARNED CIT(DR) RELIED ON THE FINDING OF THE LOWER AUTHORITIES. 11.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN SECTION 158B(B) OF THE A CT UNDISCLOSED HAS BEEN DEFI NED , WHICH IS AN INCLUSIVE DEFINITION, AS UNDER : 158B. IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWISE REQUIRES, ( A ) ( B ) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHERE SUCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT BEE N OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THIS ACT , OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. 11.3.1 IN SECTION 158BB(1) COMPUTATION OF UNDISCLOSED INCOME HAS BEEN PROVIDED AS UNDER: COMPUTATIO N OF UNDISCLOSED INCOME OF THE BLOCK PERIOD. 158BB. (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, 8 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE, AS REDUCED BY THE AGGREGATE OF THE TOTAL INCOME, OR AS THE CASE MAY BE, AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH PREVIOUS YEARS, DETERMINED, ( A ) .. ( B ) ( C ) .. 11.3.2 T HUS , ACCORDING TO THE SECTION 158BB(1) OF THE ACT, THE UNDISCLOSED INCOME CONSIST OF TOTAL INCOME OF THE PREVIOUS YEAR COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AS WELL AS OTHER DOCUMENTS AND SUCH I NFORMATION A S AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE S . 11.3.3 IN THE CASE OF CIT VS. JUPITER BUILDERS PRIVATE L IMITED (SUPRA), THE HON BLE DELHI HIGH COURT HAS DECIDED AS UNDER : 2 7. ASSESSMENT PROCEEDINGS UNDER CHAPTER XIV - B ARE NOT CONCERNED WITH THAT INCOME WHICH HAS ALREADY BEEN DISCLOSED AND IN RESPECT OF WHICH REGULAR ASSESSMENT PROCEEDINGS STAND CONCLUDED OR ARE STILL PENDING, OR IN RESPECT OF WHICH TIME FOR FILING OF RETURN HAS NOT EXPIRED ON THE DATE OF SEARCH/REQUISITION AND WHICH STAND RECORDED IN THE BOOKS OF ACCOUNT ON THE DATE OF SEARCH. THE PROCEE DINGS UNDER CHAPTER XIV - B CANNOT BE USED AS AN OPPORTUNITY TO EITHER REOPEN CONCLUDED ASSESSMENTS OR TO REASSESS THE RETURNED INCOME BY TAKING A FRESH LOOK AT THE DISCLOSED FACTS AND FIGURES, UNLESS, OF COURSE, THEY ARE FOUND TO BE FALSE AS A RESULT OF THE SEARCH OR REQUISITION. 28. TO ARRIVE AT THE FIGURE OF UNDISCLOSED INCOME, THE AGGREGATE OF THE TOTAL INCOME IN THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD IS FIRST COMPUTED 'ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT 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 AGGREGATE OF THE TOTAL INCOME, OR AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH 9 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 PREVIOUS YEARS , CALCULATED IN ACCORDANCE WITH CLS. (A) TO (F) OF S. 158BB(1). CLEARLY THE SCHEME UNDER THE ACT IS TO REDUCE FROM THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT O F SEARCH OR REQUISITION, ALL SUCH INCOMES WHICH HAVE PREVIOUSLY BEEN DISCLOSED AND ASSESSMENT IN RESPECT WHEREOF IS EITHER COMPLETE OR PENDING, OR YET TO BE FILED AND FOR WHICH TIME HAS NOT YET EXPIRED AND WHICH IS REFLECTED IN THE BOOKS OF ACCOUNT AS ON T HE DATE OF SEARCH OR REQUISITION. IT IS EVIDENT FROM CLS. (A) AND (B) OF S. 158BB THAT IN ASSESSMENT PROCEEDINGS UNDER CHAPTER XIV - B, ASSESSMENTS COMPLETED UNDER S. 143 OR 144 OR 147 CANNOT BE REOPENED. CONSEQUENTLY, THOSE ELEMENTS OF INCOME WHICH ALREADY STAND DISCLOSED IN THE RELEVANT ASSESSMENT YEARS FALLING WITHIN THE BLOCK PERIOD MUST BE EXCLUDED WHILE COMPUTING THE UNDISCLOSED INCOMES UNDER THE ACT. IT IS FOR THIS REASON THAT ASSESSMENTS UNDER CHAPTER XIV - B HAVE BEEN DECLARED TO BE IN ADDITION TO THE REGULAR ASSESSMENT PROCEEDINGS FOR THE PREVIOUS YEARS INCLUDED IN THE BLOCK PERIOD. 29. WE MAY AT THIS STAGE CITE A FEW DECISIONS OF THE OTHER HIGH COURTS DEALING WITH THE RELEVANT PROVISIONS OF THE ACT. IN N.R. PAPER & BOARD LTD. VS. DY. CIT (SUPRA), GUJA RAT HIGH COURT CONSIDERED THE SCOPE OF CHAPTER XIV - B OF THE ACT. IN THIS CASE THE ASSESSEE HAD CHALLENGED THE ISSUANCE OF NOTICE UNDER S. 143(2) OF THE ACT ON THE GROUND THAT THE RELEVANT ASSESSMENT YEAR WAS A PART OF THE BLOCK PERIOD IN RESPECT OF WHICH A NOTICE UNDER S. 158BC HAD ALREADY BEEN ISSUED AND ASSESSMENT CONCLUDED. IT WAS CONTENDED THAT NO FURTHER ASSESSMENT PROCEEDINGS COULD BE UNDERTAKEN IN RESPECT OF THE SAME ASSESSMENT YEAR FOR WHICH BLOCK ASSESSMENT PROCEEDINGS HAVE ALREADY BEEN CONCLUDED. THE HIGH COURT BY A DETAILED AND CONSIDERED JUDGMENT CAME TO THE CONCLUSION THAT ASSESSMENT OF UNDISCLOSED INCOME IS ALTOGETHER A DIFFERENT MATTER FROM REGULAR ASSESSMENTS. SINCE WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE HIGH COURT IN THE SAID CASE, W E QUOTE FROM THE SAID DECISION AS FOLLOWS: 'UNDER S. 158BB OF THE ACT, FOR COMPUTING THE UNDISCLOSED INCOME OF THE BLOCK PERIOD, THE AO HAS TO COMPUTE THE TOTAL INCOME OF THE RELEVANT PREVIOUS YEARS ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO. THE EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION WOULD BE THE EVIDENCE THAT HAS BEEN GATHERED BY THE AUTHORISED OFFICER 10 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 UNDER SS. 1 32 AND 132A OF THE ACT. THIS WOULD ALSO INCLUDE THE STATEMENTS RECORDED BY THE AUTHORISED OFFICER DURING THE COURSE OF SEARCH AND SEIZURE UNDER S. 132(4) OF THE ACT WHICH EMPOWERS HIM TO RECORD THE STATEMENT OF ANY PERSON IN POSSESSION OF SUCH ASSETS OR BO OKS OF ACCOUNT OR DOCUMENTS ON OATH AND WHICH CAN BE USED IN EVIDENCE IN ANY PROCEEDING UNDER THE ACT. THE EVIDENCE SO GATHERED BY THE AUTHORISED OFFICER UNDER S. 132 ALONG WITH OTHER MATERIAL SEIZED, MARKED, OR INVENTORIED, WOULD BE AVAILABLE BEFORE THE A O WHEN HE EXERCISES HIS POWER TO ASSESS THE UNDISCLOSED INCOME UNDER CHAPTER XIV - B OF THE ACT. THIS EVIDENCE FOUND AND MATERIAL AVAILABLE IS TO BE THE BASIS FOR COMPUTING THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING IN THE BLOCK PERIOD. THIS EXERCISE IS UNDERTAKEN AS AN INITIAL STEP FOR COMPUTATION OF THE UNDISCLOSED INCOME UNDER S. 158BB(1) FOR WHICH THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD IS TO BE COMPUTED IN ACCORDANCE WITH CHAPTER IV OF THE ACT, I.E., UNDER VARIOUS HEADS MENTIONED IN THAT CHAPTER, ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEARCH AND THE MATERIAL OR INFORMATION AS AVAILABLE WITH THE AO. FOR THE PURPOSE OF WORKING OUT THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD, HE IS THEN REQUIRED TO REDUCE THE AGGREGATE OF THE TOTAL INCOME SO WORKED OUT FOR THE BLOCK PERIOD BY AGGREGATE OF THE TOTAL INCOME DETERMINED, ON THE BASIS INDICATED IN CLS. (A) TO (F) OF S. 158BB(1) OF THE ACT OR INCREASE IT BY THE AGGREGATE OF LOSSES OF SU CH PREVIOUS YEAR DETERMINED ON THE BASIS OF THESE CLAUSES.' 'UNDER S. 158BB(1), R/W S. 158BC OF THE ACT, WHAT IS ASSESSED IS THE UNDISCLOSED INCOME OF THE BLOCK PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR REQUIRED TO BE ASSESSED IN THE NOR MAL REGULAR ASSESSMENT UNDER S. 143(3), WHERE THE AO MAKES AN ENQUIRY TO ENSURE THAT THE ASSESSEE HAS NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAD NOT UNDERPAID THE TAX IN ANY MANNER AND ON THE BASIS OF THE EVIDENCE PRODUCED BY THE ASSESSEE, THE EVIDENCE OBTAINED ON THE SPECIFIC POINTS AND ALL RELEVANT MATERIAL WHICH HE HAS GATHERED ASSESSES THE TOTAL INCOME OR LOSS AND DETERMINES THE SUM PAYABLE THEREON AS PER THAT ASSESSMENT. THIS EXERCISE UNDER S. 143(2) AND (3) FOR REGULAR ASSESS MENT STANDS IN CONTRAST TO THE EXERCISE OF THE AO UNDER S. 158BB R/W S. 158BC(B), WHERE HE HAS TO ASSESS ONLY THE UNDISCLOSED INCOME OF THE BLOCK PERIOD ON THE BASIS OF THE EVIDENCE FOUND AND MATERIAL AVAILABLE AS A RESULT OF THE SEARCH CONDUCTED BY THE AU THORISED OFFICER UNDER S. 132 OF THE ACT. THEREFORE, THERE IS NO MERIT IN THE CONTENTION RAISED ON BEHALF OF 11 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 THE PETITIONERS THAT ONCE THE PETITIONER - ASSESSEES TOTAL INCOME OF THE PREVIOUS YEAR FALLING IN THE BLOCK PERIOD FOR WHICH REGULAR ASSESSMENT IS P ENDING, IS COMPUTED WHILE COMPUTING THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING IN THE BLOCK PERIOD UNDER S. 158BB(1) IN THE PROCESS OF FINDING OUT THE UNDISCLOSED INCOME, THERE WOULD BE A SECOND ASSESSMENT OF THE TOTAL INCOME IF THE RE GULAR ASSESSMENT OF THAT PREVIOUS YEAR IS ALLOWED TO PROCEED UNDER S. 143(3) OF THE ACT. THESE PROVISIONS OPERATE ENTIRELY FOR DIFFERENT PURPOSES, ONE FOR ASSESSING UNDISCLOSED INCOME OF THE BLOCK PERIOD WHILE THE OTHER FOR ASSESSING THE TOTAL INCOME OR LO SS OF THE PREVIOUS YEAR IN A REGULAR ASSESSMENT.' 'THEREFORE, WHERE THERE IS A PENDING REGULAR ASSESSMENT FOR ONE OF THE PREVIOUS YEARS FALLING IN THE BLOCK PERIOD FOR WHICH THE PROCEEDINGS UNDER CHAPTER XIV - B ARE COMMENCED AS A RESULT OF SEARCH UNDER S. 1 32, THERE IS NOTHING THAT WOULD PREVENT THE AO TO PROCEED WITH AND COMPLETE THE REGULAR ASSESSMENT OF SUCH PREVIOUS YEAR IN THE REGULAR ASSESSMENT, BEFORE THE BLOCK ASSESSMENT OF UNDISCLOSED INCOME IS MADE. THERE WOULD BE NO WARRANT FOR WITHHOLDING THE REG ULAR ASSESSMENT WHICH IS PENDING FOR THE PREVIOUS YEAR FALLING IN THE BLOCK PERIOD. THE ASSESSMENT OF UNDISCLOSED INCOME OF A BLOCK PERIOD IS, THUS, DIFFERENT FROM THE REGULAR ASSESSMENT OF THE TOTAL INCOME OF A PREVIOUS REGULAR ASSESSMENT YEAR AND BOTH CA N OPERATE TOGETHER. THE BLOCK ASSESSMENT PROCEDURE IS NOT INTENDED TO HAVE THE EFFECT OF EXCLUDING THE REGULAR ASSESSMENTS THAT MAY BE PENDING. THE BLOCK ASSESSMENT TARGETS THE AREA OF UNDISCLOSED INCOME THAT WAS NOT DISCLOSED AND WOULD NOT BE DISCLOSED, W HILE THE REGULAR ASSESSMENT IS TO ASSESS THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR WHERE A RETURN IS FILED UNDER S. 139 AND THE AO CONSIDERS IT NECESSARY OR EXPEDIENT UNDER S. 143(2) TO ENSURE THAT THE ASSESSEE HAD NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCESSIVE LOSS OR HAS NOT UNDERPAID TAX IN ANY MANNER. BOTH THESE AREAS ARE DIFFERENT AND THERE IS NO WARRANT TO PREVENT THE STATUTORY POWER OF REGULAR ASSESSMENT FROM BEING EXERCISED WHERE THE BLOCK ASSESSMENT IS UNDERTAKEN OR COMPLETED FOR ASSE SSING THE UNDISCLOSED INCOME.' 'THE ESSENCE OF THE SPECIAL PROCEDURE OF CHAPTER XIV - B IS TO PROVIDE FOR AN ASSESSMENT OF THE UNDISCLOSED INCOME DETECTED AS A RESULT OF THE SEARCH WITHOUT AFFECTING THE REGULAR ASSESSMENTS MADE OR TO BE MADE. THE SPECIAL PRO VISIONS ARE DEVISED TO 12 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 OPERATE IN THE SEPARATE FIELD OF UNDISCLOSED INCOME AND ARE CLEARLY IN ADDITION TO THE REGULAR ASSESSMENTS COVERING THE PREVIOUS YEARS FALLING IN THE BLOCK PERIOD.' THIS DECISION HAS BEEN FOLLOWED BY THE GUJARAT HIGH COURT IN CIT VS. N.R. PAPERS & BOARDS LTD. (2000) 162 CTR (GUJ) 488 : (2001) 248 ITR 526 (GUJ) AND IN CIT VS. SHAMBHULAL C. BACHKANIWALA (SUPRA). 30. IN CIT VS. RAJENDRA PRASAD GUPTA (2001) 166 CTR (RAJ) 83 : (2001) 248 ITR 350 (RAJ), THE REVENUE CHALLENGED THE DECISION O F THE TRIBUNAL WHEREBY THE TRIBUNAL HAD NOT ACCEPTED RESORT TO A PROCESS OF ESTIMATION BY THE ASSESSING AUTHORITY ON THE GROUND THAT THE ASSESSING AUTHORITY HAD NOT EXAMINED THE MATERIAL THAT HAD COME IN HIS POSSESSION DURING THE COURSE OF SEARCH WHILE RES ORTING TO BEST JUDGMENT ASSESSMENT. IT WAS THE CONTENTION OF THE REVENUE THAT THERE WAS NO PROHIBITION AGAINST MAKING A BEST JUDGMENT ASSESSMENT UNDER S. 158BB, SINCE EXPLANATION TO S. 158BB PERMITTED RESORT TO THE PROVISIONS OF SS. 144 AND 145 OF THE ACT. WHILE AGREEING WITH THE CONTENTION OF THE REVENUE THAT THE AO HAD JURISDICTION TO RESORT TO BEST JUDGMENT ASSESSMENT IN PROCEEDINGS UNDER S. 158BB, HIGH COURT PROCEEDED TO OBSERVE AS FOLLOWS : 'HOWEVER, UNDER THE SCHEME OF THE PROVISIONS FOR BLOCK ASSESSM ENT, IT IS APPARENT THAT IT RELATES TO ASSESSMENT 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 APPARENT FROM THE PERUSAL OF S. 158 BB THAT THE RETURNS ARE ALSO REQUIRED TO BE FILED IN PURSUANCE OF THE NOTICE UNDER S. 158BC(A) AND THE ASSESSMENT IS TO BE FRAMED ON THAT BASIS IN THE LIGHT OF MATERIAL THAT HAS COME INTO POSSESSION OF THE ASSESSING AUTHORITY DURING THE COURSE OF SEARCH WH ICH IS THE FOUNDATION OF THE PROCEEDINGS. THAT BEING SO, THE CORRECTNESS OR OTHERWISE OF THE RETURNS FILED IN PURSUANCE OF THE NOTICE UNDER S. 158BC(A) HAS TO BE EXAMINED WITH REFERENCE TO THE MATERIAL IN THE POSSESSION OF THE ASSESSING AUTHORITY HAVING NE XUS TO ASSESSMENT OF 'UNDISCLOSED INCOME WHICH IS WITH THE ASSESSING AUTHORITY, AND PREMISE OF SUCH PROCEEDINGS. IF THE RETURNS FILED BY THE ASSESSEE DO NOT ACCORD WITH THE MATERIALS WHICH ARE ALREADY IN THE POSSESSION OF THE AUTHORITY, IT CAN BE ESTIMATE D TO THE BEST JUDGMENT BY THE ASSESSING AUTHORITY ON THE BASIS OF THE MATERIAL IN HIS POSSESSION. HOWEVER, THE ASSESSING AUTHORITY IS NOT CONFERRED WITH POWER TO MAKE ESTIMATION OF INCOME 13 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 DE HORS THE MATERIAL IN HIS POSSESSION, WHILE MAKING REGULAR ASSESSM ENT ORDER UNDER S. 158BB. IT HAS TO BE BORNE IN MIND THAT PROCEEDINGS UNDER SS. 158BB AND 158BC ARE THAT OF UNDISCLOSED INCOME. THEREFORE, THE PROCEEDINGS CARRIES WITH IT A PRESUMPTION THAT RETURNS FILED IN PURSUANCE OF SUCH PROCEEDINGS ARE OF UNDISCLOSED INCOME AND NOT NECESSARILY IN ACCORDANCE WITH THE BOOKS OF ACCOUNT. ITS VERIFICATION HAS TO BE SEARCHED OUTSIDE REGULAR BOOKS WITH REFERENCE TO MATERIAL THAT HAS BEEN FOUND DURING SEARCH. THAT MAKES IT IMPERATIVE TO ADJUDICATE THE RETURN WITH REFERENCE TO MATERIAL THAT HAS COME IN THE POSSESSION OF THE ASSESSING AUTHORITY DURING THE COURSE OF SEARCH PROCEEDINGS AND ON WHICH BASIS THE BELIEF ABOUT THE EXISTENCE OF UNDISCLOSED INCOME IS ENTERTAINED BY THE ASSESSING AUTHORITY INVITING INVOCATION OF SS. 158BB A ND 158BC. THE ENQUIRY INTO THE CORRECTNESS OF SUCH RETURNS WITH REFERENCE TO MATERIAL SO FOUND HAS NEXUS WITH THE OBJECT OF THE SPECIAL PROVISIONS, TO ADJUDGE WHETHER THE ASSESSEE IS STILL HONESTLY DISCLOSING HIS INCOME CORRECTLY AFTER INCRIMINATING MATERI AL HAS BEEN FOUND IN THE POSSESSION OF THE REVENUE AUTHORITY BEFORE SUCH RETURNS CAN BE REJECTED AND THEREAFTER TO FRAME ASSESSMENT ESTIMATING THE INCOME LIABLE TO TAX TO THE BEST OF JUDGMENT ON THE BASIS OF THE MATERIAL THAT IS AVAILABLE WITH HIM.' WE RES PECTFULLY AGREE WITH THIS DECISION OF THE RAJASTHAN HIGH COURT. 31. WE MAY ALSO REFER TO A DECISION OF THE KERALA HIGH COURT. IN MALAYIL BANKERS VS. ASSTT. CIT (1999) 152 CTR (KER) 443 : (1999) 236 ITR 869 (KER). THE PETITIONER HAD CHALLENGED THE ASSESSMEN T ON THE GROUND THAT THE AO HAD NO JURISDICTION TO COMPLETE THE ASSESSMENT UNDER S. 143(3) AFTER THE ISSUANCE OF A NOTICE UNDER S. 158BC OF THE ACT. THE PETITIONER HAD RELIED ON TWO DECISIONS, ONE FROM THE KERALA HIGH COURT IN THE CASE OF N.T. JOHN VS. CIT & ANR. (1997) 137 CTR (KER) 656 : (1999) 228 ITR 314 (KER) AND ANOTHER OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF RAJA RAM KULWANT RAI VS. ASSTT. CIT (1997) 142 CTR (P&H) 292 : (1997) 227 ITR 187 (P&H). THE COURT DID NOT AGREE WITH THE CONTENTION O F THE PETITIONER AND HELD AS FOLLOWS : 'CHAPTER XIV - B OF THE ACT PROVIDES A SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. SEC. 158BA DEFINES BLOCK PERIOD AS WELL AS UNDISCLOSED INCOME. SEC. 158BA DEALS WITH HE ASSESSMENT OF UNDISCLOSED INCOME AS A RESUL T OF SEARCH. THIS PROVISION 14 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 EMPOWERS THE AO TO PROCEED TO ASSES THE UNDISCLOSED INCOME IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER WHERE THERE WAS A SEARCH UNDER S. 132. SUB - S. (2) OF S. 158BA STATES THAT THE TOTAL UNDISCLOSED INCOME RELATING TO THE BLOCK PERIOD SHALL BE CHARGED TO TAX. THEREFORE, BY A PLAIN READING OF S. 158BA AND THE HEADING, IT IS CLEAR THAT THIS PROVISION IS INTENDED TO ASSESS THE UNDISCLOSED INCOME IN CONTRADISTINCTION WITH A REGULAR ASSESSMENT. THIS SECTION THOUGH REFERS TO A BL OCK PERIOD, CANNOT MAKE AN ASSESSMENT OTHER THAN THE UNDISCLOSED INCOME. THE EXPLANATION INSERTED BY THE FINANCE (NO. 2) ACT OF 1998, W.E.F. 1ST JULY, 1995, CLEARS ALL THE DOUBTS, IF ANY, ON THE ISSUE. EXPLANATION (A) STATES THAT THE ASSESSMENT MADE UNDER THIS CHAPTER SHALL BE IN ADDITION TO THE REGULAR ASSESSMENT. EXPLANATION (B) STATES THAT THE TOTAL UNDISCLOSED INCOME RELATING TO THE BLOCK PERIOD SHALL NOT BE INCLUDED IN ANY REGULAR INCOME, IN ANY ASSESSMENT. IN THE LIGHT OF THE EXPLANATION TO S. 158BA T HE QUESTION IS TO BE ANSWERED AGAINST THE ASSESSEE. THE CONTENTION THAT ONCE AN ASSESSMENT HAS BEEN FRAMED FOR A BLOCK PERIOD UNDER S. 158BC THE ITO IS DEBARRED FROM FRAMING AN ASSESSMENT UNDER S. 143 CANNOT BE ACCEPTED. THE JUDGMENT REFERRED TO ON BEHALF OF THE PETITIONER CAN HAVE NO APPLICATION SINCE THE EXPLANATION HAS BEEN INSERTED TO REMOVE ANY DOUBT AND IT IS NOW MADE CLEAR THAT THE BLOCK ASSESSMENT SHALL BE IN ADDITION TO THE REGULAR ASSESSMENT. THEREFORE, THERE IS NO SCOPE FOR ANY AMBIGUITY OR DOUBT IN THIS REGARD. CLARIFICATION IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE (NO. 2) BILL, 1998, STATES AS FOLLOWS [SEE (1998) 147 CTR (ST) 154 : (1998) 231 ITR (ST) 228, 256] : 'TO SET AT REST THE CONTROVERSY AS TO WHETHER BLOCK ASSESSMENT SU BSUMES THE REGULAR ASSESSMENTS OR INDEPENDENT OF THE LATTER, THE BILL PROPOSES TO CLARIFY THAT BLOCK ASSESSMENT SHALL BE MADE IN ADDITION TO THE REGULAR ASSESSMENT OF PREVIOUS YEARS INCLUDED IN THE BLOCK PERIOD. FURTHER, IT PROPOSES TO PROVIDE THAT INCOME ASSESSED IN REGULAR ASSESSMENT SHALL NOT BE INCLUDED IN THE BLOCK PERIOD AND INCOME ASSESSED IN THE BLOCK PERIOD SHALL NOT BE INCLUDED IN THE REGULAR ASSESSMENT. THE CLARIFICATORY AMENDMENT IS PROPOSED TO BE INSERTED RETROSPECTIVELY FROM THE 1ST DAY OF JUL Y, 1995. IF THE ARGUMENT OF LEARNED COUNSEL IS ACCEPTED, ULTIMATELY, IT WILL LEAD TO DISASTROUS CONSEQUENCES. THE AO ASSESSING UNDISCLOSED INCOME OF BLOCK PERIOD MAY HAVE TO ASSESS ALL THE TEN PRECEDING PREVIOUS YEARS AND PART OF THE CURRENT YEAR UP TO TH E DATE OF SEARCH BY REOPENING THEM WHICH WILL HAVE AN UNDESIRABLE EFFECT ON THE ASSESSEES IN GENERAL. THE VERY PURPOSE OF MAKING PROCEDURE FOR 15 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 ASSESSMENT IN SUCH CASES SIMPLE AND EFFECTIVE WOULD BECOME UNWIELDY AND PROTRACTED. THE DECISION CITED BY LEARNED COUNSEL FOR THE PETITIONER REPORTED IN KELAPPAN NAIR VS. PAYINGATEN (1961) KLT 527, HELD THAT THE EXPLANATION DOES NOT EXPLAIN OR ADD TO THE SCOPE OF THE ORIGINAL SECTION. THE EXPLANATION IN THIS CASE IS INSERTED PROBABLY IN THE LIGHT OF THE TWO DECISIONS REFERRED TO BY LEARNED COUNSEL FOR THE PETITIONER AND FOR REMOVAL OF DOUBTS. IT IS THE DECLARATION OF THE INTENTION OF THE LEGISLATURE AS TO THE SCOPE OF S. 158BA.' 32. WE AGREE WITH THIS VIEW OF THE KERALA HIGH COURT. THE TWO DECISIONS IN N.T. JOHN (SUPR A) AND RAJA RAM KULWANT RAI (SUPRA) HAVE BEEN CRITICALLY EXAMINED BY GUJARAT HIGH COURT IN THE EARLIER N.R. PAPER & BOARD LTD. S CASE (SUPRA), AND WE CONCUR WITH THE DECISION OF THE GUJARAT HIGH COURT THAT THESE TWO DECISIONS DO NOT CORRECTLY INTERPRET THE LAW. 33. WE MAY ALSO REFER TO A DECISION OF THE GAUHATI HIGH COURT IN DR. (MRS.) ALAKA GOSWAMI AND DR. ANIL KUMAR GOSWAMI VS. CIT (2004) 190 CTR (GAU) 214 : (2004) 268 ITR 178 (GAU). IN THE COURSE OF THIS JUDGMENT, THE HIGH COURT OBSERVED AS FOLLOWS : 'CH APTER XIV - B OF THE ACT LAYS DOWN THE SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES AND PROVIDES FOR ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH. UNDER S. 158BB(1) R/W S. 158BC OF THE ACT, WHAT IS ASSESSED IS THE UNDISCLOSED INCOME OF THE BLOC K PERIOD AND NOT THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR REQUIRED TO BE ASSESSED IN THE NORMAL REGULAR ASSESSMENT UNDER S. 143(3) OF THE ACT. THE EXERCISE UNDER S. 143(2) AND (3) FOR REGULAR ASSESSMENT STANDS ON A DIFFERENT FOOTING THAN THE EXERCISE UNDERTAKEN BY THE AO UNDER S. 158BB R/W S. 158BC(B), WHERE THE AO HAS TO ASSESS ONLY THE UNDISCLOSED INCOME OF THE BLOCK PERIOD ON THE BASIS OF THE EVIDENCE FOUND AND MATERIAL AVAILABLE AS A RESULT OF THE SEARCH CONDUCTED UNDER S. 132 OF THE ACT. THE REGUL AR ASSESSMENT IS TO ASSESS THE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR WHERE A RETURN IS FILED UNDER S. 139 AND THE AO CONSIDERS IT NECESSARY OR EXPEDIENT UNDER S. 143(2) TO ENSURE THAT THE ASSESSEE HAD NOT UNDERSTATED THE INCOME OR HAS NOT COMPUTED EXCE SSIVE LOSS OR HAS NOT UNDERPAID TAX IN ANY MANNER. THE PROCEEDINGS UNDER THE REGULAR ASSESSMENT AND THE ASSESSMENT FOR THE BLOCK PERIOD STAND TO OPERATE ON DIFFERENT FIELDS. THEREFORE, THE CONSIDERATIONS WHICH WOULD BE ATTRACTED WHILE MAKING THE ASSESSMENT IN EXERCISE OF THE POWERS UNDER S. 143(2) AND (3) FOR THE REGULAR ASSESSMENT WOULD 16 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 STAND ON A DIFFERENT FOOTING AND WILL BE GOVERNED BY DIFFERENT PROVISIONS OF THE ACT WHEREAS THE ASSESSMENT FOR THE BLOCK PERIOD AS A RESULT OF THE SEARCH AND SEIZURE WOULD BE GOVERNED BY DIFFERENT PROVISIONS OF THE ACT AND WOULD BE MADE BY THE AO IN ACCORDANCE THEREWITH.' WE AGREE WITH THE AFORESAID OBSERVATIONS OF THE GAUHATI HIGH COURT. 34. LASTLY, THE RESPONDENT HAS RELIED UPON DECISION OF THIS COURT IN CIT VS. VISHAL AGGARWAL IN IT APPEAL 268 OF 2005 DECIDED ON 5TH MAY, 2005 [REPORTED AT (2005) 196 CTR (DEL) 279 ED.]. IN THE SAID DECISION, LIKE IN THE PRESENT CASE, THE ADDITIONS MADE BY THE AO UNDER S. 158BC WERE DELETED BY THE CIT(A) ON THE GROUND THAT FOR THE AMOUNTS TO BE CONSIDERED FOR THE PURPOSES OF BLOCK ASSESSMENT, IT WAS IMPORTANT THAT SOME MATERIAL DOCUMENT OR INFORMATION SHOULD HAVE BEEN DISCOVERED PERTAINING TO THE SAID AMOUNTS UNDER CONSIDERATION DURING THE SEARCH OPERATIONS WHICH WOULD INDICATE THAT THEY C ONSTITUTED CONCEALED INCOME OF THE ASSESSEE. IN THAT CASE THE TRIBUNAL HAD UPHELD THE ORDER OF THE CIT(A) ON THE SAME GROUND. THIS COURT ALSO AFFIRMED THE SAID VIEW. THIS COURT HELD THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND IN THE COURSE OF SEARCH, TH E AO COULD NOT TAKE RESORT TO THE PROVISIONS OF CHAPTER XIV - B OF THE ACT TO TAX WHAT WAS SAID TO BE 'UNDISCLOSED INCOME' OR CONCEALED INCOME OF THE ASSESSEE. WE FIND THAT THE SAID DECISION CONSEQUENTLY APPLIES IN THE FACTS OF THE PRESENT CASE AS WELL. 11.3 .4 THUS FROM THE PROVISIONS OF THE ACT AS WELL AS THE DECISION IN THE CASE OF JUPITER BUILDERS PVT. LTD. (SUPRA), IT IS EVIDENT THAT IN BLOCK ASSESSMENT PROCEEDINGS ADDITION COULD ONLY BE MADE ON THE BASIS OF INCRIMINATING MATERIAL. IN THE ISSUE IN DISPUTE BEFORE US, THE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF ENTRIES APPEARING IN BANK ACCOUNT NO. 999. THOUGH IN PARA - NO. 3, THE ASSESSING OFFICER HAS MENTIONED SAVING BANK ACCOUNT NO. A - 44 IN THE N AME OF THE AS SESSEE WITH VAISH C OOPERATIVE BANK, BUT NEITHER THE NAME OF THE BANK HAS BEEN MENTIONED IN RESPECT OF ACCOUNT NO. 999, NO R IT IS MENTIONED WHETHER IT WAS FOUND IN THE COURSE OF SEARCH PROCEEDING OR GATHERED IN RELATION TO ANY EVIDENCE FOUND DURING THE COUR SE OF SEARCH. 17 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 11.3.5 I T IS CLEAR THAT THE FACT WHETHER THE SAID BANK ACCOUNT WAS REVEALED AS A RESULT OF SEARCH OR GATHERED BY THE ASSESSING OFFICER IN RELATION TO ANY EVIDENCE FOUND DURING THE COURSE OF SEARCH, IS NOT AVAILABLE ON RECORD. IN THE CIRCUMST ANCES, WE FEEL IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THE PANCHNAMAS PREPARED AT THE TIME OF SEARCH AND SEIZED RECORDS AND FIND OUT WHETHER THE SAID DETAILS IN RESPECT OF BANK ACCOUNT NO. 999 WERE FOUND DURIN G THE COURSE OF SEARCH OR GATHERED IN RELATION TO ANY EVIDENCE FOUND DURING THE COURSE OF SEARCH AND THEN DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY , THIS GROUND OF APPEAL IS ALLOW ED FOR STATISTICAL PURPOSE. 12. IN GROUNDS NO. 5.2, 5.2.1 IN 5.2.2 THE ASSESSEE HAS CHALLENGE D SUSTAINING OF ADDITION OF RS.1,65, 317 / - BY THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS). THE FACTS IN RESPECT OF ISSUE IN DISPUTE ARE THAT THE ASSESSI NG OF FICER MADE ADDITION OF RS.2,05, 317/ - REPRESENTING CASH DEPOSITS IN SAVING BANK A CCOUNT NO. A - 44 WITH THE VAISH COOPERATIVE B ANKS LTD. THIS BANK ACCOUNT WAS DETECTED DURING THE COURSE OF SEARCH AND THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF DEPOSIT THE REIN. THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF THREE ENTRIES, OUT OF WHICH ENTRY OF RS. 40,000/ - WAS DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). HOWEVER , TWO ENTRIES WERE UPHELD BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) W ITH OBSERVATIONS AS UNDER: (I) ENTRIES TOTALING TO RS.35769/ - REPRESENTED ACCOMMODATION CHARGES RECEIVED FROM SH. RAM HARI RAM JEWELLERS. THE NATURE OF BUSINESS IS NOT CLEAR AND THEREFORE IT IS HELD TO BE UNDISCLOSED INCOME. IT IS ALSO SEEN THAT THE PA RTNERS OF THE SAID FIRM WERE RELATED TO THE APPELLANT. THEREFORE THIS ADDITION IS UPHELD, (II) REGARDING AN ENTRY OF RS.1,29,548/ - IT WAS SUBMITTED THAT SOME JEWELLERIES AND SILVERWARE WERE PURCHASED FROM THE SAID JEWELER IN 1989 AND THESE 18 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 WERE SOLD ON 27 - 11 - 94 TO ONE SMT.SUSHMA SAHWANY FOR A SUM OF RS.1,29,548/ - . THE AO IN HIS REPORT DATED 16 - 10 - 2003 HAS SUBMITTED THAT HE EXAMINED THE SAID PERSON AND THOUGH SHE CONFIRMED TO HAVE SOLD THE SILVERWARE TO THE APPELLANT FOR CASH, HE ALSO FOUND THAT SHE WAS A SP INSTER STAYING WITH HER BROTHER AND MOTHER, THAT DURING THE RELEVANT PERIOD SHE RECEIVED SALARY OF ONLY RS.7000/ - P/M., THAT SHE COULD NOT PRODUCE HER BANK PASS BOOK, THAT THE ENTIRE AMOUNT WAS PAID IN CASH OUT OF HER SAVINGS THAT WAS HIGHLY IMPROBABLE AND THAT SHE SAID THAT SHE COULD NOT PRODUCE THE ITEMS PURCHASED BY HER AS SHE HAD SOLD IT. SHE DID NOT PRODUCE THE EVIDENCE TO SUPPORT THE SALE OF THE SAID SILVERWARE. I AGREE WITH THE AO THAT ALL THE EVIDENCES PUT TOGETHER ONLY INDICATE THAT ONLY ACCOMMODATI ON ENTRIES WERE MADE IN THE NAME OF MISS SAWHNEY. SHE WAS NOT CAPABLE OF PURCHASING THE SILVERWARE. THEREFORE THE ADDITION IS UPHELD 12.1 B EFORE US , THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED NO EXPLANATIO N IN RESPECT OF AMOUNT OF RS.35, 769/ - , HOWEVER , IN RESPECT OF ADDITION OF RS.1,29, 548/ - THE LEARNED AUTHORIZED REPRESENTATIVE REFERRED TO PAG ES 7 TO 8 AND 58 OF THE ASSESSEE S PAPER BOOK, WHICH ARE THE SUBMISSION BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND CONFIRMATION FROM MS . SUSHMA SAHNI FOR PURCHASE OF SILVERWARES AND MAKING PAYMENT TO THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE ALSO REFERRED TO THE PAGES 68 TO 71 OF THE PAPER BOOK, IN SUPPORT OF PURCHASE OF JEWELLERY BY THE ASSESSEE FROM SH. RAM HARI RAM J EWELLERS . IT WAS CONTENDED THAT MS. SUSHMA SAHNI WAS PRODUCED BEFORE THE ASSESSING OFFICER AND IN HER STATEMENT ON OATH, S H E CONFIRMED TO PURCHASE SILVERWARE FROM THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE REFERRED TO THE STATEMENT OF M R . SAHNI, AVAILABLE ON PAGE S 90 TO 91 OF THE PAPE R BOOK. IT WAS SUBMITTED THAT MS . SAHNI WAS NOT RELATED TO THE ASSESSEE AND THERE WAS NO REASON WHY THE PAYMENT MADE BY HER TO THE ASSESSEE SHOULD NOT BE ACCEPTED , PARTICULARLY WHEN SHE CAME FORWARD AND HER STATEMENT WAS RECORDED AND NO CONTRADICTION OR INCONSISTENCY WAS BROUGHT OUT ON RECORD BY THE ASSESSING OFFICER TO DISBELIEVE HER STATEMENT. IT WAS SUBMITTED THAT NO 19 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 LIABILITY OR BLAME CAN BE FASTENED ON THE ASSESSEE , FOR FAILURE OF MR. SAHNI IN PRODUCING THE ARTICLES OR HER SOURCE OF INVESTMENT. IN THIS CONNECTION THE LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF NATHU RAM PREMCHAND VS. COMMISSIONER OF INCOME T AX, 49 ITR 561. 12.2 THE LEARNED CIT ( D R ) RELIED ON THE FINDING OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE FAILED TO ESTABLISH THE CREDITWORTHINESS OF MS . SUSHMA SAHNI AND THUS THE ASSESSEE COULD NOT DISCHARGE THE ONUS PROVIDED UNDER SECTION 68 OF THE ACT, ACCORDINGLY HE PRAYED TH AT THE ADDITION SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) MIGHT BE UPHELD. 12.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. NO ARGUMENTS HAVE BEEN MADE BEFORE U S IN RESPECT OF ADDITION OF RS.35, 769/ - . IN RESPECT OF THE ADDITION OF RS.1,29, 548/ - THE LEARNED AUTHORIZED REPRESENTATIVE HAS REFERRED TO COPY OF ACCOUNT OF THE ASSESSEE IN THE BOOKS OF SRI RAM HARI R AM JEWELLERS, CONFIRMATION OF MS . SUSHMA SAHNI AND HER STATEMENT. AS AGAINST THE ASSESSING OFFICER HAS POINTED OUT, THAT IN HER STATEMENT, MS . SUSHMA SAHNI SAID THAT SHE BEING A SPINSTER , WAS STAYING WITH HER BROTHER AND MOTHER. WE ALSO OBSERVED THAT SHE COULD NOT PRODUCE ANY EVIDENCE TO SHOW HER CREDITWORTHINESS FOR BUYING SILVERWAR E WEIGHING 23.092 KGS. FURTHER, THE COPY OF ACCOUNT OF THE ASSESSEE MAINTAINED IN THE BOOKS OF THE SRI . RAM HARI JEWELLERS CANNOT BE A CONCLUSIVE EVIDENCE THAT JEWELLERY IN QUESTION WAS SOLD TO MS SAHANI. THE DECISION CITED BY THE LEARNED COUNSEL IN THE CASE OF NATHU RAM PREMCHAND (SUPRA) WAS IN RESPECT OF NON - APPEARANCE OF A WITNESS IN RESPONSE TO SUMMON ISSUED BY THE INCOME TAX OFFICER AND IT WAS HELD BY THE COURT THAT BLAME OF NONAPPEARANCE CANNOT BE FASTED ON THE ASSESSEE. IN OUR OPINION THE RATIO O F THE CITED 20 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 CASE IS NOT APPLICABLE OVER THE FACTS OF THE INSTANT CASE AS IN THE CASE THE WITNESS APPEARED AND HER STATEMENT WAS RECORDED BUT SHE FAILED TO EXPLAIN HER CREDITWORTHINESS . IN VIEW OF ABOVE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE CREDITWORTHINESS OF MS . SUSHMA SAHNI. IN SUCH CIRCUMSTANCES, THE EXPLANATION OF THE ASSESSEE OF DISCHARGING ITS ON US IN RESPECT OF DEPOSIT OF RS.1,29, 548/ - , AS REQUI RED UNDER SECTION 68 OF THE ACT , CANNOT BE ACCEPTED. IN OUR OPINION, THE FINDI NG OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) ON THE ISSUE IN DISPUTE ARE WELL REASONED AND NO FURTHER INTERFERENCE ON OUR PART IS REQUIRED, ACCORDINGLY WE UPHOLD THE SAME. 13. IN GROUNDS NO. 5.3 AND 5.3.1 , THE ASSESSEE HAS CHALLENGED ADDITION OF RS. 1,59, 328/ - . THE ASSESSEE HAS RAISED THAT THE INCOME OF THE ASSESSEE WAS BELOW TAXABLE LIMIT IN THE RELEVANT ASSESSMENT YEAR AND MERELY BECAUSE NO RETURN OF INCOME WAS FILED, THE INCOME EARNED COULD NOT BE HELD AS UNDISCLOSED INCOME . 13.1 IN CONNECTI ON WITH THIS GROUND , LEARNED AUTHORIZED REPRESENTATIVE RELIED ON THE DECISION OF THE HON BLE RAJASTHAN HIGH COURT IN THE CASE OF CHAIN SUKH RATHI VS. CIT 270 ITR 368. 13.2 ON THE OTHER HAND, LEARNED CIT(DR), RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 13.3 WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD IN RESPECT OF THE ISSUE IN DISPUTE. 13.4 THE FACTS IN RESPECT OF THE ADDITION OF RS.1,59, 328/ - , ARE THAT IN THE STATEMENT OF COMPUTATION OF INCOME THE AS SESSING OFFICER FOUND THAT THE ASSESSEE HAD SHOWN ACCOM MODATION CHARGES RECEIPT OF RS.19, 240/ - FOR AY : 19 91 - 92 AND 1992 - 93 EACH AND RS.12, 729 / - FOR AY: 1993 - 94. THE ASSESSING OFFICER HELD THAT AFTER CONSIDERING THE OTHER ADDITIONS, THE INCOME RECEIPT FOR TH E YEARS WAS NO LONGER BELOW THE TAXABLE LIMIT AND 21 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 THEREFORE THIS INCOME WAS TAXED AS UNDISCLOSED INCOME IN THOSE YEARS . 13.5 BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX( APPEALS), THE ASSESSEE CONTESTED THAT INCOME WHICH HAD ALREADY BEEN DISCLOSED BY THE ASSESSEE IN THE BLOCK RETURN FILED BEFORE COMPLETION OF THE BLOCK ASSESSMENT CANNOT BE TERMED AS HAVING BEEN FOUND BY THE ASSESSING OFFICER . THE LEARNED COMMISSIONER OF IN COME - TAX ( APPEAL S) REFERRED TO CLAUSE (CA) AND (C) OF SECTION 158 BB(1) OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE ADDITION ON THIS ACCOUNT BY ALLOWING THE RELIEF GIVEN TO THE ASSESSEE BY HIM. 13. 5.1 IN SECTION 158BB(1) OF THE ACT, IT IS SPECIFIED THAT THE ASSESSING OFFICER SHALL COMPUTE THE TOTAL INCOME INCLUDING UNDISCLOSED INCOME FOR RESPECTIVE YEARS FALLING IN THE BLOCK PERIOD IN ACCORDANCE TO THE PROVISION OF THE ACT ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR OTHER DOCUMENTS OR SUCH OTHER MATERIALS WHICH ARE AVAILABLE WITH ASSESSING OFFICER . THEREAFTER, OUT OF SAID AMOUNT ( SAY AMOUNT A ) , THE AMOUNT OF INCOME OR LOSS MENTIONED IN SUB CLAUSE (A) TO (F) ARE TO BE REDUCED OR INCREASED RESPECTIVELY ( SAY AMOUNT B ) . THUS NET UNDISCLOSED INCOME COMPUTED WILL BE AMOUNT = (A B). 13.5.2 IN CLAUSES (A) TO (F) , DIFFERENT SITUATION HAVE BEEN MENTIONED, ACCORDING TO WHICH AMOUNT B IS TO BE DETERMINED. AS PER CLAUSE (A), THE CASES WHERE ASSESSMENT UNDER SE CTION 143/1 44/147 ARE COMPLETED , THE INCOME COMPUTED IN THAT ASSESSMENT HAS TO BE TAKEN FOR THE PURPOSE OF AMOUNT B . AS PER CLAUSE (B), WHERE RETURN OF INCOME IS FILED, BUT ASSESSMENT IS NOT COMPLETED, THEN INCOME DISCLOSED IN THE RETURN SHALL BE THE AMOUNT FOR THE PURPOSE OF AMOUNT B . 13.5.3 IN CLAUSE (CA), IT IS MENTIONED THAT WHERE THE DUE DATE OF FILING OF RETURN HAS EXPIRED BUT NO RETURN OF INCOME HAS BEEN FILED, NIL AMOUNT SHALL BE TAKEN FOR THE PURPOSE OF AMOUNT B . BUT IN CLAUSE (C), TWO EXCEPTIONS HAV E BEEN CARVED OUT TO DEAL WITH THE CASES WHERE THE DUE 22 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 DATE OF FILING OF RETURN HAS EXPIRED BUT NO RETURN HAS BEEN FILED. ONE SUCH EXCEPTION IS THAT INCOME WHICH IS DETERMINED ON THE BASIS OF ENTRIES RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAI NTAINED IN NORMAL COURSE ON OR BEFORE THE DATE OF SEARCH AND SUCH INCOME DOES NOT EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK PERIOD, SHALL BE REDUCED AS AMOUNT B . THUS IF ANY INCOME WHICH IS APPEARING IN R EGULAR BOOKS OF ACCOUNTS MAINTAINED ON OR BEFORE THE DATE OF SEARCH AND THAT INCOME BEING LESS THAN THE MAXIMUM AMOUNT CHARGEABLE TO TAX I.E EXEMPTION LIMIT, THAT AMOUNT OF INCOME SHALL BE DETERMINED AS AMOUNT B AND SHALL BE REDUCED OUT OF THE AGGREGATE TOTAL INCOME INCLUDING UNDISCLOSED INCOME OF THE PREVIOUS YEARS ( I.E. AMOUNT A ) . IN CLAUSES (D) TO (F) , OTHER THREE SITUATIONS ARE MENTIONED, WHICH ARE NOT RELEVANT TO PRESENT DISPUTE. 13.6 IN THE INSTANT CASE, THE ASSESSEE IS SEEKING BENEFIT OF RED UCING THE AMOUNT OF EXEMPTION LIMIT FOR THE PURPOSE OF AMOUNT B , I.E. THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX, SHOULD BE TAKEN FOR REDUCTION IN RESPECTIVE YEAR(S) OF THE BLOCK PERIOD. 13.7 THE LEGISLATURE HAS MADE IT CLEAR THAT IN SUCH A CASES WHERE N O RETURN OF INCOME HAS BEEN FILED, IF THE AMOUNT DOES NOT EXCEED THE MAXIMUM AMOUNT CHARGEABLE TO TAX AND DULY RECORDED I N THE REGULAR BOOKS OF ACCOUNTS, SHALL BE TAKEN FOR THE PURPOSE OF AMOUNT B I.E THE AMOUNT FOR THE PURPOSE OF REDUCING OUT OF THE AGG REGATE OF TOTAL INCOME OF THE PREVIOUS YEARS COMPUTED INCLUDING UNDISCLOSED INCO ME. IN OUR VIEW , THE LEGISLATURE HAS NOT PROVIDED FOR ANY BLANKET REDUCTION OF AMOUNT OF EXEMPTION LIMIT OUT OF THE TOTAL INCOME UNDISCLOSED INCOME AND THE ONLY INCOME WHICH IS RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED IN REGULAR COURSE SUBJECT TO THE CEILING OF EXEMPTION LIMIT, CAN ONLY BE REDUCED . 23 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 13.8 FURTHER WE FIND THAT IN THE CASE OF CHAIN SUKH RATHI(SUPRA), THE HON BLE RAJASTHAN HIGH COURT HAS HELD AS UNDER: 11. MR. JHANWAR, LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT IN VIEW OF THE PROVISIONS OF S. 158BB THE INCOME SHOULD BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND THE INCOME EXEMPTED TO THAT EXTENT SHOULD NOT BE TAXED. 12. THE READING OF S. 1 58BB IS AS UNDER : 'COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD : (SIC) AMENDMENT HAS BEEN MADE BY INSERTING THE FOLLOWING WORDS IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESULT 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 .' 13. WHEN SOME MATERIAL WAS SEIZED CONNECTING THE CONCEALED INCOME, THE ITO CAN COMPUTE THE INCOME ON THAT BASIS BU T THAT SHOULD BE COMPUTED AND TAXED IN ACCORDANCE WITH THE PROVISIONS OF ACT, 1961. THEREFORE, THE TAX EXEMPTION LIMIT HAS TO BE KEPT IN MIND AND TO THAT EXTENT, INCOME NOT CHARGEABLE TO TAX, TAX SHOULD NOT BE CHARGED ON THAT PART OF THE INCOME. WE AGREE W ITH MR. JHANWAR THAT CONCEALED INCOME SHOULD BE COMPUTED IN CASES OF SEARCH IN ACCORDANCE WITH PROVISION OF S. 158BB AND AFTER COMPUTING THE TOTAL CONCEALED INCOME, IT SHOULD BE TAXED AS PER THE RATES SPECIFIED FOR THE CONCEALED INCOME, IN EACH YEAR. 24 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 13.9 WE FIND THAT THE HON BLE HIGH COURT DIRECTED TO COMPUTE THE INCOME IN ACCORDANCE WI TH THE PROVISION OF SECTION 158BB OF THE ACT . WE HAVE ALREADY DISCUSSED ABOVE , IN THE CASES WHERE NO RETURN HAS BEEN FILED EVEN AFTER EXPIRY OF THE DUE DATE OF FILING THE RETURN, THE AMOUNT RECORDED IN BOOKS OF ACCOUNTS OF THE DOCUMENT MAINTAINED IN THE NORMAL COURSE ON OR BEFORE THE SEARCH SHOULD BE REDUCED WHERE SUCH AMOUNT DOES NOT EXCEED THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX FOR ANY PREVIOUS Y EAR FALLING IN THE BLOCK PERIOD . THUS IN THE CASES OF NON - FILING OF RETURN , THE BENEFIT OF EXEMPTION LIMIT IS GRANTED WHERE THE INCOME IS APPEARING IN THE RECORDS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE ON OR BEFORE THE DATE OF SEARCH . ACCORDING TO CLAUSE (CA) OF THE SEC TION 158BB(1) OF THE ACT , WHERE THE INCOME EXCEEDS THE EXEMPTION LIMIT AND NO RETURN HAS BEEN FILED AFTER THE EXPIRY OF DUE DATE OF FILING OF RETURN, THE AMOUNT FOR REDUCTION OUT OF THE AGGREGATED TOTAL INCOME INCLUDING UNDISCLOSED INCOME TO BE TAKEN AS N IL. 13.10 THE ASSESSING OFFICER ON PAGE 8 OF THE ASSESSMENT ORDER COMPUTED THE UNDISCLOSED INCOME FOR PREVIOUS YEARS FALLING IN THE BLOCK PERIOD AS UNDER : S.NO ASSESSMENT YEAR AMOUNT 1. 1991 - 92 RS.19,240/ - 2 . 1992 - 93 (RS.11520 + 19240) RS. 30,760 / - 3 . 1993 - 94 (RS. 24729 + 24249) RS. 48,978/ - 4 . 1994 - 95 (RS. 21000 + 517) RS. 21,517 / - 5 . 1995 - 96 (RS.129548+699+22056) RS.1,52,303/ - 6 . 1996 - 97 (RS.4,36,623 + 24000) RS.4,60,623/ - 7 . 1997 - 98 (RS.40000+181140+29063) RS.2,50,203/ - 8 . 1999 - 00 (RS.2, 40,000 +1,11,000/ - ) RS.3,51,000/ - 9 . 2000 - 01 RS.2,40,000/ - 25 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 10 . 2001 - 02 (RS.273000 + 75000/ - ) RS.3,48,000/ - 13.11 TH E ASSESSING OFFICER HAS FURTHER , MENTIONED THAT INCOME C OMPUTED FOR THE ASSESSMENT YEARS 19 91 - 92 TO 19 94 - 95 WAS BELOW THE TAXABLE LIMIT HENCE ALLOWED AS D EDUCTION UNDER SECTION 158BB(1)(C) (B) OF THE ACT. THE UNDISCLOSED INCOME IN RESPECT OF THE ASSESSMENT YEARS OTHER THAN ASSESSMENT YEAR S 1991 - 92 TO 1994 - 95 BEING MORE THAN AMOUNT OF TAXABLE LIMIT IN RESPECTIVE YEARS , TOTAL OF WHICH WAS RS.18,18, 867/ - WAS ASSESSED AS UNDIS CLOSED INCOME UNDER SECTION 158 BC OF THE ACT. THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS ALLOWED CERTAIN RELI EF TO THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE UNDISCLOSED INCOME KEEPING IN VIEW CLA USE( C A) & (C) OF SECTION 158BB(1) OF THE ACT. 13.12 IN VIEW OF BACKGROUND OF THE DISCUSSION ABOVE, WE DIRECT THE ASSESSING OFFICER TO RECOMPUTE AGGREGATE TOTAL INCOME INCLUDING UNDISCLOSED INCOME AFTER GIVING EFFECT TO OUR ORDER AND THEN REDUCE THE INCOME O UT OF THE AGGREGATE TOTAL INCOME INCLUDING UNDISCLOSED INCOME AS PER THE CLAUSES (A) TO (F) OF SECTION 158BB(1) OF THE ACT AS DISCUSSED ABOVE. THIS GROUND OF THE APPEAL IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 14. IN GROUND NO. 6, THE ASSESSEE CHALLENGED SUSTAI NING THE ADDITION OF RS. 50,000/ - TOWARDS INVESTMENT ON FDR IN THE NAME OF MINOR DAUGHTER OF THE ASSESSEE. THE FDR WAS INITIALLY MADE FOR RS. 50,000 / - AND AFTER ACCRUAL OF THE INTEREST, IT AGGREGATED TO RS.75,000/ - . T HE ASSESSING OFFICER HE LD THAT NO EXPLANATION REGARDING SOURCE OF THE INVESTMENT WAS FILED BY THE ASSESSEE AND THE SAID INVESTMENT WAS ALSO NOT APPEARING IN THE RETURN OF INCOME OF ASSESSEE S WIFE FOR ASSESSMENT YEAR 19 98 - 99 TO 2000 - 01 AS WELL AS IN THE STATEMENT OF ASSETS AS ON 31/03/1999 AND 26 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 31/03/2000 FILED . THE ASSESSING OFFICER HELD THAT INCOME OF THE MINOR CHILD WAS REQUIRED TO BE CLUBBED IN THE HANDS OF THE PARENTS DERIVING HIGHER INCOME AND , THEREFORE , IT SHOULD HAVE BEEN CLUBBED IN THE HAND OF THE AS SESSEE . BEFORE THE LE ARNED COMMISSIONER OF INCOME - TAX ( APPEALS), THE ASSESSEE SUBMITTED THAT THE INVESTMENT WAS MADE BY THE ASSESSEE S WIFE, OUT OF CASH WITHDRAWAL BY HER FROM HER BANK ACCOUNT AND WAS INCLUDED IN THE CASH FLOW STATEMENT SUBMITTED BY HER. IN VIEW OF THE FACTS O BSERVED BY THE ASSESSING OFFICER, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ADDITION OF INVESTMENT OF RS. 50,000/ - BUT ALLOWED RELIEF IN RESPECT OF INTEREST ACCRUED FROM YEAR TO YEAR , UNDER SECTION 80L OF THE ACT. 14.1 BEFORE US , THE LEA RNED AUTHORIZED REPRESENTATIVE REPEATED THE SUBMISSION MADE BEFORE THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) AND PRAYED TO DELETE THE ADDITION. 14.2 THE LEARNED CIT ( DR ), ON THE OTHER HAND , RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 14.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE INVESTMENT HAS NOT BEEN DECLARED BY THE WIFE OF THE ASSESSEE IN HER RETURN OF INCOME AND EVEN NOT REFLECTED IN THE STATEMENT OF ASSETS FOR THE RELEVANT PERIOD EN DING . ONLY GENERAL SUBMISSION THAT INVESTMENT WAS MADE OUT OF CASH WI THDRAWAL BY THE ASSESSEE S WIFE , CANNOT BE ACCEPTED. THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS ELABORATELY DEALT THE ISSUE AND FINDING OF THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) ON THE ISSUE IN DISPUTE ARE WELL REASONED, ACCORDINGLY , WE UPHOLD THE SAME. THE GROUND IS DISMISSED. 27 ITA NO. 50/DEL/2004 BLOCK PERIOD: 01.04.1990 TO 11.01.2001 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES . THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 0 T H NOV. , 2016 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H NOVEMBER , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI