Ram Nath Singh, V. DCIT,

ITSSA 7/PAT/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3413 (ITAT-PATNA)
• Duration Of Justice: 6 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 17-05-2022
• Assessment Year: misc
• Appeal Filed On: 10-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift; Depreciation; Search and seizure; Salary income; Document seized; Tangible material; Competent authority; Block assessment; Documents seized; Unabsorbed depreciation
• Section: 32; 147; 132; 144; 69C; 80C; 139; 143(3); 142(1); 69B; 250; 143(2); 158BC; 158B(b); 158BFA; 22

Judgement Text

आयकर अपीलीय अिधकरण, “पटना“ ᭠यायपीठ पटना IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA (Heard from Kolkata Benches through web-based video conferencing platform) ] ] BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1998-99 Ram Nath Singh Raghunath Tola Anishabad Patna - 800002 PAN: AHKPS4357D Vs Deputy Commissioner of Income Tax, Central Circle-4, Patna अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri K.N. Prasad, Advocate Revenue by : Shri Saumyajit Dasgupta, CIT D/R सुनवाई कᳱ तारीख/Date of Hearing : 18/05/2022 घोषणा कᳱ तारीख /Date of Pronouncement : 26/07/2022 आदेश/O R D E R PER RAJPAL YADAV, VICE PRESIDENT : The assessee is in appeal before the Tribunal against the order of the Learned Commissioner of Income Tax (Appeal) - 3, Patna, [hereinafter the “ld. CIT(A)”], dt. 12/02/2016, passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), for the block period starting from 1989-90 to 21 st April, 1998. 2. The assessee has taken eighteen (18) grounds of appeal out of which Ground Nos. 17 & 18 are general grounds of appeal which do not call for any specific findings, and are rejected as such. 3. Before taking the grounds in appeal in seriatim, we deem it proper to take note of the brief facts. The assessee was working as an Executive Engineer, Government of Bihar, PWD. He retired on 31/03/1998. It appears that on account of some investigation of the assessee’s involvement in the bitumen scam, a search was also conducted on the assessee u/s 132 of the I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 2 Act on 21/04/1998. According to the revenue, during the course of search incriminating material were found and seized. A notice u/s 158BC of the Act was issued and served upon the assessee. In response to this notice a return of undisclosed income of Rs.11,30,740/- was filed by the assessee. This return has a tax liability of Rs.6,78,444/- and the assessee had made a request that this amount be realized from the cash seized as well as available in other bank accounts which were freezed. The Assessing Officer after hearing the assessee passed a Block assessment order u/s 158BC/143(3) of the Act on 28/04/2000. He determined the undisclosed income of the block period at Rs.1,06,37,123/-. The Assessing Officer has made various additions. 3.1. The assessee carried the matter in appeal before the ld. First Appellate Authority, who has partly allowed the appeal vide the impugned order. 4. Before we embark upon an enquiry on each of the additions and explanation of the assessee, in order to find out what should be the undisclosed income of the assessee for the block period, we deem it appropriate to take note of the relevant provisions expounding the scope of a Block assessment, the method of determining undisclosed income in a block assessment. 5. Sections 158B(b) and 158BB provide the definition of undisclosed income and its computation for the block period. These provisions read as under: 158B(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 been 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. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 3 158BB Computation of undisclosed income of the block period.-- (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, 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, 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) 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 requisition), on the basis of such assessments; (b) where returns of income have been filed under Section 139 (or in response to a notice issued under Sub-section (1) of Section 142 or Section 148) but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns; (c) where the due date for filing a return of income has expired, but no return of income has been filed,- (A) on the basis of entries 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 where such entries result in computation of loss for any previous year falling in the block period; (B) or (B) on the basis of entries 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 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 income 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 date of filing the return of income under Sub-section (1) of Section 139 has not expired, on the basis of entries relating 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 relating to such previous years; I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 4 (e) where any order of settlement has been made under Sub-section (4) of Section 245D, on the basis of such order; (f) where an assessment of undisclosed income had been 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 income 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 Sub- section (2) of Section 32: Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or unabsorbed depreciation under Sub-section (2)of Section 32; (b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being a working partner: Provided that undisclosed income of the firm so determined 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 determination of income under Sub-section (1) or Sub-section (1B) of Section 143. (2) In computing the undisclosed income of the block period, the provisions of Sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to 'financial year' in those sections shall be construed as references to the relevant previous 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 the AO that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under Sub-section of Section 32 shall not be set off against the undisclosed income I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 5 determined in the block assessment under this chapter, but may be carried forward for being set off in the regular assessments. 6. 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) 250 ITR 141 (Del) has observed that the special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. As the statutory provisions go to show, it is not intended to be a substitute for regular assessment. 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 information as are available with the AO. Evidence found as a result of search is clearly relatable to Sections 132 and 132A. Similarly Hon'ble Rajasthan High Court has explained the scope of block assessment and determination 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 block assessment, 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 Section 158BB that the returns are also required to be filed in pursuance of the notice under Section 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 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 possession 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 assessee do not accord with the materials which are already in the possession of the authority, it can be estimated 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 de hors the material in his possession, while making regular I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 6 assessment order under Section 158BB. It has to be borne in mind that proceedings under Sections 158BB and 158BC are that of undisclosed income. Therefore, the proceeding 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 accounts. 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 Sections 158BB and 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 adjudicate whether the assessee is still honestly disclosing his income correctly after incriminating material 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.” 7. The Hon'ble Bombay High Court had also an occasion to examine the concept of block assessment in CIT v. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom), wherein it was found that an assessee had constructed a bungalow and incurred an expense of Rs. 4,16,000. Thereafter search was carried out and the AO referred the valuation of the bungalow to the Departmental Valuer who determined the value of the property at Rs. 6,66,000 and the AO added the difference to the income of the assessee as undisclosed income. The Tribunal has deleted the addition on the ground that addition was not made on the basis of the material gathered during the course of search, rather all these informations were available to the AO at the time of regular assessment. He obtained the DVO's report subsequent to the regular assessment, therefore, addition is made beyond the scope of block assessment. The Hon'ble Bombay High Court upheld the deletion made by the Tribunal. 8. The Tribunal Mumbai Bench in the case of Sunder Agencies v. Dy. CIT (1997) 59 TTJ (Mumbai) 610 : (1997) 63 ITD 245 (Mumbai) has made extremely I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 7 lucid enunciation of law on the subject and we cannot do better than to extract some of the observations made in that decision; "23.There are adequate safeguards present against any possible misuse of the provision of search and seizure. Chapter XIV-B was introduced in order to make procedure of assessment of search and for requisition cases more effective. Under the provisions of this chapter the undisclosed income detected as a result of search initiated or requisition made after 30th June, 1995 be assessed separately as income of that block of ten previous years. The provision was introduced to streamline the procedure concerning the search matters. It is abundantly clear from the perusal of the prescription of Section 158BA that within the pale of Chapter XIV-B assessment could be made only in respect of the undisclosed income. Such undisclosed income must come as a result of search. This section does not provide a licence to the Revenue for making roving enquiries connected with the completed assessment. It is beyond the power of the AO to review the assessments completed unless some direct evidence comes to the knowledge of the Department as a result of search which indicates clearly the factum of undisclosed income. Without such evidence or material the AO is not empowered to draw any presumption as to the existence of undisclosed income. A presumption is an inference of fact drawn from other known or proved facts. It is rule of law under which Courts are authorised to draw a particular inference 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 regard to the undisclosed income. The AO could proceed on the basis of material detected at the time of search and the evidence gathered. 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, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Act.” 9. From the above it is clear that undisclosed income in block assessment has to be determined on the basis of the seized material. Thus for assessing an assessee for a block period there should be a search conducted under Section 132. The search only would infuse jurisdiction to an AO over the assessee. The next step for the AO is to serve a notice upon the assessee under Section 158BC inviting it for furnishing the return. When the return is being furnished the AO was required to issue notice under Section 142(1) or under Section 143(2) etc. and compute the undisclosed I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 8 income of the assessee. If such return was not filed then on the basis of the seized material AO would compute the undisclosed income for the block period. 10. The scheme of the block assessment indicates that assessee has to compute its undisclosed income for the purpose of filing a block return on the basis of seized material. If he failed to compute the true undisclosed income on the basis of the seized material and the AO determined a different undisclosed income than the one disclosed by the assesses, the assessee would be liable to penalty under Section 158BFA(2). 11. The second proviso appended with s. 158BC(1) prohibits an assessee to revise its return filed for the block period. This in response to a notice under s. 158BC if an assessee had filed the return of income, it cannot revise that return. 12. Sec. 158BFA(1) contemplates that if the assessee furnishes the return after expiry of the time limit provided in the notice issued under s. 158BC(1) then assessee shall be liable to pay simple interest @ 1 per cent of the tax on undisclosed income. 13. The above chronological procedural requirement contemplates that an assessee (i) has to compute the undisclosed income on the basis of the seized material for filing the return in response to notice under s. 158BC, (ii) if the assessee failed to compute true undisclosed income and the AO determined a different undisclosed income than the one returned by the assessee, the assessee will be exposed to penalty, (iii) if the assessee failed to file the return within the time-limit provided in the notice issued under s. 158BC, an interest under s. 158BFA (1) would be imposed upon the assessee. In the present case such interest has been imposed upon the assessee of I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 9 more than Rs. 4 crores per month, (iv) s. 158BE provides the limitation for passing an assessment order under s. 158BC or 158BD. The limitation has to be counted from the execution of the last authorized warrant of search. If a notice under s. 158BC is issued during the pendency of search and assessment proceedings begin the Department would execute such warrant of search according to the will and that can enhance the limitation for passing an assessment order. It can be seen from the present assessment that notice under s. 158BC was issued on 18th May, 2001, search was concluded in the first week of June and the AO got the enhanced limitation of roughly 20 days. In a given case it can be extended even for a longer period, (v) according to second proviso to s. 158BC assessee cannot revise a return furnished in response to a notice under s. 158BC. 14. In light of the above, now let us examine each ground. 15. Ground Nos. 1, 2 & 3 In Ground Nos. 1 & 2, the assessee has challenged the validity of the search whereas in Ground No. 3, the assessee has raised a peripherial argument pleading therein that the ld. CIT(A) has erred in dismissing his first two grounds where validity of the search has been challenged. The case of the assessee is that section 132(1) of the Act contemplates that there should be a reasonable belief on the basis of information that action u/s 132 of the Act is required against the assessee. According to the assessee there was no material available on the record which justified this belief at the end of the competent authority for issuing a search warrant. In other words, the search warrant was issued mechanically and without collecting complete information. On the other hand, the ld. CIT D/R, relied upon the finding of the ld. CIT(A). I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 10 15.1. We have duly considered the rival contentions and gone through the record carefully. We find that the ld. CIT(A) has rejected this contention of the assessee on the ground that this issue does not emerge from the assessment order rather it is a plea raised by the assessee for the first time against an administrative order whereby search warrant was issued. On due consideration of the above finding we are of the view that except pleading in the grounds of appeal, there is no material with the assessee for buttressing its contention. To take action u/s 132(1) of the Act, is an administrative action, which must have been formed before the search was carried out. Nothing is available before us reflecting as to what material was possessed by the revenue, how the competent authority has formed its opinion. To our mind, the assessee should have challenged this action before the appropriate forum because it was an administrative order. In a regular appeal the assessee should have collected all those information and placed before us, so that it may have been appreciated as to whether some tangible material was available with the revenue authority or not for issuing the search warrant. But no such plea has been taken nor anything is available for us on the record. Therefore all these three grounds of appeal are rejected. 16. Ground No. 4:- In this ground, the assessee has challenged an addition of ₹ 30,000/-. The facts of the case are that the assessee has filed its return of income for Assessment Year 1997-98. In the balance sheet for Assessment Year 1997-98, an investment in shares of M/s. Escort Finance Ltd., in the name of the assessee’s son was reflecting. The ld. CIT(A) has observed that the stand of the assessee is contradictory. During the course of search, his statement was recorded wherein he has admitted that the sum of ₹ 30,000/-, was invested I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 11 in M/s. Escort Finance Ltd., in the name of his son who was a student of M. Tech., getting a stipend of ₹ 18,000/-. Thus, the assessing officer added this amount as unexplained investment of the assessee. However, after the search and before us the assessee took a stand that this addition is not based on any seized material rather it has been made on the basis of the balance sheet filed by the assessee before the date of search. 16.1. We have duly considered the rival contentions. The undisclosed income for the block period, could not be determined based on items which have been already disclosed to the revenue before the date of search. The allowance and disallowance of any item can only be examined in a regular assessment and not in a block assessment. Here according to the assessee he has disclosed this investment in the balance sheet for Assessment Year 1997- 98 filed before the search. This fact has not been rejected by both the lower authorities, rather the ld. CIT(A) has given importance to the statement of the assessee recorded during the course of search. The short question is whether the unexplained investment in the shares of M/s. Escort Finance Ltd., were unearthed during the course of search or it was brought to the notice of the Department prior to the search. What has been admitted by the assessee is totally immaterial because an artificial line has to be drawn before the date of search and if anything is disclosed which is not admissible in law then that subject has to be investigated only during the course of regular assessment proceedings and action is required to be taken u/s 143(3) or 147 of the Act. It cannot be subject matter of a block assessment u/s 158BC. Accordingly, this ground of the appeal is allowed and the addition is deleted. 17. Ground No. 5:- I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 12 In this ground of the appeal, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the following additions which were added by the assessing officer being short-term deposit/investment. The details of the amounts along with the findings of the ld. CIT(A) as well as explanation of the assessee has been enumerated by the assessee in the written submissions filed. We deem it proper to take note of the same, which reads as under:- “4.1 That the next dispute in this case is with regard that the learned CIT(A) is not justified in confirming the following additions as made by the Assessing Officer being the impugned short term deposits/ investment:- (i) Rs. 26,477/- in Assessment Year 1993-94; (ii) Rs. 13,294/- in Assessment Year 1995-96; (iii) Rs. 56,777/- in Assessment Year 1995-96; (iv) Rs. 2757/- in Assessment Year 1995-96; and (v) Rs. 25,024/- in Assessment Year 1995-96 (Deposit owned and belong to Renu Kumari). 4.2. That while confirming the aforesaid impugned investment, the learned CIT(A) observed as under:- "During the appellate proceeding, the issue was remanded to the AO and in the remand report dated 26.04.2010, the A.O. had given comments on the investment in FDR during the period 1992-93 to 1995-96 which has been reproduced in the foregoing grounds of appeal. In the remand, AO has stated that the appellant did not had any house property income during the period 1992-93 to 1995-96 and appellant was only substantial earning member of the joint family. Therefore, his salary income could not be said to suffice for investments in FDRs or other investments. The appellant's contention during the appellate proceeding is only for the sake of argument and without going into the facts of the notings on the seized document which clearly reflected short term deposits with New Bank of India on various dates as welt as short term deposits at Rajapur Branch of bank and all these deposits had also mentioned specific receipt nos. / short term deposit nos. with dates. The appellant cannot avoid explanation on these specific notings as being without any corroborative evidence. The mention of the bank name as well as the specific nos. and dates clearly indicate the nature of investment in short term deposits. The appellant has referred to some decisions and also contended that the onus is on the revenue to establish that in the I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 13 said year impugned investment have been made. This contention of the appellant is not tenable as the provision of sec. 132(4) of the IT Act, 1961 raises presumptions against the appellant in respect of any of the seized document found during the course of search and seizure action. Thus, with the specific short term depicts nos. dates and amounts as well as the name of the bank, ledger folio mentioned on two of the notings, the appellant was Rs. 56,777/- (1995-96), Rs 2,7571-(AY 1995-96) & 15.024/- (AY 1995-96) are hereby confirmed." 4.3 That it is respectfully submitted inter-alia:- (a) That the aforesaid additions have been made on impugned noting/jotting in a diary marked as SK - 6. (b) That the Assessing Officer has made the additions on mere presumption and surmises that the assessee might have acquired aforesaid impugned fixed deposits. (c) That during the course of search no scripts of F.D. were found. On the basis of some noting/jotting in a diary, no additions could be made in as much as the Assessing Officer had not stated the date on which the impugned fixed deposits were purchased. (d) That the aforesaid addition as enumerated in para 7.1 above has been made on the basis of some noting/ jotting in the diary. It is submitted that no addition could be made on the basis of some noting/ jotting in the diary without any corroborating evidence. (e) That the appellant is placing reliance on the following decisions:- (i) Munga Metal Pvt. Ltd. vs ACIT, reported in 67 TTJ Page 247. (ii) Central Bureau of Investigation vs VC Shukla and Others, reported in (1998) 3 SCC Page 410. (f) That during the course of search no any script of alleged FDRs were found. (g) That without prejudice to above, it is submitted that if certain jotting is noted in the diary as due and receivable, the addition in the year in which certain particulars was shown as due to be materialized cannot be made. The onus is on the revenue to establish that the year in which impugned investment have been made. The onus has not been discharged by the revenue. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 14 4.4 That there is no date(s) on which the impugned Fixed Deposits were purchased. The addition has been sustained on the presumption that the assessee was legally bound under the provisions of section 132(4) of the Act to explain the source of such deposits. It is respectfully submitted that the addition as sustained is illegal, arbitrary, bad and unjustified. The addition as sustained as sustained is fit to be deleted.” 17.1. The ld. Counsel for the assessee, relied upon his written submissions as noticed by us. On the other hand, the ld. CIT D/R relied upon the order of the ld. CIT(A). 18. There is no dispute with regard to the fact that during the search a diary was found, reflecting short-term deposits with New Bank of India, Rajapur Branch. According to the revenue, the assessee’s salary was not sufficient to make such a short-term deposits. Whereas according to the assessee, the FDRs were not found. These were some notings/jottings in the diary exhibiting some investment but neither the dates are there nor copy of the FDRs were there. Hence the addition for the block year cannot be made. 19. On due consideration of the above material, we do not find any merit in the contention of the ld. Counsel for the assessee because the ld. CIT(A) has recorded a specific finding of fact that the diary contains the dates, slip nos./scrip nos. and the amounts. It does reflect that the assessee has made investment in different areas which might be for a short period and must have matured prior to the date of search. Evidence exhibiting investment in FDRs was found which was required to be explained by the assessee on the basis of proper source of investment. The assessee filed the discharge the burden of proof that lay on him. Hence these amounts have rightly been treated as undisclosed income of the assessee for these years and addition rightly been made. Thus, the addition is confirmed and this ground of appeal is dismissed. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 15 20. Ground No. 6:- In this ground of appeal the assessee has challenged the addition of Rs. 3,75,000/- (Assessment Year 1998-99). The facts of the case are that the assessee has gifted a Tata Sumo at the occasion of his daughter’s marriage. This vehicle was arranged by taking finance from M/s. Kasturi Finance Ltd.. The assessee failed to explain the source of investment in this vehicle. Hence this addition was made. On appeal, the ld. CIT(A) has confirmed the addition by observing as under:- “There is no dispute that the purchase of Tata Sumo worth Rs.3,75,000/-was indicated as per the seized documents as mentioned by the AO in the assessment order and the said vehicle was given as marriage gift to the daughter of the appellant at the time of her marriage, it is also not disputed by the appellant that the seized document indicated acknowledgment of cash receipt by the MD of Kasturi Finance Ltd. In the remand proceeding, the appellant produced money receipt from Kasturi Leasing Pvt Ltd. and the AO in his remand report has observed that the money receipt appears to be genuine. However, the production of money receipt in the remand proceeding, in no way controverts the findings of the AO in the assessment proceeding regarding acknowledged cash receipt by financer based on notings of the seized documents. Further, the discrepancies in the books of accounts of the financer and the appellant's so called balance sheet as at 31.03. 1998 has also been mentioned by the AO in the original assessment proceeding. In the remand proceeding or at the time of appellate proceeding the appellant has not been able to controvert the notings of acknowledgement of cash receipt by the financer Kasturi Leasing Pvt Ltd. The appellant's claim in the remand proceeding that the certificate of full payment of financer was received due to demand of the bridegroom is merely an afterthought and cover up being given to the actual transaction of cash payment for purchase of Tata Sumo vehicle in the garb of hire purchase agreement. There is no sanctity to the balance sheet drawn by the appellant as on 31.03.1997 and 31.03. 1998 as year wise balance sheet and re turns of income for most of the AYrs in the block was not filed by the appellant. Considering these factual position evidenced from seized document, I am not inclined to accept appellant's contention and hence the addition of Rs. 3,75,000/- as undisclosed investment in purchase of Tata Sumo car for AY 1998-99 is hereby confirmed.” 21. Before us, the ld. Counsel for the assessee drew our attention towards the remand report submitted by the assessing officer during the hearing I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 16 before the ld. CIT(A). The contents of such remand report dt. 26/04/2010, is available in the written submission of the assessee and they read as under: – “The assessee had stated that this vehicle was ‘gifted’ to her daughter at the time of her marriage. He also stated that due to the demand of the bridegroom, he had to obtain certificate of full payment from the financer. However, during the remand proceedings, the assessee produced copies of money receipt by M/s Kasturi Leasing India Pvt. Ltd., a company loan which the assessee took loan for purchase of Tata Sumo Vehicle. He produced the original money receipts a copy thereof. The same appears genuine.” 22. According to the ld. Counsel for the assessee, there is no dispute with regard to the purchase of a Tata sumo which was financed from M/s. Kasturi Finance Ltd. according to him under the pressure of bridegroom the assessee had taken a cash receipt from the MD of M/s. Kasturi Finance Ltd., exhibiting the fact that loan has been discharged. On the contrary this loan was discharged subsequently and assessee has produced original cash receipts to the Assessing Officer which was accepted by the Assessing Officer as genuine in the remand report. On the other hand, the ld. D/R relied upon the findings of the ld. CIT(A). 23. On due consideration of the facts and circumstances of the case, we are of the view that the assessee has demonstrated as to why this should not form part of undisclosed income. According to the assessee the loan was repaid subsequently but only for the sake of prestige or for some other reason a cash receipt was taken from M/s. Kasturi Finance Ltd. there is no material possessed by the ld. CIT(A) to observe that this claim made by the assessee during the remand proceedings is an afterthought. Once the Assessing Officer, after examining the original receipts accepted it as genuine then, the ld. First Appellate Authority ought to have not brushed aside the finding of the Assessing Officer on the basis of some apprehension of facts. The assessee has explained the source of these investment and I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 17 hence this addition is not sustainable. Accordingly we allow this ground of appeal and delete the addition. 24. Ground No. 7:- In this ground of appeal the grievance of the assessee is that the ld. CIT(A) has ordered in confirming the addition of Rs.43,055/-. Brief facts qua the issue are that, a motorcycle was purchased during the Assessment Year 1997-98. This investment has been considered as undisclosed income of the assessee. However, we find that this motorcycle was purchased before the date of search and duly reflected in the accounts. Its registration was also obtained prior to the date of search. Hence it cannot be counted as an unexplained income for the purpose of block assessment. Accordingly, we allow this ground of appeal and delete the addition. 25. Ground No. 8 :- In this ground the grievance of the assessee is that the ld. CIT(A) has erred in confirming the addition of Rs.3,40,474/- in Assessment Year 1998- 99. With the assistance of the ld. Representatives we have gone through the record carefully. The case of the assessee is that his son Mr. Rewati Raman Singh got married to Ms. Rina and at the time of marriage a Maruti Zen car was gifted to them by the parents of Ms. Rina. Hence it was not an undisclosed income to be assessed in the hands of the assessee. The amount is in the name of the assessee’s son/daughter-in-law and cannot be treated as unexplained investment in the hands of the assessee. The statement of the donor, Shri Raghuvansh Prasad was recorded in this regard by the revenue. This fact is reflected in the remand report dt 26/04/2010 available in the paper book and page number 49. On due consideration of the above aspect, we delete the addition of Rs.3,40,474/-. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 18 26. Ground No. 9:- In this ground, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the addition of Rs.15,360/- in respect of purchase of shares. During the course of search, a diary was found and inventoried as SK-4. There are jottings in his diary which contain investment in shares. The details of these shares have been narrated in the impugned order. These were made in the assessment years 1993-94, 1994-95, 1996-97 & 1999-2000. The total investment was Rs.42,035/-. During the assessment proceedings, the Assessing Officer did not accept the explanation of the assessee. But on appeal, the ld. CIT(A) accepted the explanation to the extent of the purchase of shares worth Rs.26,675/- during these years and the ld. CIT has deleted this addition. However, he confirmed the addition to the extent of Rs.15,360/- . The ld. Counsel for the assessee contended that the addition was made merely on the basis on jotting and notings in the diary. No other details were found. Therefore, no addition has to be made in this regard. He relied upon the order of ITAT in the case of Monga Metals Pvt. Ltd. Vs. ACIT 67 TTJ (All) 247 and Central Bureau Of Investigation vs V.C. Shukla & Ors reported in [1998] 3 SSC 410. On the other hand, the ld. D/R relied upon the order of the ld. CIT(A) and took us through the findings. 27. On due consideration of the above facts and circumstances, we do not find any merit in this ground of appeal. During the course of such a diary inventorized as SK-4 was found and seized which contains investment in certain shares. It is not certain as to when these shares have been sold by the assessee and if that be so, how copy of the share certificate could be available. It is sufficient to assume that investment was made by the assessee during the block period and it was required to be explained by I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 19 him. He failed to explain the source. Hence we find that the ld. CIT(A) has rightly rejected the ground of the assessee. We find no reason to interfere with the same. Accordingly this ground of the assessee is dismissed. 28. Ground No. 10:- The ld. CIT(A) has erred in confirming the addition of Rs.1,77,172/-in respect of marriage expenses. The Assessing Officer has estimated the expenditure at Rs.3,24,500/- and Rs.35,157/-. However, on appeal, the ld. CIT(A) restricted it to a lower amount. On due consideration of the above facts and circumstances, we find that this addition is not substantiated with any seized material. Rather it is based on presumption that the assessee must have incurred expenditure on the marriage of his daughter. The revenue authorities were expecting at the end of the assessee to demonstrate the expenditure with the bank account but there can be many factors, namely, (a) whether expenditure was incurred (b) whether any family member has contributed (c) whether any gifts were received at the time of marriage as Kanyadaan has been recognized. For determining all these factors regular assessment is meant and not a block assessment. It is a special assessment for a period of 10 years where income has to be determined strictly on the basis of seized material and not by assumption. Hence this ground of appeal is allowed and addition is deleted. 29. Ground No. 11:- In this ground of appeal, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the addition of Rs.20,000/- being loan advance to Shri Ram Lal Rastogi in Assessment Year 1998-99. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 20 According to the assessee, this was disclosed investment for Assessment Year 1997-98 and duly reflected in the balance sheet. We find that the ld. First Appellate Authority has confirmed this addition on the ground that the balance sheet of the assessee is not verifiable but to our mind that should be subject matter of a regular assessment and not block assessment. The ld. CIT(A) failed to draw distinction between the scope of both the assessments. Accordingly this addition is not sustainable and the same is deleted. 30. Ground No. 12:- The grievance of the assessee in this ground of appeal relates to the additions made on account of unexplained investment in LIC payments. During the course of search, following receipts/evidence of LIC policies were found:- SI NO. NAME POLICY NO. YEARLY PAYMENT PAGE OF SK-2 COMMENCEMENT FROM 1 R.N. SINGH 510017151 9100 21 28.03.1988 2 R.R. SINGH 510398874 6694 22 15.12.1990 3 RAMA VIDYADHAR 510395464 1626.30 X 4 =6505.20 24 26.03.1990 The Assessing Officer was of the view that when the assessee was confronted with regard to the source of payments for purchasing the LIC then, it was contended that two policies were taken in the name of assessee’s sons and they have purchased those policies. Hence the assessee is not supposed to explain the same. As far as the policy in his name is concerned, the assessee has duly disclosed the source of such payments being salary income. The Assessing Officer was not satisfied with the explanation, he observed that both the sons were not having sufficient means of earning from which investments in the LIC policies can be made. Hence, he made the addition. Appeal before the ld. CIT(A), did not bring any relief to the assessee. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 21 31. With the assistance of the ld. Representatives, we have gone through the record carefully. The evidence exhibiting investment in LIC policies were found and seized during the course of search which was inventorized in SK-2 at pages no. 21 to 24. Except one payment i.e., Rs.9,100/- for Assessment Year 1991-92 all other payments have been made in cash. This one payment was made through proper banking channel. It was contended by the assessee that Rana Vidyadhar has purchased his LIC policy out of his salary income but he was drawing salary of Rs.1300/- per month only and according to the Assessing Officer it was not possible to make payment of Rs.13,199.20/- every year. He must have some other expenditure also. It is pertinent to note that these investments were made in 1988 and 1990. It is not demonstrated whether in these years sons of the assessee had any earning. The appellant has just raised a plea about salary income of Rana Vidyadhar but failed to show when he started earning. Therefore, considering the concurrent finding of fact at the end of the both the revenue authorities. We do not find any merit in the explanation of the assessee. These LIC policies were purchased in the names of family member and their payments must have been made by the assessee. The assessee has not recorded these payments in the accounts and not disclosed in the regular return of income. Therefore, their source can be examined in the block assessment. The material relating to this unexplained investment was seized during the course of search. In view of the above discussion, this Ground is rejected. 32. Ground No. 13:- In this ground, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the addition of Rs.4,93,000/- on account of undisclosed investment in construction of house. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 22 The assessee had constructed a house and its investment was duly disclosed in its regular banks of accounts but the Assessing Officer has made a reference to the DVO for determining the value of the house. On the basis of valuer’s report, he made the addition of Rs.4,93,000/-. While expounding the scope of block assessment in the earlier paragraph of this order, reference was drawn to the judgment of the Hon’ble Bombay High Court in the case of CIT v. Vinod Danchand Ghodawat (supra), wherein a specific issue of similar nature arose and it has been held that addition on the basis of valuation cannot be made in the block assessment. It can be a subject matter of regular assessment and not a block assessment. Therefore, the ld. CIT(A) has erred in confirming the addition. Hence we delete the addition and allow this ground of appeal. 33. Ground No. 14:- In this Ground of appeal, the grievance of the assessee is that the ld. CIT(A) has erred in confirming the undisclosed investment for purchase of two shops amounting to Rs.1,48,000/-. During the course of search, it revealed that two shops were purchased in the name of two sons of the assessee, namely, Shri Rana Vidhya Dhar and Shri Rewati Raman Singh. The value of each shop was Rs.74,000/-. According to the Assessing Officer, both the sons were not having sufficient source of investment at their hand and hence the investment was made by the assessee. On the other hand, the stand of the assessee is that the shops were purchased by the two sons in their individual name and their source cannot be enquired into from the assessee. The Assessing Officer did not accept the explanation of the assessee and he made addition of Rs.1,48,000/-. 34. On appeal, the ld. CIT(A) did not bring any relief to the assessee. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 23 35. With the assistance of the ld. Representatives, we have gone through the record carefully. It is pertinent to observe that two adult sons who can be income tax assessees because one of them is working as a part time lecturer in Gaya Polytechnic and the other one was studying in M.Tech, if made some undisclosed investments in their hands then, the source can be asked from them. The properties are not in the name of the assessee. These were purchased somewhere in the year 1996. While dealing with LIC investments, we have visualised the situation in 1988, whereas these shops were purchased in 1996. The time gap is eight years. They have got married and must have become major. Therefore, the assessee cannot be asked to explain the source of investment in the shops. It is not the case of the revenue that these are the benami assets of the assessee. This aspect can be enquired from the sons of the assessee. Therefore, we allow this ground of appeal and delete the addition made. 36. Ground No. 15:- In this ground of appeal, the grievance of the assessee is that the ld. CIT(A) erred in confirming the following additions:- Income from House Property A.Y. Amount 1989-90 5,891/- 1990-91 13,730/- 1991-92 8,140/- 1996-97 10,500/- 1997-98 42,000/- 1998-99 42,000/- The above additions have been made on the ground that there is discrepancy in the amount of house property income shown by the assessee in his block return of income. The Assessing Officer has added the difference between both the amounts. I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 24 37. With the assistance of the ld. Representative, we have gone through the record carefully. The Assessing Officer has estimated the income from the shops as income of the assessee. In the foregoing ground of appeal, we have held that the shops were purchased by two adult sons. One of them has been working as a part time lecturer in Gaya Polytechnic. Whatever may be the source of investment in the property standing in the name of the sons can be enquired in their cases. Both of them were major at that point of time and probably assessed to income tax also. Thus, the corresponding house property income cannot be added in the hands of the assessee from these shops. The ld. Revenue Authorities have erred in estimating such income in the hands of the assessee. We allow this ground of appeal and delete this addition from the hands of the assessee. 38. Ground No. 16:- In this ground of appeal, the assessee has submitted that, the ld. CIT(A) has erred in not adjudicating the claim of the assessee for grant of deduction u/s 80C and 80L of the Act. On due consideration of the facts and circumstances of the case, we are of the view that these were supposed to be the subject matter of regular returns of income which the assessee must have claimed and this cannot be processed in a block assessment. Therefore, this ground of appeal is rejected. 39. In the result, appeal of the assessee is partly allowed. Order pronounced in the Court on 26 th July, 2022 at Kolkata. Sd/- Sd/- (RAJESH KUMAR) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT Kolkata, Dated 26/07/2022 *SC SrPs I.T(SS)A. No. 07/Pat/2016 Block Assessment Years: 1989-90 to 1989-99 Ram Nath Singh 25 आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय Ůितिनिध आयकर अपीलीय अिधकरण, पटना /DR,ITAT, Patna 6. गाडᭅ फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Patna