Sri. V. Ramprasad Raju, Bangalore V. ACIT, Bangalore

ITSSA 8/BANG/2011

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0934 (ITAT-BANGALORE)
• Duration Of Justice: 9 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP DEPT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Document seized; Source of fund; Corroborative evidences; Block assessment; Documents seized; Set aside; FORM 2B; CHAPTER XIVB
• Section: 143(3); 158BC; 158B(b); 113; 13; 158BD; 132; 139

Judgement Text

IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(SS)A NO.4/BANG/2005 ASSESSMENT YEAR: 1990-2001 V. RAMPRASAD RAJU NO.10-155A, 1 ST FLOOR UPPER PALACE ORCHARDS BANGALORE PAN NO : AAPCM1706D VS. COMMISSIONER OF INCOME TAX (A)-VI BANGALORE APPELLANT RESPONDENT IT(SS)A NO.8/BANG/2011 ASSESSMENT YEAR: 1990-2001 V. RAMPRASAD RAJU NO.10-155A, 1 ST FLOOR UPPER PALACE ORCHARDS BANGALORE VS. ACIT CENTRAL CIRCLE-2(2) BANGALORE APPELLANT RESPONDENT IT(SS)A NO.9/BANG/2011 ASSESSMENT YEAR: 1990-2001 DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-2(2) BANGALORE VS. V. RAMPRASAD RAJU NO.10-155A, 1 ST FLOOR UPPER PALACE ORCHARDS BANGALORE APPELLANT RESPONDENT ASSESSEE BY : SHRI V. SRINIVASAN, A.R. REVENUE BY : SHRI DILIP, STANDING COUNSEL FOR DEPT. DATE OF HEARING : 18.02.2021 DATE OF PRONOUNCEMENT : 24.02.2021 IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 2 OF 19 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: ALL THESE APPEALS ARE RELATED TO THE ASSESSMENT OR DER PASSED U/S 158BC OF THE ACT CONSEQUENT TO THE SEARCH AND S EIZURE OPERATIONS CONDUCTED IN THE HANDS OF THE ASSESSEE U /S 132 OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] ON 23.03. 2001. THIS IS SECOND ROUND OF PROCEEDINGS. 2. IT IS NECESSARY TO MENTION ABOUT THE DETAILS OF EARLIER PROCEEDINGS. CONSEQUENT TO THE SEARCH OPERATIONS, T HE ASSESSING OFFICER COMPLETED THE IMPUGNED ASSESSMENT AS PER TH E THEN EXISTING PROVISIONS OF SEC.158BC OF THE ACT COVERING THE BLO CK PERIOD FROM 01.04.1990 TO 23.03.2001. WHEN THE MATTER REACHED THE ITAT, THE ASSESSEE RAISED A LEGAL GROUND CHALLENGING THE VALI DITY OF SEARCH CONDUCTED U/S 132 OF THE ACT CONTENDING THAT THE CO NDITIONS SPECIFIED IN THAT SECTION HAVE NOT BEEN FULFILLED A ND HENCE THE SEARCH OPERATION ITSELF IS ILLEGAL. ON MERITS, THE ASSESS EE CONTENDED THE ADDITIONS MADE BY THE AO IN THE BLOCK ASSESSMENT OR DER, WHICH RELATED TO THE DISALLOWANCE OF AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN HIS RETURNS OF INCOME FILED PRIOR TO SE ARCH OPERATIONS. 2.1 THE TRIBUNAL DISPOSED OF THE APPEAL OF THE ASSESSEE IN IT(SS)A NO.4/BANG/2005 AND THE APPEAL OF REVENUE IN IT(SSA) NO.15/BANG/2005, VIDE ITS ORDER DATED 29-06-2006. WITH REGARD TO THE LEGAL ISSUE RELATING TO THE VALIDITY OF THE SEA RCH PROCEEDINGS, THE TRIBUNAL REJECTED THE SAME BY FOLLOWING THE DECISIO N RENDERED IN THE CASE OF C RAMAIAH REDDY IN IT(SS)A 38/B/97 DATED 19 -03-2006, WHEREIN IT WAS HELD THAT THE TRIBUNAL HAD NO JURISD ICTION TO EXAMINE THE AUTHORISATION OF SEARCH. ON THE ISSUES URGED ON MERITS, THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE AO F OR ADJUDICATING THE SAME AFRESH. THE ASSESSEE FILED A MISCELLANEOUS AP PLICATION BEFORE IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 3 OF 19 THE ITAT, WHICH WAS NUMBERED AS MP NO.52/BANG/2008. THE ADDITION MADE BY THE AO BY DISALLOWING AGRICULTURAL INCOME PERTAINED TO AN INVESTMENT MADE IN A COMPANY AS SHA RE APPLICATION MONEY. THE AO HAD TAKEN THE INVESTMENT VALUE AS RS .2.99 CRORES. IN THE MISCELLANEOUS APPLICATION, THE ASSESSEE SUBM ITTED THAT THE ACTUAL AMOUNT OF INVESTMENT WAS ONLY RS.1.30 CRORES AND IT WAS POINTED OUT IN THE MISCELLANEOUS APPLICATION THAT T HE TRIBUNAL HAD OMITTED TO ISSUE SUITABLE DIRECTION IN THIS REGARD IN ITS ORDER WITH REGARD TO THE QUANTUM OF INVESTMENT, EVEN THOUGH TH E TRIBUNAL HAD NOTED THE FIGURE OF RS.1.30 CRORES IN ITS ORIGINAL ORDER. ACCORDINGLY, THE MISCELLANEOUS PETITION WAS ALLOWED BY THE TRIBU NAL, VIDE ITS ORDER DATED 31.10.2008, DIRECTING THE AO TO DETERMINE THE QUANTUM OF INVESTMENTS ALSO. 2.2 THE ASSESSEE CHALLENGED THE ORDER OF TRIBUNAL IN REJECTING THE LEGAL ISSUE RELATING THE VALIDITY OF SEARCH BY FILI NG APPEAL BEFORE HONBLE HIGH COURT OF KARNATAKA. IN THE MEANTIME, THE HONBLE HIGH COURT HAD DECIDED AN IDENTICAL ISSUE IN THE CASE OF C. RAMAIAH REDDY VS. ACIT HOLDING THAT THE TRIBUNAL IS NOT ESTOPPED FROM EXAMINING THE VALIDITY OF SEARCH OPERATIONS. ACCORDINGLY, FO LLOWING THE ABOVE SAID ORDER, THE HONBLE HIGH COURT RESTORED THE LEG AL ISSUE BACK TO THE FILE OF TRIBUNAL FOR DECIDING THE SAME. HENCE THE APPEAL OF THE ASSESSEE NUMBERED AS IT(SS)A NO.4/BANG/2005 WAS REV IVED FOR THE LIMITED PURPOSE OF DISPOSING OF THE LEGAL ISSUE CIT ED ABOVE. 2.3 SINCE THE ISSUES URGED ON MERITS WERE SET A SIDE TO THE FILE OF THE AO BY THE TRIBUNAL, THE ASSESSING OFFICER PASSE D THE IMPUGNED ASSESSMENT ORDER DATED 03-11-2009 U/S 158BC R.W.S. 254 OF THE ACT. THE APPEAL FILED BEFORE LD CIT(A) CHALLENGING THE A BOVE SAID ASSESSMENT ORDER CAME TO BE DISPOSED OF BY THE FIRS T APPELLATE AUTHORITY, VIDE HIS ORDER DATED 07 TH FEB, 2011. AGGRIEVED BY THE ORDER IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 4 OF 19 SO PASSED BY LD CIT(A), BOTH THE PARTIES ARE IN APP EAL BEFORE US AND THEIR APPEALS HAVE BEEN NUMBERED AS IT(SS)A 8/BANG/ 2011 (ASSESSEE) AND IT(SS)A 9/BANG/2011 (REVENUE). 3. WE SHALL FIRST TAKE APPEAL IN IT(SS)A NO.4/B ANG/2005, I.E., THE APPEAL RESTORED TO THE FILE OF THE TRIBUNAL BY HON BLE HIGH COURT OF KARNATAKA FOR DECIDING THE LEGAL ISSUE OF VALIDITY OF SEARCH OPERATIONS. 3.1 AT THE TIME OF HEARING BEFORE US, THE LD A .R SUBMITTED THAT THE ASSESSEE IS NOT PRESSING THE GROUNDS RELATING T O LEGAL ISSUE NOW. SINCE THIS APPEAL WAS RESTORED TO THE FILE OF THE T RIBUNAL BY HONBLE HIGH COURT TO DECIDE ONLY THE GROUNDS URGED ON LEGA L ISSUE AND SINCE THE ASSESSEE IS NOT PRESSING THE SAME NOW, THERE IS NO REQUIREMENT OF ADJUDICATING THOSE GROUNDS. ACCORDINGLY, THE GR OUNDS URGED ON THE LEGAL ISSUE RELATING TO VALIDITY OF SEARCH PROC EEDINGS ARE DISMISSED AS NOT PRESSED. 4. WE SHALL NOW TAKE UP THE APPEAL OF THE ASSE SSEE NUMBERED AS IT(SS)A NO.8/BANG/2011. THE GROUNDS URGED BY THE A SSESSEE RELATE TO THE FOLLOWING ISSUES:- (A) WHETHER THE WAS JUSTIFIED IN DETERMINING THE UNDISCLOSED INCOME AT RS.2.96 CRORES. (B) WHETHER THE AO WAS JUSTIFIED IN LEVYING SURCH ARGE U/S 113 OF THE ACT. 4.1 THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. DURING THE COURSE OF SEARCH OPERATIONS, THE SEARCH OFFICIALS FOUND ONE BALANCE SHEET BELONGING TO A COMPANY NAMED M/S MRP HOME INN PRIVATE LIMITED FOR THE FINANCIAL YEAR ENDING 31.3. 1998 ALONG WITH CORRESPONDING FIGURE FOR THE YEAR ENDING 31.3.1997. THE RELEVANT DOCUMENTS ARE PLACED AT PAGES 55 56 OF THE PAPER BOOK. THE ASSESSEE IS THE MANAGING DIRECTOR OF THE ABOVE SAID COMPANY AND HIS IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 5 OF 19 WIFE IS THE OTHER DIRECTOR. THE SAID FINANCIAL STAT EMENTS WERE TO HAVE BEEN SIGNED BY THE DIRECTORS AND ALSO BY THE AUDITO R NAMED SHRI MOHAN BALAKRISHNAN ON 31 ST AUGUST, 1998. THE SAID FINANCIAL STATEMENTS DISCLOSED THAT THE ABOVE SAID COMPANY HA S RECEIVED SHARE APPLICATION MONEY. THE BALANCE SHOWN UNDER T HE HEAD SHARE APPLICATION MONEY AS ON 31.3.1998 AND 31.3.1997 AR E RS.259 LAKHS AND RS.227 LAKHS RESPECTIVELY. 4.2 DURING THE COURSE OF SEARCH PROCEEDINGS, TH E AGGREGATE AMOUNT OF INVESTMENT WAS ARRIVED AT RS.299 LAKHS AS DETAIL ED BELOW:- F Y 96-97 - 227.36 LAKHS F Y 97-98 - 31.64 LAKHS F Y 98-99 - 40.00 LAKHS DURING THE COURSE OF POST SEARCH ENQUIRIES, THE ASS ESSEE EXPLAINED THE SOURCES FOR ABOVE SAID INVESTMENTS AS UNDER:- NAME OF THE ASSESSEE F.Y. AMOUNT (RS.IN LAKHS) SOURCE SRINIVASA & BROS 1994-95 32.50 PLANT AND MACHINERY IN THE ERSTWHILE FIRM SOLD OVER A PERIOD OF 12 MONTHS 18.00 CLOSING STOCK OF THE FIRM 18.00 DEBTORS 1.50 BILLS RECEIVABLE SRI V. RAMPRASAD 1994 - 95 41.00 AGRICULTURAL INCOME 1995 - 96 44.00 AGRICULTURAL INCOME 1996 - 97 46.50 AGRICULTURAL INCOME 1997 - 98 50.50 AGRICULTURAL INCOME 47.00 OTHER SOURCES TOTAL 299 DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S, THE AO NOTICED THAT THE ASSESSEE HAS FILED RETURNS OF INCOME FOR A Y 1995-96 TO 1997- 98 DECLARING SUBSTANTIALLY HIGHER AGRICULTURAL INCO ME WHEN COMPARED TO EARLIER YEARS. FURTHER, ALL THE ABOVE SAID RETURNS OF INCOME HAVE BEEN FILED ON THE SAME DATE, I.E., 17.1 1.1997. ACCORDINGLY, THE AO DID NOT ACCEPT THE QUANTUM OF A GRICULTURAL INCOME DECLARED BY THE ASSESSEE. THE AO ALSO DID N OT ACCEPT THE IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 6 OF 19 CLAIM OF SALE OF MACHINERY FOR A VALUE OF RS.32.50 LAKHS AND OTHER SOURCES OF INCOME DECLARED BY THE ASSESSEE TO THE E XTENT DECLARED. ACCORDINGLY, THE AO DETERMINED THE QUANTUM OF SOURC ES AVAILABLE WITH THE ASSESSEE AT RS.33.00 LAKHS AND ACCORDINGLY DETERMINED THE UNDISCLOSED INCOME AT RS.266 LAKHS. 4.1 WE HAVE EARLIER NOTICED THAT THE TRIBUNAL H AD RESTORED THE ISSUE OF DETERMINATION OF AGRICULTURAL INCOME TO TH E FILE OF THE AO. VIDE THE ORDER PASSED BY THE TRIBUNAL AGAINST THE M ISCELLANEOUS APPLICATION, THE QUANTUM OF INVESTMENT MADE IN THE ABOVE SAID COMPANY WAS ALSO DIRECTED TO BE EXAMINED. HENCE TH E AO PASSED TWO ASSESSMENT ORDERS TO GIVE EFFECT TO THE ORDER O F THE TRIBUNAL. THE FIRST ORDER CAME TO BE PASSED ON 31.12.2007 IN ORDE R TO GIVE EFFECT TO THE ORDER OF THE TRIBUNAL AND THE SECOND ORDER CAME TO BE PASSED ON 03.11.2009 TO GIVE EFFECT TO THE ORDER PASSED BY TH E TRIBUNAL AGAINST THE MISCELLANEOUS APPLICATION. THE LD A.R SUBMITT ED THAT THE ASSESSEE HAD PREFERRED APPEAL BEFORE LD CIT(A) AGAI NST THE ASSESSMENT ORDER DATED 31.12.2007, BUT THE SAME HAS BEEN SET ASIDE TO THE FILE OF THE AO BY LD CIT(A), SINCE THE AO WA S REQUIRED TO PASS THE ASSESSMENT ORDER AGAIN CONSEQUENT TO THE ORDER PASSED BY THE TRIBUNAL AGAINST THE MISCELLANEOUS APPLICATION FILE D BY THE ASSESSEE. IN THE ASSESSMENT ORDERS PASSED TO GIVE EFFECT TO T HE DIRECTION OF THE TRIBUNAL, THE AO DETERMINED UNDISCLOSED INCOME AT RS.2.96 CRORES, I.E., THE AO HAS DETERMINED THE SOURCES AVAILABLE W ITH THE ASSESSEE AT RS.3.00 LAKHS ONLY AS AGAINST RS.33.00 LAKHS DET ERMINED IN THE ORIGINAL ASSESSMENT ORDER. THE AO REJECTED THE CL AIM OF THE ASSESSEE THAT THE QUANTUM OF INVESTMENT WAS RS.130 LAKHS ONL Y AND NOT RS.299 LAKHS. IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 7 OF 19 4.2 THE ASSESSEE CHALLENGED THE ASSESSMENT ORD ER DATED 03-11- 2009 BY FILING APPEAL BEFORE LD CIT(A). THE ASSESS EE CHALLENGED THE QUANTUM OF UNDISCLOSED INCOME DETERMINED BY THE AO; QUANTUM OF INVESTMENT; INTEREST CHARGED U/S 158BFA(1) BEYOND T HE DATE OF ORIGINAL ASSESSMENT ORDER AND ALSO THE SURCHARGE CH ARGED U/S 113 OF THE ACT. THE LD CIT(A) UPHELD THE QUANTUM OF UNDIS CLOSED INCOME AND THE QUANTUM OF INVESTMENT AS RS.299 LAKHS. HE A LSO UPHELD CHARGING OF SURCHARGE U/S 113 OF THE ACT BY FOLLOWI NG THE DECISION RENDERED BY HONBLE SUPREME COURT RENDERED IN THE C ASE OF SURESH N GUPTA (297 ITR 322). WITH REGARD TO THE CHARGING O F INTEREST U/S 158BFA(1), THE LD CIT(A) DIRECTED THE AO TO RESTRIC T THE SAME UPTO THE DATE OF ORIGINAL ASSESSMENT ORDER. AGGRIEVED B Y THE ORDER PASSED BY LD CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 4.3 THE FIRST ISSUE URGED IN THE APPEAL OF TH E ASSESSEE RELATES TO THE UNDISCLOSED INCOME DETERMINED BY THE AO. THE L D. A.R. SUBMITTED THAT THE ADDITION HAS BEEN MADE ON THE BA SIS OF A BALANCE SHEET FOUND DURING THE COURSE OF SEARCH PROCEEDINGS . HE SUBMITTED THAT THE SHARE APPLICATION MONEY SHOWN IN THE SAID BALANCE SHEET WAS ONLY RS.259 LAKHS AS ON 31.3.1998. HENCE, IT I S NOT DISCERNABLE AS TO HOW THE ASSESSING OFFICER HAS ADOPTED THE FIG URE OF RS.299 LAKHS. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HA S EXPLAINED THAT THE SAID BALANCE SHEET DOES NOT REFLECT CORRECT FIG URES AND IT WAS SUBMITTED THAT THE SAME WAS PREPARED FOR FURNISHING TO A FINANCIAL INSTITUTION. THE LD. A.R. SUBMITTED THAT THE BALAN CE SHEET ADOPTED IN THE ANNUAL GENERAL MEETING AND FILED WITH REGIST RAR OF COMPANIES SHOW SHARE APPLICATION MONEY OUTSTANDING AS ON 31.3 .1998 AS RS.131 LAKHS ONLY. ACCORDINGLY, HE SUBMITTED THAT THE ABOVE SAID BALANCE SHEET SHOULD NOT HAVE BEEN RELIED UPON BY T HE ASSESSING OFFICER. IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 8 OF 19 4.4 THE LD. A.R. SUBMITTED THAT THE BLOCK ASSESSME NT PROCEEDINGS PRESCRIBED U/S 158BC OF THE ACT IS A CO DE BY ITSELF AND WHAT CAN BE ASSESSED IN THE BLOCK PERIOD IS THE UN DISCLOSED INCOME AS DEFINED IN SECTION 158B(B) OF THE ACT. FURTHER, AS PER PROVISIONS OF SECTION 158BB THE UNDISCLOSED INCOME SHOULD BE D ETERMINED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH A ND SUCH OTHER MATERIAL AS ARE AVAILABLE WITH THE ASSESSING OFFICE R AND RELATABLE TO SUCH EVIDENCE. HENCE NO INCOME COULD BE ASSESSED A S UNDISCLOSED INCOME ON THE BASIS OF INFERENCES AND SURMISES. THE LD. A.R. SUBMITTED THAT THE ABOVE SAID BALANCE SHEET FOUND D URING THE COURSE OF SEARCH DOES NOT TALLY WITH THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. FURTHER, THE SAID DOCUMENT DOES NOT CONT AIN BREAKUP DETAILS OF SHARE APPLICATION MONEY. ACCORDINGLY, H E SUBMITTED THAT THE SAID DOCUMENT IS A DUMB DOCUMENT. FURTHER, IT CANNOT BE PRESUMED THAT THE ASSESSEE HEREIN HAS INVESTED ENTI RE AMOUNT OF SHARE APPLICATION MONEY SHOWN IN THE BALANCE SHEET. 4.5 THE LD. A.R. SUBMITTED THAT, EVEN IF THE SAID B ALANCE SHEET IS ASSUMED TO BE CORRECT FOR A MOMENT, THE ASSESSEE HA S EXPLAINED THE SOURCES FOR MAKING INVESTMENTS IN SHARE APPLICATION MONEY, MAJOR PART OF WHICH IS THE AGRICULTURAL INCOME DECLARED I N THE RETURNS OF INCOME FILED BY THE ASSESSEE PRIOR TO THE DATE OF S EARCH. IT IS PERTINENT TO NOTE THAT THE SEARCH OFFICIALS DID NOT UNEARTH A NY INCRIMINATING MATERIAL TO SHOW THAT THE SOURCES BY WAY OF AGRICUL TURAL INCOME AND OTHER INCOME/RECEIPTS WERE NOT AVAILABLE WITH THE A SSESSEE. ACCORDINGLY HE SUBMITTED THAT THE AO HAS REJECTED T HE CLAIM OF AVAILABILITY OF SOURCES MERELY ON SURMISES. HE SUB MITTED THAT THE RETURNS OF INCOME UPTO AY 1997-98 HAVE BEEN FILED P RIOR TO THE DATE OF SEARCH AND HENCE THE DETAILS OF INCOME WERE ALRE ADY KNOWN TO THE REVENUE. IN ANY CASE, THE SOURCES EXPLAINED BY THE ASSESSEE WOULD FULLY COVER THE ACTUAL INVESTMENT OF RS.130 LAKHS. ACCORDINGLY, HE IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 9 OF 19 SUBMITTED THAT THERE IS NO UNDISCLOSED INCOME AS PE R THE DEFINITION GIVEN U/S 158B (B) R.W.S. 158BB OF THE ACT, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL TO SUPPORT OF THE VIEW TAKEN BY THE ASSESSING OFFICER. ACCORDINGLY, HE SUBMITTED THAT THE ENTIRE INCOME ASSESSED BY THE A.O. AS UNDISCLOSED INCOME IS LIABLE TO BE D ELETED. 4.6 THE LD. D.R., ON THE CONTRARY SUBMITTED THAT T HE ASSESSEE DID NOT RAISE THIS LEGAL ISSUE DURING THE FIRST ROUND OF PROCEEDINGS. HE FURTHER SUBMITTED THAT THE ASSESSE E HAS DECLARED HUGE AGRICULTURAL INCOME IN ASSESSMENT YEARS 1995-9 6 TO 1997-98 AND FURTHER THE RETURNS OF INCOME FOR THESE THREE Y EARS HAVE BEEN FILED ON THE SAME DAY. HENCE, THE ASSESSING OFFICE R DISBELIEVED THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME AND OT HER SOURCES OF INCOME. 4.7 IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE LAW ON BLOCK ASSESSMENT HAS EVOLVED OVER THE YEARS AND THE LAW I S WELL SETTLED NOW. IT HAS BEEN HELD BY VARIOUS COURTS THAT THE U NDISCLOSED INCOME SHOULD BE DETERMINED ONLY ON THE BASIS OF INCRIMINA TING MATERIAL. IN THIS REGARD, HE PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PIN AKI MISRA (392 ITR 347 (DELHI). ACCORDINGLY HE SUBMITTED THAT THE POI NT CONTESTED BY HIM IS PURELY A LEGAL ISSUE AND IT CAN BE RAISED AT ANY STAGE OF PROCEEDINGS. 4.8 WE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE EXPRESSION UNDISCLOSED INCOME IS DEFINED IN SECTI ON 158B (B) OF THE ACT AS UNDER: 158B(B) 'UNDISCLOSED INCOME' INCLUDES ANY MONEY, B ULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS, WHER E SUCH MONEY, BULLION, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BO OKS OF ACCOUNT OR OTHER DOCUMENT OR TRANSACTION REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERTY IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 10 OF 19 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. IN THE INSTANT CASE, THE DISPUTE IS WITH REGARD TO THE ALLEGED INVESTMENTS MADE BY THE ASSESSEE IN A COMPANY BY WA Y OF SHARE APPLICATION MONEY. WE NOTICE THAT THE AMOUNT OF SH ARE APPLICATION MONEY MENTIONED IN THE SEIZED DOCUMENTS DOES NOT TA LLY WITH THE AMOUNT OF SHARE APPLICATION MONEY MENTIONED IN THE BALANCE SHEET APPROVED IN THE ANNUAL GENERAL MEETING/FILED WITH T HE REGISTRAR OF COMPANIES. FURTHER, AS STATED BY LD. A.R., THE SEI ZED DOCUMENT DOES NOT CONTAIN BREAKUP DETAILS OF SHARE APPLICATION MO NEY I.E. THE DETAILS OF PERSONS WHO HAS INVESTED THE SAID AMOUNT . IN THE ABSENCE OF BREAK-UP DETAILS OF INVESTORS, WE ARE OF THE VIE W THAT THE ASSESSING OFFICER HAS DRAWN CONCLUSIONS ONLY ON SURMISES AND CONJECTURES THAT IT IS THE ASSESSEE WHO HAS INVESTED THE MONEY AS SH ARE APPLICATION. FURTHER, AS POINTED OUT BY LD A.R, THE AMOUNT OF SH ARE APPLICATION MONEY SHOWN IN THE SAID BALANCE SHEET IS RS.259 LAK HS AND NOT RS.299 LAKHS AS MENTIONED BY THE AO. THE DIFFERENC E BETWEEN THE TWO FIGURES HAVE NOT BEEN RECONCILED ANYWHERE BY TH E AO. IN ANY CASE, THE ASSESSEE HAS EXPLAINED THAT THE ABOVE SAI D FINANCIAL STATEMENT DOES NOT REFLECT TRUE STATE OF AFFAIRS AN D IT HAS BEEN PREPARED TO FURNISH IT TO A FINANCIAL INSTITUTION, I.E., THE SAID FINANCIAL STATEMENT IS NOT BACKED BY ANY ORIGINAL BOOKS OF AC COUNTS. IT IS AN UNDISPUTED FACT, THE SEARCH OFFICIALS ALSO DID NOT UNEARTH ANY MATERIAL TO SHOW THAT THE TRANSACTIONS SHOWN IN THE SEIZED FINANCIAL STATEMENTS REPRESENT TRUE TRANSACTIONS. NO MATERIA L WAS BROUGHT ON RECORD BY THE AO TO DISPROVE THE CLAIM OF THE ASSES SEE ALSO. 4.9 BE THAT AS IT MAY, THE ASSESSEE HAS FURNI SHED THE DETAILS OF SOURCES FOR THE ABOVE SAID AMOUNT OF RS.299 LAKHS, EVEN THOUGH THE CLAIM OF THE ASSESSEE IS THAT THE AMOUNT OF SHARE A PPLICATION MONEY INVESTED WAS ONLY RS.131 LAKHS. THE SOURCES, INTE R ALIA, GIVEN BY IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 11 OF 19 THE ASSESSEE INCLUDES THE AGRICULTURAL INCOME DECLA RED IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SEARCH AND ALS O OTHER RECEIPTS. THERE IS NO DISPUTE THAT THE SEARCH OFFICIALS DID N OT UNEARTH ANY MATERIAL TO SHOW THAT THE AGRICULTURAL INCOME DECLA RED IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SEARCH AND OTH ER RECEIPTS DECLARED BY THE ASSESSEE ARE BOGUS, I.E., THERE IS NO INCRIM INATING MATERIAL TO DISPROVE THE CLAIM OF THE ASSESSEE. 4.10 THE SETTLED LAW ON BLOCK ASSESSMENT HAS BE EN EXPLAINED BY HONBLE DELHI HIGH COURT IN THE CASE OF PINAKI MISR A (SUPRA). THE RELEVANT OBSERVATIONS MADE BY THE HONBLE DELHI HIG H COURT ARE EXTRACTED BELOW:- 23. THE GUJARAT HIGH COURT HAD, IN AN EARLIER DECISION , IN N.R. PAPER & BOARD LTD. V. DY. CIT [1998] 101 TAXMAN 525/234 ITR 733 RULED THAT BLOCK ASSESSMENTS AND REGULAR ASSESSMENTS DEAL WITH DIFFERENT PURPOSES. THE AIM AND OBJECTIVE OF BLOCK ASSESSMENTS IS THE A SSESSMENT OF UNDISCLOSED INCOME OF THE BLOCK PERIOD AS A RESULT OF SEARCH. THE OBJECTIVE OF A REGULAR OR NORMAL ASSESSMENT IS TO DETERMINE T HE TRUE TOTAL INCOME OR LOSS OF THE PREVIOUS YEAR ON THE BASIS OF THE RETUR N UNDER SECTION 139 AND OTHER DOCUMENTS AND DECIDE THE ASSESSEE'S TAX LIABI LITY. 24. THE STRUCTURE AND PATTERN OF CHAPTER XIV-B AS ORIG INALLY ENACTED W.E.F. 1ST JULY, 1995 AND AS MODIFIED/CHANGED THROUGH AMEN DMENTS, FROM TIME TO TIME (IN THE RELEVANT PROVISIONS), CONTINUES TO RET AIN ITS PURPOSE, IN THAT, A BLOCK ASSESSMENT PERTAINING TO A NUMBER OF YEARS RE MAINS DISTINCT FROM AN ASSESSMENT UNDER SECTION 143(3) PERTAINING TO A SIN GLE ASSESSMENT YEAR. FURTHER, THE AMENDMENT TO SECTION 158B(B) HAS ENLAR GED THE MEANING OF THE TERM 'UNDISCLOSED INCOME' BY INCLUDING THEREIN 'ANY EXPENSES, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT, WHIC H IS FOUND TO BE FALSE'. HOWEVER, THIS CANNOT BE CONSTRUED TO MEAN THAT WHAT EVER HAS BEEN LEFT OUT IN A REGULAR ASSESSMENT CAN BE REASSESSED OR RE-EXA MINED WITH REFERENCE TO THOSE PROVISIONS WHICH ARE RELATABLE TO AN ASSES SMENT U/S. 143(3). THIS IS EVIDENT FROM A.R. ENTERPRISES (SUPRA), WHERE THE COURT HELD AS FOLLOWS: '. . . SECTIONS 158BD AND 158BC, ALONG WITH THE RES T OF CHAPTER XIV-B, FIND APPLICATION ONLY IN THE EVENT OF DISCOVERY OF 'UNDISCLOSED INCOME' OF AN ASSESSEE. UNDISCLOSED INCOME IS DEFINED BY SECTI ON 158B AS THAT INCOME 'WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSE D FOR THE PURPOSES OF THIS ACT'. THE LEGISLATURE HAS CHOSEN TO DEFINE 'UN DISCLOSED INCOME' IN TERMS OF INCOME NOT DISCLOSED, WITHOUT PROVIDING AN Y DEFINITION OF 'DISCLOSURE' OF INCOME IN THE FIRST PLACE. WE ARE O F THE VIEW THAT THE ONLY WAY OF DISCLOSING INCOME, ON THE PART OF AN ASSESSE E, IS THROUGH FILING OF A RETURN, AS STIPULATED IN THE ACT, AND THEREFORE AN 'UNDISCLOSED INCOME' SIGNIFIES INCOME NOT STATED IN THE RETURN FILED. KE EPING THAT IN MIND, IT IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 12 OF 19 SEEMS THAT THE LEGISLATURE HAS CLEARLY CARVED OUT T WO SCENARIOS FOR INCOME TO BE DEEMED AS UNDISCLOSED: (I) WHERE THE INCOME H AS CLEARLY NOT BEEN DISCLOSED AND (II) WHERE THE INCOME WOULD NOT HAVE BEEN DISCLOSED. IF A SITUATION IS COVERED BY ANY ONE OF THE TWO, INCOME WOULD BE UNDISCLOSED IN THE EYES OF THE ACT AND HENCE SUBJECT TO THE MACHIN ERY PROVISIONS OF CHAPTER XIVB. THE SECOND CATEGORY, VIZ. WHERE INCOM E WOULD NOT HAVE BEEN DISCLOSED, CONTEMPLATES THE LIKELIHOOD OF DISC LOSURE; IT IS A PRESUMPTION OF THE INTENTION OF THE ASSESSEE SINCE IN CONCLUDING THAT AN ASSESSEE WOULD OR WOULD NOT HAVE DISCLOSED INCOME, ONE IS IPSO FACTO MAKING A STATEMENT WITH RESPECT TO WHETHER OR NOT T HE ASSESSEE POSSESSED THE INTENTION TO DO THE SAME. TO GAUGE THIS, HOWEVE R, RELIANCE MUST BE PLACED ON THE SURROUNDING FACTS AND CIRCUMSTANCES O F THE CASE.' 25. A BLOCK ASSESSMENT IS TO BE CARRIED OUT ON THE BAS IS OF THE MATERIAL FOUND DURING THE COURSE OF SEARCH AND NOT AS A RESU LT OF OTHER DOCUMENTS OR MATERIAL, WHICH COME TO THE POSSESSION OF THE AO SUBSEQUENT TO THE CONCLUSION OF THE SEARCH OPERATION UNLESS AND UNTIL SUCH MATERIAL HAS A RELATIONSHIP OR CONNECTION WITH CERTAIN MATERIAL OR EVIDENCE FOUND DURING THE COURSE OF SEARCH. IT WAS HIGHLIGHTED IN CIT V. RAVI KANT JAIN [2001] 117 TAXMAN 28/250 ITR 141/117 TAXMAN 28 (DELHI) HOW THE PROCEDURE OF CHAPTER -XIV-B IS INTENDED TO PROVIDE A MODE OF ASS ESSMENT OF UNDISCLOSED INCOME, WHICH HAS BEEN DETECTED AS A RESULT OF SEAR CH. THE SCOPE AND AMBIT OF A BLOCK ASSESSMENT IS LIMITED TO MATERIALS UNEAR THED DURING SEARCH AND THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DON E ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION A S ARE AVAILABLE WITH THE AO. THE BOMBAY HIGH COURT IN THE CASE OF CIT V. VINOD DANCHAND GHODAWAT [2001] 114 TAXMAN 90/247 ITR 448 ALSO HELD, SIMILARLY THAT WHERE THE ASSESSEE HAD MADE DISCLOSURE IN THEIR WEA LTH TAX RETURN, WHICH WAS ACCEPTED BY THE DEPARTMENT, ADDITIONS MADE BY T HE DEPARTMENT ON THE GROUND OF UNDISCLOSED INCOME WAS ERRONEOUS. 26. A LARGER, FIVE MEMBER BENCH OF THE SUPREME COURT R EITERATED THE DISTINCTNESS OF THE PROCEDURE BETWEEN NORMAL ASSESS MENTS AND BLOCK ASSESSMENTS, WITH SPECIFIC REFERENCE TO THE CHARGIN G SECTION (OF THE INCOME TAX), THE REFERENCE TO 'PREVIOUS YEAR' AS THE INCOM E FOR WHICH TAX IS LEVIED AND THE SPECIAL PROCEDURE FOR ASSESSMENT OF UNDISCL OSED INCOME RELATABLE TO MATERIALS SEIZED DURING A SEARCH, IN CIT V. VATI KA TOWNSHIP (P.) LTD. [2014] 49 TAXMANN.COM 249/227 TAXMAN 121/367 ITR 46 6 SC) IN THE FOLLOWING TERMS: 'UNDISCLOSED INCOME REFERRED TO IN CHAPTER XIVB IS NOT RELATEABLE TO THE PREVIOUS YEAR. ON THE CONTRARY, IT IS FOR TH E BLOCK PERIOD WHICH MAY BE 6 YEARS OR 10 YEARS, AS THE CASE MAY BE. CON SEQUENTLY, AS ALREADY MENTIONED, WHILE ANALYZING THE SCHEME OF CH APTER XIVB, SUCH CHAPTER IS A COMPLETE CODE IN RESPECT OF ASSES SMENTS OF 'UNDISCLOSED INCOME'. NOT ONLY IT DEFINES WHAT IS U NDISCLOSED INCOME, IT ALSO LAYS DOWN THE BLOCK PERIOD FOR WHIC H UNDISCLOSED IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 13 OF 19 INCOME CAN BE TAXED. FURTHER, IT ALSO LAYS DOWN THE PROCEDURE FOR TAXING THAT INCOME. IT IS VERY PERTINENT TO NOTE AT THIS STAGE THAT FOR THIS PURPOSE, SPECIFIC PROVISION IN THE FORM OF SEC TION 158BA (2) IS INSERTED MAKING IT A CHARGING SECTION. THUS, A DIAG NOSTIC OF CHAPTER XIVB OF THE ACT LEADS TO IRRESISTIBLE CONCLUSION TH AT IT CONTAINS ALL THE PROVISIONS STARTING FROM CHARGING SECTION TILL THE COMPLETION OF ASSESSMENT, BY PRESCRIBING SPECIAL PROCEDURE IN REL ATION THERETO, MAKING IT A COMPLETE CODE BY ITSELF. LOOKING IT FRO M THIS ANGLE, THE CHARACTER AND NATURE OF 'UNDISCLOSED INCOME' REFERR ED TO IN CHAPTER XIVB BECOMES QUITE DISTINCT FROM 'TOTAL INCOME' REF ERRED TO IN SECTION 5. IT IS OF SOME SIGNIFICANCE TO OBSERVE TH AT WHEN A SEPARATE CHARGING SECTION IS INTRODUCED SPECIFICALLY, TO ASS ESS THE UNDISCLOSED INCOME, NOTWITHSTANDING A PROVISION IN THE NATURE O F SECTION 4 ALREADY ON THE STATUTE BOOK, THIS MOVE OF THE LEGIS LATURE HAS TO BE ASSIGNED SOME REASON, OTHERWISE, THERE WAS NO NECES SITY TO MAKE A PROVISION IN THE FORM OF 158BA (2). IT COULD ONLY B E THAT FOR ASSESSING UNDISCLOSED INCOME, CHARGING PROVISION IS 158BA (2) ALONE.' 27. THIS COURT IS ALSO OF THE OPINION THAT THE PROPER APPROACH, COMMENDED THROUGH THE DECISION IN SHAILENDRA MAHTO (SUPRA) BY THE REVENUE, IS INAPT. WHERE THE LAW IS CLEAR THAT UNLESS MATERIAL EXTRANE OUS TO THE RETURNS AND DOCUMENT ARE SEIZED OR DISCERNED AS RELATABLE TO ST ATEMENTS MADE, ETC. ADDITIONS COULD NOT HAVE BEEN MADE, HAVING REGARD T O THE STATE OF LAW APPLICABLE TO THE FACTS OF THE CASE. FURTHERMORE, D URGA PRASAD MORE (SUPRA) UNDOUBTEDLY PROPOUNDS AN IMPORTANT PRI NCIPLE OF LAW RELATING TO EVIDENCE. ITS APPLICATION HOWEVER IS WH EREVER THERE IS MATERIAL THAT CAN VALIDLY BE USED TO COMPLETE AN ASSESSMENT (IN THIS CASE A BLOCK ASSESSMENT). AGAIN, AS IN THE CASE OF SHAILENDRA MA HTO, THAT AUTHORITY HAS NO APPLICABILITY FOR THIS CASE. ............ 33. IN MAHESH BHATT V. ASSTT. CIT [2004] 84 TTJ 734 (M UM.) THE COURT HIGHLIGHTED HOW THE INCOME TAX ACT PROVIDES ADDITIO NS OR DISALLOWANCES IN A BLOCK ASSESSMENT HAVE TO BE BASED ON EVIDENCES FOUND AT THE TIME OF SEARCH AND NOT MERELY ON THE BASIS OF PRESUMPTIONS AND ASSUMPTIONS BY TAKING INFERENCE FROM THE SET OF MATERIAL AVAILABLE ON RECORD. IT WAS SIMILARLY HELD IN SUNDER AGENCIES V. DY. CIT [1997] 63 ITD 245 (MUM.) THAT THE SCHEME OF CHAPTER XIV-B DOES NOT EMPOWER TO THE REVENUE TO PRESUME OR DRAW ASSUMPTIONS IN REGARD TO THE UNDISCLOSED INCOME. THE AO CAN ONLY PROCEED ON THE BASIS OF MAT ERIAL DETECTED AT THE TIME OF SEARCH AND THE EVIDENCE GATHERED UNDER SECT ION 132(4) ONLY, AND NOT OTHERWISE. IF SEEN IN THIS LIGHT, THE ESTIMATES OF COSTS ON THE FOREIGN TRAVELS OF THE ASSESSEE AND HIS WIFE WERE NOT MADE DURING THE COURSE OF THE SEARCH PERTAINING TO THE BLOCK ASSESSMENT, BUT THRO UGH SURMISES BASED ON THE DETAILS FOUND IN THE PASSPORTS OF THE TWO ASSES SEES AFTER REQUISITIONING THEM FROM THE PASSPORT OFFICE. THUS, THE INFERENCE OF ESCAPED INCOME IS BASED UPON MATERIALS GATHERED FROM EXTRANEOUS SOURC ES AND NOT FROM SEARCH. SECTION 158BB (SUBSEQUENT TO AMENDMENT BY T HE FINANCE ACT, IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 14 OF 19 2002 W.E.F. 01.07.1995) STATES HOW THE UNDISCLOSED INCOME OF THE BLOCK PERIOD NEEDS TO BE COMPUTED ON THE BASIS OF EVIDENC E FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE AO AND RELATABLE TO SUCH EVIDENCE ON THE BASIS OF EVIDENCE. IN ASSTT . CIT V. HOTEL BLUE MOON [2010] 188 TAXMAN 113/321 ITR 362 (SC) HELD THAT BLOCK ASSESSMENTS ARE NOT INTENDED TO SUBSTITUTE REGULAR ASSESSMENT AND ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIALS UNE ARTHED DURING SEARCH. SIMILARLY, IT WAS HIGHLIGHTED IN CIT V. R.M.L. MEHR OTRA [2010] 186 TAXMAN 137/320 ITR 403 (ALL.) , AN ASSESSMENT BASED ON SEARCH ALONE THAT DOES NOT ATTRIBUTE MATERIAL EVIDENCE FOUND THEREIN OR OTHER INFORMATION AVAILABLE WITH THE AO RELATING TO SUCH MATERIALS CA NNOT CONSTITUTE BLOCK ASSESSMENT. IN THE LIGHT OF THE ABOVE ANALYSIS, IT IS HELD THAT THE ADDITIONS MADE ON ACCOUNT OF THE FOREIGN TRIPS MADE BY THE AS SESSEES FELL OUTSIDE THE JURISDICTION OF THE AO UNDER SECTION 158BC. THEY WE RE CORRECTLY DELETED BY THE ITAT. ............ 34. ........................... THE COUNSEL FOR TH E REVENUE, HOWEVER, IN THE COURSE OF THE PRESENT PROCEEDINGS WAS UNABLE TO PINPOINT A NY MATERIAL, WHICH HAD BEEN FOUND DURING THE COURSE OF THE SEARCH VIS-A-VI S THE POINT AT ISSUE, THEREBY, THE AFORESAID FIGURES ARRIVED AT CANNOT BE BROUGHT TO TAX AS 'UNDISCLOSED INCOME' IN THE BLOCK ASSESSMENT, WITHI N THE MEANING OF SECTION 158BB(1). THEREFORE, IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH, THE POST SEARCH ENQUIRIES MAD E BY THE AO WOULD BECOME FUTILE SINCE THIS WOULD ONLY BE RELEVANT FOR A REGULAR ASSESSMENT U/S. 143(3) AND NOT IN RESPECT OF A BLOCK ASSESSMEN T. 4.11 IN THE INSTANT CASE, WE NOTICE THAT THERE A RE NO CORROBORATIVE EVIDENCES TO SHOW THAT THE BALANCE SHEET FOUND DURI NG THE COURSE OF SEARCH REPRESENTS TRUE NATURE OF TRANSACTIONS. ON THE CONTRARY, THE ASSESSEE, BEING A LIMITED COMPANY, HAS FILED ANNUAL REPORTS CONTAINING BALANCE SHEETS WITH REGISTRAR OF COMPANI ES, WHICH IS BASED ON BOOKS OF ACCOUNTS. HENCE THE BALANCE SHEE T FOUND DURING THE COURSE OF SEARCH HAS TO BE CONSIDERED AS A DUM B DOCUMENT ONLY. IN THAT VIEW OF THE MATTER, THE QUANTUM OF I NVESTMENT MADE AS SHARE APPLICATION MONEY IN THE ABOVE SAID COMPANY S HOULD BE TAKEN AS RS.131 LAKHS ONLY. THE ASSESSEE HAS CLAIMED THA T HE HAS INVESTED RS.130 LAKHS. SINCE THE CLAIM OF THE ASSESSEE IS S UPPORTED BY THE BOOKS OF ACCOUNTS, THE SAME IS REQUIRED TO BE ACCEP TED. IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 15 OF 19 4.12 WE HAVE NOTICED EARLIER THAT THE ASSESSEE H AS EXPLAINED THE SOURCES, MAJOR PORTION OF WHICH REPRESENTS AGRICULT URAL INCOME AND IT HAS BEEN DECLARED TO THE REVENUE IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SEARCH. THE REVENUE HAS NOT FOUND A NY MATERIAL TO SHOW THAT THE AGRICULTURAL INCOME AND OTHER INCOME DECLARED BY THE ASSESSEE IN THE RETURNS OF INCOME ARE FALSE. HENCE , WE ARE OF THE VIEW THAT THE AO, IN THE BLOCK ASSESSMENT PROCEEDINGS, C ANNOT TINKER WITH THE INCOME/AGRICULTURAL INCOME ALREADY DECLARED BY THE ASSESSEE IN THE RETURNS OF INCOME FILED PRIOR TO THE DATE OF SE ARCH. HENCE THE SOURCES FOR RS.130 LAKHS ALSO REQUIRE TO BE ACCEPTE D. ACCORDINGLY, IN EFFECT, THERE IS NO INCRIMINATING MATERIAL AVAIL ABLE WITH THE AO IN SUPPORT OF THE UNDISCLOSED INCOME DETERMINED BY HIM . ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRE CT THE AO TO DELETE THE ENTIRE AMOUNT OF UNDISCLOSED INCOME DETERMINED BY HIM. 5. THE NEXT ISSUE CONTESTED BY THE ASSESSEE R ELATES TO THE SURCHARGE LEVIED U/S 113 OF THE ACT. THE AO HAD LE VIED THE SURCHARGE U/S 113 OF THE ACT AND THE LD CIT(A) HAS CONFIRMED THE SAME FOLLOWING THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF SURESH N GUPTA (SUPRA). SINCE WE HAVE DELETED T HE ENTIRE UNDISCLOSED INCOME IN THE EARLIER PARAGRAPHS, THE Q UESTION OF LEVYING OF SURCHARGE HAS BECOME ACADEMIC. IN ANY CASE, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE DECISION RENDERED IN THE C ASE OF SURESH N GUPTA (SUPRA) HAS SINCE BEEN MODIFIED BY HONBLE SU PREME COURT IN THE CASE OF VATIKA TOWNSHIP (367 ITR 466)(SC). ACC ORDINGLY, IN CASE IF ANY NEED ARISE FOR LEVYING OF SURCHARGE IN THE I NSTANT CASE, THE LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF V ATIKA TOWNSHIP (SUPRA) NEEDS TO BE FOLLOWED. IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 16 OF 19 6. WE SHALL NOW TAKE UP THE APPEAL OF THE REVENUE IN IT(SS)A NO.9/BANG/2011. THE REVENUE IS AGGRIEVED BY THE DE CISION OF LD CIT(A) IN DIRECTING THE AO TO COMPUTE INTEREST U/S 158BFA(1) OF THE ACT UPTO THE DATE OF ORIGINAL ASSESSMENT ORDER AND NOT UPTO THE DATE OF ASSESSMENT ORDER PASSED IN THE SET ASIDE PROCEED INGS. SINCE WE HAVE DELETED THE ENTIRE UNDISCLOSED INCOME IN THE E ARLIER PARAGRAPHS, THIS QUESTION HAS BECOME ACADEMIC. IN ANY CASE, WE DEAL WITH THIS ISSUE ON ACADEMIC INTEREST. 6.1 THE FACTS RELATING TO THE ABOVE SAID ISSUE AR E SET OUT IN BRIEF. THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 158BC O F THE ACT ON 19- 12-2001 DIRECTING THE ASSESSEE TO FILE THE RETURN O F INCOME IN FORM 2B WITHIN 30 DAYS FROM THE DATE OF SERVICE OF THE N OTICE. THE ASSESSEE DID NOT FILE RETURN OF INCOME IN FORM 2B AND HENCE THE ASSESSING OFFICER PASSED THE BLOCK ASSESSMENT ORDER U/S 158BC R.W.S. 144 OF THE ACT ON 28.3.2003. THE ASSESSING OFFICER ALSO C HARGED INTEREST U/S 158BFA(1) OF THE ACT FOR 14 MONTHS, I.E., FOR THE P ERIOD FROM FEB. 2002 TO MAR. 2003. WE HAVE NOTICED EARLIER, THE TR IBUNAL HAD RESTORED THE ISSUES URGED ON MERITS TO THE FILE OF THE AO FOR DECIDING THEM AFRESH. ACCORDINGLY, THE AO PASSED A FRESH AS SESSMENT ORDER ON 03.11.2009 U/S 158BC R.W.S 254 OF THE ACT. IN T HE SAID ORDER, THE ASSESSING OFFICER CHARGED INTEREST FOR THE PERIOD F ROM FEB 2002 TO OCTOBER 2009. 6.2 THE ASSESSEE, INTER ALIA, CHALLENGED BEFORE LD CIT(A) THE INTEREST CHARGED U/S 158BFA(1) OF THE ACT UPTO THE DATE OF ASSESSMENT ORDER PASSED BY THE AO IN THE SET ASIDE PROCEEDINGS. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE INTEREST COULD BE CHARGED UPTO THE DATE OF ORIGINAL ASSESSMENT ORDER. THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE INTEREST IS CHARG EABLE UPTO THE DATE IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 17 OF 19 OF ORIGINAL ASSESSMENT ORDER ONLY, I.E., UPTO FEBRU ARY, 2003 ONLY. THE REVENUE IS AGGRIEVED BY THE SAME. 6.3 THE MAIN CONTENTION OF THE REVENUE IS THAT THE TRIBUNAL HAD DIRECTED THE AO TO PASS ASSESSMENT ORDER DENOVO AND HENCE THE ORIGINAL ASSESSMENT ORDER NO LONGER EXISTS. HENCE THE AO WAS JUSTIFIED IN CHARGING INTEREST UPTO THE DATE OF FRE SH ASSESSMENT ORDER. 6.4 THE LD A.R, ON THE CONTRARY, SUBMITTED THAT THE TRIBUNAL IN THE ORDER PASSED BY IT EARLIER HAD NOT QUASHED THE ASSE SSMENT ORDER. IT HAD ONLY RESTORED THE ISSUES URGED ON MERITS FOR FR ESH CONSIDERATION. HENCE IT IS A CASE OF CONTINUATION OF ORIGINAL ASSE SSMENT PROCEEDINGS ONLY. HE SUBMITTED THAT THE PROVISIONS OF SEC.158 BFA(1) PERMITS CHARGING OF INTEREST UPTO THE DATE OF ORIGINAL ASSE SSMENT ORDER ONLY. ACCORDINGLY HE SUBMITTED THAT THE LD CIT(A) WAS JUS TIFIED IN DIRECTING THE AO TO RESTRICT THE CHARGING OF INTEREST UPTO TH E DATE OF ORIGINAL ASSESSMENT ORDER. 6.5 WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. THE PROVISIONS OFSEC.158BFA(1) EXISTED AT THE TIME OF PASSING OF ORIGINAL ASSESSMENT ORDER READ AS UNDER:- 158BFA. (1) WHERE THE RETURN OF TOTAL INCOME INCLUDING UND ISCLOSED INCOME FOR THE BLOCK PERIOD, IN RESPECT OF SEARCH INITIATE D UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ANY ASSETS REQUISITI ONED UNDER SECTION 132A ON OR AFTER THE 1ST DAY OF JANUARY, 1997, AS REQUIRED BY A NOTICE UNDER CLAUSE (A) OF SECTION 158BC , IS FURNISHED AFTER THE EXPIRY OF THE PERIOD SPECI FIED IN SUCH NOTICE, OR IS NOT FURNISHED, THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST AT THE RATE OF ONE AND ONE FOURTH PER CENT OF THE T AX ON UNDISCLOSED INCOME, DETERMINED UNDER CLAUSE (C) OF SECTION 158BC , FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD COMMENCING ON THE DAY IMMEDIATELY FOLLOWING THE EXPIRY OF THE TIME SPECIFIED IN THE NOTICE, AND IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 18 OF 19 (A) WHERE THE RETURN IS FURNISHED AFTER THE EXPIRY OF THE TIME AFORESAID, ENDING ON THE DATE OF FURNISHING THE RETURN; OR (B) WHERE NO RETURN HAS BEEN FURNISHED, ON THE DATE OF COMPLETION OF ASSESSMENT UNDER CLAUSE (C) OF SECTION 158BC . A CAREFUL READING OF ABOVE SAID PROVISIONS WOULD SH OW THAT THE INTEREST IS CHARGEABLE UPTO THE MONTH ENDING ON THE DATE OF COMPLETION OF ASSESSMENT, IF THE RETURN OF INCOME W AS NOT FILED IN RESPONSE TO THE NOTICE ISSUED U/S 158BC OF THE ACT. IN THE INSTANT CASE, THE ASSESSEE DID NOT FILE RETURN OF INCOME AN D HENCE THE AO HAD CHARGED INTEREST UPTO THE DATE OF COMPLETION OF ASS ESSMENT IN THE ORIGINAL ASSESSMENT ORDER. 6.6 IT IS THE CASE OF THE REVENUE THAT THE ORI GINAL ASSESSMENT ORDER HAS BEEN SET ASIDE BY THE TRIBUNAL BY OBSERVING THA T THE ASSESSMENT ORDER IS SET ASIDE TO BE DONE DE NOVO AND HENCE TH E DATE OF PASSING OF FRESH ASSESSMENT ORDER SHOULD BE CONSIDERED AS T HE DATE OF COMPLETION OF ASSESSMENT. 6.7 WE ARE UNABLE TO AGREE WITH THE CONTENTIONS OF THE REVENUE. AS RIGHTLY POINTED OUT BY LD A.R, THE ORDER PASSED BY THE TRIBUNAL EARLIER AND THE ORDER PASSED BY THE AO IN THE SET A SIDE PROCEEDINGS ARE CONTINUATION OF ORIGINAL ASSESSMENT PROCEEDINGS . IT IS NOT A CASE OF QUASHING OF ORIGINAL ASSESSMENT ORDER AND INITIA TION OF ALTOGETHER NEW PROCEEDINGS. HENCE, WE AGREE WITH THE VIEW EXP RESSED THE LD CIT(A) THAT THE INTEREST U/S 158BFA(1) SHOULD BE CH ARGED UPTO THE DATE OF ORIGINAL ASSESSMENT ORDER, I.E., THE EXPRES SION DATE OF COMPLETION OF ASSESSMENT UNDER CLAUSE (C) OF SEC. 1 58BC SHOULD MEAN THE ORIGINAL ASSESSMENT ORDER ONLY. WE FURTHE R NOTICE THAT THERE IS NO PROVISION UNDER THE ACT TO EXTEND CHARG ING OF INTEREST BEYOND THE DATE OF COMPLETION OF THE ORIGINAL ASSES SMENT IT(SS)A NO.4/BANG/2005 IT(SS)A NOS.8 & 9/BANG/2011 V. RAMPRASAD, BANGALORE PAGE 19 OF 19 PROCEEDINGS. ACCORDINGLY, WE CONFIRM THE ORDER PAS SED BY LD CIT(A) ON THIS ISSUE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IN IT(SS)A NO.4/BANG/2005 RELATING TO LEGAL ISSUE IS DISMISSED AS NOT PRESSED. THE APPEAL FILED BY THE ASSESSEE IN IT(SS)A NO.8/BA NG/2011 IS ALLOWED. THE APPEAL FILED BY THE REVENUE IN IT(SS) A NO.9/BANG/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEB, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 24 TH FEB, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.