Shri Bhagwandas P.Punjabi, Ahmedabad V. The ACIT., Circle-6, Ahmedabad

ITSSA 93/AHD/2007

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9351 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-04-2010
• Assessment Year: misc
• Appeal Filed On: 21-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: ASHEEM L THAKKAR
• Keywords: Unexplained investment; Gift; Depreciation; Share purchase agreement; Source of fund; Block assessment; Unabsorbed depreciation
• Section: 69C; 142(1); 32; 147; 131; 68; 69; 148; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD A BENCH, BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI N. S. SAINI, A.M. IT (SS) A NO.93/AHD/2007 BLOCK PERIOD: 01-04-1990 TO 07-03-2001 LATE BHAGWANDAS PUNJABI (ASSESSEE)- THROUGH L/H MS. VARSHA BHAGWANDAS PUNJABI (DAUGHTER), 702, GANESH COMPLEX, OPP. NAVRANG SCHOOL, NARANPURA, AHMEDABAD VS THE A. C. I. T., CIRCLE-6, AHMEDABAD PAN NO. AEHPP 2016C (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI ASHEEM L. THAKKAR, AR FOR DEPARTMENT: SHRI RAJEEV AGARWAL, DR O R D E R PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS)-XII, AHME DABAD DATED 12-02- 2007 FOR THE ABOVE BLOCK PERIOD ON THE FOLLOWING GR OUND: 1. THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING AN ADDITION OF RS.15,20,000/- MADE BY THE ASSESSING OFFICER FOR THE ALLEGED UNDISCLOSED INVESTMENT IN THE PROPERTY ON ESTIMATE BASIS. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. 2 3. THE LEANED COUNSEL FOR THE ASSESSEE INTIMATED T HAT ASSESSEE HAS EXPIRED LEAVING BEHIND HIS DAUGHTER MS. VARSHA BHAGAWANDAS PUNJABI AS LEGAL HEIR. HER AFFIDAVIT IS ALSO FILED . THERE IS NO OBJECTION TO THE SUBSTITUTION OF THE LEGAL HEIR BY OPPOSITE S IDE. THE ASSESSEE IS, THEREFORE, SUBSTITUTED THROUGH ABOVE LEGAL HEIR. 4. THE FACTS IN BRIEF ARE THAT A SEARCH OPERATION U /S 132 OF THE IT ACT WAS CARRIED OUT IN THE CASE OF SHRI DEVENDRA GAJEND RANATH CHATURVEDI. THE KEY OF T HE PROPERTY TENEMENT NO.4A, NAVENDU CO -OPERATIVE HOUSING SOCIETY, MEMNAGAR, AHMEDABAD WAS SEIZED BY THE POLI CE AUTHORITIES AND THE SAME WAS HANDED OVER TO THE INCOME TAX DEPARTME NT U/S 132A OF THE IT ACT. SHRI CHATURVEDI STATED BEFORE THE POLICE TH AT THE ABOVE PREMISES WERE PURCHASED FOR RS. 12 LACS FROM SHRI BHAGWANDAS PARMANAND PUNJABI I.E. THE ASSESSEE. HOWEVER, DURING THE COUR SE OF BLOCK ASSESSMENT OF SHRI DEVENDRA GAJENDRANATH CHATURVEDI , HE DENIED THE ABOVE STATEMENT AS HAVING BEEN TAKEN UNDER COERCION BY THE POLICE AND THE PROPERTY BELONGED TO THE ASSESSEE ONLY. THE ASS ESSEE WAS THEREFORE, SUMMONED AND HIS STATEMENT WAS RECORDED U/S 131 ON 04-10-2004, WHEREIN THE ASSESSEE HAS ACCEPTED THE OWNERSHIP OF THE PROPERTY. HOWEVER, T HE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF INVESTMENT BEFORE THE ACIT, CENTRAL CIRCLE 2(2), AHMEDABAD. AS THE AS SESSEE COULD NOT SUBSTANTIATE THE INVESTMENT, PROCEEDINGS U/S 158BD WERE INITIATED. IT HAS BEEN STATED BY THE ASSESSING OFFICER THAT THE ABOVE SAID PROPERTY IS NOT FOUND REFLECTED IN THE BALANCE SHEER ENCLOSED TO TH E RETURN OF INCOME FILED PRIOR TO THE SEARCH. HENCE, NOTICE U/S 158BD READ W ITH SECTION 158BC OF THE IT ACT DATED 17-11-2004 WAS ISSUED TO THE ASSES SEE ASKING TO FILE THE PRESCRIBED RETURN IN FORM NO.2B WITHIN 30 DAYS OF R ECEIPT OF THE ABOVE NOTICE. THE ASSESSEE FURNISHED HIS RETURN OF INCOME FOR BLOCK ASSESSMENT ON 31-03-2005 DECLARING UNDISCLOSED INCOME AT RS. N IL. FURTHER, A NOTICE 3 U/S 143(2) (II) OF THE IT ACT WAS ISSUED TO THE ASS ESSEE ON 10-05-2005. INCOMPLIANCE, THE ASSESSEE ATTENDED AND SUBMITTED S TATEMENT RECORDED BY ACIT, CENTRAL CIRCLE 2(2),AHMEDABAD WHEREIN HE S TATED THAT HE HAS NOT CONSTRUCTED ANY FLOOR IN THE AFORESAID TENEMENT AND HIS BROTHER AND MOTHER STAYED AT THE HOUSE AND CONSTRUCTED THE TWO FLOORS. FURTHER, HE STATED THAT HE HAS NOT INVESTED ANY MONEY IN ADDITIONAL CONSTRU CTION, WHICH WAS CLEARLY STATED IN ANSWER NOS. 6, 7 AND 8 IN HIS STA TEMENT RECORDED ON 04-10-2004. THE ASSESSING OFFICER ISSUED A DETAILED LETTER ALONG WITH NOTICES U/S 143(2) AND 142(1) OF THE IT ACT TO THE ASSESSEE. SUBSEQUENTLY, LETTERS DATED 19-10-2005 AND 09-11-2005 WERE ISSUED TO THE FOLLOWING PARTIES BY THE ASSESSING OFFICER: 1) THE CHIEF OFFICER, MEMNAGAR NAGARPALIKA/PANCHAY AT. 2) THE SECRETARY/VAHIVATDAR, NAVENDU CO-OP. HOUSIN G SOCIETY. 3) THE DY. TOWN PLANNER, AUDA, AHMEDABAD THE ASSESSING OFFICER STATED IN HIS ORDER THAT THE SECRETARY/VAHIVATDAR NAVENDU CO-OPERATIVE HOUSING SOCIETY VIDE ITS LETTE R DATED 11-11-2005 STATED THAT THEY HAVE TAKEN OVER CHARGE OF NAVENDU CO-OPERATIVE HOUSING SOCIETY, MEMNAGAR AHMEDABAD FROM THE SECRETARY ON 1 7-11-2004 AND THEY HAVE NOT RECEIVED THE COUNTERFOILS OF THE SHAR E CERTIFICATES. BUT THEY HAVE ISSUED DUPLICATE SHARE CERTIFICATES WHEREIN TH E TENEMENT LOCATED AT 4A NAVENDU PARK SOCIETY, MEMNAGAR,AHMEDABAD ORIGINA LLY BELONGED TO SHRI BHAILAL CHANDUBHAI PATEL AND T HEREAFTER IT HA S BEEN REGISTERED IN THE NAME OF SHRI BHIKHABHAI MAIJBHAI DESAI AND THEREAFT ER IT HAS BEEN REGISTERED IN THE NAME OF SHRI BHAGAWANDAS P. PUNJA BI. IN THE LIGHT OF THE EXPLANATION OFFERED BY THE SECRETARY, THE ASSESSING OFFICER ISSUED SUMMONS TO AMARBEN DESAI, WIFE OF LATE SHRI BHIKHAB HAI M. DESAI AND HER STATEMENT WAS RECORDED ON OATH. SMT. AMARBEN ST ATED IN HER 4 STATEMENT THAT THE ABOVE PROPERTY WAS PURCHASED ALR EADY CONSISTING OF THREE FLOORS AND THE SAME WAS SOLD TO SHRI BHAGAWAN DAS PUNJABI WITH ALL THE THREE FLOORS. IT WAS FURTHER STATED BY THE SECR ETARY/VAHIVATDAR THAT T HEY HAVE NOT OBTAINED NO OBJECTION CERTIFICATE FROM T HE CO-OPERATIVE SOCIETY UNDER CO-OPERATIVE SOCIETY ACT, 1961 FOR ANY RENOVA TION/CHANGES/ CONSTRUCTION OF OTHER TWO FLOORS. THE ASSESSING OFF ICER FURTHER STATED THAT THE PROPERTY WAS REFERRED TO THE VALUATION CELL. TH E VALUATION OFFICER HAS VISITED THE SITE AND BASED UPON ACTUAL MEASUREMENT THE FAIR COST OF INVESTMENT OF THE ENTIRE PROPERTY I.E. INVESTMENT O N LAND AND BUILDING DETERMINED AT RS.15,20,000/- AS ON DATE OF PURCHASE I.E. 04-07-1998. FURTHER, THE ASSESSEE FILED ITS SUBMISSION ON 25-11 -2005 BEFORE THE ASSESSING OFFICER. IT HAS BEEN STATED BY THE ASSESS EE THAT THE SAID PROPERTY WAS PURCHASED AT RS.4 LACS OUT OF INHERITE D CASH AMOUNT OF RS.4,11,000/- UNDER WILL FROM SMT. SHARDABEN R. SHA H WHO EXPIRED ON 16-02-1998. IT HAS BEEN FURTHER STATED THAT THE DEC EASED HAD NO CHILDREN AND SHE WAS AUNT OF THE ASSESSEES WIFE. FURTHER, I T HAS BEEN STATED THAT THE ASSESSEE FAILED TO REFLECT THIS PROPERTY IN THE RETURNS OF INCOME OUT OF IGNORANCE. THE ASSESSING OFFICER STATED THAT NOW, T HE ASSESSEE HAS FILED REVISED BALANCE SHEETS INCORPORATING THE ABOVE PROP ERTY. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, THE ASSESSING OFFICER STATED THAT THE FACT OF RECEIVING INHERITED AMOUNT OF RS.4,11,0 00/- ON 16-02-1998 BY WAY OF WILL FROM SMT. SHARDABEN R. SHAH IS NOTHING BUT AFTERTHOUGHT STORY TO HOOD-WINK THE REVENUE. THE ALLEGED DATE OF GIFT IS ALSO DATED 16-02-1998 WITH A VIEW TO MAKE THE PROCEEDING TIME BARRED IN THE CASE OF SMT. SHARDABEN R. SHAH. THE ASSESSING OFFICER CONTE NDED THAT IF THE ASSESSEE HAD RECEIVED ANY MONEY BY INHERITANCE ON T HE ABOVE DATE HE COULD HAVE DEFINITELY MENTIONED THE SAME AT THE TIM E OF STATEMENT RECORDED U/S 131 OF THE IT ACT OR AT THE TIME OF FI LING BLOCK RETURN, WHICH HE HAS NOT DONE. AFTER REBUTTING THE ARGUMENT OF THE A SSESSEE, THE ASSESSING 5 OFFICER TREATED THE VALUE OF THE PROPERTY AT RS.15, 20,000/- AND ADDED THE SAME TO THE TOTAL INCOME F THE ASSESSEE AS UNDISCLO SED INCOME. 5. IT WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSEE WAS FIRST SUMMONED BY A CIT, CENTRAL CIRCLE 2(2), AHMEDABAD IN CONNECTION WITH THE BLOCK ASSESS MENT PROCEEDINGS IN THE CASE OF SHRI DEVENDRA GAJENDRANATH CHATURVEDI B EFORE WHOM THE ASSESSEE ADMITTED THAT THE PROPERTY BELONGS TO HIM AND THAT HE HAS PURCHASED THE SAME FOR RS.4,00,000/- ON 04-07-1998. IT WAS FURTHER STATED THAT THE ASSESSEE HAD FURNISHED COMPLETE INFORMATIO N AS TO THE PURCHASE OF THE PROPERTY IN QUESTION. IT HAS BEEN STATED THA T THE PROPERTY WAS PURCHASED ON 04-07-1998 AS PER THE SALE DEED DATED 04-07-1998 FOR A TOTAL CONSIDERATION OF RS.4,00,000/-. THE PROPERTY IN QUESTION WAS PURCHASED BY THE ASSESSEE FROM BHIKHABHAI M. DESAI. IT WAS FURTHER CONTENDED THAT AS REGARDS THE SOURCE OF FUND FOR PU RCHASE OF THE SAID PROPERTY THE ASSESSEE HAS FILED WRITTEN SUBMISSION BEFORE THE ASSESSING OFFICER ON 24-11-2005 EXPLAINING THAT THE ASSESSEE HAD INHERITED RS.4,11,000/- BY WILL FROM SMT. SHARDABEN M. SHAH. THE ASSESSEE FURTHER CONTENDED THAT IN THE ABSENCE OF ANY MATERIAL/EVIDE NCE ON RECORD TO SHOW THAT THE APPELLANT HAD INCURRED ANY EXPENDITURE ON CONSTRUCTION/RENOVATION OR OTHER INVESTMENT IN THE SAID PROPERTY, THE ESTIM ATE MADE BY THE ASSESSING OFFICER DETERMINING THE TOTAL INVESTMENT IN THE SAID LAND AND BUILDING OF RS.15,20,000/- IS TOTALLY UNJUSTIFIED. THE ASSESSEE, THEREFORE, CONTENDED THAT THE ADDITION MADE BY THE ASSESSING O FFICER MAY BE DELETED AND INCOME FOR THE BLOCK PERIOD MAY BE TAKEN AS PER THE RETURN FILED. 6. ON CONSIDERATION OF THE SUBMISSIONS OF THE ASSES SEE AND THE FACTS ON RECORD, THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) CONFIRMED THE ADDITION BY HOLDING AS UNDER: 6 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, OBSERVATIONS OF THE A O AS WELL AS THE ARGUMENTS PU T FORTH BY THE LEARNED COUNSEL FOR THE APPELLANT. FROM THE FAC TS OF THE CASE IT IS VERY CLEAR THAT THE PROPERTY SITUATED AT 4A NAVENDU CO-OPERATIVE HOUSING SOCIETY, MEMNAGAR, AHMEDABAD BELONGS TO THE APPELLANT AND THE SAME WAS PURCHASED FROM SHRI BHIKHABHAI MAIJBHAI DESAI ON 04.07.1998. AS DI SCUSSED ABOVE, IT IS CLEAR IN THIS CASE THAT THE APPELLANT DID NOT SHOW THE PROPERTY IN HIS BALANCE SHEET. AS PER STATEMENT OF SMT. AMARBEN DESAI, W/O. OF LATE SHRI BHIKHABHAI M. DESA I RECORDED ON 22.11.2005, IT WAS CLEARLY STATED BY HE R THAT THE PROPERTY WAS PURCHASED BY HER HUSBAND, WHICH ALREAD Y CONSISTED OF THREE FLOORS AND THE SAME WAS SOLD TO BHAGAWANDAS PUNJABI WITH ALL THREE FLOORS. THE APPE LLANT NEITHER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOR APPELLATE PROCEEDINGS PROVED ANY INVESTMENT MADE IN THE PROPERTY AFTER IT WAS PURCHASED. IT IS CONCLUSIVE E VIDENCE THAT WHEN T HE PROPERTY WAS PURCHASED IT WAS A THREE STO RIED BUILDING. SO FAR AS INVESTMENT IN PURCHASE OF PROPE RTY IS STATED BY THE APPELLANT THROUGH THE WILL IS CONCERNED, THE APPELLANT COULD NOT CLARIFY AS AND ON WHAT DATE THE EXECUTION OF WILL WAS MADE AND HOW THE MONEY WAS RECEIVED BY THE APPELLAN T IS NOT CLEAR. THE ASSISTANT VALUATION OFFICER, WHO IS A TE CHNICAL PERSON DETERMINED THE COST OF LAND AND BUILDING AT RS.15,20,000/- AFTER INSPECTING THE PROPERTY AND MA KING THE ACTUAL MEASUREMENT. THE ASSISTANT VALUATION OFFICER WHILE SUBMITTING HIS REPORT, DETERMINING THE FAIR COST OF INVESTMENT IN THE PROPERTY MENTIONED AS UNDER THE FAIR COST OF INVESTMENT ON LAND AND BUILDING A S WORKED OUT BY THIS OFFICE COMES TO RS.15,20,000/- A S ON DATE OF PURCHASE I.E. 4.7.98. AS THE ASSESSEE HAS N OT SUBMITTED ANY DETAILS REGARDING THE CONSTRUCTION MA DE AFTER THE DATE OF PURCHASE I.E. AFTER 4.7.199, AND IT IS ALSO NOT IDENTIFIABLE AT THE TIME OF INSPECTION OF THE PROPERTY. THE UNDERSIGNED HAS CONSIDERED THE TOTAL AREA OF THE BUILDING AS EXISTED AT THE TIME OF PURCHASE AND THE SAME FACT HAS BEEN RECEIVED FROM THE COPY OF FO RM NO.1 AVAILABLE WITH THE ASSESSEE. THE DETAILED REPO RT REGARDING THE COST OF INVESTMENT OF THE PROPERTY IS FOLLOW. THE ABOVE COST DOES NOT INCLUDE THE FOLLOWI NG: 7 1. ADDITION/EXPENDITURE DONE BY THE OCCUPANT AT FIR ST FLOOR 2. COST OF MOVABLE FURNITURE LIKE SOFA, BED, CHAIR ETC. ACCORDINGLY, THE VALUE OF RS.15,20,000/- DETERMINED BY THE ASSISTANT VALUATION OFFICER AS ON 04.07.1998 IS WEL L CONSIDERED AND JUSTIFIED. IT IS ALSO WORTH TO BE CO NSIDERED THAT HE SECRETARY/VAJHIVATDAR HAS STATED THAT THEY HAVE NOT OBTAINED NO OBJECTION CERTIFICATE FROM CO-OPERATI VE SOCIETY UNDER CO-OPERATIVE SOCIETY ACT, 1961 FOR ANY RENOVATION/CHANGE/CONSTRUCTION OF OTHER TWO FLOORS (PAGE 5 OF ASSESSMENT ORDER). IT MEANS THE INVESTMENT MADE IN THE PROPERTY AS DETERMINED BY THE TECHNICAL PERSON, ASS ISTANT VALUATION OFFICER AT RS.15,20,000/- WAS NOT DISCLOS ED TO THE DEPARTMENT BY THE APPELLANT, AS IT WAS MADE OUT OF UNDISCLOSED SOURCE. IN VIEW OF THE ABOVE DISCUSSION AND DETAILED ORDER PASSED BY THE A. O., THE ADDITION MA DE BY THE A. O. FOR UNEXPLAINED INVESTMENT IN THE PROPERTY OF RS.15,20,000/- IS HEREBY CONFIRMED. THIS GROUND OF APPEAL IS, THEREFORE, REJECTED. 4. IN THE RESULT, THE APPEAL IS DISMISSED. 7. THE ASSESSEE RAISED THE FOLLOWING ADDITIONAL GRO UND OF APPEAL AND REQUESTED THAT THE SAME MAY BE ADMITTED FOR THE PUR POSE OF HEARING: 1. THE APPELLANT CHALLENGES THE VALIDITY OF THE AS SESSMENT MADE BY THE A. O. U/S. 158BC RWS 158BD OF THE I. T. ACT AS THE SAME IS ILLEGAL & BAD IN LAW. HENCE THE ASSESSM ENT SO MADE REQUIRE TO BE ANNULLED. 7.1 LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ABOVE ADDITIONAL GROUND IS LEGAL IN NATURE AND MAY BE ADMITTED. HE H AS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER CORPORATION 229 ITR 383 (SC). HE HAS REFERRED TO THE FINDINGS OF THE ASSESSING OFFICER U/S 158 BC OF THE IT ACT IN T HE BLOCK ASSESSMENT IN RESPECT OF PROPERTY IN QUESTION IN THE CASE OF SHRI DEVENDRAN 8 GAJENDRANATH CHATURVEDI, THE PERSON IN WHOSE CASE S EARCH WAS CONDUCTED BY POLICE AND ACTION WAS TAKEN BY THE INC OME TAX DEPARTMENT U/S 132A OF THE IT ACT AND SUBMITTED THAT THE ASSES SING OFFICER DID NOT BELIEVE HIS STATEMENT AND DIRECTED TO CONSIDER INVE STMENT IN THE HANDS OF THE ASSESSEE. HE HAS SUBMITTED THAT KEY OF THE PROP ERTY IN QUESTION AND STATEMENT OF DEVENDRA GAJENDRANATH CHATURVEDI WAS O N RECORD BUT THERE IS NO EVIDENCE THAT SAME WERE HANDED OVER BY ASSESS ING OFFICER IN THAT CASE TO THE ASSESSING OFFICER OF THE ASSESSEE. HE H AS SUBMITTED THAT POST SEARCH ENQUIRY WAS CONDUCTED AGAINST THE ASSESSEE. HE HAS SUBMITTED THAT KEY OF THE PROPERTY HAS NO VALUE. THEREFORE, I T IS NOT A VALUABLE PROPERTY. HE HAS SUBMITTED THAT ONUS IS UPON REVENU E DEPARTMENT IF ANY ADDITION IS TO BE MADE U/S 69 OF THE IT ACT. HE HAS SUBMITTED THAT NOTICE ISSUED BY THE ASSESSING OFFICER U/S 158BD/158BC DAT ED 17-11-2004 IS ILLEGAL BECAUSE NO STATUS IS MENTIONED IN THE NOTIC E. HE HAS SUBMITTED THAT ASSESSING OFFICER IN THE CASE OF THE PERSON SEARCHE D HAS NOT RECORDED SATISFACTION AS REQUIRED U/S 158 BD OF THE IT ACT. HE HAS RELIED UPON THE FOLLOWING DECISIONS: (1) MANISH MAHESHWARI VS ACIT 289 ITR 341(SC) (2) VISHWANATH PRASAD 86 ITD 516 (ALL) (3) CIT VS P. K. GANESHWAR 308 ITR 124 (MAD) (4) MANGERAM MITTAL VS ACIT 103 ITD 389 (SB) (DELH I) (5) MORARJEE GOKULDAS SPG. & WVG. CO. LTD. VS DCIT 95 ITD 1 (MUM) (TM) (6) CIT VS M. K. GABRIEL BABU & OTHERS 188 ITR 464 (KER) (7) BHAGAWANDAS NARAYANDAS VS CIT 98 ITD 194 (GUJ) (8) AMBESHWAR GRUH NIRMAN SAHKARI SAMITY LTD. VS DC IT 84 ITD 139 (JP) (TM) (9) CIT VS DAWN VIEW FUNDS PVT. LTD. 224 CTR 504 ( DELHI) (10) RADHESHYAM TANWAI 77 TTJ 505 (11) SRINIVAS RESORTS LTD. VS CIT 86 TTJ 797 (HYD. ) (12) CHABARIA MANUFACTURING LTD. VS CIT 81 ITD 314 THE LEARNED COUNSEL FOR THE ASSESSEE ACCORDINGLY SU BMITTED THAT THE ABOVE ADDITIONAL GROUND MAY BE ADMITTED FOR HEARING . HE HAS HOWEVER, 9 FAIRLY CONCEDED THAT THE ASSESSEE NEVER CHALLENGED THE DEFECT IN THE NOTICE AND INITIATION OF PROCEEDINGS U/S 158 BD OF THE IT ACT BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS). 7.2 ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT NO FACTS ARE AVAILABLE ON RECORD THA T ASSESSING OFFICER DID NOT RECORD ANY SATISFACTION AS REQUIRED U/S 158 BD OF THE IT ACT OR THAT THE KEY AND THE STATEMENT OF DEVENDRA GAJENDRANATH CHAT URVEDI WAS NOT HANDED OVER TO THE ASSESSING OFFICER OF THE ASSESSE E. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE BLOC K ASSESSMENT ORDER IN THE CASE OF DEVENDRA GAJENDRANATH CHATURVEDI CLEARL Y DISCERNED THE SATISFACTION RECORDED BY THE ASSESSING OFFICER OF T HE PERSON SEARCHED AND THE SEIZED MATERIAL HANDED OVER TO THE ASSESSING OF FICER OF THE ASSESSEE. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE KEY OF THE PROPERTY IN QUESTION REPRESENTS IMMOVABLE PROPERTY IN QUESTION WHICH WAS FOUND TO BE CORRECT AND CONNECTED WITH THE ASSESSEE . 158 BD PROCEEDINGS HAVE THEREFORE, BEING CORRECTLY INITIATED AGAINST T HE ASSESSEE BEING THE INCOME OF OTHER PERSON. UNDISCLOSED INCOME CAME TO THE KNOWLEDGE OF THE DEPARTMENT AS PER THE MATERIAL FOUND DURING THE SEA RCH AS WELL AS FROM THE STATEMENT OF DEVENDRA GAJENDRANATH CHATURVEDI AND P OST SEARCH ENQUIRY CONDUCTED FROM THE ASSESSEE WHICH WAS RELATED TO TH E MATERIAL SEIZED DURING THE COURSE OF SEARCH. THE ASSESSEE IN THE PO ST SEARCH ENQUIRY ADMITTED UNDISCLOSED INVESTMENT IN THE PROPERTY WHI CH WAS NOT SHOWN TO THE REVENUE DEPARTMENT PRIOR TO THE SEARCH. ASSESSI NG OFFICER WAS THEREFORE, SATISFIED THAT ASSESSEE HAS UNDISCLOSED INCOME WITHIN THE BLOCK PERIOD. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT SINCE THE ASSESSEE HAS NOT CHALLENGED THE ABOVE ISSUE BEFORE THE AUTHORITIES BELOW AND ASSESSEE HAS FAILED TO ADDUCE SUFFICIENT MATERI AL TO SUPPORT THE ADDITIONAL GROUND THEREFORE, SAME CANNOT BE ADMITTE D FOR THE PURPOSE OF 10 HEARING BECAUSE OTHERWISE IT WOULD AMOUNT TO PROBIN G OF THE NEW FACTS NOT ON RECORD. 7.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. SECTION 158 B OF THE IT ACT PROVIDES DEF INITION OF BLOCK PERIOD AND UNDISCLOSED INCOME. IT READS AS UNDER: 158B. IN THIS CHAPTER, UNLESS THE CONTEXT OTHERWISE REQUIRES, [(A) BLOCK PERIOD MEANS THE PERIOD COMPRISING PRE VIOUS YEARS RELEVANT TO SIX ASSESSMENT YEARS PRECEDING TH E PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED UNDER SECTIO N 132 OR ANY REQUISITION WAS MADE UNDER SECTION 132A AND ALSO INCLUDES THE PERIOD UP TO THE DATE OF THE COMMENCEM ENT OF SUCH SEARCH OR DATE OF SUCH REQUISITION IN THE PREV IOUS YEAR IN WHICH THE SAID SEARCH WAS CONDUCTED OR REQUISITION WAS MADE : PROVIDED THAT WHERE THE SEARCH IS INITIATED OR THE REQUISITION IS MADE BEFORE THE 1ST DAY OF JUNE, 2001, THE PROVISIO NS OF THIS CLAUSE SHALL HAVE EFFECT AS IF FOR THE WORDS SIX A SSESSMENT YEARS, THE WORDS TEN ASSESSMENT YEARS HAD BEEN SUBSTITUTED;] ( 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, BULLIO N, JEWELLERY, VALUABLE ARTICLE, THING, ENTRY IN THE BO OKS 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 A NY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE]. SECTION 158 BB PROVIDES COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD AND READS AS UNDER: 158BB. (1) THE UNDISCLOSED INCOME OF THE BLOCK PER IOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS Y EARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, 1 [IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESUL T OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE], AS REDUCED BY THE AGGREGATE OF THE 11 TOTAL INCOME, OR AS THE CASE MAY BE, AS INCREASED B Y 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 REQUISIT ION], ON THE BASIS OF SUCH ASSESSMENTS; (B) WHERE RETURNS OF INCOME HAVE BEEN FILED UNDER S ECTION 139 [OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTI ON (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 INC OME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, (A) ON THE BASIS OF ENTRIES AS RECORDED IN THE BOO KS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMA L COURSE ON OR BEFORE THE DATE OF THE SEARCH OR REQUISITION WHERE SUCH ENTRIES RESULT IN COMPUTATION OF LOSS FOR ANY PREVI OUS YEAR FALLING IN THE BLOCK PERIOD; OR (B) ON THE BASIS OF ENTRIES AS RECORDED IN THE BOO KS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMA L COURSE ON OR BEFORE THE DATE OF THE SEARCH OR REQUISITION WHERE SUCH INCOME DOES NOT EXCEED THE MAXIMUM AMOUNT NOT CHARG EABLE TO TAX FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK P ERIOD; (CA) WHERE THE DUE DATE FOR FILING A RETURN OF INC OME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, A S NIL, IN CASES NOT FALLING UNDER CLAUSE (C);] (D) WHERE THE PREVIOUS YEAR HAS NOT ENDED OR THE DA TE OF FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) O F SECTION 139 HAS NOT EXPIRED, ON THE BASIS OF ENTRIES RELATING T O SUCH INCOME OR TRANSACTIONS AS RECORDED IN THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEF ORE THE DATE OF THE SEARCH OR REQUISITION RELATING TO SUCH PREVIOUS YEARS; (E) WHERE ANY ORDER OF SETTLEMENT HAS BEEN MADE UND ER SUB-SECTION (4) OF SECTION 245D , ON THE BASIS OF SUCH ORDER; (F) WHERE AN ASSESSMENT OF UNDISCLOSED INCOME HAD B EEN MADE EARLIER UNDER CLAUSE (C) OF SECTION 158BC , ON THE BASIS OF SUCH ASSESSMENT. EXPLANATION.FOR THE PURPOSES OF DETERMINATION OF UNDISCLOSED INCOME, (A) THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR SHALL, FOR THE PURPOSE OF AGGREGATION, BE TAKEN AS THE TOTAL I NCOME OR LOSS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF [THIS ACT] 12 WITHOUT GIVING EFFECT TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORBED DEPRECIATION UNDER SUB-SEC TION (2) OF SECTION 32 : [PROVIDED THAT IN COMPUTING DEDUCTIONS UNDER CHAPTE R 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 SE CTION 32 ;] [(B) OF A FIRM, RETURNED INCOME AND TOTAL INCOME AS SESSED 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 WHAT EVER NAME CALLED [TO ANY PARTNER NOT BEING A WORKING PARTNER] : PROVIDED THAT UNDISCLOSED INCOME OF THE FIRM SO DET ERMINED SHALL NOT BE CHARGEABLE TO TAX IN THE HANDS OF THE PARTNE RS, 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 BLOC K 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 REQUI SITION. (3) THE BURDEN OF PROVING TO THE SATISFACTION OF TH E ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME HAD ALREADY BEE N DISCLOSED IN ANY RETURN OF INCOME FILED BY THE ASSE SSEE BEFORE THE COMMENCEMENT OF SEARCH OR OF THE REQUISITION, A S THE CASE MAY BE, SHALL BE ON THE ASSESSEE. (4) FOR THE PURPOSE OF ASSESSMENT UNDER THIS CHAPTE R, LOSSES BROUGHT FORWARD FROM THE PREVIOUS YEAR UNDER CHAPTE R VI OR UNABSORBED DEPRECIATION UNDER SUB-SECTION (2) OF SE CTION 32 SHALL NOT BE SET OFF AGAINST THE UNDISCLOSED INCOME DETERMINED IN THE BLOCK ASSESSMENT UNDER THIS CHAPTER, BUT MAY BE CARRIED FORWARD FOR BEING SET OFF IN THE REGULAR AS SESSMENTS. 7.4 THE ABOVE PROVISIONS WOULD SHOW THAT IN BLOCK A SSESSMENT UNDER CHAPTER XIV B WOULD APPLY IN CASE OF REQUISITION WA S MADE U/S 132A OF THE IT ACT. IN THE PRESENT CASE, THE DOCUMENTS AND MATE RIAL FOUND IN THE SEARCH BY THE POLICE WAS REQUISITIONED BY THE REVEN UE AUTHORITIES U/S 132A OF THE IT ACT AND WAS ALSO HANDED OVER TO THE IT DEPARTMENT. THE 13 DEFINITION OF UNDISCLOSED INCOME U/S 158B (B) IS IN CLUSIVE OF THE ITEMS REFERRED TO IN THE ABOVE PROVISIONS. THE COMPUTATIO N OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD COULD BE MADE IN ACCORD ANCE WITH PROVISIONS OF THIS ACT ON THE BASIS OF EVIDENCE FOUND AS A RES ULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE A SSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE. THE FINANCE ACT 2002, H AS AMENDED SECTION 158 BD OF THE IT ACT WITH EFFECT FROM 01-07-1995, T O CLARIFY THAT THE BLOCK ASSESSMENT OF UNDISCLOSED INCOME IS TO BE BASED ON EVIDENCE FOUND IN THE SEARCH AND MATERIAL, OR INFORMATION GATHERED IN POS T SEARCH ENQUIRIES MADE ON THE BASIS OF EVIDENCE FOUND IN THE SEARCH. THE PROVISIONS OF SECTION 68, 69, 69A, 69B AND 69 C SHALL ALSO APPLY FOR THE BLOCK PERIOD. IF ANY UNEXPLAINED INVESTMENT IS MADE BY THE ASSESSEE AND ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE I NVESTMENT OR THE EXPLANATION OFFERED BY ASSESSEE IS NOT IN THE OPINI ON OF THE ASSESSING OFFICER SATISFACTORY, THE VALUE OF THE INVESTMENT M AY BE DEEMED TO BE INCOME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. HON' BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HOTEL KUMAR PALACE VS CIT 283 ITR 110 (P&H) HELD AS UNDER: FROM A BARE READING OF SECTION 158BB OF THE INCOME -TAX ACT, 1961, IT IS CLEAR THAT UNDISCLOSED INCOME OF T HE BLOCK PERIOD HAS TO BE COMPUTED ON T HE BASIS OF THE EVID ENCE FOUND AS A RESULT OF THE SEARCH OR REQUISITION OF B OOKS OR DOCUMENTS AND SUCH OTHER MATERIALS AS ARE AVAILABLE WITH THE ASSESSING OFFICER. THE INCIDENT OF SEARCH IS TH E FOUNDATION FOR APPLICABILITY OF CHAPTER XIV-B. HELD, THAT AS NOTICED BY THE COMMISSIONER, INCOME FROM CATERING BUSINESS WAS ESTIMATED BY THE ASSESSI NG OFFICER, ON THE BASIS OF THE STATEMENT OF THE PARTN ER, RECORDED DURING THE COURSE OF SEARCH, AND DIARIES S EIZED IN THESE PROCEEDINGS. THE TRIBUNAL HAD ALSO OBSERVE D THAT IN HIS STATEMENT, THE PARTNER HAD ADMITTED THA T INCOME FROM CATERING BUSINESS WAS NOT FULLY RECORDE D IN 14 THE BOOKS OF ACCOUNT. THIS FINDING WAS NEVER UNDER CHALLENGE. THE BLOCK ASSESSMENT WAS VALID. IN THE PRESENT CASE, KEY OF THE PROPERTY AND THE PR OPERTY IN QUESTION WAS ADMITTEDLY BELONGING TO THE ASSESSEE. STATEMENT OF DEVENDRA GAJENDRANATH CHATURVEDI WAS RECORDED BY THE POLICE IN WHICH HE HAS ADMITTED TO HAVE PURCHASED THE PROPERTY IN QUESTION FROM THE ASSESSEE FOR RS.12 LACS. DURING THE BLOCK ASSESSMENT PROCEEDINGS IN HIS CASE, HE HAS DENIED TO HAVE PURCHASED THE PROPERTY AND CLAIMED T HAT THE PROPERTY BELONG TO THE ASSESSEE. THE ASSESSEE IN HIS STATEME NT ADMITTED OWNERSHIP OF THE PROPERTY IN QUESTION BUT COULD NOT EXPLAIN THE SOURCE OF INVESTMENT. THE INVESTMENT IN THE PROPERTY WAS ALSO NOT SHOWN TO THE REVENUE DEPARTMENT PRIOR TO THE SEARCH. THE ABOVE F ACTS WOULD SHOW THAT THERE WAS SUFFICIENT MATERIAL AVAILABLE WITH THE AS SESSING OFFICER OF DEVENDRA GAJENDRANATH CHATURVEDI WHICH WAS REQUISIT IONED FROM THE POLICE U/S 132A OF THE IT ACT. THE POST SEARCH ENQU IRIES CONDUCTED ON THE EVIDENCE AND MATERIAL REQUISITIONED U/S 132A OF THE IT ACT CLEARLY REVEALED THAT ASSESSEE MADE UNDISCLOSED INVESTMENT IN THE PR OPERTY IN QUESTION WHICH WAS NOT DISCLOSED TO THE REVENUE DEPARTMENT P RIOR TO THE SEARCH IN THE REGULAR RETURN. IN THE CASE OF MANISH MAHESHWAR I (SUPRA) THE FOLLOWING CONDITIONS WERE HELD TO BE PRECEDENT FOR PROCEEDING U/S 158BD OF THE IT ACT. (I) SATISFACTION MUST BE RECORDED BY THE ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME BELONGS TO ANY PERSON OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER S ECTION 132 OF THE ACT, (II) THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASS ETS SEIZED OR REQUISITIONED HAD BEEN HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND (III) THE ASSESSING OFFICER HAS PROCEEDED UNDER SEC TION 158BC AGAINST SUCH OTHER PERSON. 15 THE BLOCK ASSESSMENT ORDER IN THE CASE OF DEVENDRA GAJENDRANATH CHATURVEDI IN PARA 23 CLEARLY RECORDED THE ABOVE FA CTS BY THE ASSESSING OFFICER (ACIT, CENTRAL CIRCLE 2(2), AHMEDABAD) IT W AS ALSO NOTED THAT SINCE THE ASSESSEE COULD NOT EXPLAIN SOURCE OF THE INVEST MENT IN THE ABOVE PROPERTY IN QUESTION, THEREFORE, THE MATTER IS REFE RRED TO THE ASSESSING OFFICER OF THE ASSESSEE I.E. ACIT, CIRCLE-6, AHMEDA BAD. THE BLOCK ASSESSMENT ORDER IN THE CASE OF THE PRESENT ASSESSE E IS COMPLETED BY ACIT, CIRCLE-6, AHMEDABAD. THE FINDING IN THE CASE OF DEVENDRA GAJENDRANATH CHATURVEDI THEREFORE, CLEARLY DISCERNI BLE THE SATISFACTION OF THE ASSESSING OFFICER IN THE CASE OF THE PERSON SEA RCHED AND THE SEIZED MATERIAL HANDED OVER TO THE ASSESSING OFFICER OF TH E ASSESSEE. IT WOULD, THEREFORE, PRIMA FACIE PROVE THAT THE CONDITIONS OF SECTION 158BD OF THE IT ACT WERE SATISFIED BEFORE INVOKING JURISDICTION IN THE CASE OF THE ASSESSEE. THE ASSESSEE HAS NOT RAISED THESE ISSUES BEFORE THE ASSESSING OFFICER OR THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). T HE ADDITIONAL GROUND RAISED ABOVE IS NOT PURELY LEGAL IN NATURE AND IS N OT ARISING OUT OF THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. IT INVOLV ES INVESTIGATION OF FACTS WHICH HAVE NOT BEEN BROUGHT ON RECORD BY THE ASSESS EE. IN THESE CIRCUMSTANCES, THE ASSESSEE SHOULD HAVE RAISED THIS GROUND AT THE EARLIEST BEFORE THE AUTHORITIES BELOW. NO FACTS OR MATERIAL HAS BEEN BROUGHT ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE IN S UPPORT OF THE ADDITIONAL GROUND OF APPEAL. SINCE ADDITIONAL GROUND IS RAISED BY THE ASSESSEE, THEREFORE, ASSESSEE SHALL HAVE TO PROVE THAT THE SA ME IS FIT FOR ADMISSION. THE ONUS ON ASSESSEE IS NOT DISCHARGED IN THIS CASE . THE CHALLENGE TO THE NOTICE U/S 158 BD OF THE IT ACT IS NOT MADE BEFORE THE AUTHORITIES BELOW AND THE ASSESSEE FILED THE RETURN FOR THE BLOCK PER IOD WITHOUT ANY OBJECTION. ITAT AMRITSAR SPECIAL BENCH IN THE CASE OF SMT. MAH ESH KUMARI BATRA VS JCIT 95 ITD 152 HELD AS UNDER: 16 ANY DEFECT WITH REGARD TO ISSUE OF NOTICE UNDER 15 8BC CANNOT RENDER BLOCK ASSESSMENT PROCEEDINGS TO BE NU LL AND VOID; SUCH DEFECT WILL BE RECTIFIABLE UNDER SEC TION 292B. 7.5 THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPO N SEVERAL DECISIONS OF THE TRIBUNAL WHICH ARE DECISIONS ON MERITS IN TH EIR OWN FACTS. THESE ARE NOT RELEVANT TO THE ADMISSION OF THE ADDITIONAL GRO UND OF APPEAL. IN THE CASE OF P. K. GANESHWAR (SUPRA), HONBLE MADRAS HIG H COURT HELD THAT SINCE THE FIXED DEPOSITS IN FICTITIOUS NAMES NOT D ETECTED DURING SEARCH BUT BY INVESTIGATION FOLLOWING AFTER SEARCH, THEREFORE, NOT INCLUDABLE AS UNDISCLOSED INCOME. IN THE CASE OF M.K. GABRIEL BABU AND OTHERS (SUPRA) HONBLE KERALA HIGH COURT CONSID ERED THE SCOPE OF SECTION 132 OF THE IT ACT AS REGARDS SEIZURE OF IMM OVABLE PROPERTY. IN THE CASE OF BHAGAWANDAS NARAYANDAS (SUPRA), HONBLE GUJ ARAT HIGH COURT CONSIDERED THE ISSUE OF LIMITATION FOR SEIZURE AND THE THINGS OR ARTICLES WHICH CAN BE RETAINED U/S 132(5) OF THE IT ACT. IN THE CASE OF DAWN VIEW FIRMS PVT. LTD. (SUPRA) IT WAS FOUND THAT CONDITION S OF SECTION 158 BD ARE NOT SATISFIED. THEREFORE, DEPARTMENTAL APPEAL WAS D ISMISSED. THE ABOVE DECISIONS WOULD NOT SUPPORT THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR ADMISSION OF THE ADDITIONAL GROUND. LE ARNED COUNSEL FOR THE ASSESSEE LASTLY ARGUED THAT THE MATERIAL AND EVIDEN CE CONNECTED WITH INVOKING OF THE JURISDICTION U/S 158 BD OF THE IT A CT ARE THE INTERNAL RECORD OF THE DEPARTMENT AND ASSESSEE COULD NOT LAY HAND O N THE SAME. THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE I S DEVOID OF MERIT BECAUSE ALL MATERIALS CONNECTED WITH BLOCK ASSESSME NT ARE PART OF THE RECORD OF THE BLOCK ASSESSMENT AND AVAILABLE WITH T HE ASSESSING OFFICER. THE ASSESSEE COULD INSPECT THE RECORD OR GET THE CO PY OF THE SAME BY MAKING A REQUEST IN ACCORDANCE WITH RULES. THE FAIL URE ON THE PART OF THE ASSESSEE TO DO THE NEEDFUL WOULD NOT SUPPORT THE CO NTENTION OF THE LEARNED 17 COUNSEL FOR THE ASSESSEE. CONSIDERING THE ABOVE DIS CUSSION, WE ARE NOT INCLINED TO ADMIT THE ADDITIONAL GROUND OF APPEAL A T THE SECOND APPELLATE STAGE. WE ACCORDINGLY REJECT THE REQUEST OF THE ASS ESSEE FOR ADMISSION OF THE ADDITIONAL GROUND OF APPEAL. 8. NOW, WE CONSIDER THE MAIN ISSUE ON MERIT. THE LE ARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSEE PURCHASED THE PROPERTY IN QUESTION ON 04-07-1998 FOR A SUM OF RS.4 LACS FROM SHRI BHIKHAB HAI MAIJIBHAI AND AMARBEN VIDE SALE DEED PB-65. PB-80 IS THE UNREGIST ERED WILL DATED 25-12-1997 OF SHARDABEN RATILAL SHAH. PB-78 IS AFFI DAVIT OF EXECUTOR TO THE WILL SHRI NIMESH JITENDRABHAI SHAH. ACCORDING TO TH E WILL RS.4,11,000/- WAS GIVEN IN CASH TO THE ASSESSEE ON THE DEATH OF T HE DECEASED (TESTATOR) ON 16-02-1998. HE HAS HOWEVER, ADMITTED THAT THE AF FIDAVITS OF THE WITNESS TO THE WILL WERE NOT FILED BEFORE THE AUTHORITIES B ELOW. HE HAS SUBMITTED THAT SMT. AMARBEN, SELLER OF THE PROPERTY WAS CALLE D AND HER STATEMENT WAS RECORDED BY THE ASSESSING OFFICER IN WHICH SHE ADMITTED TO HAVE SOLD PROPERTY TO THE ASSESSEE WHICH WAS TWO/THREE STORIE D BUILDING. HE HAS SUBMITTED THAT ASSESSING OFFICER MADE REFERENCE TO THE DVO FOR VALUATION OF THE PROPERTY ON 18-10-2005 AND THE DVO FILED HIS REPORT OF VALUATION ON 25-11-2005 AND ON THE SAME DAY THE ASSESSING OFFICE R PASSED THE ORDER FOR BLOCK ASSESSMENT. HE HAS SUBMITTED THAT NO OTHE R EVIDENCE WAS RECOVERED TO SHOW MORE INVESTMENT IN THE PROPERTY. THEREFORE, REFERENCE TO THE DVO IS ILLEGAL. LEARNED COUNSEL FOR THE ASSE SSEE VERY FAIRLY ADMITTED THAT ASSESSEE HAS NOT SHOWN OR DISCLOSED I NVESTMENT IN PROPERTY IN A SUM OF RS.4 LACS TO THE REVENUE DEPARTMENT PRI OR TO THE SEARCH AND THE SAME IS ALSO NOT SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE HAS RELIED UPON DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS ASHOK KHETRAPAL 294 ITR 143 (DEL) IN WHICH IT WAS H ELD WHEN NO ADVERSE 18 MATERIAL FOUND DURING COURSE OF SEARCH, NO ADDITION BY TREATING INVESTMENT AS UNDISCLOSED COULD BE MADE. HE HAS RELIED UPON T HE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS MANO J JAIN 287 ITR 285 (DEL) IN WHICH IT WAS HELD ADDITION BASED ON ESTIM ATE OF VALUE OF PROPERTY NOT VALID. HE HAS RELIED UPON DECISION OF M P. HI GH COURT IN THE CASE OF CIT VS KHUSHAL CHAND NIRMALKUMAR 263 ITR 77 IN WHIC H IT WAS HELD THAT A PERUSAL OF THE UNAMENDED AND AMENDED PROVISIONS A ND THE CIRCULAR OF THE CENTRAL BOARD OF DIRECT TAXES WOULD MAKE IT CLEAR THAT THERE HAD BEEN NO SPECIFIC EFFECT THAT THE AMENDMENT EFFE CTED TO SECTION 158BB IN THE FINANCE ACT, 2002, WITH EFFECT FROM JU LY 1, 1995, WOULD BE APPLICABLE TO THE INSTANT CASE AS THE BLOCK PERI OD COVERED TEN YEARS COMMENCING 1986 TO 1996. EMPHASIS HAD BEEN GI VEN TO THE FACT THAT THE EVIDENCE MUST HAVE BEEN FOUND DURING SEARC H AND ONLY THEREAFTER THE QUESTION OF GATHERING ANY MATERIAL I NFORMATION WOULD ARISE BASED ON THE SEARCH INQUIRY. ADMITTEDLY, DURI NG THE SEARCH IN THE PREMISES OF THE ASSESSEE NOTHING WAS FOUND WITH REGARD TO THE INVESTMENT IN THE HOUSE. THE CONTENTION THAT THE VA LUATION REPORT OF THE DEPARTMENTAL VALUATION OFFICER WAS OBTAINED AND WAS CONFRONTED TO THE ASSESSEE BUT HE WAS NOT ABLE TO GIVE ANY EXP LANATION AND THEREFORE IT SHOULD BE ACCEPTED AS EVIDENCE COULD N OT BE ACCEPTED IN VIEW OF THE PROVISIONS OF SECTION 158 BB AND THE LA W LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. VINOD DANCH AND GHODAWAT [2001] 247 ITR 448. HE HAS ALSO RELIED UPON DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS VINOD DANCHAND GHO DAWAT 247 ITR 448 IN WHICH IT WAS HELD DURING THE SEARCH, IT WAS FOUND THAT THE ASSESSEE HAD CONSTRUCTED A BUNGALOW. IT WAS FOUND THAT THE A SSESSEE HAD INCURRED AN EXPENSE OF RS.4.16 LAKHS. THE ASSESSING OFFICER, THEREAFTER REFERRED THE MATTER TO THE DEPARTMENT VA LUER, WHO VALUED THE PROPERTY AT RS.6.66 LAKHS AND, ACCORDINGLY THE DIFFERENCE HAD 19 BEEN ADDED TO THE INCOME OF THE ASSESSEE AS UNDISCL OSED INCOME: HELD, THAT THE ABOVE BASIS CLEARLY SHOWED THAT THE DEPARTMENT HAD NOT UNDERSTOOD THE SCOPE OF CHAPTER XIV-B OF THE AC T. THE ADDITION DID NOT FALL WITHIN THE CHAPTER XIV-B.. HE HAS ALSO RELIED UPON DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF CIT VS BIMLA AUTO AGENCY 314 ITR 191 IN WHICH BY FOLLOWING THE ABOVE DECISIO N IT WAS HELD THAT DVOS REPORT DOES NOT CONSTITUTE MATERIAL OR INFOR MATION RELATABLE TO SEARCH. TRIBUNAL DELETING ADDITION JUSTIFIED. ON T HE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON ORDERS OF A UTHORITIES BELOW AND SUBMITTED THAT ASSESSEE HAS NOT SHOWN INVESTMENT IN PROPERTY IN THE RETURN OF INCOME. NO SOURCE OF INVESTMENT PROVED. T HE WILL AND AFFIDAVIT ARE FABRICATED AND AFTERTHOUGHT. THE SALE DEED DID NOT SHOW EXACT VALUE AND CONSTRUCTION IN THE PROPERTY. THEREFORE, ASSESS ING OFFICER WAS JUSTIFIED IN MAKING REFERENCE TO THE DVO FOR ESTIMATING THE V ALUATION OF INVESTMENT IN PROPERTY. THE LEARNED DEPARTMENTAL REPRESENTATIV E THEREFORE, SUBMITTED THAT APPEAL OF THE ASSESSEE MAY BE DISMIS SED. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. AS NOTED ABOVE THE PROVISIONS FOR BLOCK AS SESSMENT UNDER CHAPTER XIV- B WOULD APPLY IN CASE OF REQUISITION W AS MADE U/S 132A OF THE IT ACT. IN THE PRESENT CASE, THE DOCUMENTS AND MATERIAL FOUND IN THE SEARCH BY THE POLICE WAS REQUISITIONED BY THE REVEN UE AUTHORITIES U/S 132A OF THE IT ACT AND WAS ALSO HANDED OVER TO THE IT DEPARTMENT. THE DEFINITION OF UNDISCLOSED INCOME U/S 158B (B) IS IN CLUSIVE OF THE ITEMS REFERRED TO IN THE ABOVE PROVISIONS. THE COMPUTATIO N OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD COULD BE MADE IN ACCORD ANCE WITH PROVISIONS OF THIS ACT ON THE BASIS OF EVIDENCE FOUND AS A RES ULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNTS OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAILABLE WITH THE A SSESSING OFFICER AND 20 RELATABLE TO SUCH EVIDENCE. THE FINANCE ACT 2002, H AS AMENDED SECTION 158 BD OF THE IT ACT WITH EFFECT FROM 01-07-1995, T O CLARIFY THAT THE BLOCK ASSESSMENT OF UNDISCLOSED INCOME IS TO BE BASED ON EVIDENCE FOUND IN THE SEARCH AND MATERIAL, OR INFORMATION GATHERED IN POS T SEARCH ENQUIRIES MADE ON THE BASIS OF EVIDENCE FOUND IN THE SEARCH. IN THE PRESENT CASE, KEY OF THE PROPERTY AND THE PROPERTY IN QUESTION WA S ADMITTEDLY BELONGING TO THE ASSESSEE. STATEMENT OF DEVENDRA GAJENDRANATH CHATURVEDI WAS RECORDED BY THE POLICE IN WHICH HE HAS ADMITTED TO HAVE PURCHASED THE PROPERTY IN QUESTION FROM THE ASSESSEE FOR RS.12 LA CS. DURING THE BLOCK ASSESSMENT PROCEEDINGS IN HIS CASE, HE HAS DENIED T O HAVE PURCHASED THE PROPERTY AND CLAIMED THAT THE PROPERTY BELONG TO TH E ASSESSEE. THE ASSESSEE IN HIS STATEMENT ADMITTED OWNERSHIP OF THE PROPERTY IN QUESTION BUT COULD NOT EXPLAIN THE SOURCE OF INVESTMENT. THE INVESTMENT IN THE PROPERTY WAS ALSO NOT SHOWN TO THE REVENUE DEPARTME NT PRIOR TO THE SEARCH. THE ASSESSEES COUNSEL ALSO ADMITTED THAT S AME WAS NOT SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE , IT PROVE ON RECORD THAT UNDISCLOSED INCOME FOUND IN THIS CASE WAS BAS ED ON EVIDENCES FOUND IN THE SEARCH AND MATERIAL AND INFORMATION GATHERED IN POST SEARCH ENQUIRIES MADE ON THE BASIS OF EVIDENCE FOUND IN SE ARCH. THE SALE DEED SHOWS ASSESSEE MADE INVESTMENT IN PURCHASE OF PROPE RTY IN A SUM OF RS.4 LACS. THE ASSESSEE TRIED TO EXPLAIN THAT RS.4 LACS WAS INVESTED AFTER INHERITING CASH AMOUNT OF RS.4,11,000/- THROUGH THE WILL OF SMT. SHARDABEN R. SHAH. THE ASSESSEE IN HIS STATEMENT DA TED 04-10-2004 DID NOT EXPLAIN THE EXECUTION OF WILL OR INHERITANCE OF ANY AMOUNT THROUGH THE WILL. THE WILL IS UNREGISTERED. THE WILL IS ATTESTE D BY THE WITNESSES I. K. KHALSA AND K. L. PATEL. THE AFFIDAVITS OF THE WITNE SSES TO THE WILL WERE NOT FILED BEFORE THE ASSESSING OFFICER AND THE CIT(A). AS PER SECTION 68 OF THE EVIDENCE ACT THE DOCUMENT (WILL) CANNOT BE USED IN EVIDENCE UNTIL ONE OF THE ATTESTING WITNESSES HAS BEEN CALLED FOR THE PUR POSE OF PROVING ITS 21 EXECUTION. THE ONUS OF PROVING A WILL IS ON THE PRO POUNDER. PROOF OF SIGNATURE OF THE TESTATOR, THE TESTAMENTARY CAPACIT Y AND AT THE TIME OF EXECUTION, THE TESTATOR WAS IN A SOUND AND DISPOSIN G MIND HAS TO BE PROVED. HOWEVER, ASSESSEE DID NOT DISCHARGE ONUS UP ON HIM IN THIS REGARD. THE AFFIDAVIT OF EXACUTOR TO THE WILL SHRI NIMESH JITENDRABHAI DID NOT DISCLOSE IF ORIGINAL WILL WAS HANDED OVER TO HI M ALONG WITH THE CASH BY THE DECEASED OR THAT HE HAS DISTRIBUTED THE CASH AS PER THE WILL OF THE DECEASED. IN THE ABSENCE OF SATISFACTORY EXPLANATIO N, THE EXECUTION AND EXISTENCE OF THE UNREGISTERED WILL ITSELF IS DOUBTF UL AND CANNOT BE USED IN EVIDENCE. NO RELIANCE COULD BE PLACED ON THE ABOVE WILL OR THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. IT APPEARS TO BE FABRICATED AND CREATED WILL AFTERTHOUGHT IN ORDER TO EXPLAIN INVES TMENT IN PROPERTY WHICH WAS NEVER DISCLOSED TO THE REVENUE DEPARTMENT PRIOR TO SEARCH/REQUISITION. IT THUS PROVED THAT ASSESSEE FA ILED TO EXPLAIN THE SOURCE OF INVESTMENT IN THE PROPERTY IN A SUM OF RS.4 LACS . THE ABOVE EVIDENCES, MATERIAL OR INFORMATION WERE DISCOVERED DURING THE COURSE OF SEARCH AND REQUISITION U/S 132A OF THE IT ACT AND THE POST SEA RCH ENQUIRIES MADE ON THE BASIS OF ABOVE EVIDENCES, MATERIAL AND INFORMAT ION. THEREFORE, AUTHORITIES BELOW WERE JUSTIFIED IN MAKING THE ADDI TION ON ACCOUNT OF UNDISCLOSED INCOME IN THE BLOCK PERIOD. HOWEVER, TH E QUESTION WOULD BE AS TO WHETHER AUTHORITIES BELLOW WERE JUSTIFIED IN MAKING ADDITION OF RS.15,20,000/- IN THIS MATTER. ADMITTEDLY, REFERENC E TO THE DVO IS MADE AFTER THE SEARCH ON 18-10-2005 TO MAKE THE VALUATIO N OF THE PROPERTY. NO EVIDENCE IS FOUND IN THE COURSE OF SEARCH OR REQUIS ITION OR IN POST SEARCH ENQUIRIES THAT THE ASSESSEE MADE ANY FURTHER INVEST MENT IN THE PROPERTY IN QUESTION. THE DVO FILED HIS REPORT OF CALCULATION O N 25-11-2005. THUS, THE REFERENCE TO THE DVO AND HIS REPORT OF VALUATION CA NNOT BE TREATED AS EVIDENCE FOUND DURING THE SEARCH OR REQUISITION U/S 132A OF THE IT ACT. THE DECISIONS CITED BY LEARNED COUNSEL FOR THE ASSESSEE ABOVE SQUARELY APPLY 22 TO THE ABOVE CASE. THE ADDITION OF RS.1,5,20,000/- CANNOT BE MADE. HOWEVER, THE ASSESSEE HAS FAILED TO EXPLAIN THE SOU RCE OF INVESTMENT IN THE PROPERTY IN QUESTION IN A SUM OF RS.4 LACS. THE SAME INVESTMENT WAS ALSO NOT SHOWN TO THE REVENUE DEPARTMENT PRIOR TO T HE SEARCH AND THE ASSESSEE HAS NOT ESTABLISHED THAT HE HAD ANY INTENT ION TO SHOW THE ABOVE INVESTMENT TO THE REVENUE DEPARTMENT. THEREFORE, TH E ADDITION OF RS. 4 LACS SHALL HAVE TO BE MADE AS UNDISCLOSED INCOME WI THIN THE BLOCK PERIOD UNDER CHAPTER XIV B OF THE IT ACT. WE ACCORDINGLY, MODIFY THE ORDERS OF THE AUTHORITIES BELOW AND RESTRICT THE ADDITION TO RS.4 LACS AS AGAINST RS.15,20,000/- MADE BY THE AUTHORITIES BELOW. AS A RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED PARTLY. 10. NO OTHER POINT IS ARGUED OR PRESSED. 11. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7-05- 2010. S SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 7/05/2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, 6. GUARD FILE BY ORDER //TRUE COPY// DY.R/AR, ITAT , AHMEDABAD