M/s. Krishna Terine Pvt. Ltd., Ahmedabad V. The ACIT., Cent. Circle-3, Surat

ITSSA 94/AHD/2006

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8931 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 07-10-2010
• Assessment Year: misc
• Appeal Filed On: 28-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained investment; Sale consideration of property below Jantri Value; Presumptive income; Gift; Business income; Depreciation; Income from undisclosed sources; Search and seizure; Valuation report; Block assessment; Retraction; Unabsorbed depreciation
• Section: 69C; 143(3); 50C; 32; 147; 132; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D C. AGRAWAL, AM) IT (SS) A NO.94/AHD/2006 BLOCK PERIOD: 1995-96 O 2000-01 UP TO 06-09-2001 M/S. KRISHNA TERINE PVT. LTD., C/O. M/S. RAVI & DEV, CHARTERED ACCOUNTANTS, 201, ARTH, BEHIND A. K. PATEL HOUSE, MITHAKALI SIXTH ROAD, AHMEDABAD 380 009 VS THE A. C. I. T., CENTRAL CIRCLE-3, AAYAKAR BHAVAN, MAJURA GATE, OPP. NEW CIVIL HOSPITAL, SURAT PA NO. AABCK 0205B (APPELLANT) (RESPONDENT) IT (SS) A NO.98/AHD/2006 BLOCK PERIOD: 1995-96 O 2000-01 UP TO 06-09-2001 THE A. C. I. T., CENTRAL CIRCLE-3, ROOM NO. 5-7. AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. KRISHNA TERINE PVT. LTD., KRISHNA HOUSE BEHIND WORLD TRADE CENTRE, RING ROAD, SURAT PA NO. AABCK 0205B (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI M. K. PATEL, AR DEPARTMENT BY SHRI S. K. GUPTA, DR O R D E R PER BHAVNESH SAINI: BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II, AHMEDAB AD DATED 27-02-2006 FOR THE ABOVE BLOCK PERIOD. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT GROUND NO1 IN THE APPEAL OF THE ASSESSEE IS GENERAL IN NATURE AND IS NOT PRESSED. 3. GROUNDS NO 2 AND 3 OF THE APPEAL OF THE ASSESSEE READ AS UNDER: IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 2 ADDITION ON ACCOUNT OF UNACCOUNTED RECEIVABLES RS.2,58 ,170 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.2,58,170/- MADE BY THE A. O. IN RESPECT OF UNACC OUNTED RECEIVABLES. NO SET OFF IN RESPECT OF INVESTMENT IN COMPUTER ETC . RS.39,211/- 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.39,211/- MADE BY T HE LEARNED A. O. IN RESPECT OF SET OFF OF INVESTMENT IN COMPUT ER ETC. CLAIMED BY THE APPELLANT 4. GROUNDS NO.1 TO 4 IN THE DEPARTMENTAL APPEAL REA D AS UNDER: 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING TO DELETE THE ADDITION OF RS.1,83,140/- MADE ON ACCOUN T OF UNACCOUNTED INVESTMENT IN KRISHNA HOUSE 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.20,00,000/- MADE ON ACCOUNT OF ON-M ONEY FOR PURCHASE OF LAND. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING TO DELETE THE ADDITION OF RS.9,32,811/- MADE ON ACCOUN T OF UNEXPLAINED INVESTMENT IN CONSTRUCTION AND INTERIOR S OF GANGA DARSHAN BUNGALOW. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING TO DELETE THE SURCHARGE LEVIED U/S 113 OF THE ACT, BY HOLDING THAT THE SURCHARGE IS NOT LEVIABLE IN RESPECT OF SEARCHE S CONDUCTED THAT SURCHARGE IS LEVIABLE IN THE CASE OF SEARCHES U/S. 132 INITIATED ON OR AFTER 01.04.1999. 5. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH U /S 132 OF THE IT ACT WAS CONDUCTED ON 06-09-2009 AT THE PREMISES OF THE ASSESSEE. THE ASSESSEE HAD DECLARED UNDISCLOSED INCOME OF RS.1,15 ,00,000/- DURING THE STATEMENT RECORDED U/S 132(4) OF THE IT ACT. HO WEVER, THE ASSESSEE FILED BLOCK RETURN SHOWING UNDISCLOSED INCOME OF RS .25,00,000/- ON 22-02-2002. THE AO HAS DETERMINED THE TOTAL UNDISCL OSED INCOME AT RS.69,55,870/- U/S 158BC OF THE IT ACT VIDE ASSESSM ENT ORDER DATED IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 3 30-09-2003. APPEAL IN THIS CASE WAS DECIDED BY THE LEARNED CIT(A) VIDE ORDER DATED 17-12-2003. BOTH THE ASSESSEE AND THE D EPARTMENT WENT IN APPEAL AGAINST THE SAID ORDER BEFORE ITAT AHMEDABAD BENCH. ITAT AHMEDABAD B BENCH VIDE THEIR ORDER IN IT (SS) A N O.43/AHD/2004 AND IT (SS) A NO.46/AHD/2004 DATED 31-05-2005 HAVE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE ISSUES WIT H DIRECTION THAT FRESH ORDER MAY BE PASSED AFTER ALLOWING OPPORTUNITY OF B EING HEARD TO THE ASSESSEE AND THE DEPARTMENT. THE APPEAL WAS ACCORDI NGLY HEARD BY THE LEARNED CIT(A) AFRESH ON THE ABOVE GROUNDS OF APPEA LS. BEFORE PROCEEDING FURTHER, IT WOULD BE RELEVANT TO REPRODUCE THE DIRE CTION AND FINDINGS OF THE TRIBUNAL IN THE ORDER DATED 31-05-2005 IN PARA 18 WHICH ARE REPRODUCED AS UNDER: 18. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE FIRST CONTROVER SY IN THIS CASE IS WHETHER ADDITION CAN BE MADE ON THE BASIS O F STATEMENT RECORDED U/S. 132(4). THE ADDITION ON THE BASIS OF THE STATEMENT OF THE ASSESSEE AT THE TIME OF SEARCH IS JUSTIFIED UNLESS IT IS ESTABLISHED THAT THE STATEMENT WAS MAD E ON A MISTAKEN BELIEF. IF THE ASSESSEES CASE IS THAT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT UNDER MISTAKEN BELIEF OF A FACT OR LAW THAT HE SHOULD MAKE AN APPL ICATION AND MADE RETRACTION FROM THE STATEMENT. IN THE CASE UND ER CONSIDERATION, WE NOTICE THAT THOUGH THE DISCLOSURE MADE AT THE TIME OF SEARCH HAS BEEN ACCEPTED IN THE STATEME NT RECORDED ON DIFFERENT DATES I.E. 6-9-01, 14-9-01, 2 6-9-01 & 1-11-2001. THE ASSESSEE HAS FILED AFFIDAVIT DATED 9 TH SEPT, 2001 ON 16-6-03 AND THE CONTENTS OF THE AFFIDAVIT A RE REPRODUCED IN PARA-2 OF THIS ORDER. FROM THE FACTS OF THE CASE, IT HAS BEEN NOTICED THAT THE A.O. HAS HEAVILY RELIE D UPON THE DISCLOSURE MADE BY THE ASSESSEE IN THE STATEMENT RE CORDED U/S 132(4) IN RESPECT OF ABOVE ADDITION OF RS.23 LA KHS, RS.20 LAKHS, RS.19,30,000/- & RS.2,60,981/-. IT APPEARS F ROM THE ORDER OF A O. THAT HE HAS EXAMINED THE ABOVE ADDITI ONS HALFHEARTEDLY WITHOUT CONSIDERING AND EXAMINING THE SEIZED MATERIAL AND OTHER RELEVANT MATERIALS AND BOOKS OF ACCOUNTS. ON PERUSAL OF THE ORDER OF THE ASSESSING OFFICER, W E FIND THAT THE A.O. HIMSELF HAS ACCEPTED PART RETRACTION OF TH E ASSESSEE FROM THE STATEMENT RECORDED U/S. 132(4) DIRECTLY OR INDIRECTLY. THE CIT(A) DELETED THE ADDITION OF RS.1,83,120/- ON ACCOUNT OF IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 4 INVESTMENT IN KRISHNA HOUSE WITH THE OBSERVATION TH AT THE ASSESSEE HAS SHOWN INVESTMENT OF RS.89,86,521/- WHI CH INCLUDED RS.21,16,880/- DECLARED AS UNACCOUNTED INV ESTMENT IN THE BLOCK RETURN. ON PERUSAL OF THE DETAILS THE INCOME DECLARED BY THE ASSESSEE IN BLOCK RETURN OF RS.25 L AKHS, WE NOTICE THAT THE ASSESSEE HAD DECLARED INVESTMENT IN CONSTRUCTION AND INTERIOR OF KRISHNA HOUSE RS.21,16 ,880/- COMPRISING AMOUNT PAID TO ANKIT CONSTRUCTION OF RS15,00,000/-, MISC. TO BE COVERED IF ANYTHING FOUN D RS.6,16,880/- . THE ASSESSEE MADE THE DISCLOSURE OF RS.25 LAKHS IN THE STATEMENT RECORDED U/S. 132(4) WHEREAS THE ASSESSEE HAS DECLARED RS.21,16,880/. WE NOTICE THAT THE CIT(A) HAS DELETED THE ADDITION WITHOUT VERIFYING A ND EXAMINING THE RELEVANT FACTS ABOUT THE TOTAL INVEST MENT SHOWN BY THE ASSESSEE FOR RS.89,68,521/-. IN ABSENCE OF M ATERIAL AND RELEVANT FACTS ON RECORD THE MATTER CANNOT BE D ECIDED AT THIS STAGE. THE OTHER UNACCOUNTED INCOME DETERMINED BY THE A. O. RS.39,30,000/-WERE ALSO PERTAINING TO INVESTM ENT IN LAND AND CONSTRUCTION OF GANGA DARSHAN BUGALOW. HE SAME POSITION IS THAT THE COMPLETE FACTS OF THE CASE NEI THER EXAMINED NOR RECORDED, ARE AVAILABLE ON RECORD. WE FIND THAT THE CIT(A) HAS DELETED RS.2,60,981/- UNACCOUNTED IN VESTMENT BY PROVIDING TELESCOPING AGAINST THE ADDITION SUSTA INED ON ACCOUNT OF UNACCOUNTED STOCK. THE SUBMISSION OF THE ASSESSEE THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACTS THAT RS.2811/- LEFT AFTER DELETING ADDITION OF RS.258170 /- OUT OF TOTAL UNACCOUNTED RECEIVABLE OF RS.2,60,981/- IN TH E ASSESSEES CASE, IS THE AMOUNT OF BALANCE IN CANARA BANK AND WHICH HAS ALREADY BEEN DECLARED IN BLOCK RETURN OF SRIGOPAL BHAIYA. THIS SUBMISSION OF THE ASSESSEE IS SUBJECT TO VERIFICATION. AFTER CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND LAW, WE ARE OF THE VIEW THAT WHEN THE ASSE SSEE HAD MADE THE RETRACTION FROM THE DISCLOSURE MADE DURING THE STATEMENT RECORDED U/S. 132(4), THE CASE IS TO EXAM INE ON THE BASIS OF MATERIAL SEIZED AND MATERIAL AVAILABLE AND BOOKS OF ACCOUNTS. WE NOTICE THAT BOTH THE LOWER AUTHORITIES HAVE FAILED IN THIS REGARD. WE NOTICE HAT THE CIT(A) HAS DELETE D THE ADDITION OF RS.1,83,120/-, RS.20,00,000/- AND RS.19,30,000/- WITHOUT EXAMINING AND RECORDING THE RELEVANT FACTS OF THE CASE. UNDER THE CIRCUMSTANCES, WE FIND APPROPRIATE TO SEND BACK THESE MATTERS I.E GROUND N O.2 OF THE APPEAL OF THE ASSESSEE PERTAINING ADDITION OF RS.2, 60,981/- AND GROUND NOS. 1, 2 AND 3 OF REVENUE APPEALS PERT AINING TO RS.1,83,120/-, RS.20 LACS AND RS.9,32,811/- TO THE FILE OF CIT(A). THE CIT(A) IS DIRECTED TO EXAMINE THE RELEV ANT FACTS OF THE CASE AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 5 AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O BOTH SIDES. 6. THE LEARNED CIT(A) AFTER RECONSIDERING THE ISSUE DELETED THE ADDITION OF RS.1,83,140/-, RS.20,00,000/- AND RS.9, 32,811/- AS WELL AS DELETED THE LEVY OF SURCHARGE ON WHICH THE REVENUE IS IN APPEAL ON FOUR EFFECTIVE GROUNDS OF APPEAL NOTED ABOVE. 7. THE LEARNED CIT(A) HOWEVER, CONFIRMED THE ADDITI ON OF RS.2,58,170/- AND RS.39,211/- ON WHICH THE ASSESSEE IS IN APPEAL ON GROUNDS NO.2 AND 3 NOTED ABOVE. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE BLOCK ASSESSMENT ORDER WAS NOT PASSED IN ACCORDANCE WITH THE PROVISIONS OF LAW AS PRESCRIBED FOR THE BLOCK ASSESSMENT AND THAT THE ADDITIONS HAVE BEEN RIGHTLY DELETED BY THE LEARNED CI)T(A). HOWEVE R, TWO ADDITIONS WERE WRONGLY CONFIRMED BY THE LEARNED CIT(A) MERELY ON T HE BASIS OF RETRACTED STATEMENT AND ON ESTIMATE BASIS. THE LEARNED COUNSE L FOR THE ASSESSEE AS REGARDS THE GROUND OF APPEAL RAISED IN THE APPEA L OF THE ASSESSEE SUBMITTED THAT THOUGH THE AMOUNT OF RS.2,60,981/- W AS SURRENDERED IN THE STATEMENT BUT SUCH STATEMENT WAS RETRACTED AND THERE WAS NO SEIZED MATERIAL RECOVERED DURING THE COURSE OF SEARCH TO M AKE THE ADDITION IN THE BLOCK ASSESSMENT. ON GROUND NO.3 IN THE APPEAL OF THE ASSESSEE, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SET OFF OF RS.39,211/- MAY BE GIVEN TO THE ASSESSEE OUT OF THE AMOUNT DECL ARED IN THE RETURN OF INCOME FILED FOR THE BLOCK PERIOD. AS REGARDS DEPAR TMENTAL APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO SEIZED MATERIAL OR EVIDENCE IS RECOVERED DURING THE COURSE OF SEARCH T O MAKE ANY OF THE ADDITIONS WHICH HAVE BEEN RIGHTLY DELETED BY THE LE ARNED CIT(A). HE HAS SUBMITTED THAT NO INCRIMINATING DOCUMENT EXCEPT VAL UATION REPORT OR NOTICE OF THE STAMP AUTHORITY HAS BEEN RECOVERED AN D ON THAT BASIS NO IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 6 ADDITION IN THE BLOCK ASSESSMENT COULD BE MADE. HE HAS REFERRED TO THE FINDING OF THE TRIBUNAL IN THE ORDER DATED 31-05-20 05 IN WHICH THE TRIBUNAL WHILE RESTORING THE MATER TO THE FILE OF T HE LEARNED CIT(A) DIRECTED HIM TO EXAMINE THE CASE OF THE ASSESSEE ON THE BASIS OF THE MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AND T HE BOOKS OF ACCOUNT. HE HAS SUBMITTED THAT THE VALUATION REPORT SEIZED D URING THE COURSE OF SEARCH DATED 28-11-1996 SHOWS THE TOTAL VALUE A RS. 21,89,300/- AND ANOTHER REPORT WAS FOUND FOR A SPECIFIC PURPOSE FOR TAKING LOAN FROM THE BANK. NO EVIDENCE WAS FOUND THAT THE ASSESSEE MADE UNDISCLOSED INVESTMENT IN THE PROPERTY. HE HAS RELIED UPON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS KISHAN KUMAR & OTHERS 215 CTR 181 IN WHICH IT WAS HELD AS UNDER: CONCLUSION: IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL FOUND AS A RESULT OF SEARCH, STAMP VALUATION AUTHOR ITYS RATE OF PROPERTY FIXED FOR PURPOSES OF REGISTRATION OF S ALE DEEDS CANNOT, BY ITSELF, BE TAKEN TO BE THE PRICE FOR WHI CH THE PROPERTY WAS PURCHASED FOR THE PURPOSE OF COMPUTING UNDISCLOSED INCOME UNDER S.158BB. HE HAS ALSO RELIED UPON THE DECISION OF THE ITAT AH MEDABAD BENCH IN THE CASE OF SHRI BHARAT KUMAR N. PATEL VS ACIT IN I TA NO.1749/AHD/2009 DATED 29-08-2008 IN WHICH IT WAS H ELD THAT SECTION 50C IS NOT APPLICABLE TO THE CASE OF THE P URCHASER. HE HAS SUBMITTED THAT SINCE THERE WAS NO INCRIMINATING DOC UMENT AGAINST THE ASSESSEE AND THE ADDITION WAS MADE ON THE BASIS OF RETRACTED STATEMENT, THEREFORE, THE LEARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION. HOWEVER, AS REGARDS LEVY OF SURCHARGE HE HAS SUBMITTED THAT THE ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE SUPREME COURT. 9 ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND REFERRED TO VARIOUS PAGES OF THE ASSESSMENT ORD ER TO POINT OUT THAT IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 7 THE AO RELIED UPON THE STATEMENT RECORDED U/S 132 ( 4) OF THE IT ACT FOR THE PURPOSE OF MAKING THE ADDITIONS AGAINST THE ASS ESSEE. THE LEARNED DR SUBMITTED THAT THE ASSESSEE NOT ONLY SURRENDERED THE UNDISCLOSED INCOME OF RS.1,15,00,000/- IN HIS STATEMENT U/S 132 (4) OF THE IT ACT ON THE DATE OF THE SEARCH BUT IT WAS REAFFIRMED IN THE SUBSEQUENT STATEMENT RECORDED ON 26-09-2001 AND 02-11-2001. THE LEARNED DR SUBMITTED THAT SINCE THE STATEMENT WAS NOT RETRACTED IMMEDIATELY A FTER THE RECORD OF THE STATEMENT, THEREFORE, BURDEN IS UPON THE ASSESSEE T O PROVE THAT SUCH STATEMENT WAS RECORDED UNDER COERCION, INTIMIDATION OR DURESS. THE ASSESSEE HAS HOWEVER, FAILED TO PROVE THE SAME. THE REFORE, THE STATEMENT OF THE ASSESSEE IS RELEVANT FOR THE PURPOSE OF MAKI NG THE ADDITIONS. HE FURTHER SUBMITTED THAT THE ASSESSEE IN HIS RETURN O F INCOME FILED FOR THE BLOCK PERIOD HAS THOUGH RETRACTED SOME PART OF THE SURRENDERED AMOUNT BUT SOME AMOUNT HAS BEEN SURRENDERED WOULD PROVE TH AT RETRACTION WAS INVALID. HE HAS SUBMITTED THAT THE LEARNED CIT(A) S HOULD HAVE ACCEPTED THE STATEMENT OF THE ASSESSEE SURRENDERING UNDISCLO SED INCOME IN THE STATEMENT OF THE ASSESSEE AND SHOULD NOT HAVE DELET ED THE ADDITION. HE HAS SUBMITTED THAT THE LEARNED CIT(A) HAS RIGHTLY C ONFIRMED TWO ADDITIONS ON WHICH THE ASSESSEE IS IN APPEAL BECAUS E NO EXPLANATION WAS FILED IN THIS REGARD. THE LEARNED DR SUBMITTED THAT THE BASIS OF THE ADDITIONS MADE BY THE AO WAS SUBSTANTIALLY THE STAT EMENT MADE U/S 132(4) OF THE IT ACT WHICH SHOULD NOT HAVE BEEN IGN ORED BY THE LEARNED CIT(A). HE HAS RELIED UPON THE DECISION OF THE HON BLE HIGH COURT OF CHHATTISGARH IN THE CASE OF ACIT VS HUKUM CHAND JAI N 191 TAXMAN 319 IN WHICH IT WAS HELD THAT WHEN THE ASSESSEE DID NOT RETRACT HIS STATEMENT IMMEDIATELY AFTER SEARCH AND SEIZURE WAS OVER AND IN RETURN ALSO NO EXPLANATION WAS OFFERED FOR SURRENDE R OF UNDISCLOSED INCOME AT THE TIME OF SEARCH U/S 132(4) OF THE ACT IT COULD NOT BE SAID THAT STATEMENT U/S 132(4) WAS MAD E AS A RESULT OF INTIMIDATION, DURESS OR COERCION. THE AO WAS JUSTIF IED IN ASSESSING THE INCOME OF THE ASSESSEE ON THE BASIS OF SURRENDE R OF UNDISCLOSED IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 8 INCOME MADE BY THE ASSESSEE U/S 132(4) OF THE ACT. THE LEARNED DR, THEREFORE, SUBMITTED THAT THE LEARNED CIT(A) SHOULD NOT HAVE DELETED THE ABOVE ADDITIONS ON WHICH THE DEPARTMENT IS IN APPE AL. THE LEARNED DR SUBMITTED THAT LEVY OF SURCHARGE IS JUSTIFIED AS PE R THE DECISION OF THE HONBLE SUPREME COURT IN FAVOUR OF THE REVENUE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD. BEFORE PROCEEDING FURTHER TO DECIDE THE RESPECTIVE GROUNDS OF APPEAL ON MERITS, IT WOULD BE RELEVANT TO DISCUSS THE PROVISI ONS CONTAINED UNDER CHAPTER XIV-B OF THE IT ACT FOR THE PURPOSE OF COMP UTING UNDISCLOSED INCOME DURING THE BLOCK PERIOD. 10.1 CHAPTER XIV-B STARTS WITH SEC. 158B AND PROVIDES TH E DEFINITION OF BLOCK PERIOD AND UNDISCLOSED INCOME. UNDISCLOS ED INCOME IS RELEVANT IN THIS CASE, WHICH IS REPRODUCED BELOW AS AMENDED BY FINANCE ACT, 2002 W.E.F. 1.7.1995: S.158B(B) UNDISCLOSED INCOME INCLUDES ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR ANY INCOME BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT O R 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 PURPOSE OF THIS ACT, OR ANY EXPENSE, DEDUCTION OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. THIS SECTION SHOWS THAT THE FOLLOWING CONDITIONS MU ST BE SATISFIED TO TREAT THE INCOME AS UNDISCLOSED INCOME I.E.: (I) IT MUST BE IN THE FORM OF MONEY, BULLION, JEWELLERY , OTHER VALUABLE ARTICLE OR THING OR SHOULD CONSTITUTE INCO ME OR PROPERTY BASED ON ANY ENTRY IN THE BOOKS OF ACCOUNT S OR OTHER DOCUMENT OR TRANSACTION; IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 9 (II) IT SHOULD BE AVERRED THAT THE ASSETS OR ENTRY IN TH E BOOKS REPRESENTS WHOLLY OR PARTLY INCOME OR PROPERT Y WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT . (III) OR ANY EXPENSES, DEDUCTION OR ALLOWANCE CLAIMED UND ER THIS HEAD, WHICH IS FOUND TO BE FALSE. SECTION 158BB (1) PROVIDES FOR COMPUTATION OF UNDIS CLOSED INCOME OF THE BLOCK PERIOD AND IS REPRODUCED AS UNDER: (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOU S 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 REQUISIT ION 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 B E, AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH PREVIOUS YEARS, DETERMINED,- (A) WHERE ASSESSMENTS U/S 143 OR SEC. 144 OR SEC. 1 47 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 U/S 139 [OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION (1) OF SEC. 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 INCO ME 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 IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 10 LOSS FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK PERIOD; 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 INCO ME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, AS NIL, IN CASES NOT FALLING UNDER CLAUSE (C );] (D) WHERE THE PREVIOUS YEAR HAS NOT ENDED OR THE DATE O F FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) O F SEC. 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; (E) WHERE ANY ORDER OF SETTLEMENT HAS BEEN MADE UNDER SUB-SECTION(4) OF SEC. 245D, ON THE BASIS OF SUCH ORDER; (F) WHERE AN ASSESSMENT OF UNDISCLOSED INCOME HAD BEEN MADE EARLIER UNDER CLAUSE (C) OF SEC. 158BC, ON THE BASIS OF SUCH ASSESSMENT. EXPLANATION.-FOR THE PURPOSE OF DETERMINATION OF UN DISCLOSED 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; IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 11 [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 SEC. 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 SEC. 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 T O FINANCIAL YEAR IN THOSE SECTIONS SHALL BE CONSTRU ED AS REFERENCES TO THE RELEVANT PREVIOUS YEAR FALLING IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WIT H THE DATE OF SEARCH OR OF THE REQUISITION. (3) THE BURDEN OF PROVING TO THE SATISFACTION OF TH E AO THAT ANY UNDISCLOSED INCOME HAD ALREADY BEEN DISCLOSED IN ANY RETURN OF INCOME FILED BY THE ASSE SSEE BEFORE THE COMMENCEMENT OF SEARCH OR THE REQUISITIO N, AS THE CASE MAY BE, SHALL BE ON THE ASSESSEE. (4) FOR THE PURPOSE OF ASSESSMENT UNDER THIS CHAPTE R, LOSSES BROUGHT FORWARD FROM THE PREVIOUS YEAR UNDER CHAPTER VI OR UNABSORBED DEPRECIATION UNDER SUB- SECTION (2) OF SECTION 32 SHALL NOT BE SET OFF AGAI NST THE UNDISCLOSED INCOME DETERMINED IN THE BLOCK ASSESSME NT UNDER THIS CHAPTER, BUT MAY BE CARRIED FORWARD FOR BEING SET OFF IN THE REGULAR ASSESSMENTS. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 12 10.2 WE, AFTER CONSIDERING THE ABOVE PROVISIONS, A RE OF THE OPINION THAT EVEN IF THERE IS AN AMENDMENT IN THE ABOVE SEC TIONS, THE SCHEME OR PURPOSE OF ENACTING CHAPTER XIV-B HAS NOT UNDERGONE A MAJOR CHANGE IN THE SENSE THAT THE BLOCK ASSESSMENT PERTAINING TO A NUMBER OF YEARS REMAINS DISTINCT FROM ASSESSMENT U/S 143(3) PERTAIN ING TO A SINGLE ASSESSMENT YEAR. THE BLOCK ASSESSMENT COULD BE MADE IN RESPECT OF UNDISCLOSED INCOME IF DURING THE BLOCK PERIOD UNDIS CLOSED INCOME IS RECOVERED AS A RESULT OF EVIDENCE FOUND DURING THE COURSE OF SEARCH AND NOT AS A RESULT OF OTHER DOCUMENTS OR MATERIAL WHIC H CAME TO THE POSSESSION OF THE AO SUBSEQUENT TO THE CONCLUSION O F SEARCH OPERATION UNLESS AND UNTIL SUCH MATERIAL OR DOCUMENT IS RELAT ABLE TO SUCH EVIDENCE RECOVERED DURING THE COURSE OF THE SEARCH. THE AMEN DED DEFINITION OF SEC. 158BB AS MENTIONED ABOVE CLEARLY SUGGESTS THAT SOME EVIDENCE IS TO BE FOUND AS A RESULT OF SEARCH OPERATION AND IT IS ONL Y THEREAFTER THAT THE REMAINING PART OF THE PROVISIONS COME INTO PLAY AND THAT TOO THE REMAINING EVIDENCE MUST BE RELATABLE TO THE EVIDENC E RECOVERED DURING THE COURSE OF THE SEARCH. THE OTHER AMENDMENT IN SE C. 158B(B) WHICH IS REPRODUCED ABOVE HAS ENLARGED THE MEANING OF THE TE RM UNDISCLOSED INCOME BY INCLUDING THEREIN ANY EXPENSE, DEDUCTIO N OR ALLOWANCE CLAIMED UNDER THIS ACT WHICH IS FOUND TO BE FALSE. WHAT HAS TO BE SEEN IS THAT THE VALUABLE ARTICLES, DOCUMENTS OR TRANSAC TIONS WHICH REPRESENT WHOLLY OR PARTLY INCOME OR PROPERTY WHICH HAS NOT B EEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THIS ACT. TH EREFORE, BEFORE COMING TO ANALYZE WHAT IS UNDISCLOSED INCOME, IT IS NECESS ARY TO BE SEEN THAT SUCH INCOME HAS NOT BEEN OR WOULD NOT HAVE BEEN DIS CLOSED FOR THE PURPOSE OF THIS ACT. IF ANY SUCH ARTICLE OR THING O R INCOME HAS ALREADY BEEN DISCLOSED TO THE DEPARTMENT PRIOR TO THE SEARC H, IT CANNOT BE TERMED THAT THE SAME HAS NOT BEEN OR WOULD NOT HAVE BEEN D ISCLOSED FOR THE PURPOSE OF THIS ACT. THEREFORE, WHATEVER ITEMS OR A RTICLES HAVE BEEN SHOWN TO THE DEPARTMENT PRIOR TO THE SEARCH CANNOT BE TREATED AS UNDISCLOSED INCOME. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 13 10.3 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. VINOD DANCHAND GHODAWAT, 247 ITR 448 (BOM.) OBSERVED: WHERE THE VALUE OF THE GOLD AND SILVER ARTICLES AND JEWELLERY HAD BEEN DISCLOSED IN THE ASSESSEES WEAL TH- TAX RETURN WHICH WAS ACCEPTED BY THE DEPARTMENT. HELD, THAT CHAPTER XIV-B OF THE IT ACT, 1961 HAD NOT APPLICATION TO THE FACTS OF THE CASE AND THE AD DITION MADE BY THE DEPARTMENT ON THE GROUND OF UNDISCLOSED INCOME WAS ERRONEOUS. 10.4 THE HONBLE CALCUTTA HIGH COURT IN THE CASE O F BHAGWATI PD. KEDIA VS. CIT, 248 ITR 562 (CAL.) OBSERVED THE EXPLANATION TO SEC. 158BA OF THE IT ACT, 1961 MAKES IT CLEAR THAT THE LEGISLATURE THOUGHT IT FIT TO MAKE A DISTINCTION BETWEEN THE BLOCK ASSESSMENT AND THE REGULAR ASSESSMENT. IN THE CASE OF REGULAR ASSESSMENT, THE AO IS FREE TO EXAMINE THE VERACITY OF THE RETURN AS WELL AS THE CLAIMS MADE BY THE ASSESS EE, WHEREAS THE UNDISCLOSED INCOME IS TAXED BY WAY OF BLOCK ASSESSMENT AS A RESULT OF SEARCH AND SEIZURE. THE LOGIC BEHIND THE TWO DIFFERENT MODES OF ASSESSMENT IS THAT CONCEALMENT OF INCOME AND CLAIMING DEDUCTION O R EXEMPTION IN RESPECT OF A DISCLOSED INCOME CANNOT B E TREATED AT PAR. THE FORMER IS AN OFFENCE WHICH GOES TO THE ROOT OF THE MATTER AND THE OTHER IS ON THE BASI S OF THE CAUSES SHOWN BY THE ASSESSEE WHERE THE AO IS FR EE TO ACCEPT THE JUSTIFICATION SHOWN OR REJECT THE SAM E. THERE WAS A SEARCH AND SEIZURE RESULTING IN BLOCK ASSESSMENT OF THE ASSESSEE. DURING THE BLOCK ASSESSMENT, THE ASSESSEE WAS CALLED UPON TO EXPLAIN THE ADVANCE TAKEN FROM A COMPANY. THE ASSESSEE HAD FILE D THE CONFIRMATION LETTER OF LOAN FROM THE COMPANY INCLUDING INCOME TAX FILE NUMBERS OF THE CREDITOR. THE INCOME-TAX AUTHORITY HELD THAT THE SAID LOAN WAS A FICTITIOUS ONE AND WAS TO BE CONSIDERED AS UNDISCLO SED INCOME OF THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION. ON THE QUESTION WHETHER THE AO WAS ENTITLED TO QUESTION THE LOAN AMOUNT WHICH WAS THE SUBJECT MATTER OF REGULAR ASSESSMENT, WHILE MAKING BLOCK ASSESSMENT. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 14 HELD, THAT THE AO WAS NOT ENTITLED TO QUESTION IN BLOCK ASSESSMENT THE LOAN WHICH WAS A SUBJECT MATTE R OF THE REGULAR ASSESSMENT. THE AO WAS WRONG IN HOLD ING THAT THE SAID SUM COULD BE TAXED IN BLOCK ASSESSMEN T ALTHOUGH THE SAME FEATURED IN THE REGULAR BOOKS OF ACCOUNT. WHEN THE LOAN CREDITOR WAS AN ASSESSEE AND IN WHOSE ASSESSMENT THE LOAN ADVANCED HAD BEEN ACCEPTE D BY THE REVENUE, THE AO WAS WRONG IN HOLDING THAT TH E ASSESSEE WAS LIABLE TO PAY TAX ON THAT LOAN MONEY TAKEN FROM THE ASSESSEE. 10.5 IN CASE OF CIT VS. RAVI KANT JAIN, 250 ITR 141 (DEL.), THE HONBLE DELHI HIGH COURT OBSERVED: BLOCK ASSESSMENT UNDER CHAPTER XIV-B OF THE IT ACT, 1961, IS NOT INTENDED TO BE A SUBSTITUTE FOR REGULA R ASSESSMENT. ITS SCOPE AND AMBIT IS LIMITED IN THAT SENSE TO MATERIALS UNEARTHED DURING SEARCH. IT IS IN ADDI TION TO THE REGULAR ASSESSMENT ALREADY DONE OR TO BE DON E. THE ASSESSMENT FOR THE BLOCK PERIOD CAN ONLY BE DON E ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH O R REQUISITION OF BOOKS OF ACCOUNT OR DOCUMENTS AND SU CH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WIT H THE AO. EVIDENCE FOUND AS A RESULT OF SEARCH IS RELATAB LE TO SECTIONS 132 AND 132A. HELD, THAT, ADMITTEDLY THE UNDISCLOSED INCOME WAS NOT DETERMINED ON THE BASIS OF ANY SEARCH MATER IAL AND THE AO WAS PROCEEDING WITHIN THE SCOPE OF THE ASSESSMENT AND NOT WITHIN THE SCOPE OF EXERCISING JURISDICTION UNDER CHAPTER XIV-B AND SEC. 158BA. THEREFORE, SEC. 158BA OF THE ACT HAD NO APPLICATION TO THE FACTS OF THE CASE. 10.6 IN THE CASE OF SUNDER AGENCIES VS. DCIT, 63 I TD 245, ITAT, MUMBAI BENCH B HELD AS UNDER: SEC. 158BA OF THE IT ACT, 1961 SEARCH AND SEIZURE BLOCK PERIOD 1.4.1985 TO 16.11.1995 WHETHER WITHI N PALE OF CHAPTER XIVB ASSESSMENT COULD BE MADE ONLY IN RESPECT OF UNDISCLOSED INCOME AND SUCH UNDISCLOSED INCOME MUST COME AS A RESULT OF SEARCH HELD, YES WHETHER SEC. 158BA DOES NOT PROVIDE A LICENSE TO REVENUE FOR MAKING ROVING ENQUIRIES CONNECTED WITH IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 15 COMPLETED ASSESSMENT AND IS BEYOND POWER OF AO TO REVIEW ASSESSMENTS COMPLETED UNLESS SOME DIRECT EVIDENCE COMES TO KNOWLEDGE OF DEPARTMENT AS A RESU LT OF SEARCH WHICH INDICATES CLEARLY FACTUM OF UNDISCL OSED INCOME HELD, YES WHETHER SCHEME OF CHAPTER XIVB GIVES POWER TO REVENUE TO DRAW PRESUMPTION IN REGAR D TO UNDISCLOSED INCOME HELD, NO ASSESSEE CLAIMED 1 TO 1.5 PER CENT OUT OF TOTAL SALES AS SALES PROMOTION EXPENSES DURING SEARCH PROCEEDINGS A BOOK CALLED GIFT REGISTER WAS SEIZED FROM ASSESSEES BUSINESS PREMISES GIFT REGISTER RELATED TO SALE PROMOTION EXPENSES IN EARLIER ASSESSMENT PROCEEDINGS COVERI NG BLOCK PERIOD IN QUESTION, SUCH EXPENSES WERE DISCLO SED AND DISALLOWANCES WERE MADE NEITHER ANY INCRIMINATING MATERIAL REVEALING UNDISCLOSED INCOME CAME TO LIGHT NOR ENQUIRY REGARDING SALES PROMOTION EXPENSES IN PROCEEDING U/S 132(1) WAS MADE. WHETHER ADDITION ON ACCOUNT OF SALES PROMOTION EXPENSES ON ESTIMATE BASIS COULD BE JUSTIFIED HELD NO. 10.7 IN THE CASE OF DIGVIJAY CHEMICAL LTD. VS. ACI T, 68 TTJ 280, ITAT, DELHI BENCH E HELD THAT ADDITION BASED ON SUSPICION AND SURMISES ARE NOT COVERED U/S 158B(B). IT WAS FURTHE R HELD THAT THE ADDITION U/S 158B(B) MUST BE MADE ON CONCRETE MATER IAL. 10.8 IN THE CASE OF P.K. GANESHWAR VS. DCIT, 80 IT D 429 (CHENNAI), ITAT, CHENNAI BENCH C HELD SEC. 158BA OF THE IT ACT, 1961 BLOCK ASSESSMENT SEARCH CASES ASSESSMENT OF UNDISCLOSED INCOME AS A RESULT OF SEARCH WHETHER, WHERE UNDISCLOSED INCOM E IS FOUND NOT ON BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH BUT ON INVESTIGATION AND INQUIRIES MADE FOLLOWING SEARCH, SUCH INCOME COULD BE INCLUDED AS UNDISCLOSED INCOME OF BLOCK PERIOD COMPUTED UNDER CHAPTER IV HELD, NO WHETHER CHAPTER XIV-B IS A SPECIAL PROVISION FOR ASSESSMENT OF UNDISCLOSED INC OME FOUND AS A RESULT OF SEARCH ONLY AND THERE IS NO SC OPE FOR CONSIDERING ITEMS THAT COULD BE CONSIDERED UNDE R REGULAR ASSESSMENT HELD, YES. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 16 10.9 HONBLE CALCUTTA HIGH COURT IN THE CASE OF CI T VS. ASHIM KRISHNA MONDAL, 270 ITR 160 AT PAGES 163 AND 164 OB SERVED: THE PRINCIPLE THAT HAS BEEN LAID DOWN FOR THE PURPO SE OF MAKING ASSESSMENT ARE SETTLED PROPOSITION AS WAS REFERRED TO BY THE LD. TRIBUNAL IN THE CASE OF SUND ER AGENCIES VS. DCIT [1997] 63 ITD 245 (MUMBAI); T.S. KUMARASAMY VS. ACIT [1998] 65 ITD 188 (MAD), AT PAG E 206 AND INDORE CONSTRUCTION (P) LTD. VS. ACIT [1999 ] 71 ITD 128 (INDORE) WHEREIN THE MUMBAI BENCH OF THE IT AT, THE MADRAS BENCH OF THE ITAT AND THE INDORE BENCH O F THE ITAT, RESPECTIVELY, HAD HELD THAT THE INCOME FO R BLOCK ASSESSMENT UNDER SEARCH AND SEIZURE PROCEDURE IS TO BE COMPUTED STRICTLY ON THE BASIS OF THE DOCUMEN TS SEIZED; AND IT CANNOT PROCEED ON CONJECTURES AND/OR SURMISES AND ARRIVE AT AN ESTIMATION INSTEAD OF COMPUTATION. THE WORD COMPUTATION CONNOTES A DIFFERENT MEANING THAN ESTIMATION OR APPRAISAL. COMPUTATION PRESUPPOSES A CALCULATION ON THE BASIS OF THE MATERIALS, WHICH IS SOMETHING DIFFERENT FROM ESTIMATION OR APPRAISAL AND IT MUST BE BASED ON METHODICAL CALCULATION WITH SOME AMOUNT OF APPROXIMITY TO MATHEMATICAL PROCESS ON THE MATERIAL S AVAILABLE ON SEARCH AND SEIZURE. 10.10 ITAT, DELHI BENCH (TM) IN THE CASE OF DANG & CO. PVT. LTD. VS. DCIT, 277 ITR (AT) 190 HELD: THE ASSESSEE EXPLAINED THAT IT WAS AN ESTATE AGENT AND THE AMOUNT RECEIVED BY THE ASSESSEE WAS AN ADVANCE RECEIVED TOWARDS PURCHASE OF CERTAIN PROPERTIES. ASSUMING IT WAS A LOAN RECEIVED BY THE ASSESSEE, IT WAS NOT IN DISPUTE THAT THE ASSESSEE HAD FILED ITS REGU LAR RETURN OF INCOME FOR THE AY 1994-95 DISCLOSING THE AMOUNT IN THE BALANCE-SHEET. IF IT WAS A LOAN, THE AMOUNT THEREOF COULD HAVE BEEN ADDED TO THE TOTAL INCOME U/S 68 ONLY IF IT WAS HELD TO BE A NON-GENUI NE LOAN. THE GENUINENESS COULD HAVE BEEN GONE INTO ONL Y IN THE COURSE OF REGULAR ASSESSMENT WHEN THE ASSESSEE HAD DULY DISCLOSED THE AMOUNT IN ITS BALANCE-SHEET. THE ASSESSEE HAD DISCHARGED ITS PART OF THE OBLIGATION BY DISCLOSING THE AMOUNT IN THE BALANCE-SHEET AND BY F ILING THE RETURN. IT WAS NOT THE ASSESSEES FAULT THAT NO IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 17 ASSESSMENT WAS MADE. IT WAS OF NO CONSEQUENCE UNDER WHICH HEAD THE AMOUNT WAS DISCLOSED IN THE BALANCE- SHEET. IF IT WAS AN ADVANCE FROM A CUSTOMER FOR PURCHASE OF PROPERTY, IT COULD NOT BE TREATED AS IN COME BECAUSE IT WAS MERELY AN ADVANCE TOWARDS PURCHASE O F PROPERTY AND IN NO WAY THE INCOME OF THE ASSESSEE. WHEN THE AMOUNT STOOD DULY DISCLOSED IN THE REGULAR RETURN OF INCOME, THE AO COULD NOT RESORT TO BLOCK ASSESSMENT PROCEEDINGS TO GO INTO ITS GENUINENESS A ND SUBJECT IT TO A HIGHER RATE OF TAX. THE ADDITION OF RS.55 LAKHS WAS NOT JUSTIFIED. 10.11 HONBLE MP HIGH COURT IN THE CASE OF CIT VS. KHUSHLAL CHAND NIRMAL KUMAR, 263 ITR 77 HELD: HELD, THAT A PERUSAL OF THE UNAMENDED AND AMENDED PROVISIONS AND THE CIRCULAR OF THE CENTRAL BOARD OF DIRECT TAXES WOULD MAKE IT CLEAR THAT THERE HAD BEE N NO SPECIFIC EFFECT THAT THE AMENDMENT EFFECTED TO S EC. 158BB IN THE FINANCE ACT, 2002, WITH EFFECT FROM JU LY 1, 1995, WOULD BE APPLICABLE TO THE INSTANT CASE AS THE BLOCK PERIOD COVERED TEN YEARS COMMENCING 1986 TO 1996. EMPHASIS HAD BEEN GIVEN TO THE FACT THAT THE EVIDENCE MUST HAVE BEEN FOUND DURING SEARCH AND ONL Y THEREAFTER THE QUESTION OF GATHERING ANY MATERIAL INFORMATION WOULD ARISE BASED ON THE SEARCH INQUIRY . ADMITTEDLY, DURING THE SEARCH IN THE PREMISES OF TH E ASSESSEE NOTHING WAS FOUND WITH REGARD TO THE INVESTMENT IN THE HOUSE. THE CONTENTION THAT THE VALUATION REPORT OF THE DEPARTMENT VALUATION OFFICE R WAS OBTAINED AND WAS CONFRONTED TO THE ASSESSEE BUT HE WAS NOT ABLE TO GIVE ANY EXPLANATION AND THEREFORE IT SHOULD BE ACCEPTED AS EVIDENCE COULD NOT BE ACCEPTE D IN VIEW OF THE PROVISIONS OF SEC. 158BB AND THE LAW LA ID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS . VINOD DANCHAND GHODAWAT [2001] 247 ITR 448. 10.12 HONBLE GAUHATI HIGH COURT IN THE CASE OF CI T VS. ARMAN SHEIKH, 293 ITR 266 HELD: DISMISSING THE APPEAL, THAT THE TWO AMOUNTS WERE RECEIVED BY THE ASSESSEE FROM A GOVT. AGENCY BY CHE QUES AND THEY WERE DEPOSITED IN THE BANK ACCOUNT OF THE IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 18 ASSESSEE AND DULY REFLECTED IN THE REGULAR BOOKS OF ACCOUNT. THE AO RELIED UPON A PART OF THE ENTRIES I N THE BOOKS OF ACCOUNT AND REJECTED THE OTHER PART. SINCE THE ENTRIES MADE IN THE BOOKS OF ACCOUNT BEFORE THE DAT E OF SEARCH AND SEIZURE HAD BEEN ACCEPTED, THE AMOUNT IN QUESTION OUGHT NOT TO HAVE BEEN TREATED AS UNDISCLO SED. THE SEARCH TOOK PLACE ON JULY 20, 2000, AND AUGUST 9, 2000, ON WHICH DATES THE RETURN FOR THE AYS 2000-01 AND 2001-02 HAD NOT FALLEN DUE. THE RETURNS FOR THE AYS BASED ON REGULAR BOOKS OF ACCOUNT WERE FILED AFTER SEARCH DISCLOSING THE BANK DEPOSITS. THERE WAS NO MATERIAL TO SHOW THAT THE ASSESSEE INTENDED TO HIDE ANY PART OF HIS INCOME FOR THE ASSESSMENTS UNDER APPEAL . THUS, THE BANK ACCOUNTS OUGHT NOT TO HAVE BEEN TREA TED AS UNDISCLOSED BANK ACCOUNTS AND COULD NOT BE THE SUBJECT MATTER OF BLOCK ASSESSMENT PROCEEDINGS. 10.13 HONBLE DELHI HIGH COURT IN THE CASE OF GIRISH CHO UDHARY, 163 TAXMAN 608 HELD THERE IS NO BASIS AS TO HOW, AO CAME TO CONCLUSION THAT 48 WAS RS.48 LAKHS. NO MATERIAL IS THERE TO SUPPORT SUCH FINDING OF THE AO. IT IS DUMB DOCUMENT . ADDITIONS DELETED. 11. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KISHAN KUMAR & OTHERS (SUPRA) ALSO HELD THAT U/S 158 BB OF THE IT ACT, COMPUTATION OF UNDISCLOSED INCOME IS TO BE MADE ON THE BASIS OF EV IDENCE FOUND AS A RESULT OF SEARCH OR ACQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS ARE AVAIL ABLE WITH THE AO AND RELATABLE TO SUCH EVIDENCES AND IT DOES NOT INCLUDE ANY FICTIONAL OR PRESUMPTIVE INCOME, TO BE LIABLE TO, OR CAPABLE OF BEING INCLUDED IN THE AGGREGATE OF THE UNDISCLOSED INCOME. SECTION 50 C O F THE IT ACT ALSO DOES NOT SHOW THAT VALUATION PUT BY THE STAMP VALUATION AUTHORITY IS NOT REQUIRED TO BE ADOPTED AS THE VALUE OF THE PROPERTY . THE ITAT AHMEDABAD BENCH IN THE CASE OF SHRI BHARAT KUMAR N. PATEL (SU PRA) ALSO TOOK THE VIEW THAT SECTION 50C OF THE IT ACT WOULD NOT BE AP PLICABLE TO THE PURCHASER. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 19 12. BEFORE PROCEEDING FURTHER, WE MAY FURTHER MENTI ON HERE THAT IN VIEW OF THE ABOVE, THE TRIBUNAL HAS VIDE ORDER DATE D 31-05-2005 RESTORED THE MATER BACK TO THE FILE OF THE LEARNED CIT(A) TO RE-DECIDE THE ABOVE GROUNDS OF APPEAL AFRESH ON EXAMINING THE MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AND THE BOOKS OF ACCOUNT. THE L EARNED CIT(A) IS, THEREFORE, BOUND BY THE ORDER OF THE TRIBUNAL IN TH E SET ASIDE PROCEEDINGS TO DECIDE THE ABOVE GROUNDS OF APPEALS ON THE BASIS OF MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AND THE BOOKS OF ACCOU NT BECAUSE THE ASSESSEE MADE RETRACTION FROM THE STATEMENT. THE ME RE STATEMENT U/S 132(4) OF THE IT ACT THUS WAS NOT CONSIDERED FAVORA BLY BY THE TRIBUNAL IN FAVOUR OF THE REVENUE. THE ORDER OF THE TRIBUNAL IS STATED TO BE FINAL BETWEEN THE PARTIES BECAUSE NOBODY POINTED OUT IF H E SAID ORDER WAS CHALLENGED BY THE REVENUE BEFORE THE HONBLE HIGH C OURT. IT IS ALSO SETTLED LAW THAT IN THE SET ASIDE PROCEEDINGS THE A UTHORITIES BELOW ARE BOUND TO DECIDE AS PER THE DIRECTION CONTAINED IN T HE ORDER AND IT IS NOT OPEN TO CONDUCT FRESH ENQUIRY. THE AUTHORITIES BELO W ARE PRECLUDED FROM ENTERTAINING A NEW PLEA. IT APPEARS THAT THE AUTHOR ITY IS CONFINED TO THE SUBJECT MATER ON REMAND BY THE TRIBUNAL. NO OTHER Q UESTION COULD BE CONSIDERED OR TO ENLARGE THE SCOPE OF THE PROCEEDIN GS IN CONTRADICTION TO THE FINDINGS GIVEN BY THE TRIBUNAL. WE ARE FORTIFIE D IN OUR VIEW BY THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT I N THE CASE OF PULIPATI SUBBARAO AND COMPANY VS AACIT 35 ITR 673, DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF KATIHAR JUTE MILLS PVT. LTD. 120 ITR 861, DECISION OF ALLAHABAD HIGH COURT IN TH E CASE OF S. P. KOCHHAL VS ITO 145 ITR 255, SRI VINDHYA VASINI PRAS AD GUPTA VS CIT 186 ITR 253 AND THE DECISION OF THE HONBLE M. P. H IGH COURT IN THE CASE OF CIT VS HOPE TEXTILES LTD. 225 ITR 993. 13. CONSIDERING THE ABOVE DISCUSSIONS, IT IS CLEAR THAT IN THE BLOCK ASSESSMENT THE ADDITION CAN BE MADE ONLY ON THE BAS IS OF EVIDENCES FOUND AND RECOVERED DURING THE COURSE OF SEARCH AND IN THE SET ASIDE IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 20 PROCEEDINGS THE LEARNED CIT(A) IS BOUND TO FOLLOW T HE DIRECTION OF THE TRIBUNAL IN WHICH ALSO IT WAS DIRECTED TO EXAMINE T HE CASE OF THE ASSESSEE ON THE BASIS OF MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AND THE BOOKS OF ACCOUNT. CONSIDERATION OF THE RETRACTE D STATEMENT WAS NOT CONSIDERED FAVORABLY IN FAVOUR OF THE REVENUE. HOWE VER, THE LEARNED DR RELIED UPON THE DECISION OF THE HONBLE HIGH COURT OF CHHATTISGARH IN THE CASE OF HUKUM CHAND JAIN (SUPRA) WHICH IS CLEARLY D ISTINGUISHABLE. IN THIS CASE, THE ASSESSEE COULD NOT EXPLAIN RECOVERY OF CASH AND JEWELLERY FOUND DURING THE COURSE OF SEARCH AND IN HIS STATEM ENT RECORDED U/S 132 (4) OF THE IT ACT HE HAS SURRENDERED CERTAIN AMOUNT AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE ASSESSEE AFTER CON CLUSION OF THE SEARCH DID NOT RETRACT FROM HIS STATEMENT AND HAS FAILED T O PROVE THAT HIS STATEMENT WAS RECORDED UNDER DURESS, COERCION OR IN TIMIDATION. ON SUCH FACTS, IT WAS HELD THAT ADDITION COULD BE MADE ON T HE BASIS OF THE INCOME SURRENDERED U/S 132 (4) OF THE IT ACT. I WOULD, THE REFORE, PROVE THAT EVEN IN THIS CASE INCRIMINATING MATERIAL WAS SEIZED WHICH WAS CONFRONTED TO THE ASSESSEE DURING THE SEARCH PROCEEDINGS AND T HAT THE ASSESSEE AGREED TO SURRENDER THE UNDISCLOSED INCOME. THEREFO RE, ADDITION WAS NOT MADE MERELY ON THE BASIS OF THE SOLE STATEMENT OF T HE ASSESSEE. THE DECISION REPLIED UPON BY THE LEARNED DR IS, THEREFO RE, CLEARLY DISTINGUISHABLE ACCORDING TO THE FACTS OF THE CASE WHICH WE WOULD DISCUSS IN THIS ORDER AS UNDER. 14. NOW, WE WILL DEAL WITH THE DEPARTMENTAL APPEAL. ON GROUND NO.1 OF THE DEPARTMENTAL APPEAL, THE AO MADE ADDITION OF RS .1,,83,120/- ON ACCOUNT OF UNACCOUNTED INVESTMENT IN KRISHNA HOUSE. THE ASSESSEE STATED THAT INVESTMENT OF RS.68,69,640/- WAS MADE D URING THE PERIOD FROM 02-8-2000 TO 31-03-2002. IT WAS STATED THAT TH E ENTIRE INVESTMENT WAS RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE SUBMITTED THAT IT HAS ALREADY DISCLOSED RS.89,68,521/- WHICH HAS BEEN ACC EPTED BY THE AO AND NO DISCREPANCY WAS FOUND BY HIM IN THE EXPENDIT URE ON CONSTRUCTION IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 21 OF KRISHNA HOUSE. NO INCRIMINATING EVIDENCE IN ANY FORM WAS FOUND DURING THE COURSE OF SEARCH PROCEEDINGS INDICATING UNACCOUNTED INVESTMENT IN THE KRISHNA HOUSE. THE AO WITHOUT ANY EVIDENCE ESTIMATED THE INVESTMENT IN KRISHNA HOUSE AT RS.91, 69,641/- AS AGAINST RS.89,68,521/- INVESTED BY THE ASSESSEE AND THEREBY ADOPTED THE UNDISCLOSED INCOME OF RS.23,00,000/- INSTEAD OF RS. 21,16,880/- DECLARED BY THE ASSESSEE IN THE BLOCK RETURN. NONE OF THE DIRECTORS HAS BEEN EXAMINED BY THE AO BEFORE MAKING THE ADDITION. THE LEARNED CIT(A) CONSIDERING THE STATEMENT OF THE ASSESSEE DELETED T HE ENTIRE ADDITION. HIS FINDINGS IN PARA 7 OF THE IMPUGNED ORDER ARE REPROD UCED AS UNDER: 7. I HAVE CAREFULLY PERUSED THE CONTENTIONS RAISED BY THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDE R. THE ASSESSING OFFICER HAS MADE THE ABOVE ADDITION ON TH E GROUND THAT THE CIRCLE INSPECTOR REPORTED THAT GOOD QUALIT Y OF MATERIAL WAS USED AND ALSO ON THE GROUND THAT SHRI DINESH BH AIYA HAD ADMITTED HIGHER INVESTMENT DURING STATEMENT UND ER SECTION 132(4) OF THE ACT. THE APPELLANT HAS FILED RELEVANT DETAILS IN THE SHAPE OF PAPER BOOK. THE APPELLANT H AS SHOWN INVESTMENT OF RS.89,86,521/- IN THE CONSTRUCTION A ND INTERIOR OF KRISHNA HOUSE WHICH APPEARS IN THE BOOKS OF ACCO UNT AND WHICH ALSO INCLUDES RS.21,16,880/- DECLARED AS UNACCOUNT4EDINVESTMENT IN THE BLOCK RETURN. THIS AM OUNT APPEARS IN THE BOOKS OF ACCOUNT OF THE APPELLANT UN DER VARIOUS HEADS AS UNDER: BUILDING A/C. RS.79,52,761/- FURNITURE AND FIXTURE A/C RS. 7,11,618/- ELECTRICAL FITTINGS RS. 3,22,142/- RS.89,68,521/- THE APPELLANT PLEADED THAT TOTAL INVESTMENT IN THE ABOVE PROPERTY WAS MUCH MORE THAN WAS ADMITTED BY SHRI DI NESH BHAIYA. THE APPELLANT REITERATED THAT THE ASSESSING OFFICER COULD NOT PROVE BY EVIDENCE THAT ACTUAL AMOUNTS SPE NT UNDER THIS HEAD WAS MORE, THEREFORE, ADDITION IS MADE AGA INST THE PROVISIONS OF SECTION 14(B) OF THE ACT. HOWEVER, LO OKING TO THE FACTS OF THIS CASE AND EXPLANATION OF THE APPELLANT FILED BEFORE ME, THE ASSESSING OFFICER WAS NO JUSTIFIED IN MAKIN G THE ABOVE ADDITION OF RS.1,83,140/-. THUS, THE ADDITION OF IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 22 RS.1,83,140/- ON ACCOUNT OF INVESTMENT IN KRISHNA H OUSE IS DELETED. 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF THE PARTIES AS NOTED ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFER E WITH THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION. THE ASSESS EE PLEADED THAT INVESTMENT IN THE PROPERTY WAS MUCH MORE AS COMPARE D TO THE INVESTMENT DISCLOSED IN THE STATEMENT OF SHRI DINES H BHAIYA. NO EVIDENCE WAS FOUND THAT THE ASSESSEE MADE UNDISCLOS ED INVESTMENT IN THE PROPERTY. THE AO TOOK INITIAL SURRENDER OF RS.2 3,00,000/- FOR THE PURPOSE OF MAKING THE ADDITION IN THE STATEMENT OF THE ASSESSEE U/S 132 (4) OF THE IT ACT WITHOUT CONSIDERING THE ENTIRETY OF THE FACTS OF THE CASE INCLUDING THE INVESTMENT SHOWN IN THE BOOKS OF ACCO UNT BY THE ASSESSEE AND FURTHER SURRENDER MADE IN THE RETURN FOR THE BL OCK PERIOD IN A SUM OF RS.21,16,880/-. THE LEARNED CIT(A) ON THE BASIS OF PROPER APPRECIATION OF FACTS AND LAW RIGHTLY DELETED THE ADDITION. IN T HE ABSENCE OF ANY INCRIMINATING EVIDENCE ON RECORD REGARDING UNDISCLO SED INVESTMENT IN THE PROPERTY, THE LEARNED CIT(A) HAS RIGHTLY DELETE D THE ADDITION. GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DISMISSED 16. ON GROUND NO.2 OF THE APPEAL OF THE REVENUE, AD DITION OF RS.20,00,000/- WAS MADE ON THE BASIS OF RETRACTED S TATEMENT MADE BY SHRI DINESH BHAIYA. THE ASSESSEE SUBMITTED THAT THE AO HAS NOT CONSIDERED THE SUBMISSION MADE AND EVIDENCES FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ARBITRARY ADDITIONS HAVE BEEN MADE. IT WAS EXPLAINED THAT THE AO HAS COMPLETELY IGNORED THE RE GISTERED VALUERS REPORT DATED 28-11-1996 (PB-57) FOUND AND SEIZED DU RING THE SEARCH WHICH STATES THE MARKET VALUE OF THE LAND AT RS.21, 25,600/-. THE ASSESSEE WAS ALLOWED DISCOUNT OF RS.85,000/- FOR IM MEDIATE PAYMENT. THEREFORE, CONSIDERATION OF THE LAND WAS RS.20,40,0 00/-. THE AO HAS NOT CONSIDERED THE STATEMENT OF SHRI VASANT VHAIYA JOIN T HOLDER OF THE LAND RECORDED U/S 132 (4) OF THE IT ACT WHERE TOTAL INVE STMENT IN THE LAND WAS IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 23 EXPLAINED AT RS.22,00,000/- APPROXIMATELY. THE AO H AS NEITHER EXAMINED ANY SELLER NOR ANY OF THE BUYERS OF THE LA ND BEFORE MAKING THE ADDITION. THE LEARNED CIT(A) CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 9 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 9. I HAVE CAREFULLY CONSIDERED THE FACTS OF THIS C ASE AND ARGUMENTS OF BOTH THE PARTIES. THE ASSESSING OFFICE R HAS MADE AN ADDITION OF RS.20 LAKHS ON ACCOUNT OF ON M ONEY PAID IN PURCHASE OF LAND ON WHICH GANGADARSHAN BUNG LOW WAS CONSTRUCTED. FIRST GROUND FOR MAKING THE ADDITI ON IS VALUATION REPORT DATED 14/6/2000 PREPARED BY GOVERN MENT APPROVED VALUER SHRI C M. MANDVIWALA. IT WAS SEIZED DURING THE COURSE OF SEARCH AND INDICATES RATE OF RS.10,00 0/- AS ON 14.06.2000. SECOND GROUND IS REGARDING NOTICE ISSUE D BY STAMP DUTY AUTHORITY AND THIRD GROUND IS REGARDING RETRACTED CONFESSIONAL STATEMENT MADE BY SHRI DINESH BHAIYA. ON PERUSAL OF THE FACTS IT IS GATHERED THAT THE ASSESS ING OFFICER HAS CONSIDERED THE VALUATION CERTIFICATE OF GOVERNM ENT APPROVED VALUER SHRI C. M. MANDVIWALA PREPARED AFTE R A PERIOD OF FOUR YEARS FROM THE ACTUAL DATE OF PURCHA SE OF LAND. IT IS FURTHER SEEN THAT THE VALUATION REPORT IS PRE PARED IN A SUMMARY MANNER AND DOES NOT GIVE COMPARATIVE DETAIL S OF FURTHER DEALS OF LAND IN THAT AREA. THUS CERTIFICAT ES ARE STATED TO BE OBTAINED FOR THE PURPOSE OF OBTAINING BANK LO AN BY THE APPELLANT. THE ASSESSING OFFICER HAS NOT CONSIDERED VALUATION REPORT DATED 28/11/1996 WHICH IS PART OF SEIZED MAT ERIAL. IT WAS OBTAINED FOR FINDING MARKET RATE AT WHICH THE L AND COULD BE SOLD IN THE MARKET RATE. THE ASSESSING OFFICER H AS NOT CONSIDERED THE FACT THAT LAND WAS PURCHASED BY THE APPELLANT FOR A CONSIDERATION OF RS.20,00,000/- BY ALL THE SI X MEMBERS OF THE FAMILY FOR RS.23,87,520/-. THE ASSESSING OFF ICER HAS NOT APPRECIATED THAT NOTICE ISSUED FOR GOVERNMENT F OR STAMP DUTY WERE STILL PENDING AND NO ADDITIONAL STAMP DUT Y WAS PAID BY ANY MEMBER OF THE FAMILY. NOW LOOKING TO TH E ABOVE NOTED FACTS AND CONTENTIONS RAISED BY THE APPELLANT , THE ASSESSING OFFICER WAS NOT JUSTIFIED TO MAKE ADDITIO N OF RS.20,00,000/- ON ACCOUNT OF ON MONEY FOR PURCHAS E OF LAND. IN VIEW OF THESE FACTS THE ABOVE ADDITION IS DELETE D. 17. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND F ACTS OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 24 CIT(A). NO INCRIMINATING EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH THAT THE ASSESSEE MADE PAYMENT OF ANY ON MONEY FOR PURCHASE OF THE LAND. THE AO RELIED UPON THE VALUATION REPORT DATED 14-06-2000 WHICH WAS PREPARED AFTER SEVERAL YEARS FROM THE DATE OF P URCHASE OF THE LAND AND ACCORDING TO THE EXPLANATION OF THE ASSESSEE IT WAS PREPARED FOR TAKING BANK LOAN SHOWING HIGHER VALUATION. DURING T HE SEARCH ALSO THE VALUATION REPORT DATED 28-11-1996 WAS SEIZED WHICH SHOWS REASONABLE RATE AS EXPLAINED BY THE ASSESSEE WHICH HAS BEEN IG NORED BY THE AO WITHOUT ANY JUST CAUSE. THE AO ALSO RELIED UPON THE NOTICE OF STAMP DUTY VALUATION AUTHORITY WHICH WOULD NOT PROVE THE VALUATION OF THE PROPERTY AND ALSO COULD NOT BE CONSIDERED AS EVIDEN CE OR MATERIAL FOUND DURING THE SEARCH TO MAKE ADDITION AGAINST THE ASSE SSEE AS IS HELD BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KISHAN KUMAR & OTHERS (SUPRA). THE AO HAS ALSO AT PAGE 25 OF THE ASSESSME NT ORDER NOTED THAT THE ABOVE ADDITION IS MADE AS PER THE STATEMENT MAD E BY SHRI DINESH BHAIYA ON BEHALF OF THE ASSESSEE. IT WOULD, THEREFORE, PROVE THAT THERE WAS NO INCRIMINATING MATERIAL OR EVIDENCE FOUND DURING THE COURSE OF SEARCH TO INDICATE THAT THE ASSESSEE MADE UNDISCLOSED INVE STMENT OR PAID ANY ON MONEY TO ANY PERSON. THE ADDITION WAS, THEREFORE , RIGHTLY DELETED BY THE LEARNED CIT(A). GROUND NO.2 OF THE APPEAL OF TH E REVENUE IS THUS DISMISSED. 18. ON GROUND NO.3 OF THE APPEAL OF THE REVENUE ADD ITION OF RS.9,32,811/- WAS MADE ON ACCOUNT OF INVESTMENT MAD E IN CONSTRUCTION AND INTERIOR OF GANGA DARSHAN BUNGALOW. THE ASSESSE E EXPLAINED THAT AS PER THE VALUATION CERTIFICATE OF REGISTERED VALUER SHRI C. M. MANDVIWALA WHICH WAS FOUND DURING THE COURSE OF SEARCH TOTAL M ARKET VALUE OF CONSTRUCTION AND INTERIOR OF THE BUNGALOW IS RS.94, 64,364/- ON 14-06-2000. CONSTRUCTION OF THIS BUNGALOW WAS START ED IN 1997 AND COMPLETED IN MARCH, 2000. TOTAL AMOUNT SPENT BY THE ASSESSEE OVER THIS PERIOD WAS RS.81,29,689/- AND IF THE EFFECT OF AVER AGE INCREASE IN COST IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 25 INDICATES OVER THE PERIOD OF 4 YEARS IS GIVEN TO TH E VALUE DETERMINED ON 14-06-2000 IT COMES TO RS.79,02,743/-. ACCORDINGLY, INVESTMENT OF THE ASSESSEE IS EVEN MORE THAN THE VALUE DETERMINED BY THE REGISTERED VALUER. THE AO DID NOT CONSIDER SAVING IN THE COST DUE TO VARIOUS FACTORS AND NO EVIDENCE WAS FOUND DURING THE COURSE OF SEAR CH TO INDICATE ANY UNDISCLOSED INVESTMENT MADE IN THE PROPERTY. IN THE ABSENCE OF ANY EVIDENCE ON RECORD, ADDITION COULD NOT BE MADE MERE LY ON THE RETRACTED STATEMENT OF SHRI DINESH BHAIYA. NONE OF THE JOINT OWNERS WAS EXAMINED IN THIS REGARD. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ENTIRE ADDITION. HIS FINDINGS IN PARA 11 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 11. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH SIDES. THE APPELLANT FILED FRESH DETAILS THOUG H ARGUMENTS REMAIN THE SAME. THE DOCUMENTS DISCUSSED BY THE APPELLANT WITH REGARD TO VALUATION OF GANGADARSHAN BUNGLOW REVEAL THAT THE ASSESSING OFFICER HAS NOT FORMED HIS OPINION ON THE BASIS OF CONSOLIDATED MATERIAL. THE VALUATION REPORT WHICH W AS AVAILABLE DURING THE SEARCH OPERATION WAS FOR A SPE CIFIC PURPOSE WRITTEN ON IT, THEREFORE, NO ADVERSE INFERE NCE CAN BE DRAWN AGAINST THE APPELLANT. ADDITION HAS BE EN ARBITRARILY MADE BY ASSESSING OFFICER ON THE BASIS OF RETRACTED STATEMENT OF DINESH BHAIYA. THE APPELLANT S RELIANCE ON CBDT CIRCULAR NO.286/2/2003-IT(INV.) DT D. 10.3.2003 CAN BE APPRECIATED IN THE CONTEXT OF ASSESSEES POSITION DURING SEARCH AND SEIZURE OPERATION. THE ARGUMENT OF THE APPELLANT THAT THE ASSESSING OFFICER COULD REFER THE PROPERTY TO THE DEPARTMENTAL VALUATION CELL HAS CONSIDERABLE FORCE. INSTEAD OF SEEKING SUCH TECHNICAL OR LEGAL OPINION, THE ASSESSING OFFICER PROCEEDED TO MAKE THE ADDITION. I N THE LIGHT OF THESE FACTS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SUCH ADDITION, HENCE, ADDITION OF RS.9,32,811/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN GANGADARSHAN BUNGALOW IS DELETED. 19. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE AR E OF THE VIEW THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LEARNE D CIT(A) IN THE MATTER. IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 26 THERE WAS NO MATERIAL FOUND DURING THE COURSE OF SE ARCH TO JUSTIFY THE ABOVE ADDITION. THE LEARNED CIT(A) ON THE BASIS OF PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RIGHTLY DELETED TH E ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 20. ON GROUND NO.4 OF THE APPEAL OF THE REVENUE, TH E LEARNED CIT(A) DELETED CHARGING OF SURCHARGE BECAUSE SEARCH TOOK P LACE PRIOR TO 01-06- 2002 I.E. BEFORE INSERTION OF PROVISO TO SECTION 11 3 OF THE IT ACT. THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES ADMITTE D THAT THIS ISSUE IS NOW COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SURESH N. GUPTA 297 ITR 322 IN WHICH IT WAS HELD THAT PROVISO TO SECTION 113 OF THE IT ACT IS CLARIFICATORY EVEN TO THE SEARCH PRIOR TO INSERTION OF THE PROVISIONS. BY FOLLOWING THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE REFERRED TO ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ORDER OF THE AO FOR LEVY OF SURCHARGE. AS A RESULT, GROUND NO.4 OF THE APPEAL OF THE REVEN UE IS ALLOWED. 21. NO OTHER POINT IS ARGUED OR PRESSED IN THE DEPA RTMENTAL APPEAL. 22. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTL Y ALLOWED. 23. NOW, WE WILL TAKE UP THE APPEAL OF THE ASSESSEE IN WHICH THE ASSESSEE HAS RAISED GROUNDS NO.2 AND 3 CHALLENGING THE ADDITION OF RS.2,58,170/- ON ACCOUNT OF UNACCOUNTED RECEIVABLE AND UNACCOUNTED INVESTMENT IN COMPUTER FOR A SUM OF RS.39,211/-. TH E LEARNED CIT(A) CONSIDERING THE STATEMENT OF THE ASSESSEE ADMITTED INVESTMENT AND SURRENDER OF THE ABOVE AMOUNTS IN THE STATEMENT AND THAT NO F4RESH EVIDENCE IS FILED BEFORE HIM CONFIRMED BOTH THE ADD ITIONS. IT APPEARS THAT BOTH THE ADDITIONS HAVE BEEN MADE BY THE AO BECAUSE THE ASSESSEE IN THE STATEMENT U/S 132(4) OF THE IT ACT MADE SURREND ER OF THE ABOVE AMOUNTS BUT LATER ON DID NOT DISCLOSED THE SAME IN THE RETURN OF INCOME FILED FOR THE BLOCK PERIOD. HOWEVER, ON CONSIDERATI ON OF THE ORDERS OF THE IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 27 AUTHORITIES BELOW, WE ARE OF THE VIEW THAT NO EVIDE NCE OR MATERIAL IS DISCUSSED TO SHOW ANY INCRIMINATING MATERIAL RECOVE RED DURING THE COURSE OF SEARCH TO MAKE THE ABOVE ADDITIONS. THE T RIBUNAL IN THE FIRST ROUND PROCEEDINGS HAS ALREADY DIRECTED TO EXAMINE T HE CASE ON THE BASIS OF MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AN D BOOKS OF ACCOUNT. IN THE ABSENCE OF ANY SPECIFIC FINDINGS AS PER THE DIR ECTION OF THE TRIBUNAL DATED 31-05-2005 AND AS PER LAW FOR THE BLOCK ASSES SMENT NOTED ABOVE, BEFORE MAKING THE ADDITION ON THE ABOVE ISSUE THE A O AND THE LEARNED CIT(A) SHOULD HAVE SPECIFIED AS TO WHAT MATERIAL WA S FOUND DURING THE COURSE OF SEARCH TO MAKE THE ABOVE ADDITIONS. IN TH E ABSENCE OF ANY PROPER EXPLANATION AND FINDING IN THE ABOVE GROUNDS , WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THESE T WO GROUNDS OF APPEAL TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE B OTH THE GROUNDS AFRESH ON THE BASIS OF MATERIAL SEIZED, MATERIAL AVAILABLE ON RECORD AND THE BOOKS OF ACCOUNTS AS IS DIRECTED BY THE TRIBUNAL EA RLIER VIDE ORDER DATED 31-05-2005 AND IN ACCORDANCE WITH LAW FOR THE BLOCK ASSESSMENT AS NOTED ABOVE. 24. IN THE RESULT, APPEAL OF THE ASSESSEE ON BOTH T HE GROUNDS IS ALLOWED FOR STATISTICAL PURPOSES. 25. NO OTHER POINT IS ARGUED OR PRESSED IN BOTH THE APPEALS. 26. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTL Y ALLOWED; WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED ON 22-10-2010 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 22-10-2010 LAKSHMIKANT/- IT (SS) A NO.94 AND 98/AHD/2006 M/S KRISHNA TERINE PVT. LTD. 28 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, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD