C I T UDAIPUR vs. SHRI SARDAR SINGH HODA

Date of Judgment :: 13.05.2013 PRESENT HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN HON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant. Mr. Anjay Kothari, for the respondent. ---- BY THE COURT: This appeal under Section 260A of the Income Tax Act, 1961 ('the Act') has been filed by the Revenue aggrieved by the order dated 15.7.2005 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('Tribunal'), whereby, the appeal filed by the assessee has been partly allowed and certain additions made vide Assessment Order dated 31.7.1998 for block period F.Y. 1986-87 to 1996-97 have been deleted.

The appeal was admitted on the following substantial questions of law by this Court on 3.4.2006:- Vs.

“(i) - Whether in the facts and circumstances of the case, the Tribunal was justified in law in deleting the additions made by the Assessing Officer for the relevant assessment year falling within the block period of 1986-87 to 1996-97 primarily on the ground of Section 158BB is not applicable for the purposes of making additions unless the additions are directly referable to material found during the course of search and seizure proceedings? (ii)- Whether in the facts and circumstances of the case, the Tribunal was justified in deleting the additions on account of cash credit to the extent of Rs.2,04,500/- by setting aside the additions made by the Assessing Officer on the ground that the opportunity was not given though demanded to produce the so-called creditors, without remitting the case back to the Assessing Officer for making the relevant enquiry into the genuineness of such cash credit and passing fresh order after giving an opportunity to the assessee to satisfy the Assessing Officer about its genuineness ?” The facts in brief are that cash amounting to Rs. 5,72,000/- was captured from Chandan Singh on 19.9.1996 by the Police Authority of Jaipur at Sindhi Camp bus stand, who had travelled from Udaipur to Jaipur by a Deluxe bus. In the statement recorded by the Assistant Director of Income Tax (Investigation) IV, Jaipur, Chandan Singh stated that cash was given by his employer Sardar Singh to deliver it to Girdhar Ji Bajoria. The cash was requisitioned under Section 132A of the Act; notice under Section 158BC/BD was served on Chandan Singh; and in response to it, he filed return of income tax declaring total undisclosed income for the block period at Rs.2,99,440/-. During the course of assessment proceedings Vs.

Chandan Singh stated that he was employee of M/s. K.K. Gas Distributors, Udaipur and the cash was given to him by Sardar Singh Hoda, Proprietor of the firm. He also mentioned that Rs. 2,99,470/- shown as undisclosed income is in fact undisclosed cash of Sardar Singh, his employer. Sardar Singh – assessee admitted the income from undisclosed source in his statement before the ADIT, Udaipur and notice under Section 158BC/BD were issued to him. In response, the assessee returned income of Rs. 3,40,211/- for the block period. The Assistant Commissioner of Income Tax, Investigation Circle, Udaipur by his assessment order dated 31.7.1998 added Rs. 2,99,470/- as undisclosed income of the assessee based on his own admission to the total income of the assessee for the assessment year 1997-98. The Assessing Officer ('AO') further made various additions under several heads and computed the total income including undisclosed income under Section 158BB of the Act at Rs. 15,68,479/- and the total undisclosed income for the block period at Rs. 12,28,268/-. Feeling aggrieved by the assessment order dated 31.7.1998, the assessee preferred an appeal before the Tribunal. The Tribunal vide order dated 15.7.2005 upheld the addition of Rs.2,99,470/- based on the admission of the assessee. The addition of old capital balance was set-aside by the Tribunal as the provisions of Chapter XIV-B of the Act in correct perspective. It was submitted that the AO can use all the material and evidence placed before him and in his possession to compute undisclosed income by framing block assessment and the onus of proof lies on the assessee and in the instant case, the assessee has failed to discharge his onus and therefore, the additions made were quite justified and consequently, the appeal deserves to be allowed. On the other hand, it was contended by Mr. Anjay Kothari, learned counsel for the assessee that in fact, no substantial question of law arise for consideration in the appeal and submitted that the finding of the Tribunal that the AO had estimated undisclosed income without reference to the material in his possession was arrived at on the basis of material on record and by applying the principle of law correctly and therefore, it cannot be said that any question of law arises in the present case. It was further submitted that under Chapter XIV-B, Chapter XIV-B where the AO has to assess only the undisclosed income. While dealing with this aspect, the Bombay High Court speaking through Hon'ble Mr. Justice S.H. Kapadia (as His Lordships then was) in Commissioner of Income Tax v. Dr. M.K.E. Memon : (2001) 248 ITR 310 held as under: “In conclusion, we would also like to mention that Chapter XIV-B lays down a special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of the search. Under section 158BB read with section 158BC of the Act, what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed under regular assessment vide section 143(3). This exercise under section 143(3) for regular assessment stands on a different footing in contrast to the exercise undertaken by the Assessing Officer under Chapter XIV-B where the Assessing Officer has to assess only the undisclosed income. Therefore, the scope of regular assessment is quite different from the scope of assessment under Chapter XIV-B. The regular assessment is to ensure that the assessee had not understated the income or has not computed excessive loss or has not underpaid the tax in any manner whereas what is assessed under Chapter XIV- XIV-B of the Income Tax Act.” Further while dealing with the same issue, this Court in Commissioner of Income Tax v. Rajendra Prasad Gupta : (2001) 248 ITR 350 (Raj.) held as under:- “We are of the opinion that so far as the contention of learned counsel for the appellant that the Assessing Officer has necessary juri iction to resort to best judgment assessment in proceedings under section 158BB, the correctness of it cannot be doubted. However, under the scheme of the provisions for block assessment, it is apparent that it relates to assessment of “undisclosed income” of the assessee excluding the income subjected to regular assessment in pursuance of the returned filed by the assessee for such period. It is also apparent from the perusal of section 158BB that the returns are also required to be filed in pursuance of the notice under section 158BC (a) and the assessment is to be framed on that basis in the light of material that has come into possession of the assessing authority during the course of search which is the foundation of the proceedings. That being so, the correctness or otherwise of the returns filed in pursuance of the notice under section 158BC (a) has to be examined with reference to the material in the possession of the assessing authority having nexus to assessment of “undisclosed income” which is with the available with him.” The court further held: “Having perused the assessment order, we are of the opinion that no such finding has been recorded by the Assessing Officer whether the returns filed by the assessee do not accord with facts that came to light during the course of search and seizure nor estimate of income made by the assessing authority appears to be after considering that material on record. It is the substance and the reasoning adopted by the Tribunal that the Assessing Officer has estimated the income without reference to the material in his possession which cannot be countenanced. Thus, finding has rightly been reached by the Tribunal on the basis of the material that was on record by applying the principle of law correctly. Such finding does not give rise to any substantial questions of law.” Further in the case of Commissioner of Income Tax v. Late Manohar Lal Soni : (2009) 316 ITR 365, this Court has held that Chemoux : (2008) 298 ITR 98 (Raj.), this Court held that addition can be made only when evidence is available as a result of search or requisition of books of account, documents and other material, however, addition cannot be made on the basis of inferences. In the present case while the AO in its assessment order dated 31.7.1998 dealt with the issue as if it was undertaking the assessment proceedings under Section 143(3) of the Act of the period 1986-87 to 1996-97 and made additions under several heads like cash credit, disallowed commission, disallowed job work expenses, deposit in the Bank, investment in restaurant in the name of Cool Station, income from the restaurant in the name of wife, disallowed salary in the name of relative, income from VAN and salary by rejecting the explanations submitted by the assessee. The Tribunal on the other hand, after rejecting the plea of the assessee regarding the amount of undisclosed cash as admitted by him to the tune of Rs. 2,99,740/- came to the conclusion that the rest of the additions made by the AO does not fall within the parameters of Chapter-XIV-B relating to the the undisclosed cash of Rs. 2,99,740/-, the AO was not in possession of any evidence found as a result of search or requisition of book of accounts or other documents so as to make the additions as made by him in the assessment order dated 31.7.1998. The reliance placed by the Revenue in Rajendra Kumar Lahoty v. Deputy Commissioner of Income Tax : (2003) 132 Taxman 877 (Raj.) has no application to the present case as the said case turned on its own facts and no principle of law has been laid down in the said judgment. From what has been noticed above, the Tribunal on the basis of material on record and by applying the principle of law correctly has rightly reached a finding, which does not call for any interference by this court. Accordingly, the questions are answered against the Revenue and consequently, as the appeal has no substance, the same is, therefore, dismissed. No costs. (ARUN BHANSALI),J. (NARENDRA KUMAR JAIN),J. Rm/