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2008 (6) TMI 375 - AT - Income TaxBlock period assessment u/s 158BA - scope of undisclosed income - Income in the form of salary and interest - Addition u/s 69 - Unexplained investments - search and seizure u/s 132. Block period assessment u/s 158BA - scope of undisclosed income - Income in the form of salary and interest - HELD THAT - We noticed that in assessment years 1989-90 1990 to 1993 and 1995-96 are apparently below taxable limit and the assessee was not required to file return of income as per the provisions prevailing at that time - in Block assessment only undisclosed income is required to be computed - There were some Tribunal decisions in which this point was decided in favour of assessee. The controversy came up for adjudicating before Kerala High Court in M.M. George s case 2001 (12) TMI 53 - KERALA HIGH COURT in which the decision went against the assessee. The High Court held that income below the taxable limit of any previous year is not to be excluded from the undisclosed income of the block period for the purpose of section 158BC if such income has not been declared by the assessee by filing the return of income. Clause (c) has been substituted by a clause with effect from 1-7-1995 by the Finance Act 1995. The decision of Kerala High Court has been rendered redundant in view of said substitution. As held by the Kerala High Court itself in a subsequent judgment in the case of CIT v. M.M. Thomas 2003 (3) TMI 37 - KERALA HIGH COURT . In respect of income which is subject to TDS. We noticed that there are various decisions on the issue including the decisions cited by the ld. AR of the assessee according to which such income is not to be treated as undisclosed income as such income was known to the department - Therefore we are of the view that the income in the case where it was below taxable limit and income subject to TDS and advance tax those income are not to be treated as undisclosed income. The AO is directed accordingly. Addition u/s 69 - Unexplained investments - search and seizure u/s 132 - slip of paper found attached with purchase agreements of the flats showing payment of own money - presumption u/s 132(4A) - Whether AO has rightly in invoking section 69? - HELD THAT - According to the Revenue that paper contains details of consideration paid by the Assessee through cheque and in cash therefore the whole details of said paper is to read together - It is found that the presumption under sub-section (4A) is a rebuttable presumption. Statement u/s 134(4) is one of the important evidence while making presumption u/s 132(4A). Addition u/s 69 can be made if the explanation offered by the assessee is not found satisfactory - In a search case where some material or loose paper is found the department is to follow certain procedure viz. the assessee is to confront on the material found at the time of search. Examination of all concerned parties. For this purpose the Income-tax Act provides power to Revenue authorities u/s 132(4) and u/s 131 of the Income-tax Act. That income cannot be treated as undisclosed income merely because some loose paper is found during the course of search. It is important to note that both Revenue authorities the AO and the CIT(A) conveniently ignored the later part of examination by saying that those statements were not used against the assessee (as said by the AO in remand report). They heavily relied upon the paper found at the time of search. Such action of revenue authorities is not appreciable as same is not in accordance with law. Therefore their action in the matter cannot be approved. The department cannot convert a good proof or evidence in the form of statements of assessee recorded at the time of search u/s 132(4) and statement of seller u/s 131 of IT Act recorded at the time of assessment proceedings in to no proof or evidence - Therefore we are of the considered view that additions in both the cases under consideration are not in accordance with law. Addition in view of section 69 of IT Act. The Apex Court in the case of Smt. P.K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT has laid down the law that the explanation offered by the assessee is not found satisfactory the AO has to exercise his discretion keeping in view the facts and circumstances of the particular case. We find that assessee has furnished satisfactory explanation regarding purchasing price paid by the assessee for purchase of flats and there is no material on record basis on which it can be said that the explanation offered by the assessee is not satisfactory. We therefore of the considered view that the AO has wrongly invoke section 69. The addition made by the AO is not in accordance with the provisions of section 69 of the Income-tax Act and the same is liable to be deleted - Thus we delete the addition made by the AO in both the cases. In the result the appeal filed by the assessee Shri Harish Daulatram Innani is partly allowed and the appeal of Shri Daulatram Innani is allowed.
Issues Involved:
1. Validity of notice issued under section 158BC(a) granting 10 days instead of 15 days. 2. Validity of assessment made in response to the notice issued under section 158BC(a). 3. Addition of Rs. 3,38,200 as concealed income under section 158BB. 4. Addition of Rs. 7,82,000 under section 69 for alleged investment in a flat. Issue-wise Detailed Analysis: 1. Validity of Notice Issued Under Section 158BC(a) Granting 10 Days Instead of 15 Days: The assessee challenged the validity of the notice issued under section 158BC(a) on the grounds that it granted only 10 days instead of the 15 days provided by law. However, this ground was not pressed by the representative of the assessee and was therefore dismissed as not pressed. 2. Validity of Assessment Made in Response to the Notice Issued Under Section 158BC(a): Similar to the first issue, the assessee did not press this ground, and it was dismissed as not pressed. 3. Addition of Rs. 3,38,200 as Concealed Income Under Section 158BB: The Assessing Officer added Rs. 3,38,200 as concealed income for various assessment years within the block period, arguing that the assessee had not filed any return of income for those years. The CIT(A) confirmed this addition. The assessee contended that the income for certain years was below the taxable limit and that salary and interest income, which were subject to TDS, should not be considered as undisclosed income. The Tribunal noted that for certain years, the income was indeed below the taxable limit and that income subject to TDS should not be treated as undisclosed income. The Tribunal directed the Assessing Officer to exclude such income from the undisclosed income. 4. Addition of Rs. 7,82,000 Under Section 69 for Alleged Investment in a Flat: The Assessing Officer added Rs. 7,82,000 under section 69, alleging that the assessee had paid this amount as "own money" for the purchase of a flat based on a slip of paper found during a search. The CIT(A) confirmed this addition, stating that the seized slip clearly showed a cash payment for the acquisition of the flat. The assessee argued that no cash payment was made, and the slip was neither in the handwriting of the assessee nor seized from his possession. The Tribunal noted that the presumption under section 132(4A) is rebuttable and that the statements of the assessee and the seller, denying any cash payment, were not properly considered by the revenue authorities. The Tribunal found the explanation offered by the assessee satisfactory and held that the addition under section 69 was not justified. The Tribunal deleted the addition, stating that the revenue authorities had failed to follow the proper procedure for examining the material found during the search. Conclusion: The Tribunal allowed the appeal of Shri Harish Daulatram Innani partly and fully allowed the appeal of Shri Daulatram Innani, directing the deletion of the additions made by the Assessing Officer.
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