2014 (7) TMI 1124 - HC - Income Tax

Block assessments - Tribunal deleted the addition on unaccounted cash credit made in block assessment - Held that - In the instant case, the Tribunal recorded a categorical finding to the effect that all the items of cash credits alleged against the respondents were reflected in the books of account referable to the concerned assessment years. That being the case, the very justification for making the block assessment and thereby the passing of assessment order becomes shaky. The Tribunal has taken a correct view in the matter and based its conclusions on the relevant precedents. Therefore, we do not find any basis to interfere with the order under appeal. - Decided against revenue.

Summary

Issues:
1. Block assessments based on search conducted by Income-tax Department.
2. Inclusion of undisclosed income in block assessments.
3. Appeal filed by assessees before Income-tax Appellate Tribunal.
4. Interpretation of section 158BB of the Act.
5. Precedent set by the Supreme Court in Asst. CIT v. Hotel Blue Moon.
6. Tribunal's finding on cash credits reflected in books of account.
7. Justification for making block assessments.

Analysis:
The High Court dealt with a batch of appeals concerning block assessments initiated after searches conducted by the Income-tax Department. The assessees argued that the information uncovered during the search was already reflected in their profit and loss accounts for the relevant assessment years, thus no concealment or non-disclosure existed. However, the assessing authority included the items of undisclosed income identified during the search, leading to the assessees filing appeals before the Income-tax Appellate Tribunal.

The Tribunal, in a common order, set aside the assessment orders for the block assessments, prompting the Revenue to appeal. The Court noted that block assessments following searches must adhere to the procedure outlined in section 158BB of the Act. The Income-tax Officer added items after verifying previous assessment orders, revealing that the alleged undisclosed cash credits were present in the assessees' submitted accounts for earlier years, not newly discovered during the search.

Referring to the Supreme Court's decision in Asst. CIT v. Hotel Blue Moon, the Court emphasized that block assessments should only include information not previously disclosed by the assessee. In this case, the Tribunal found that all cash credits in question were already recorded in the books of account for the relevant years, rendering the justification for the block assessments weak. The Court upheld the Tribunal's decision, citing relevant precedents, and dismissed all appeals without costs.