2010 (10) TMI 296 - AT - Income Tax

Search and seizure - Addition Block assessment - Unaccounted investment - In the block assessment the addition can be made only on the basis of evidences found and recovered during the course of search and in the set aside proceedings the learned CIT(A) is bound to follow the direction of the Tribunal in which also it was directed to examine the case of the assessee on the basis of material seized, material available on record and the books of account - Therefore, addition was not made merely on the basis of the sole statement of the assessee The appellant reiterated that the Assessing Officer could not prove by evidence that actual amounts spent under this head was more, therefore, addition is made against the provisions of section 14(b) of the Act - During the search also the valuation report dated 28-11-1996 was seized which shows reasonable rate as explained by the assessee which has been ignored by the AO without any just cause - 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 investment or paid any on money to any person The learned CIT(A) considering the statement of the assessee admitted investment and surrender of the above amounts in the statement and that no fresh evidence is filed before him confirmed both the additions - In the absence of any specific findings as per the direction of the Tribunal dated 31-05-2005 and as per law for the block assessment noted above, before making the addition on the above issue the AO and the learned CIT(A) should have specified as to what material was found during the course of search to make the above additions - In the result, the departmental appeal is partly allowed; whereas the appeal of the assessee is allowed for statistical purposes. Regarding levy of surcharge - this issue is now covered by the judgment of the Hon ble Supreme Court in the case of Suresh N. Gupta (2008 -TMI - 40397 - SUPREME Court) 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

Issues Involved:
1. Addition on account of unaccounted receivables.
2. No set-off in respect of investment in computer, etc.
3. Deletion of addition on account of unaccounted investment in Krishna House.
4. Deletion of addition on account of 'on-money' for the purchase of land.
5. Deletion of addition on account of unexplained investment in construction and interiors of Ganga Darshan Bungalow.
6. Deletion of surcharge levied under section 113 of the IT Act.

Issue-Wise Detailed Analysis:

1. Addition on Account of Unaccounted Receivables:
The assessee challenged the confirmation of the addition of Rs. 2,58,170/- on account of unaccounted receivables. The Tribunal noted that the addition was based on the assessee's statement recorded under section 132(4) of the IT Act, which was later retracted. The Tribunal directed the AO to re-examine the case based on the material seized, material available on record, and books of account, as the original assessment lacked specific findings and evidence to support the addition.

2. No Set-Off in Respect of Investment in Computer, etc.:
The assessee also contested the confirmation of the addition of Rs. 39,211/- for the set-off of investment in computers. Similar to the unaccounted receivables, the Tribunal found that the addition was based on the retracted statement without any supporting evidence from the search. The issue was remanded to the AO for re-examination based on seized materials, records, and books of account.

3. Deletion of Addition on Account of Unaccounted Investment in Krishna House:
The AO made an addition of Rs. 1,83,120/- for unaccounted investment in Krishna House, which the CIT(A) deleted. The Tribunal upheld the CIT(A)'s decision, noting that the AO's addition was based on an estimated investment without any incriminating evidence found during the search. The CIT(A) had rightly considered the investment recorded in the books of account and the block return, which included the declared unaccounted investment.

4. Deletion of Addition on Account of 'On-Money' for Purchase of Land:
The AO added Rs. 20,00,000/- based on a retracted statement and a valuation report prepared four years after the land purchase. The CIT(A) deleted the addition, and the Tribunal upheld this decision, noting the absence of incriminating evidence or material found during the search. The Tribunal emphasized that the valuation report and stamp duty notice could not be considered as evidence for making the addition.

5. Deletion of Addition on Account of Unexplained Investment in Construction and Interiors of Ganga Darshan Bungalow:
The AO added Rs. 9,32,811/- for unexplained investment in the bungalow's construction and interiors, relying on a retracted statement and a valuation report. The CIT(A) deleted the addition, and the Tribunal upheld this decision, noting the lack of material found during the search to justify the addition. The Tribunal agreed with the CIT(A) that the valuation report was prepared for a specific purpose and could not be used to draw adverse inferences against the assessee.

6. Deletion of Surcharge Levied under Section 113 of the IT Act:
The CIT(A) deleted the surcharge levied under section 113, but the Tribunal reversed this decision, citing the Supreme Court's judgment in the case of Suresh N. Gupta, which held that the proviso to section 113 is clarificatory and applies even to searches conducted before its insertion. Consequently, the Tribunal restored the AO's order for levying the surcharge.

Conclusion:
The Tribunal's judgment provided a detailed analysis of each issue, emphasizing the need for concrete evidence and material found during the search to justify additions in block assessments. The Tribunal remanded certain issues for re-examination based on seized materials and records, while upholding the CIT(A)'s deletion of other additions due to the lack of incriminating evidence. The Tribunal also reinstated the levy of surcharge as per the Supreme Court's ruling.

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