2007 (7) TMI 36 - HC - Income Tax

Block Assessment - AO contended that there was undisclosed income on the ground that there is difference in the value declared by assessee and the valuation cell of the DOR - Held that this is not valid ground to treat it as a undisclosed income

Summary

Issues:
Deletion of addition based on valuation report of Revenue department regarding unexplained investment in properties.

Analysis:
The case involved a dispute regarding the deletion of an addition of Rs.2,23,08,152 made by the Assessing Officer based on a valuation report from the Department of Revenue concerning unexplained investments in the Assessee's properties. The search and seizure operation conducted under Section 132(1) of the Income Tax Act revealed papers related to the Assessee's property investments. The Assessing Officer treated the difference between the valuation officer's report and declared property values as undisclosed income for assessment years 1999-2000 and 2000-2001.

The Commissioner of Income Tax (Appeal) deleted the additions, stating that no adverse material was found during the search to indicate understated property investments by the Assessee. The Revenue challenged this decision before the Income Tax Appellate Tribunal, which upheld the deletion, emphasizing that without adverse material found during the search, no addition could be made by treating the investments as undisclosed income.

The Revenue contended that the Assessee failed to provide a registered valuer's report supporting declared property costs or objections to the Assessing Officer's relied-upon report. The Revenue argued that since the investments were not disclosed in the Assessee's regular business accounts, they had to be estimated based on available material. The court referred to Section 158B of the Act, which defines undisclosed income for block assessments, emphasizing that only income found as a result of search can be subject to assessment under this chapter.

Citing precedent, the court highlighted that Chapter XIV-B is not a substitute for regular assessment and assessments under this chapter are limited to materials unearthed during search. As no incriminating material was found during the search indicating additional property investments by the Assessee, the Tribunal's decision to delete the additions was upheld. Consequently, as the Tribunal's decision did not raise any substantial question of law, the Revenue's appeal was dismissed.