2011 (6) TMI 176 - HC - Income Tax

Search and seizure - Block assessment - Undisclosed income - whether addition could be made in the regular assessment proceedings as done by the AO or it could be the subject matter of block assessment proceedings alone - it was during block assessment proceedings the AO noticed that M/s Globe Meditech was in fact controlled by the assessee herein though one Mr. Rajesh Khurana was shown as the proprietor of the said firm - It was thus a case of lifting of the veil by the Assessing Officer and this could be done in the regular assessment proceedings insofar as the assessee is concerned - The appeal is disposed of by way of remand

Summary

Issues involved:
1. Whether the addition made by the Assessing Officer (AO) in the regular assessment proceedings was justified or should have been made in the block assessment proceedings.
2. Whether the Tribunal's decision to consider the matter only in block assessment was correct.

Detailed Analysis:
Issue 1:
The case involved a search conducted on the assessee, who was a Director and shareholder of a healthcare center and also owned a garment export business. The AO found a concern named M/s Globe Meditech, controlled by the assessee but operated in the name of another individual. The AO added income in the hands of the assessee, which was earlier added in the name of the other individual. The CIT (A) deleted the additions for both years, stating that such income should be considered only in regular assessments if disclosed in the books of accounts. The Revenue appealed to the Tribunal, which upheld the CIT (A)'s decision. The Senior Counsel for the Revenue argued that the AO's actions were justified as the concern's entries were in regular books of account. However, the respondent's counsel contended that such actions should only be taken in block assessments, citing relevant case laws.

Issue 2:
The Tribunal held that additions related to evidence found during search could be made in block assessments, while other income should be added in regular assessments. The respondent's counsel argued that the concern in question was a dummy concern of the assessee, and any additions should be made in block assessments. The High Court disagreed with the Tribunal's view, stating that the AO's actions were valid as the concern was controlled by the assessee. The Court remitted the matter back to the Tribunal to determine if the concern was a dummy concern of the assessee and whether the CIT (A)'s decision was correct. The Court concluded by setting aside the Tribunal's order and disposing of the appeal accordingly.