2010 (8) TMI 673 - AT - Income Tax

Search and seizure - Addition - whether in the backdrop of facts noted, the provisions of section 153(2A) are applicable or the provisions of section 153(3)(ii) are applicable - Hon ble Supreme Court in the case of ITO v Murlidhar Bhagwan Das, (1964 -TMI - 49393 - SUPREME Court), wherein, it has been observed that a finding, could only be that which was necessary for the disposal of an appeal in respect of an assessment of a particular year, and a direction is given after recording of findings the assessee was given an opportunity to explain the entries in document No.A4, A5 and A6 containing entries relating to alleged payments made by the assessee to certain land owners - the onus was on the assessee to establish that the notice dated 6.7.98 was not served on 21.7.98 but on some other date - Supreme Court in CIT v. Jai Prakash Singh (1996 -TMI - 5516 - SUPREME Court) upheld the jurisdiction of the AO and held the notice dt.6th July, 1998 as valid in law being under the umbrella of S.292B of the Act and held that the said notice was factually served on the notice-appellant - ground is allowed for statistical purposes Deemed income u/s.69-C - the outflow claimed is quite small as compared to inflow - This ground is allowed

Summary

Issues Involved:
1. Limitation period for passing the order under section 153 of the Act.
2. Deduction under section 37(1) for expenses from the income of the block period.
3. Telescoping of deemed income under section 69-C.
4. Levying of interest under section 158BFA(1).

Issue-wise Detailed Analysis:

1. Limitation Period for Passing the Order Under Section 153 of the Act:
The primary issue was whether the provisions of section 153(2A) or section 153(3)(ii) were applicable for determining the limitation period for passing the order. The Tribunal held that section 153(3)(ii) was applicable as it does not prescribe any time limit for completion of assessment to give effect to the findings and directions contained in an order under sections 250, 254, 260, 262, 263, 264, or any court order. The Tribunal noted that the provisions of section 153(2A) would apply only if the entire assessment was set aside or cancelled. In this case, the Tribunal had merely restored certain issues to the file of the AO for fresh examination, and thus, section 153(3)(ii) was applicable.

2. Deduction Under Section 37(1) for Expenses from the Income of the Block Period:
The assessee claimed deduction under section 37(1) for expenses recorded in vouchers found during the search. The AO disallowed the claim due to lack of corroborative evidence. The Tribunal had previously restored the matter to the AO to verify the nexus between the cash payments and the purchase of land. The AO did not accept the assessee's contention, citing insufficient details and lack of confirmation from the parties involved. The Tribunal found that the AO had not provided specific examples of discrepancies and thus restored the matter for fresh examination, allowing the assessee to substantiate the claim.

3. Telescoping of Deemed Income Under Section 69-C:
The assessee sought to telescope Rs. 3,85,000/- treated as deemed income under section 69-C against the undisclosed income of Rs. 1 crore declared for earlier assessment years. The AO and CIT(A) rejected the claim due to lack of corroborative evidence. The Tribunal, however, accepted the assessee's contention that the availability of Rs. 3,85,000/- out of the declared Rs. 1 crore could not be doubted, given the small outflow compared to the inflow. The Tribunal allowed this ground.

4. Levying of Interest Under Section 158BFA(1):
The AO imposed interest under section 158BFA(1) due to delayed filing of the block return. The assessee contended that the notice dated 6.7.98 was not received, and thus the period should be reckoned from 17.9.98. The Tribunal noted that the notice was served on 21.7.98 and upheld the AO's computation of interest from this date. However, the Tribunal directed the AO to exclude the period for obtaining copies of seized records from the computation of interest.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific directions for fresh examination and verification of the issues related to the deduction under section 37(1) and the computation of interest under section 158BFA(1). The Tribunal's decision emphasized the need for detailed verification and substantiation of claims by the assessee and provided a clear interpretation of the applicable provisions and limitations under the Income Tax Act.