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2013 (1) TMI 231 - HC - Income TaxBlock assessment - ITAT held that two separate assessments should have been made in this case one for the block period concluded on 20.10.1995 and another on 16.07.1996 - addition made u/s 69 for Rs.30 lacs out of Rs.1.03 crore looted from the assessee to the block assessment - Tribunal deleted addition made u/s 69A - ITAT observed that the notice u/s 158BC as bad in law - Held that - The assessment for the block period ending 31.10.1996 covers the block period from 25.8.1984 to 26.10.1995. The amount of Rs.30 lacs was requisitioned under section 132A from the police authorities on 16.7.1996 and therefore the addition of Rs.30 lacs was outside the scope of block period. The Tribunal having regard to the fact that though search and seizure action was carried out at the business as well as the residential premises of the assessee in which no document or any other evidence was found in regard to initial investment in speculation business, and in the statement dated 23.9.1996 in which the assessee had deposed that he has not made any initial investment in speculation business held that there was no scope to add any amount purely on the basis of estimate and thus directed the deletion of the amount of Rs.30 lacs, as also Rs.2 lacs. Whether deduction under Chapter VIA are to be given, if the entire income for all the years under the block period - any deduction under Chapter VIA due to the assessee in any previous year including in the block period will not form part of the undisclosed income for the block period. While computing income for the purposes of block assessment the assessee will be entitled for deduction and adjustment under Chapter IV and VIA of the Act - A.O. was accordingly directed to modify the order giving rise ot this appeal. Applying the ratio of the judgment in Chandra Prakash Agrawal (2006 (8) TMI 139 - ALLAHABAD HIGH COURT) to the present case, it is found that the Tribunal did not commit any error in recording findings that since nothing was found in the search operations on 26.10.1995 and that though the warrant of authorisation under section 132A was issued on the following day on 27.10.1995, the amount requisitioned was actually received after the permission of the Addl. District & Sessions Judge, Agra in Criminal Misc. Application no.54/95 under section 394/411 IPC for handing over amount of Rs.72 lacs to Income Tax Department, with certain conditions. The requisitioned amount was actually received on 16.7.1996 with the conditions imposed by the Addl. District & Sessions Judge that the Income Tax Department will be duty bound to produce in the Court the amount or any part or balance thereof and when so ordered by the Court or any superior court. The amount so received in pursuance to the warrant of authorisation under section 132A could not be subjected to tax in the block assessment period under Chapter XIVB. The requisitioned amount, thus, could not be added under section 69A in the block assessments of the assessees and to that effect notice under section 158BC, including the amount, which was requisitioned and brought into the hands of the income tax authorities beyond the period of block assessment, the notices under section 158BC was bad in law - in favour of assessee.
Issues Involved:
1. Legality of separate assessments for different block periods. 2. Legality of addition under Section 69 of the IT Act. 3. Legality of addition under Section 69A of the IT Act. 4. Validity of notice under Section 158BC of the IT Act. 5. Legality of addition of Rs.5,00,000/- under Section 69A. 6. Directions to allow deductions under Chapter IV and VIA. 7. Deletion of addition under Section 145 read with Section 55 (2). Detailed Analysis: 1. Legality of Separate Assessments for Different Block Periods: The Tribunal held that two separate assessments should have been made: one for the block period up to the date of search under Section 132 concluded on 26.10.1995, and another for the block period ending on the date of requisition under Section 132A of the amount recovered from the police on 16.07.1996. This was based on the fact that the amount of Rs.30 lacs was requisitioned under Section 132A after the block period ended on 26.10.1995, thus falling outside the scope of the initial block assessment. 2. Legality of Addition under Section 69 of the IT Act: The Tribunal found that the addition of Rs.30 lacs under Section 69 was beyond the scope of the block assessment. The amount was requisitioned after the block period ended, and no documents or evidence were found during the search to support the initial investment in speculation business. Therefore, the addition was deemed improper. 3. Legality of Addition under Section 69A of the IT Act: The Tribunal deleted the addition made under Section 69A, as the assessee had admitted possession of Rs.30 lacs in cash on 8.10.1995 before it was looted. The Tribunal held that the amount could not be added as undisclosed income for the block period since it was requisitioned after the block period ended. 4. Validity of Notice under Section 158BC of the IT Act: The Tribunal observed that the notice under Section 158BC was bad in law because it was issued without waiting for the execution of the requisition under Section 132A. The notice did not indicate the date of requisition and was issued prematurely. 5. Legality of Addition of Rs.5,00,000/- under Section 69A: The Tribunal found that the addition of Rs.5,00,000/- as unexplained investment of speculation business was based on an estimate and not supported by any evidence. Therefore, it directed the deletion of this amount. 6. Directions to Allow Deductions under Chapter IV and VIA: The Tribunal directed the Assessing Officer (A.O.) to allow deductions claimed under Chapter IV and VIA, which were allowed in regular assessments for the respective assessment years while computing the undisclosed income under Section 158BB (i) for the block period. 7. Deletion of Addition under Section 145 read with Section 55 (2): The Tribunal directed the deletion of the addition of Rs.1,00,500/- made under Section 145 read with Section 55 (2) on account of goodwill received by the assessee on retirement from the firm, as it was added as undisclosed income for the assessment year 1993-94. Conclusion: The High Court upheld the Tribunal's findings, dismissing the income tax appeals. All the four common questions in both appeals were decided in favor of the respondent assessee and against the revenue. The additional questions in ITA No.50 of 2012 were based on facts and not substantial questions of law, thus to be computed by the A.O. as per the Tribunal's observations.
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