2013 (6) TMI 16 - HC - Income Tax

Block assessment - Suppression of receipts and inflation of expenses - search conducted - Tribunal deleted the two additions - assessee is a practicing medical doctor having different sources of income such as income from agricultural activities, medical profession and pathology etc. - Held that - A search was conducted at the residential premises of the assessee and survey was conducted at the business premisses. During the search, no cash, bullion, Jewellery or any material including the investment were found, which can be considered as undisclosed income. The additions were made on estimate basis after seizing the register from the business premises of the assessee. Regarding the addition pertaining to the Blood Bank, it appears that the same was made on estimate basis. No document, register or material was found except the registers mentioned herein above. The A.O. has estimated the profit and made the addition without rejecting the books of accounts. Hence, in this regard, there is no reason to interfere in the impugned order passed by the Tribunal. The same is confirmed. Regarding the Charak X-Ray, it appears that the same was lease out and the assessee was showing the income in its return since 16.04.1993 which was accepted by the Department. So, no double addition can be made out. Therefore, in this regard also, there is no reason to interfere with the impugned order. The impugned order is hereby sustained. Considering the case of CIT vs. S. Ajit Kumar (2006 (11) TMI 130 - MADRAS HIGH COURT) clearly indicates that the sentence such other materials or information as are available with the Assessing Officer & quot, cannot be bisected or taken in isolation for the purpose of computation. Any other material cannot form basis for computation of undisclosed income of the block period. Hence, Commissioner as well as the Tribunal have the issue in accordance with the statutory provisions, and requires no interference. The appeal is accordingly dismissed. Also see CIT vs. R. M. L. Mehrotra (2009 (9) TMI 3 - ALLAHABAD HIGH COURT). In favour of assessee.

Summary

Issues:
1. Appeal under Section 260-A of the Income Tax Act, 1961 against the judgment of the Income Tax Appellate Tribunal.
2. Validity of the additions made under Section 158-BC for the block period 01.04.1986 to 26.06.1996.
3. Interpretation of the definition of "Undisclosed Income" under section 158 BC of the Act.
4. Justification of additions made on an estimate basis.
5. Consideration of evidence found during search and post-search inquiries in block assessment.
6. Application of legal principles from relevant case laws in determining undisclosed income.

Analysis:

1. The High Court entertained an appeal under Section 260-A of the Income Tax Act against the Tribunal's decision to delete additions totaling Rs. 60,96,274 for the block period 01.04.1986 to 26.06.1996. The substantial question of law was whether the Tribunal's view in deleting the additions was legally justified.

2. The Assessing Officer (A.O.) made additions under Section 158-BC based on materials found during a search and survey at the assessee's premises. The First Appellate Authority upheld the additions, but the Tribunal deleted them. The department argued that the seized registers indicated suppression of receipts and inflation of expenses by the assessee, justifying the A.O.'s estimates.

3. The department contended that the Tribunal failed to consider the expanded definition of "Undisclosed Income" post the Finance Act, 2002 amendment. Circular no.8 of 2002 emphasized including any undisclosed income detected as a result of search evidence in block assessments. Reference was made to case law supporting the inclusion of such income.

4. The counsel for the assessee justified the Tribunal's decision, arguing that the additions were made on an estimate basis, a factual matter not challengeable under Section 260-A. They cited various case laws supporting this position and requested dismissal of the appeal.

5. The High Court observed that no undisclosed income was found during the search, and the additions were estimate-based after seizing registers from the business premises. The Court upheld the Tribunal's decision regarding the Blood Bank and Charak X-Ray additions, noting no grounds for interference.

6. Legal principles from case laws like Commissioner of Income Tax vs. S. Ajit Kumar and Commissioner of Income Tax vs. R. M. L. Mehrotra were applied to determine undisclosed income based on evidence found during search or related inquiries. The Court emphasized the statutory provisions for computing undisclosed income in block assessments.

In conclusion, the High Court found no substantial question of law in the Tribunal's decision, dismissing the department's appeal and upholding the Tribunal's order.