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2014 (5) TMI 47 - AT - Income TaxAdmission of additional grounds Held that - The additional grounds are legal in nature and go to the root of the matter, thus, following the decision in National Thermal Power Corporation Ltd. V/s. CIT 1996 (12) TMI 7 - SUPREME Court the additional grounds are admitted for consideration. Invoncation of section 158BD of the Act - Non recording of satisfaction by the AO Held that - The condition precedent for initiating a block assessment under S.158BD is reaching/recording satisfaction by the AO, as enjoined in S.158BD of the Act, to the effect that incriminating material indicating undisclosed income assessable in the hands of the assessee, was found during S.132 proceedings of the person searched - revenue demonstrated that the material for such satisfaction has in fact been recorded by the AO thus, there is no merit in ground raised by the assessee Decided against Assessee. Service of assessment order Impact on computation of period of limitation Held that - The decision in Commissioner Of Income-Tax Versus Gangadhar Gowd Rama Gowd And Co 1984 (11) TMI 19 - ANDHRA PRADESH High Court followed - considering the fact of service of orders refusing the registration of the firm on one of the partners by name, after dissolution of the said firm, the appeal filed by the other partner, on obtaining certified copies of the relevant orders, was held to be within time and not barred by limitation - there was no delay in the filing of the first appeal before the CIT(A), and consequently, the CIT(A) was not justified in holding the appeal before him as barred by limitation thus, the order of the CIT(A) set aside Decided in favour of Assessee. Estimation of undisclosed income - Evidentiary value of the documents found and seized at the time of search Held that - The undisclosed income for the purpose of block assessment has to be completed solely on the basis of seized material and any enquiry made by the AO relatable to such material, meaning thereby neither any enquiry report nor any document procured either before or after search can be considered while computing the undisclosed income of the assessee - any document found and seized during the course of search has to be interpreted literally and nothing can be added or subtracted- The material found and seized are two sheets of typed paper - They are simply unsigned and cannot be attributed to the assessee - unsigned papers are mere dumb documents and cannot be relied upon for making a block assessment Relying upon ACIT V/s. Dr. Kamla Prasad Singh 2010 (3) TMI 939 - ITAT PATNA the addition made by the AO on the basis of unsigned papers cannot be sustained thus, the order of the CIT(A) set aside Decided in favour of Assessee. Penalty imposed u/S 158BFA(2) of the Act Held that - The decision in M/s. HSBC Electronic Data Processing India Ltd. Versus Dy. Commissioner of Income-tax Circle 2(2), Hyderabad 2013 (9) TMI 485 - ITAT HYDERABAD followed the addition is beind deleted, based on which penalty has been levied the very basis of the penalty no longer survives thus, the penalty confirmed by the CIT(A) also set aside - Decided in favour of Assessee.
Issues Involved:
1. Validity of the block assessment under Section 158BD. 2. Proper service of assessment order and demand notice. 3. Estimation of undisclosed income. 4. Confirmation of penalty under Section 158BFA(2). Issue-wise Detailed Analysis: 1. Validity of the block assessment under Section 158BD: The assessee contested the initiation of block assessment under Section 158BD, arguing that the Assessing Officer did not record the necessary satisfaction before invoking the provisions. The Tribunal examined whether the condition precedent for initiating a block assessment under Section 158BD, i.e., recording satisfaction that incriminating material indicating undisclosed income was found during Section 132 proceedings, was met. The Departmental Representative demonstrated that such satisfaction was indeed recorded by the Assessing Officer. Consequently, the Tribunal found no merit in the assessee's contention and rejected this ground. 2. Proper service of assessment order and demand notice: The assessee argued that the assessment order and demand notice were not properly served, as they were served by affixture at the premises of a partner, which they claimed was improper. The CIT(A) had earlier rejected this contention, noting that the assessment order was served by affixture and all subsequent notices were properly served. However, the Tribunal found merit in the assessee's contention, relying on the jurisdictional High Court's decision in CIT V/s. Gangadhar Goud Ram Gowd and Co., which held that service by affixture on one partner after dissolution of the firm was not proper service. Thus, the Tribunal concluded that there was no delay in filing the appeal before the CIT(A) and set aside the CIT(A)'s order on this aspect, allowing the assessee's grounds. 3. Estimation of undisclosed income: The Assessing Officer had estimated the undisclosed income based on two unsigned pages of seized material, which indicated higher rates of sale for commercial and residential spaces. The assessee argued that these unsigned sheets were not reliable and were counter to the actual sale considerations mentioned in registered documents. The Tribunal noted that unsigned papers are mere "dumb documents" and cannot be relied upon for making a block assessment. Citing the Patna Bench of the Tribunal in ACIT V/s. Dr. Kamla Prasad Singh, the Tribunal held that the unsigned papers could not be used to sustain the addition and deleted the addition made by the Assessing Officer, setting aside the impugned orders of the Revenue authorities on this issue. 4. Confirmation of penalty under Section 158BFA(2): The penalty of Rs. 28,46,592 was imposed by the Assessing Officer for concealment, which was confirmed by the CIT(A). However, given the Tribunal's decision to delete the addition based on which the penalty was levied, the basis for the penalty no longer survived. Consequently, the Tribunal cancelled the penalty and allowed the assessee's grounds in this appeal as well. Conclusion: Both appeals of the assessee were allowed. The Tribunal found that the unsigned documents used to estimate the undisclosed income were not reliable, leading to the deletion of the addition and cancellation of the penalty. The issue of proper service of assessment order and demand notice was also resolved in favor of the assessee, leading to the setting aside of the CIT(A)'s order on this aspect.
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