2017 (9) TMI 480 - HC - Income Tax

Block assessment - Reliance upon the self incriminating statement during the Search u/s 132 - Held that - The Tribunal by the impugned order dated 28th November 2003 on bare reading of Section 132(4) of the Act dismissed the Revenue s appeal by upholding that the statement/letter dated 15th January 1998 was not made during the course of search but much after the search was completed on 4th December 1997. Consequently it held that the letter dated 15th January 1998 would not have evidentiary value of a statement under Section 132(4) of the Act. Thus dismissed the Revenue s appeal. - Order of tribunal sustained - Decided against the revenue. Block assessment - earlier assessee filed a declaration under the Voluntary Disclosure of Income Scheme 1997 (VDIS-1997) declaring an undisclosed income 1.20 crores- Assessee did not deposit tax required to be deposited before the 31st March 1998 resulting in the rejection of declaration under the VDIS-1997 - filed return of income under Chapter XIV-B of the Act declaring undisclosed income for the Block Period at 55 lakhs - AO rejected books of accounts and on the basis of the declaration made under the VDIS 1997 sought to tax the Assessee - Held That - Tribunal has reighly dismissed the Revenue s appeal inter-alia holding that under the provisions of Chapter XIV(B) of the Act the undisclosed income for the Block Period has to be completed on the basis of material found in the course of the search. This declaration made by the respondent - Assessee under the VDIS scheme is not material discovered during the course of search as it was made after the search. Therefore the same can not form the basis of assessment under Chapter XIV(B) of the Act. - Decision of this Court in CIT v. Vinod Danchand Ghodawat 2000 (6) TMI 13 - BOMBAY High Court followed. - Decided against the revenue.

Summary

Issues Involved:
1. Interpretation of Section 132(4) of the Income Tax Act regarding the evidentiary value of a statement made during a search operation.
2. Validity of assessing undisclosed income based on a declaration under the Voluntary Disclosure of Income Scheme made after the search.
3. Explanation of the source of funds for unrecorded transactions during a block assessment period.

Analysis:

Regarding Question No.1:
The case involved a dispute over the evidentiary value of a letter disclosing income made by the assessee after a search operation. The Tribunal held that the letter, not made during the search, did not qualify as a statement under Section 132(4) of the Act. The court referred to a similar case precedent to support this interpretation, ruling in favor of the respondent-assessee.

Regarding Question No.2:
The issue revolved around assessing undisclosed income based on a declaration under the Voluntary Disclosure of Income Scheme made post the search operation. The Tribunal dismissed the Revenue's appeal, emphasizing that undisclosed income for the block period should be determined based on material found during the search, not on post-search declarations. The decision aligned with a previous court ruling and was upheld, favoring the respondent-assessee.

Regarding Question No.3:
The question addressed the source of funds for unrecorded transactions during the block assessment period. The respondent-assessee explained the source as initial capital and profits from trading activities. The Tribunal found the explanation plausible, noting the lack of evidence disputing the payments made for purchases. The court upheld the Tribunal's decision, ruling in favor of the respondent-assessee.

In conclusion, all three questions were answered in favor of the respondent-assessee, leading to the dismissal of the appeal with no costs imposed. The judgment highlighted the importance of adhering to legal provisions and established precedents in determining tax liabilities during block assessment periods.