2008 (6) TMI 208 - HC - Income Tax

Block assessment - additions are made under section 69 on unexplained investments and under section 68 on unexplained cash credit - relatives did not prove the transactions of advances made to the assessee and the assessee could not prove even substantial amount of withdrawals from his own account - contention raised by the assessee s counsel is that block assessment under section 158BC itself is not tenable because it is not based on any evidence gathered in the course of search, is rejected because assessment was based on the materials gathered on inspection additions under sections 68 and 69 are permitted in an assessment under section 158BC

Summary

Issues: Appeal against the Tribunal's order on block assessment for the period 1988-89 to 1998-99 under sections 68 and 69 of the Income-tax Act regarding unexplained investments and cash credits.

Analysis:
1. The appeal was filed by the assessee against the Tribunal's order partly confirming and partly canceling the Commissioner of Income-tax (Appeals)'s decision on the block assessment conducted on the appellant for the specified period. A search revealed substantial investments in various properties and expenditures by the non-resident Indian assessee. The Assessing Officer requested a cash flow statement to substantiate the investments and expenses, which was partially accepted. The Commissioner of Income-tax (Appeals) granted significant relief by reducing certain additions. However, the Tribunal deleted most additions except for two, leading to the current appeal.

2. The primary contention raised was the validity of the block assessment under section 158BC, challenging its basis on evidence gathered during the search. The appellant's counsel cited the Central Board of Direct Taxes circular emphasizing the requirement for undisclosed income assessment to be based on search evidence. Despite various High Court decisions on this matter, the court found the assessment in this case valid due to the investments and expenses detected during the search, leading to subsequent enquiries. The Assessing Officer accepted part of the explanation but made additions under sections 68 and 69. The court noted that the issue at hand was whether the lower authorities were justified in rejecting explanations regarding investments and expenses supported by the cash flow statement. Since the additions were based on documentary evidence and no substantial legal question arose, the court upheld the Tribunal's decision.

3. The court determined that the assessment under section 158BC followed the procedures outlined in Chapter XIV-B of the Act, allowing for additions under sections 68 and 69. With most additions already canceled by lower authorities and no substantial grounds for interference found, the court dismissed the appeal filed by the assessee. The judgment highlighted that the assessment was supported by evidence gathered during inspection, justifying the additions made under relevant sections of the Income-tax Act.