2018 (5) TMI 266 - SC - Income Tax

Block Assessment - Use of information gathered as a result of search - whether the material found in the course of survey in the premises of the builder could be used in Block Assessment of the assessee? - Held that - For the purpose of calculating the undisclosed income of the block period, it can be calculated only on the basis of evidence found as a result of search or requisition of books of accounts or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. Section 158BB has prescribed the boundary which has to be followed. No departure from this provision is allowed otherwise it may cause prejudice to the assessee. Needless to say that it is the cannon of tax law that it should be interpreted strictly. The power of survey has been provided under Section 133A of the IT Act. Therefore, any material or evidence found/collected in a Survey which has been simultaneously made at the premises of a connected person can be utilized while making the Block Assessment in respect of an assessee under Section 158BB read with Section 158 BH of the IT Act. The same would fall under the words and such other materials or information as are available with the Assessing Officer and relatable to such evidence occurring in Section158 BB of the Act. In the present case, the Assessing Officer was justified in taking the adverse material collected or found during the survey or any other method while making the Block Assessment. - Decided in favour of revenue

Summary

Issues:
- Interpretation of evidence found during a search in Block Assessment
- Applicability of evidence from a survey in Block Assessment

Analysis:

Interpretation of Evidence Found During a Search in Block Assessment:
The case involved an appeal against a judgment dismissing the appellant's appeal and upholding the decision of the Income Tax Appellate Tribunal regarding a block assessment. The key issue was whether the information gathered during a search, specifically regarding cash payments made by the assessee to a contractor, could be used in the block assessment. The appellant argued that the information revealed undisclosed income, while the respondent contended that the cash payment details did not fall within the block assessment ambit. The court examined relevant provisions of the Income Tax Act, emphasizing that evidence for adding income in block assessment must be found during the search or related proceedings. It noted that the undisclosed income for the block period should be based on such evidence.

Applicability of Evidence from a Survey in Block Assessment:
The court analyzed the evidence found during a search conducted at the assessee's premises, which revealed understatement of income for the block period. It highlighted that the law strictly requires calculating undisclosed income based on evidence found during the search or related requisition of documents. The court referred to Section 158BH of the IT Act, making all provisions applicable to block assessments unless otherwise provided. It cited the Hotel Blue Moon case, clarifying that block assessment is supplementary to regular assessments and should rely on materials unearthed during the search. The court concluded that evidence from a survey conducted simultaneously at connected premises could be used in block assessment, as per Sections 158BB and 158BH of the IT Act.

In the final judgment, the court allowed the appeals, setting aside the impugned orders and reinstating the Assessing Officer's block assessment decisions. The parties were directed to bear their own costs. The judgment provided a detailed analysis of the interpretation and applicability of evidence in block assessments, ensuring adherence to legal principles and relevant provisions of the Income Tax Act.