2007 (5) TMI 185 - HC - Income Tax

Search & seizure on basis of blank & cancelled bills (documents recovered during search) AO made an estimation tribunal was fully justified in taking in to consideration the subsequent findings i.e. return for A.Y 1996-97 which had been accepted by revenue original cancelled & blank bill were also produced by assessee, and tribunal found that all the bill numbers were entered in sale register & they were tallied, so there is no undisclosed income revenue s appeal dismissed

Summary

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal.
2. Search and seizure operation under Section 132 of the Income Tax Act.
3. Estimation of income based on cancelled and blank bills.
4. Examination of original cancelled and blank bills.
5. Acceptance of regular returns by the Revenue.
6. Gross profit rate estimation.

Analysis:

1. The Revenue appealed against the order of the Income Tax Appellate Tribunal regarding four appeals relevant for the block period from 1st April, 1985 to 22nd February, 1996. The Division Bench dismissed the appeal under Section 260A of the Income Tax Act, 1961, stating that no substantial question of law had arisen in the matter.

2. A search and seizure operation was conducted under Section 132 of the Act in the residential and business premises of the Assesses on 22nd February, 1996. During this operation, a register with reference to cancelled and blank bills was found, leading to an estimation of income for the assessment year 1996-97.

3. The Tribunal examined the original cancelled and blank bills produced by the Assesses and found that they were part of the regular bill books maintained for business purposes. The bills were tallied with entries in the sale register, leading to the conclusion that there was no undisclosed income based on these bills.

4. The Assesses had filed regular returns for the assessment year 1996-97, which were accepted by the Revenue. The Tribunal considered this acceptance as a significant factor in determining that there was no basis for the Assessing Officer to estimate sales based on the blank and cancelled bills.

5. The Tribunal concluded that there was no substantial question of law regarding the estimation of sales or the gross profit rate. Since the estimation was deemed unjustified, the issue of gross profit rate estimation did not survive as it was consequential to the estimation of sales.

6. Ultimately, the High Court found no merit in the appeal and dismissed it, affirming the Tribunal's decision that no substantial question of law arose for consideration in this case.

This comprehensive analysis covers the key issues involved in the legal judgment, detailing the events, findings, and conclusions reached by the High Court in response to the Revenue's appeal.