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2021 (1) TMI 39 - AT - Income TaxBlock assessment - Applicability of Chapter XIV B - addition to the peak of loans - AO treating the transactions disclosed in the regular books of accounts as covered by the block assessment by making additions in respect of the transactions as undisclosed income of the appellant under the provisions of Chapter XIV B - HELD THAT - No material were collected in the course of search so as to show that the loans accounted by the assessee in his books of accounts were otherwise unexplained or bogus. In the course of block assessment proceedings, in spite of all his legal arguments, the assessee has filed the details to prove the genuineness of the loans. Whether those explanations are acceptable or not is a different issue. In the light of those explanations and details furnished by the assessee, it is not possible to come to an irrefutable conclusion as far as the impugned block assessment is concerned that the loans amounts were unexplained. Therefore, it is to be seen that no material were available in the hands of the assessing authority so as to discredit the earlier disclosure already made by the assessee. It is not necessary to repeat the plethora of case laws which consistently held that what has been already disclosed cannot be a matter of block assessment. The Assessing Officer cannot indulge in roving enquires regarding the issue that has already been disclosed in the books of accounts and placed before the departments. All such enquiries and investigations should be made by the Assessing Officer in a proceeding known to the Income Tax Law other than the block assessment proceedings. Therefore, we are inclined to accept to the substantive ground raised by the assessee on the question of law that whether the loans treated by the Assessing Officer as unexplained could be treated by the Assessing Officer as unexplained could be treated as forming part of the undisclosed income. We hold that the loan amount cannot be made a subject matter of a block assessment on the basis of the review made by the assessing authority. See RAKESH N. DUTT VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS 2007 (10) TMI 285 - BOMBAY HIGH COURT - Appeal filed by the assessee is allowed.
Issues Involved:
1. Applicability of Chapter XIV B for treating disclosed transactions as undisclosed income. 2. Justification of additions made by the AO regarding unexplained loans. 3. Consideration of substantive grounds raised by the assessee in the block assessment. Detailed Analysis: 1. Applicability of Chapter XIV B: The primary issue raised by the assessee was the applicability of Chapter XIV B in treating transactions disclosed in regular books of accounts as undisclosed income. The assessee contended that the Assessing Officer (AO) erred in making additions under the provisions of Chapter XIV B for transactions that were already disclosed. 2. Justification of Additions for Unexplained Loans: The AO had made additions for certain credits reflected in the books of the assessee, including loans from individuals and entities such as Kashiben Dungershi, Surajben Shah, Daoodayal Mundhra, and Bharat Trading Co. The Tribunal initially deleted the addition of ?5,00,000/- related to Bharat Trading Co. due to sufficient documentary evidence showing the transaction was a security deposit repaid within three months. However, for the other three credits, the Tribunal found the confirmations on record unconvincing and directed the AO to restrict the addition to the peak of the loans. 3. Consideration of Substantive Grounds: The Hon'ble Bombay High Court remanded the matter back to the Tribunal, noting that the Tribunal had not considered the substantive grounds raised by the assessee. The High Court emphasized that the Tribunal must adjudicate on the substantive grounds before considering alternate contentions. The High Court observed that the Tribunal's approach of directly opting for the alternate ground without addressing the primary substantive grounds was improper. Tribunal's Findings on Remand: Upon remand, the Tribunal considered the substantive grounds. The assessee argued that the loans in question were already disclosed in regular assessments and should not be treated as unexplained in the block assessment. The Tribunal agreed with the assessee, noting that the loans were reflected in regular balance sheets and returns filed before the search. It was observed that no new material was found during the search to discredit the disclosed loans. Legal Precedents and Provisions: The Tribunal referred to several case laws, including: - Margadarsi Chit Fund (P.) Ltd. v. Addl. CIT: Reassessment proceedings can be initiated if income is taxable in a different assessment year. - Hanemp Properties (P.) Ltd. v. ACIT: Jurisdiction under sections 158 BC and 143(3) is separate. - Hope (India) Ltd. v. CIT: AO can initiate proceedings under section 147 without limitation if income is deleted in a higher forum for a different year. - Rakesh N. Dutt v. ACIT: Additions in block assessment cannot be made for income already disclosed in regular assessments. - Lotus Investments Ltd. v. ACIT: Reopening of assessments after six years is time-barred under section 149. Conclusion: The Tribunal concluded that the loans disclosed in regular assessments could not be treated as unexplained in the block assessment. The assessee's case was protected under section 150(2) of the Act, which limits the time for reassessment. The Tribunal allowed the appeal, emphasizing that the AO cannot make additions in block assessments for transactions already disclosed and assessed in regular assessments. Order: The appeal filed by the assessee was allowed, and the order pronounced through the notice board under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.
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