2004 (6) TMI 234 - AT - Income Tax

Summary

Issues Involved:
Appeal against cancellation of assessment under s. 158BC of the IT Act by CIT(A) on grounds of income below taxable limit, computation of undisclosed income, and lack of jurisdiction for block assessment.

Analysis:

Issue 1: CIT(A) cancelling assessment under s. 158BC
The Revenue appealed against the CIT(A)'s order cancelling the assessment under s. 158BC. The grounds included errors in law and facts, such as ignoring facts in the assessment order and holding that income below taxable limit of block period years does not constitute undisclosed income. The CIT(A) based the cancellation on the view that undisclosed income should reflect in assets, expenses, and investments found during search, which was not the case here. The AO computed total income for the block period based on day books of another person, leading to an arbitrary calculation. The CIT(A) concluded the assessment was unfit under s. 158BA/BC, citing supporting decisions and explanations provided by the assessee.

Issue 2: Lack of Jurisdiction for Block Assessment
The AO's jurisdiction to issue a notice under s. 158BC was questioned as no undisclosed income was found during the search proceedings. The AO relied on papers seized from other persons and statements recorded during search, which was deemed insufficient for block assessment. The Tribunal found that the AO lacked jurisdiction to initiate block assessment without seized documents or material indicating undisclosed income. In this case, the employee's salary recorded in the employer's books did not constitute undisclosed income, especially as it was below the taxable limit. The Tribunal upheld the CIT(A)'s decision to cancel the assessment, emphasizing the lack of jurisdiction for block assessment in the absence of incriminating evidence.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s cancellation of the assessment under s. 158BC due to income below taxable limit, improper computation methods, and lack of jurisdiction for block assessment without sufficient evidence of undisclosed income.