1999 (5) TMI 54 - AT - Income Tax

Summary

Issues Involved:

1. Validity of the search and seizure assessment.
2. Whether the assessment is barred by limitation.
3. Validity of the Prohibitory Order (P.O.) issued u/s 132(3).
4. Addition of opening capital balance as undisclosed income.
5. Addition of loan amounts as undisclosed income.
6. Addition of liabilities as undisclosed income.
7. Addition of income from land transactions as undisclosed income.

Summary:

1. Validity of the Search and Seizure Assessment:
The assessee challenged the validity of the search and seizure assessment on the grounds that the CIT did not allow any opportunity of being heard before giving approval to the assessment order, thus violating the principles of natural justice. The Tribunal referenced previous cases (Microland Ltd. vs. Asstt. CIT and Kirloskar Investments & Finance Ltd. vs. Asstt. CIT) and held that the approval by the CIT is administrative in nature and does not require a hearing opportunity for the assessee.

2. Whether the Assessment is Barred by Limitation:
The assessee argued that the search should be considered as concluded on 13th Dec, 1995, and any further operations were merely farces. The Tribunal, however, agreed with the Departmental Representative that search operations can span over a long period and do not require the same witnesses throughout. The Tribunal concluded that the search must be considered to have been concluded by 19th Jan., 1996, and the assessment order passed beyond one year from that date is barred by limitation and hence invalid.

3. Validity of the Prohibitory Order (P.O.) Issued u/s 132(3):
The Tribunal examined whether the P.O. issued was for practical considerations or collateral purposes. It was concluded that the search was shown to be continuing by keeping the P.O. intact on the Almirah for collateral purposes, and there was no material to show impracticability in seizing the documents. Thus, the search should be considered as concluded by 19th Jan., 1996.

4. Addition of Opening Capital Balance as Undisclosed Income:
The AO added Rs. 2,37,070 as undisclosed income for the asst. yr. 1986-87 due to lack of supporting evidence. The Tribunal found that the matter requires thorough examination and ordered that if the assessment is revived, it should be restored to the file of the AO for detailed examination.

5. Addition of Loan Amounts as Undisclosed Income:
The AO added back loans of Rs. 6 lakhs each from Shri Eshwarappa and Shri Hanumanthappa as undisclosed income for the asst. yr. 1991-92. The Tribunal held that if seized materials prove the genuineness of the loans, the AO must consider such evidence and act judiciously. The matter was restored to the AO for fresh examination.

6. Addition of Liabilities as Undisclosed Income:
The AO added Rs. 1 lakh from Shri Hariram Alidas and other liabilities totaling Rs. 6,40,500 as undisclosed income. The Tribunal noted that proper enquiries were not made and restored the matter to the AO for further examination, allowing the assessee to establish the genuineness of the loans.

7. Addition of Income from Land Transactions as Undisclosed Income:
The AO added Rs. 10,39,950 as undisclosed income from land transactions. The Tribunal found that the entire contract must be considered as a whole for determining profit/loss and that the transaction was not completed by the date of search. Hence, the addition was deleted.

Conclusion:
The appeal filed by the assessee was allowed to the extent mentioned, with several matters restored to the AO for fresh examination and the addition of Rs. 10,39,950 deleted.