1999 (2) TMI 104 - AT - Income Tax

Summary

Issues Involved:
1. Legality of block assessment u/s 158BC(C) read with section 143(3).
2. Suppression of income and estimation of undisclosed income.
3. Deduction towards business promotional expenses.
4. Valuation of construction cost of the residential house.
5. Procedural fairness in assessment.

Summary:
1. Legality of Block Assessment u/s 158BC(C):
The appeal concerns the block assessment completed u/s 158BC(C) read with section 143(3) of the Income-tax Act, 1961, where the Asstt. Commissioner of Income-tax determined an undisclosed income of Rs. 48,77,000 against Rs. 7,70,639 returned by the appellant. The appellant contested the assessment's legality, claiming it was erroneous, unjust, and contrary to the facts of the case.

2. Suppression of Income and Estimation of Undisclosed Income:
A search and seizure operation u/s 132 revealed suppression of collections at Vijaya Diagnostic Centre (VDC) and related kick-backs to doctors. The appellant admitted to suppression but only to the extent of Rs. 7,32,087. The Assessing Officer, however, estimated suppression for the period not covered by seized collection sheets, applying ratios of 165% for Ameerpet and 20% for Himayatnagar. The Tribunal found the estimation justified but modified the ratios to 100% for 1994-95 and 70% for 1995-96 for Ameerpet, and 15% for 1995-96 for Himayatnagar, considering the evidence and pattern of suppression.

3. Deduction Towards Business Promotional Expenses:
The Assessing Officer allowed deductions of 5% for Ameerpet and 10% for Himayatnagar towards business promotional expenses. The Tribunal found it reasonable to allow 10% deductions for both centers, given the higher suppression rate at Ameerpet.

4. Valuation of Construction Cost of the Residential House:
The Assessing Officer noted a difference between the construction cost declared by the appellant (Rs. 24.36 lakhs) and the Departmental Valuation (Rs. 31.37 lakhs). However, this issue was not acted upon as the appellant had enough undisclosed income to cover the differential amount. The Tribunal did not consider this issue as no addition was made on this ground.

5. Procedural Fairness in Assessment:
The appellant contended that the Assessing Officer did not provide proper opportunity before passing the order and that the Commissioner of Income-tax did not provide an opportunity of being heard before approving the order. These procedural grounds were not pressed by the appellant during the appeal.

Conclusion:
The Tribunal directed the Assessing Officer to modify the assessment based on revised ratios and deductions, treating the appeal as allowed in part.