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Issues Involved:
1. Validity of invoking the provisions of Section 158BD. 2. Legitimacy of the addition of Rs. 1,10,000 as undisclosed income. Issue-wise Detailed Analysis: 1. Validity of invoking the provisions of Section 158BD: The assessee challenged the issuance of notice under Section 158BD, arguing that the basis for invoking this section was unfounded. The search on Shri Mahesh Joshi's premises led to the discovery of certain papers related to the assessee, Mahesh Joshi HUF, which the AO interpreted as indicative of undisclosed income. The assessee contended that the bank account and the purchase of the shop were already disclosed in regular returns, making the invocation of Section 158BD baseless. The assessee emphasized that undisclosed income, as defined under Section 158B(b), refers to income not disclosed for tax purposes, which was not the case here since the transactions were recorded in regular returns. The learned CIT(A) upheld the AO's action, stating that the bank account details were not explicitly mentioned in the balance sheet, leading to the conclusion that the cash deposits were unexplained. However, the Tribunal found that the assessee had indeed disclosed the bank account and the shop purchase in regular returns. The Tribunal noted that the AO had no material evidence to justify the assumption of undisclosed income, thus invalidating the basis for issuing the notice under Section 158BD. The Tribunal referenced several judicial precedents, including the jurisdictional High Court judgment in Ramjas Naval vs. CIT, which stated that income disclosed in regular books should not be assessed under Chapter XIV-B. The Tribunal concluded that the proceedings under Section 158BD were unjustified as there was no material evidence of undisclosed income, leading to the quashing of the assessment order. 2. Legitimacy of the addition of Rs. 1,10,000 as undisclosed income: The assessee also contested the addition of Rs. 1,10,000 as undisclosed income for the assessment year 1996-97. The learned CIT(A) disallowed this amount, arguing that the cash deposit was against human behavior and probability. However, the Tribunal found that the assessee had provided a cash flow statement and balance sheet to the AO, who did not find any defects in them. Since the deposit and the subsequent investment were already declared in regular returns, the Tribunal held that the AO was not justified in making the addition under Chapter XIV-B. Conclusion: The Tribunal determined that the assessment made under Chapter XIV-B, pursuant to the notice under Section 158BD, was invalid and void ab initio. Consequently, the appeal of the assessee was allowed, and both grounds raised by the assessee were upheld. The Tribunal's decision emphasized the necessity of material evidence to invoke Section 158BD and reiterated that disclosed income in regular returns should not be reassessed under block assessment provisions.
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