2002 (9) TMI 274 - AT - Income Tax

Summary

Issues Involved:
1. Legal validity of the assessment order.
2. Opportunity of being heard before granting approval to various additions.
3. Various additions on merits including gold ornaments, silver ornaments, investment in residential house, synthetic stones, marble and granite, job work income, bank deposits, and purchase of shares.

Summary of Judgment:

1. Legal Validity of the Assessment Order:
- Issue: The legal validity of the assessment order and its compliance with the principles of natural justice.
- Details: The assessee contended that the assessment order was invalid as the reasons to believe that the assessee possessed undisclosed income/assets were not disclosed. The Tribunal directed the Departmental Representative to produce these reasons, but they were not furnished. The Tribunal concluded that the absence of reasons indicated that the conditions for authorization of search u/s 132(1) were not met, rendering the search and consequential block assessment invalid. The assessment order was quashed.

2. Opportunity of Being Heard:
- Issue: Whether the assessee was given an opportunity of being heard before the CIT granted approval for various additions.
- Details: The Tribunal held that there was no statutory requirement for the CIT to provide an opportunity of being heard before granting approval for the block assessment. The assessee had ample opportunity to contest the additions before the appellate authority. Therefore, the lack of opportunity did not invalidate the block assessment.

3. Various Additions on Merits:
- Gold Ornaments: The addition of Rs. 44,745 for gold ornaments was deleted as the ornaments were in the possession of the assessee's son for job work.
- Silver Ornaments: The ground was dismissed as it was not pressed by the assessee.
- Investment in Residential House: The addition of Rs. 3,75,500 was deleted as no incriminating material was found during the search. The Tribunal directed the AO to consider the cost of construction based on local PWD rates.
- Synthetic Stones and Labour Charges: The addition of Rs. 31,271 was deleted as the job work was done by the assessee's sons, not the assessee.
- Marble and Granite: The addition of Rs. 90,715 was deleted as the cost of construction already covered these items.
- Job Work Income: The addition of Rs. 3,08,000 was deleted as it was based on estimates without any evidence found during the search.
- Bank Deposits: The addition of Rs. 95,200 was deleted as it was based on information collected during assessment proceedings, not on evidence found during the search.
- Purchase of Shares: The addition of Rs. 8,000 was upheld as the transaction was not recorded in the books and was found during the search.
- Motor-Cycle: The addition of Rs. 33,000 was deleted as it was not based on any evidence found during the search.
- Bank Interest: The addition of Rs. 130 was deleted as it was consequential to the deletion of bank deposits.

Conclusion:
The Tribunal quashed the block assessment for Smt. Chitra Devi due to the invalidity of the search authorization. Various additions were deleted or upheld based on the presence or absence of evidence found during the search. The appeals of Shri Prem Prakash Soni and Shri Raj Kumar were allowed in part, with several additions being deleted for similar reasons.