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2012 (4) TMI 478 - HC - Income TaxBlock assessment - Search and seizure - Undisclosed income - Assessing Officer issued a notice under Section 158 BC of the Act on 11.03.1997 directing the assessee to furnish return of income in Form -2B for the block period 1987-88 to 1997-98 - In addition to the above sum of Rs.75 lakhs, the assessee also paid another sum of Rs.25 lakhs to AIADMK on 13.07.1995 as is evidenced by the statement of his Bank Account - it is an undisputed fact that the assessee would have generated more than Rs.7,73,250/- for the 10 assessment years during the period 1987-88 to 1997-98. Hence the assessee would not have earned any amount from undisclosed source - Held that it is clear that the Tribunal had given a finding that the assessee had established the source of fund from where it was collected and the collected money was given to the AIADMK head quarters for Building Fund - Decided in favor of the assessee
Issues Involved:
1. Inclusion of Rs.75 lakhs donation to AIADMK in undisclosed income. 2. Inclusion of Rs.2.25 lakhs given by J.A. Richards in undisclosed income. 3. Legality of block assessment under Section 158BC based only on materials found during the search. 4. Use of information not found during the search for block assessment under Section 158BB. Detailed Analysis: Issue 1: Inclusion of Rs.75 lakhs donation to AIADMK in undisclosed income The Revenue challenged the Income Tax Appellate Tribunal's (ITAT) decision that Rs.75 lakhs donated by the assessee to AIADMK could not be included as undisclosed income. The Tribunal had found that the assessee collected the amount from various party workers and provided affidavits and a confirmation letter from AIADMK. The Tribunal noted, "the assessee was able to establish the source of funds from where it was collected and the destination where it reached." The Tribunal emphasized the lack of evidence from the Revenue to prove that the donations came from any source other than party workers. The High Court upheld the Tribunal's findings, stating, "the Tribunal had given a finding that the assessee had established the source of fund from where it was collected and the collected money was given to the AIADMK head quarters for Building Fund." The High Court concluded that the Tribunal's decision was based on valid material and evidence, and thus, there was no error or illegality. Issue 2: Inclusion of Rs.2.25 lakhs given by J.A. Richards in undisclosed income The Revenue also contested the Tribunal's decision to exclude Rs.2.25 lakhs, allegedly paid by J.A. Richards to the assessee, from the undisclosed income. The Tribunal found that the addition was based on a diary entry and a sworn statement from J.A. Richards, which the assessee was not given a chance to cross-examine. The Tribunal noted, "the Assessing Officer did not have concrete reason for drawing the conclusion that Richards has paid the sum of Rs.2.25 lakhs to the assessee." The High Court agreed, emphasizing the lack of opportunity for cross-examination and the absence of concrete evidence. The High Court stated, "merely on the above sworn statement of J.A.Richards, the Assessing Officer made addition of Rs.2.25 lakhs as undisclosed income and no opportunity was given to cross examine the said J.A.Richards." Issue 3: Legality of block assessment under Section 158BC based only on materials found during the search The Tribunal held that block assessment under Section 158BC should be based solely on materials found during the search. The High Court did not specifically address this issue in detail but implicitly supported the Tribunal's approach by upholding its decisions on the inclusion of donations and payments in undisclosed income, which were based on the materials found during the search. Issue 4: Use of information not found during the search for block assessment under Section 158BB The Tribunal ruled that information not found during the search cannot be used to determine undisclosed income under Section 158BB, as amended retrospectively from 01.07.1995. The High Court's endorsement of the Tribunal's findings on the specific amounts in question suggests agreement with this principle, although the High Court did not explicitly elaborate on this issue. Conclusion: The High Court dismissed the Revenue's appeals, upholding the Tribunal's decisions to exclude Rs.75 lakhs and Rs.2.25 lakhs from the assessee's undisclosed income. The High Court found that the Tribunal's conclusions were based on valid evidence and proper legal reasoning, and there was no error or illegality warranting interference. The Court also noted that the Revenue failed to present any contrary evidence to challenge the Tribunal's findings. Consequently, the High Court dismissed both T.C.No.799/2005 and T.C.(Appeal)No.1202/2005.
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