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2022 (7) TMI 398 - HC - Income TaxBlock assessment - computation of undisclosed income of block period under Section 158BB - Reliance on material gathered in the course of survey - HELD THAT - Admittedly, in the present case, based on the materials collected during the course of inspection, the assessing officer made assessment for the block assessment period in question, by determining the undisclosed income which was reduced by the CIT(A). However, the Tribunal set aside the order of the CIT(A) and decided the case in favour of the assessee, by holding that the material gathered in the course of survey are to be treated as disclosed for the purpose of Income Tax Act and it cannot be sued for computation of undisclosed income of block period under section 158BB. This court is of the opinion that the finding so rendered by the Tribunal is erroneous and bad in law, in the light of the decision of the Hon'ble Supreme Court in S.Ajit Kumar case 2018 (5) TMI 266 - SUPREME COURT . The substantial question of law raised herein is decided in favour of the appellant / Revenue and the order impugned herein is set aside. Consequently, the matter is remanded to the Tribunal for reconsideration, on merits and in accordance with law, after affording due opportunity of hearing to the respondent/assessee.
Issues involved:
1. Interpretation of Section 158BB and 158BH of the Income Tax Act for block assessment period. 2. Utilization of materials collected during survey for block assessment. 3. Validity of Tribunal's decision regarding treatment of materials gathered during survey for undisclosed income computation. Issue 1: Interpretation of Section 158BB and 158BH of the Income Tax Act for block assessment period: The case involves a Tax Case Appeal against an order passed by the Income Tax Appellate Tribunal regarding block assessment for the period from 01.04.1991 to 06.02.2001. The appellant/revenue challenged the Tribunal's decision based on interpretation of Sections 158BB and 158BH of the Income Tax Act. The Tribunal held that materials gathered during a survey cannot be used for computation of undisclosed income of the block period under Section 158BB. However, the High Court referred to the decision of the Hon'ble Supreme Court in CIT v. S.Ajit Kumar, emphasizing that undisclosed income of the block period should be calculated based on evidence found as a result of search or requisition of documents. The Court highlighted the strict interpretation of tax law and the application of Section 158BH to block assessments. Issue 2: Utilization of materials collected during survey for block assessment: The appellant/revenue contended that materials collected during a survey, especially when conducted simultaneously at the premises of a connected person, can be utilized for block assessment under Section 158BB read with Section 158BH of the Income Tax Act. The High Court agreed with this argument, citing the power of survey under Section 133A of the IT Act. The Court emphasized that such materials fall under the category of "such other materials or information as are available with the Assessing Officer and relatable to such evidence" as mentioned in Section 158BB. Therefore, the Assessing Officer was justified in considering adverse material found during the survey for block assessment. Issue 3: Validity of Tribunal's decision regarding treatment of materials gathered during survey for undisclosed income computation: The Tribunal had set aside the order of the Commissioner of Income Tax (Appeals) and decided in favor of the assessee, ruling that materials gathered during a survey should be treated as disclosed for the purpose of the Income Tax Act and cannot be used for computing undisclosed income of the block period under Section 158BB. However, the High Court found this decision erroneous and contrary to the law laid down by the Supreme Court in S.Ajit Kumar case. The Court set aside the Tribunal's order, remanding the matter for reconsideration, emphasizing that the block assessment should be based on evidence found as a result of search or requisition of documents, in accordance with the provisions of the Act. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the High Court's decision based on the interpretation of relevant sections of the Income Tax Act and the precedence set by the Supreme Court.
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