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TMI Blog1999 (3) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... G. Chacko and at the residence of one Sri M.Ch. Dora, who is a director of the associate-company. Besides the search and seizure operations, survey operations under section 133A were also carried out at various godowns of the assessee-company and also it its Branch Office at Udaipur on the same day. All the interconnected cases involved in the search and survey operations were transferred to the Assistant Commissioner of Income-tax, Circle-2 at Visakhapatnam, by the order of the CIT, Visakhapatnam dated 20-6-1996 passed under section 127 of the Act. Accordingly, the block assessment order challenged in this appeal has been passed by the Asstt. CIT, cir. 2, Visakhapatnam, by her order dated 30-1-1997. 3. In the course of search operations, Floppy Discs, Books, loose-sheets and documents were found out which related to the accounts and activities of the assessee-company for various years. The details available in these materials were compared and examined with the regular books of account of the assessee-company and its returns of income filed before the search. The comparison and examination brought out various instances of discrepancies and incongruencies. These discrepancies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running of business at Udaipur" and were not recorded in the regular books of account. The total tonnage of minerals transported till the date of survey was 9,16,292 tons, and the total payments come to Rs. 9,16,292 under the head "Re. 1 Account". This amount was offered by the assessee-company as undisclosed income and has been accepted by the assessing officer. 7. The assessee-company usually utilises the services of M/s. PBL Transport Corporation for executing various transport contracts. As on 31-3-1992, there was an excess credit balance of Rs. 4,95,547 in the books of assessee-company against the said PBL Transport Corporation for which the assessee-company could not give any satisfactory explanation to the assessing officer. On this ground, the assessee-company offered an amount of Rs. 4 lakhs as undisclosed income. 8. It is how the total of Rs. 13,16,292 returned by the assessee-company as undisclosed income has been worked out. Now the various disputes relating to the undisclosed income additionally determined and assessed by the assessing officer are considered in the following paragraphs. 9. The additional undisclosed income of Rs. 68,70,342 determined by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, such as the ones in Parakh Foods Ltd. v. Dy. CIT [1998] 64 ITD 396 (Pune) and Agrawal Motors v. Asstt. Commissioner [1999] 68 ITD 407, etc. 11. Shri T. Jayashankar, the learned Senior Departmental Representative, supported the assessment order. According to him, credits in the Receipts Payments Accounts have been proved to be unaccounted cash transactions in respect of the assessee company's business at Udaipur. That this position has been reiterated by the statement of B. Satyanarayana, the Managing Director of the assessee-company as well as the statement of Prasad, the Manager of the assessee-company at Udaipur. That the explanations like share application money, etc. are only convenient arguments subsequently invented to white-wash the unaccounted transactions. He submitted that the cash deficit of Rs. 5,47,107 cannot be telescoped into the credit balance with M/s. PBL Transport Corporation as advanced by Shri Rama Rao, as those amounts are products of entirely different contexts and the credit balance with M/s. PBL Transport Corporation has already been employed for share application money with M/s. Essem Marbles (P.) Ltd. and would not be available to set off a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was put before Satyanarayana. In his statement recorded on 3-1-1996, Satyanarayana offered both the amounts totalling to Rs. 14,70,000 as his undisclosed income in the hands of the assessee-company. 2. Later, in the course of block assessment proceedings, Satyanarayana retracted from his earlier admission and further stated that the amount of Rs. 13.5 lakhs represented the share application money collected from various persons at Udaipur for allotment of shares in M/s. Essem Marbles (P.) Ltd. The assessee-company furnished a list of 43 persons who stated to have applied for the shares alongwith their letters and statements of sources of investments, etc. 3. The Assessing Officer however disbelieved the later version of the event presented by the assessee-company and treated the entire amount of Rs. 14.2 lakhs as undisclosed income of the assessee-company. 4. We considered the matter. In his statement dated 3-1-1996, B. Satyanarayana has stated that he had no idea about these amounts and he could not explain the sources. He stated that '...I disclosed the abovestated amount of Rs. 14,20,000 as my income for the block period in the hands of the Co.". Later, Satyanarayana h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmation-cum-source letters filed before the assessing officer are only self-serving evidence. 6. Therefore, we confirm the addition of Rs. 14,20,000 as the undisclosed income of the assessee-company for the impugned block period. 14. Unexplained Credit Balance Re. M/s. PBL Transport Corporation Rs. 95,547 1. The assessee-company has not raised any specific ground against the addition of Rs. 95,547 as undisclosed income. Therefore, this addition is not considered in this order. 15. Cash deficit as on 01-08-91 Rs. 5,47,107 1. As per the details collected from the seized materials the assessing officer has found that the assessee-company has made various cash payments to different transport contractors which have not been reflected in the accounts. When the assessing officer did recast the cash book with such unaccounted cash payments, the assessing officer found that there is a peak deficit cash balance of Rs. 5,47,107 as on 01-08-91. When this matter was put to the assessee-company it was stated that the payment vouchers were prepared at the site, but actual payments were made only subsequently when cash is available and the vouchers are accounted in the books only a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. This liability as on 31-03-95 was Rs. 19,38,846. For the reasons stated in para 10 of the assessment order, the assessing officer treated this outstanding liability as undisclosed income and assessed to tax. 2. On this issue, the assessee-company had given detailed explanations before the assessing officer. That out of this outstanding balance, Rs. 5,53,000 was paid during financial year 1995-96 and the entire balance was fully paid off during financial year 1996-97. Assessee-company produced vouchers before the assessing officer. That previously the assessee-company had been handling bulk cargo like fertilizers etc. at the port as sub-contractors of big Calcutta firms. That the handling of bulk cargo consists of various operations like bagging, stacking, loading and unloading which are all highly labour intensive, involving deployment of 600 to 800 labourers at a time under the supervision of different Maisteries. That the per head liability might be around Rs. 2000 as on the date of Balance-sheet. That the assessee-company has reduced the bulk cargo operations during the financial year 1995-96 and totally stopped during financial years following. 3. We find that the explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... block assessment proceedings as well. Further Section 158BB(1) provided that undisclosed income shall be computed in accordance with the provisions of Chapter-IV. The learned Departmental Representative also relied on the provisions of section 158BH, wherein it is stated that save as otherwise provided, all provisions of this Act, shall apply to assessments made under Chapter XIV-B. 5. We examined this matter and arguments carefully. Chapter-XIV-B lays down special procedure for assessment in search cases. The special procedure set out in Chapter-XIV-B is a separate set of rules, by itself. For the purposes of this chapter, the term 'undisclosed income' is defined. The definition of the term 'undisclosed income' is given in an 'inclusive' manner, but it is again made clear under section 158B(b) that 'undisclosed income' includes money, bullion, jewellery etc. only if they represent income or property which has not been or would not have been disclosed for the purposes of this Act. Therefore, we find that even though 'undisclosed income' is defined in an 'inclusive' manner, the scope and extent of the term 'undisclosed income' for the purposes of this Chapter is contingent upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed under section 113. The computation of undisclosed income provided under section 158BB does not provide for set off of unabsorbed depreciation or loss. The set off has to be claimed in the regular assessments. Explanations to section 158BA state that block assessments are in addition to regular assessments. All these special features of block assessments bring out the point that computation of undisclosed income is necessarily governed by special set of rules provided in Chapter XIV-B. Therefore, these special provisions have to be construed strictly and we cannot enlarge the scope of these provisions, so as to permit re-examination of what has been or what would have been the subject-matter of regular assessments or re-assessments. The scope of undisclosed income, as we have already considered is conditioned by the factum of disclosure whether made or not made by the assessee before the date of search, or likely to be made in the normal course on the basis of books of account maintained by it. Reliance placed by the learned Departmental Representative on the application of other provisions of the Act in matters relating to the provisions under Chapter XIV-B are only enabling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail by the assessing officer in paras 11 and 12 of her order. The assessee had constructed a ware-house during the financial years 1993-94 to 1995-96. According to the assessee-company and as per its books of account, the cost of construction is Rs. 58,48,252. In the course of search operation investigation, the issue of valuation was referred to the Departmental Valuation Officer, who determined the cost of construction at Rs. 1,08,02,617. The assessing officer proposed to treat the differential cost as the undisclosed income of the assessee-company. The assessee-company raised objections which were replied by the Departmental Valuation Officer, and after considering the objections and other points, the assessing officer determined the cost of construction of the ware-house at Rs. 85,42,094. He has given a deduction of 10% towards personal supervision and another deduction of 10% towards rate variation, as compared to the rates adopted by CPWD. After giving deduction of this 20% from the departmental value of Rs. 1,08,02,617, the assessing officer has worked out the cost of construction at Rs. 86,42,094. The assessing officer held the difference of Rs. 27,93,842 (Rs. 86,42,094 - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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