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TMI Blog2011 (3) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law involved in these appeals is common. 2. ITA No. 125 of 2004 has been preferred by the revenue under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act") against order dated 23-9-2003 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar in IT (SS) No. 3/(ASR.)/2003, for the block period 1-4-1990 to 6-4-2000, claiming following substantial question of law : "Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that the disallowance under section 40A(3) cannot be made in block assessment?" 3. The assessee filed its return for the block period 1-4-1990 to 6-4-2000. The Assessing Officer in the course of the assessment made addition on account of claimed expenses being found to be in violation of section 40A(3) of the Act. It was observed that the seized material revealed that ledger containing the details of purchases made against cash payment exceeding Rs. 20,000 which could not be allowed and on that account addition towards undisclosed income had to be made. The assertion of the assessee was that on that account disallowance could not be made. The Assessing Officer did not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(3) but that only means that such illegal business ought not be carried on. By carrying on a business out of his regular books of account he cannot be placed at an advantage as compared to other carrying on their business as per books in implemented section 40A(3). Reliance is also placed on the decision of Hon ble Income-tax Appellate Tribunal, Chandigarh Bench as per their order dated 6-3-2000 in appeal No. ITA No. 1063 (Chd.)/1996 for the block assessment in the case of Madan Lal Basi v. ACIT, Central Circle, Ludhiana. With these observations, I, therefore, disallow an amount of Rs. 9,26,673 at the rate of 20 per cent of Rs. 46,33,364 under section 40A(3) of the Income-tax Act, 1961 which is brought to tax in the hands of the present assessee." 4. The CIT(A) set aside the addition which view has been upheld by the Tribunal. It was held that section 40A(3) could not be invoked in the case of the assessee where block assessment was by estimate on the basis of GP rate. The finding recorded by the Tribunal is as under : "We have considered the rival submissions and carefully gone through the material available on the record. The undisputed fact of this case is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer was justified in making addition on that account. The observations of the Tribunal that disallowance could be made in regular assessment under section 143(3) and not in block assessment was not tenable in law. Explanation below section 158BA(2) to the effect that block assessment was in addition to regular assessment was no bar to section 40A(3). Reliance has been placed upon judgment of Madras High Court in M.G. Pictures (Madras) Ltd. v. Asstt. CIT [2003] 132 Taxman 859 and judgment of Hon ble Supreme Court in CIT v. Suresh N. Gupta [2008] 297 ITR 3221 (SC). 7. Learned counsel for the assessee supported the view taken by the Tribunal. It was submitted that section 40A(3) could have no application to block assessment which was a complete Code by itself. Reliance has been placed upon the judgment of Gujarat High Court in Cargo Clearing Agency (Gujarat) v. Jt. CIT [2008] 218 CTR (Guj.) 541. It was also submitted that when assessment was made on the estimation of income by applying GP rate, section 40A(3) could not be invoked. For this proposition reliance has been placed upon the following judgments : (i) CIT v. Banwarilal Banshidhar [1998] 229 ITR 229 (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock period of previous years relevant to 10/6 assessment years. In our view, the words "block period", as defined in section 158B (a), comprises previous years relevant to 10/6 assessment years as one unit of time for the purposes of assessment. As stated above, the object behind the enactment of Chapter XIV-B is to assess and compute "undisclosed incomes" relatable to different accounting years in which the income is earned. Therefore, if the block period comprising of previous years relevant to 10/6 assessment years is treated by Parliament as one unit of time for assessment purposes, one has to correlate "undisclosed income" to each of the years in which income was earned by the assessee. It is true that under Chapter XIV-B, computation of regular income and computation of undisclosed income has to be worked out separately. However, to arrive at the figure of undisclosed income, the said parallel calculations have to converge in order to work out the difference between the first and the second aggregates of the total incomes/losses of the previous year, in which undisclosed income is taxed under section 113. Therefore, in our view, the concept of a charge on the "total income" o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Act as per section 158BH. The plain meaning of the amendment is only to the extent of the words added and no further inferences can be drawn on that basis as is being tried by learned counsel. The first contention is, therefore, rejected." 11. As regards the judgment of Gujarat High Court in Cargo Clearing Agency (Gujarat) s case (supra) relied upon on behalf of the assessee, the said judgment was before the judgment of Hon ble Supreme Court. In the said judgment it was observed : "In the aforesaid circumstances, when one considers the entire scheme relating to procedure for assessment/reassessment as laid down in the group of sections from section 147 to section 153 of the Act and compares the same with special procedure for assessment of search cases under Chapter XIV-B of the Act it becomes apparent that the normal procedure laid down in Chapter XIV of the Act has been given a go by when Chapter XIV-B of the Act itself lays down that the said Chapter provides for a special procedure for assessment of search cases. The stand of revenue that section 158BH of the Act permits all other provisions of the Act to apply to assessment made under Chapter XIV-B of the Act does ..... X X X X Extracts X X X X X X X X Extracts X X X X
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