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TMI Blog2013 (12) TMI 545X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as 'the Act') on 12.11.1997 in the case of M/s.Sadhwani Group of Companies. Consequent to said search, notice under Section 158BC of the Act, was issued on 19.11.1998 calling upon the assessee to file the return of income for the block period. In response to the notice, the assessee filed the return of income in Form No.2B. The assessee in the regular returns filed under Section 139(1) of the Act, had shown the NRI gifts received by her and had claimed exemption from payment of income tax. The Assessing Officer called upon the assessee to substantiate the said gifts. Same was produced. However, the Assessing Officer held that these gifts have been received by the family members of M/s.Sadhwani Group from the donors residing in twent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 3. This appeal came to be admitted to consider the following substantial question of law: "Whether the Appellate Authorities were correct in holding that the NRI gifts detected in the course of search cannot be treated as an undisclosed income of the assessee for the block period despite the identification of the donor, his creditworthiness and the genuineness of the transactions, not having been proved?" 4. The material on record discloses that, the assessee in the returns filed within the due date has disclosed the amounts, which she has received by gift from nearly 25 donors across 20 countries. Now after enquiry, the Assessing Authority held that these gifts are not genuine. The question is, in a block assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period. The special procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search. It is not intended to be substituted for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. Therefore, the income assessable in block assessment under Chapter XIV-B is the income not disclosed but found and determined as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 132 or documents or assets requisitioned under Section 132A. Moreover, Section 158BD permits the application of the provisions of this Chapter only on the satisfaction of the Assessing Officer that the seized documents show undisclosed income of a person other than the person with respect to whom search was conducted or a requisition was made. Thereafter, at paragraph-18 dealing with the undisclosed income, they held as under: "18. The genesis of the issue before us lies within the folds of this section. Sections 158BD and 158BC, along with the rest of Chapter XIV-B, find application only in the event of discovery of "undisclosed income" of an assessee. "Undisclosed income" is defined by section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed. If income is disclosed in the return filed, either under Section 139(1) or under Section 139(4) of the Act, it cannot be construed as an undisclosed income. Then Chapter XIV-B is not attracted. Therefore, the condition precedent for exercising power under Chapter XIV-B are: (i) A search under Section 132 of the Act where incriminating evidence of undisclosed income is seized; (ii) The said income, which was found in such search and is not reflected in the returns filed under Section 139(1) or 139(4) before the date of search. The existence of both these conditions is sine qua non for initiation of proceedings and passing of block assessment order under Chapter XIV-B. 8. In the instant case, the so-called ..... X X X X Extracts X X X X X X X X Extracts X X X X
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