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TMI Blog2014 (4) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... lant & machinery and factory building amounting to Rs.1,01,345/- and Rs.3,77,982/- respectively, observing that no documents in this regard was found during the course of search ignoring the finding and observation of the Assessing Officer that information leading to undisclosed investment was very much in his possession? 3-Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal was correct in deleting the additions made by the A.O. on account of unexplained investment in plant & machinery and factory building amounting to Rs.1,01,345/- and Rs.3,77,982/- respectively relying on the Hon'ble Supreme Court's decision in the case of Smt. Amiya Paul reported in 262 ITR 407, ignoring the amended provisions of Section 142 A in this regard which were applicable with retrospective effect? The respondent is a Company incorporated under the Indian Companies Act and was carrying on the business of manufacture of Kattha. A search was made at the business premises of the petitioner on 17/18.10.1995 wherein certain documents were seized. The Assessing Authority by the impugned order dated 30.10.1996 passed block assessment for the periods 1.4.1985 to 17.10.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of search relating to plant & machinery as well as the factory building, therefore, the alleged investment made in the plant & machinery and the factory building determined on the basis of the valuation report which has been obtained subsequent to the search could not be basis to determine the undisclosed income. The Tribunal further relying upon the decision of the Apex Court in the case of Smt. Amiya Bala Paul vs. CIT, reported in 262 ITR 407 has held that reference to the Valuation Officer under Section 131 of the Act for the purposes of estimating the cost of construction was invalid. Heard Sri Dhananjay Awasthi, learned Senior Standing Counsel for the appellant and Sri S.D. Singh, learned counsel appearing on behalf of the respondent. Learned counsel for the appellant is not able to show any document relating to any sale for the financial year 1993-94 which was found during the course of search relatable to alleged addition of Rs.1,24,300/- towards undisclosed income on account of under invoicing. The finding of the Tribunal in this regard is finding of fact and no question of law arises. So far as the question relating to addition of Rs.1,01,345/- and Rs.3,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. Explanation.--For the removal of doubts, it is hereby declared that-- (a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period. (3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who has furnished a return under this clause shall not be entitled to file a revised return;] (b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142, sub-sections (2) and (3) of section 143[, section 144 and section 145] shall, so far as may be, apply; (c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.] Chapter XIV-B of the Act is a special provision carved out by the legislature for the purposes of assessments in cases pertaining to Sections 132 and 132A of the Act. The provisions under this Chapter were made inapplicable in case of search initiated under Section 132 or Section 132A after 31.5.2003 by introduction of an amendment to the Chapter by Finance Act, 2003. Section 158BA of the Act contemplates the assessment of undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the various High Courts, which are referred herein below: In the case of Commissioner of Income Tax, Lucknow v. B.K. Agarwal, reported in [2009] 183 Taxman 434 (Allahabad), the Division Bench of this Court has held as follows: "So far as second question is concerned, the Tribunal held that no material was found to show that any investment has been made towards construction or renovation during the year under consideration and, therefore, in the absence of any material the addition on the basis of the valuer report is not justified. We are of the opinion that the view taken by the Tribunal is correct and in accordance to the law. The addition cannot be made on mere presumption. There must be some material found during the course of search to suggest any investment towards construction or renovation in the property and only on the basis of such material the matter could be referred to the Departmental Valuer. Mere on the basis of the opinion of the Departmental Valuer in the absence of any specific material it cannot be inferred that any expenditure has been incurred towards cost of construction or renovation during the period in dispute. Our view is supported by the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r material cannot form basis for computation of undisclosed income of the block period. Hence, we are of the view that the Commissioner as well as the Tribunal have the issue in accordance with the statutory provisions, and requires no interference. The appeal is accordingly dismissed." In the case of Commissioner of Income Tax v. Smt. C. Sabira, reported in [2011] 338 ITR 0226, the Division Bench held as follows : "We are of the view that there is no merit in the contention of the appellant. Chapter XIV-B deals with ascertainment of the undisclosed income of the party for the block period. In the case of a search, the undisclosed income must be determined with reference to the evidence unearthed during the search and also the other materials or information available which are relatable to such evidence. Therefore, the focus must be on the evidence which were unearthed during the course of the search or other material or information relating to such evidence. There is no relevant matter as such which can be relied on by the appellant to justify the finding about the cost of construction being what was estimated. In the statement, in fact, what is stated is, as already noted, appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the determination of undisclosed income of Rs.40,04,369 in respect of the building in question being solely on the basis of the report of the Departmental Valuation Officer was rightly interfered with by the learned Tribunal. The said conclusion of the learned Tribunal, therefore, will not be open to interference." In the case of Commissioner of Income Tax v. Khushlal Chand Nirmal Kumar, reported in [2003] 263 ITR 0077, the Division Bench of the Madhya Pradesh High Court considering the unamended and amended provisions of Section 158BB and Circular issued by the Central Board of Direct Taxes has held as follows: "Chapter XIV-B. There would be no finality, if the Department is permitted to add back to the income of the assessee on the basis of the Departmental valuer's report obtained subsequent to the order of the regular assessment. Hence, the Tribunal was right in deleting the said addition. Accordingly, question no. 3 is answered in the affirmative, i.e., in favour of the assessee and against the Department. If the provision of Section 158BB is read in proper perspective, we are inclined to respectfully agree with the view expressed by the Bombay High Court. Quite ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. Evidence found as a result of search is clearly relatable to sections 132 and 132A." In the case of Commissioner of Income Tax v. Vinod Danchand Ghodawat, reported in [2001] 247 ITR 0448, the Bombay High Court has held that Section 158BB (1) of Chapter XIV-B has no application to make an addition to unexplained investment in the construction of the building on the basis of the report of the Department valuer obtained subsequent to the search. The Division Bench of this Court in the case of Commissioner of Income Tax, Ghaziabad v. Anil Kumar Goel, reported in [2013] 38 Taxman 22 has observed as follows: "In Chandra Prakash Agrawal v. Assistant Commissioner of Income Tax & Ors., (2006) 287 ITR 172 (All.) this Court discussed the issue and held that Chapter XIV-B inserted w.e.f. July 1st, 1995 introduced a new scheme of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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