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TMI Blog2014 (10) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... s done as an afterthought, in some cases, or that filing of returns was not warranted at all, having regard to the financial status of the concerned assessee. The Tribunal took the view that the scope of powers of an officer conducting search cannot be expanded to cover the adjudication or verification of the assessments already made - the block assessment is to be made strictly in accordance with Section 158BB of the Act – the AO propose to treat the undisclosed income as an independent entity and subject to making tax without following the provision u/s 158BB of the Act - Such a course would push the assessee to a further hardship and result in denial of the very safeguard that was prescribed by the Legislature - the persons, in whose names they were issued, have stated that they belong to them and it was also found in the search itself, that shareholders have submitted their returns - there was no basis for treating the share certificates as belonging to anybody else - relying upon Commissioner of Income Tax v. Lovely Exports Private Limited [2008 (1) TMI 575 - SUPREME COURT OF INDIA] – Decided against revenue. - I.T.T.A Nos. 10 of 1999 - - - Dated:- 31-7-2014 - L. Naras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important aspects. Hence, these appeals. Sri J. V. Prasad, learned counsel for the appellants, submits that the definition of undisclosed income under Section 148BB of the Act is wide enough, to cover every unexplained item of income and the share certificates that were found to be in possession of the respondents fall into that definition. He contends that the assessing officer scrupulously followed the procedure prescribed under Chapter XIVB of the Act and the Tribunal has interfered with the order of assessment on certain assumptions. He contends that the exercise of passing a block assessment order is wide enough and there was no justification for the Tribunal in restricting such powers. Sri S. Dwarakanath, learned counsel for the respondents, on the other hand, submits that whatever may have been the justification in including certain items in the category of undisclosed income, there was no basis for the assessing officer to add the value of the shares to the income, that too of the Company itself, as undisclosed wealth. He contends that the assessing officer has virtually proceeded on imagination that the Company has purchased its own shares and thereby avoided income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period is ₹ 7.00 lakhs. Then the taxable amount, as a result of block assessment, would be ₹ 8.00 lakhs (15 - 7). If, on the other hand, the assessee has posted losses of ₹ 4.00 lakhs over the block period, the taxable amount for the block period would be ₹ 19.00 lakhs. (15 + 4). The entire controversy revolves around the meaning to be ascribed to the expression undisclosed income. The same is defined under Section 158BB of the Act. It reads: 158BB. Computation of undisclosed income of the block period.- (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or, as the case may be, as increased by the aggregate of the losses of such previous years determined,- (a) where assessments under section 143 or section 144 or section 147 have been conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of search or of the requisition, as the case may be, shall be on the assessee. (4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or unabsorbed depreciation under sub- section (2) of section 32 shall not be set off against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments. From a perusal of this, it becomes clear that the items, such as, money, bullion, jewellery and other residuary items, which constitute the wealth or income, would be treated as an undisclosed income, provided that such items were not disclosed for the purpose of the Act. It means such items were not the subject matter of any returns filed under the Act. Once the items mentioned in the definition were the subject matter of the returns filed under the Act, they cannot be treated as undisclosed income. Another aspect is that the returns need not be those filed by the concerned assessee alone. The provision does not indicate or that the returns insist covering those items must be that of the concerned assessee alone. It is too well established that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Certain defects were also pointed out by the Tribunal in the context of making the block assessment. We have already observed that the block assessment is to be made strictly in accordance with Section 158BB of the Act. Many a time, the assessing officers, propose to treat the undisclosed income as an independent entity and subject to making tax without following the provision under Section 158BB of the Act. Such a course would push the assessee to a further hardship and result in denial of the very safeguard that was prescribed by the Legislature. The discussion undertaken by us in the preceding paragraphs, cover questions 1 to 4 that were framed in the grounds of appeal. The 5th question pertains to Managing Director and Executive Director. The assessing officer took the view that substantial number of share certificates were found with the Managing Director, Executive Director and thereby they are enjoying the benefits in respect of the shares allotted to the promoters. It has already been mentioned that the persons, in whose names they were issued, have stated that they belong to them and it was also found in the search itself, that shareholders have submitted their ret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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