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TMI Blog2014 (11) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 1996, but this would be a return u/s 139(4) of the Act which permits filing of a belated return, but it would not be a return u/s 139(1) of the Act - this return cannot be treated as a return filed before the due date. Whether additions made relate to undisclosed income – Held that:- The Tribunal has only decided the second aspect, i.e. whether or not the deposits in Punjab National Bank, Naoroji Nagar, New Delhi could have been made subject matter of addition as undisclosed income in the block assessment proceedings - the assessees throughout had pleaded and claimed that the money deposited in the bank accounts did not belong to them but was money of JMM - there is a fundamental fallacy in the reasoning given by the Tribunal to hold that no addition could have been made in the block assessment proceedings for want of undisclosed income - The Tribunal ignored the position that the four individual assessees had not filed returns of income and therefore, Section 158BB(1) clause(ca) of the Act would be attracted - the factum that the details of SB A/cs and the FDRs were made available would not make any difference - The search undertaken had revealed several incriminating e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue, Commissioner of Income Tax, Central-1, New Delhi, are being disposed of by this common judgment as identical and connected issues arise for consideration. The impugned order dated passed by the Income Tax Appellate Tribunal ( Tribunal , for short) is dated 2nd September, 2011 and is a common order to the five cases. By order dated 4th September, 2012, the following substantial questions of law were admitted for hearing:- (i) Did the Tribunal fall into error in holding that the amount brought to tax by the AO is not undisclosed income? (ii) Did the Tribunal fall into error in setting-aside the findings of lower authorities that the amounts deposited by the assessees with the bank were not taxable as income? 2. These appeals pertain to block assessment periods of ten years beginning from 1st April, 1986 to 26th April, 1996 in the case of Shibu Soren, Suraj Mandal, Shailender Mahto and Simon Marandi. In the case of the said respondent-assessees, notice under Section 158BC of the Income Tax Act, 1961 ( Act , for short) was issued. In the case of Jharkhand Mukti Morcha party ( JMM , for short), notice under Section 158BD read with Section 158BC was issued and the block ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Upto 27.09.1997 2,36,19,160/- 5. The respondent-assessees preferred appeals before the Tribunal and have succeeded with the block assessment proceedings being annulled or declared void on the ground that the additions made did not represent undisclosed income and should not have been made in the block assessment orders. These additions could have been only made in regular/normal assessment proceedings under Section 143(3) or Section 147 read with Section 148 of the Act, as the amounts/additions made did not represent undisclosed income as defined in Section 158B(b) read with Sections 158BA(2), 158BB(1) etc. of the Act. In the case of JMM, it was held that as no incriminating evidence was found during the course of search in the case of the searched persons, i.e. Shibu Soren, Suraj Mandal, Shailendra Mahto and Simon Marandi, there cannot be any evidence, which justified invoking provisions of Section 158BD of the Act. In the absence of incriminating evidence, block assessment proceeding against JMM, were a nullity and bad being contrary to law. 6. Search warrants under Section 132(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false. (underlined portion was inserted by Finance Act, 2002 w.r.e.f. 1st July, 1995) xxx 158-BA. Assessment of undisclosed income as a result of search. (1) Notwithstanding anything contained in any other provisions of this Act, where after the 30th day of June, 1995 a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132-A in the case of any person, then, the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter. (2) 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisition, on the basis of the income disclosed in such returns; (c) where the due date for filing a return of income has expired, but no return of income has been filed, (A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; (ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c); (d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments. (underlined portion was inserted by Finance Act, 2002 w.r.e.f. 1st July, 1995. Prior to its substitution, clause (c) read as under, (c) where the due date for filing a return of income has expired but no return of income has been filed, as nil ) xxx 158-BC. Procedure for block assessment. Where any search has been conducted under Section 132 or books of account, other documents or assets are requisitioned under Section 132-A, in the case of any person, then, (a) the Assessing Officer shall (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995 but before the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days; (ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997 serve a notice to such person requiring him to furnish within such time not being less than fifteen day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as undisclosed income. An inclusive definition is to be read broadly and in a wide manner and should not be given a restrictive meaning. The expression undisclosed income with effect from 1st July, 1995, therefore, would mean and include any false expenditure, deduction or allowance claimed under the Act but was found to be false, or any money, bullion, jewellery, valuable article or thing, that had not been or would not have been disclosed and also included any income based on entry in the books of accounts or other documents, which had not been disclosed or would not have been disclosed for the purposes of this Act. The crucial and singularly pre-eminent expression used in the said clause is has not been or would not have been disclosed for the purposes of this Act. We shall be subsequently referring to, in detail, the judgment of the Supreme Court in Assistant Commissioner of Income Tax, Chennai vs. A. R. Enterprises, (2013) 3 SCC 196, but suffice at this stage, it is to notice and reproduce the following paragraph from A. R. Enterprises (supra):- 17. The genesis of the issue before us lies within the folds of this section. Sections 158-BD and 158-BC, along with the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of other provisions of the Act where search was conducted after 30th June, 1995 up to 31st May, 2003 (see Section 158BI of the Act), or books of accounts or other documents of the assessee had been requisitioned in the aforesaid period. Sub-section (2) stipulates that the rate of tax as specified in Section 113 shall apply to income calculated for the block period irrespective of the previous years to which the income relates and irrespective of the fact whether regular assessment for any one or more assessment years was pending or not. Explanation which was inserted by the Finance (No. 2) Act, 1998 with retrospective effect from 1st July, 1995 is a cause of some debate, as do the subsequent amendments by Finance Act, 2002 again with retrospective effect from 1st July, 1995. The amendments incorporated by the Finance Act, 2002 reflect the position that there was a greater clarity and understanding, regarding block assessment proceedings when the Finance Act, 2002 was enacted. It reflects the march of law, as there was greater and better appreciation and the amendments negate the ill effects and problems noticed in practice (This aspect has been also examined below with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income so calculated shall be increased or reduced by the aggregate of total income or loss of previous years which have been determined where assessment under Section 143/144/147 of the Act had concluded prior to the date of commencement of search or date of requisition; but, where returns of income have been filed under Section 139/142(1)/148 of the Act, then such increase or reduction shall be done on the basis of income disclosed in such returns. Section 158BB(2)(b) of the Act is indicative that the returned income, where assessment had not been concluded or made, the returned income would be treated as disclosed income and any other income on the basis of evidence found during the course of search or requisition of books of accounts or documents with other evidence relatable to such evidence would be treated as undisclosed income and accordingly made subject matter of the block assessment. The controversy that would remain is whether in view of the said clause (b) where assessments were pending, additions in block assessment could still be made where no material or evidence was found in the search relatable to the disclosed income declared in the return, or the addition shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (B) would only apply in a case where the income, as a result of entries in the books of accounts and other documents maintained in normal course on or before the date of search or requisition did not exceed maximum amount not chargeable to tax. Clause (ca) deals with cases not covered by clause (c) i.e. when no return of income had been filed, but income was taxable. Thus, where the due date of filing of return had lapsed but no return had been filed and computation was not at a loss or below the taxable limit, income as per the books of accounts shall be treated as nil , even if as per the books of accounts and other documents maintained in normal course, the income disclosed was above the taxable limit. In such cases, irrespective of the figures in the books of accounts or documents, income has to be by default, taken as nil . Clause (ca) would apply only when the date of filing of return has expired and return of income has not been filed. 15. Clause (d) would apply to cases where previous year has not ended or date of filing of return under Section 139(1) has not expired. In such cases income has to be computed on the basis of entries relevant to such income or transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment of undisclosed income of a person who has not been searched or person whose books of accounts or other documents or assets were not seized or requisitioned under Section 132A. It requires that the Assessing Officer of the person who was searched or books of accounts or documents requisitioned, should record a satisfaction note that undisclosed income belonging to a third person had been seized or had been uncovered and in such cases the assets, books of accounts, documents etc. should be handed over to the Assessing Officer having jurisdiction over such other person, who shall proceed under Section 158BC and accordingly provisions of Chapter XIV-B shall apply. This provision has been interpreted recently by the Supreme Court in Commissioner of Income Tax III vs. Calcutta Knitwears, Ludhiana, (2014) 6 SCC 444, where it has been observed as under:- 38. We would certainly say that before initiating proceedings under Section 158-BD of the Act, the assessing officer who has initiated proceedings for completion of the assessments under Section 158-BC of the Act should be satisfied that there is an undisclosed income which has been traced out when a person was searched under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said notice was not required in the factual matrix of the present case because of the search on 26th April, 1996. As far as JMM is concerned, as noticed above, notice was issued under Section 158BD read with Section 158BC and block assessment order was passed for the period 1st April, 1986 to 26th September, 1996. The JMM had not filed returns from 1988 to 1992 and return for assessment year 1992-93 and 1993-94 were filed on 12th July, 1996 and return for the assessment year 1992-93 and 1993-94 was filed on 12th July, 1996 pursuant to notice under Sections 147/148 of the Act and for the assessment year 1994-95 the return was filed on 31st March, 1996. This again was after the due date for filing of return for that assessment year. However, as the case of JMM would fall in a different category, it is being accordingly dealt with. 20. The block assessment orders in the case of individual assessees would show that the major and substantial amount of undisclosed income relates to the period between 1st April, 1993 and 31st March, 1994. It was in this period that substantial deposits were found in the bank accounts. The details and deposits in a bank in each of the four cases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due date, for assessment under section 143 of the Act. Hence, the 'disclosure of income' is the disclosure of the total income in a valid return under section 139, subject to assessment and chargeable to tax under the provisions of the Act. It is important to bear in mind that total income is distinct from the estimated income, upon the basis of which, advance tax is paid by an assessee. Advance tax is based on estimated income, and, hence, it cannot result in the disclosure of the total income assessable and chargeable to tax. It is clearly stated in the aforesaid paragraph that due date of filing of return for the purpose of Section 158BB would be return filed in accordance with Section 139(1) of the Act. This would obviously not include a belated return filed under Section 139(4) of the Act. In the facts of the present case, Section 158BB(1)(d) would not be applicable as it refers to the previous year which has not ended or the date of filing of return under Section 139(1) has not expired. However, clause (d) also supports the construction and interpretation that due date of filing of return refers to Section 139(1) and not Section 139(4). Time for filing of return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal can be sustained, on the ground that undisclosed income became disclosed when the Revenue became aware of the undisclosed income as the bank accounts and the entries therein had come to their information and knowledge. Reliance was placed on the fact that in the statements of individual assessee recorded before the date of search, accounts were acknowledged but it was claimed that the money deposited therein was sourced from and belonged to JMM. 25. This also requires us to examine the contention raised by the respondent assessee, which has been upheld by the Tribunal, that no material or evidence was found during the search and thus there was no undisclosed income relatable to the block assessment period. The Tribunal has upheld the said contention on the basis of statements on oath under Section 131 of the Act, of Suraj Mandal, Shibu Soren and Simon Marandi on 14th March, 1996 and that of Shailendra Mahto on 18th and 19th of March, 1996 wherein the aforementioned individuals had deposed on the amount lying in the various SB A/cs and FDRs maintained in the Punjab National Bank, Nauroji Nagar, New Delhi. 26. Section 132(1) of the Act authorizes search and seizur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these assesses with PNB, Nauroji Nagar, New Delhi, and details of such FDR and saving bank account which were subjected to search are noted by the A.O. on page 7 of the assessment order in the case of Shri Shibhu Soren. This table has been reproduced by us in para 2 above. Hence, in our consider opinion, all other additions made by the A.O., in the Block assessment of these four persons are liable to be deleted for this reason alone that these are not based on evidence count as a result of search and there is no requisition of books of accounts and other documents in the present case. All these other additions are made on the basis of material and information available with the A.O. as per post search enquiry but these other material and information are not shown to be relatable to any alleged evidence found in the course of search and hence, all other additions made by the A.O. in these Block assessment orders are not sustainable. We are taking this view by respectfully following various judgement of Hon'ble High Court of Delhi cited by Ld. AR as has been noted by us in para 14 above 27. Before we deal with the said findings we would also like to reproduce paragraphs 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The other Question was as to whether he can explain the source of these bank accounts. FDRs and investment in the car and in reply, it was submitted that FDR of ₹ 30 lacs in his name and other FDR of ₹ 30 lacs in the name of himself and three other MPs are out of the funds of JMM Party. It was also submitted that similar statement was recorded of Shri Simon Marandi also by the ADI (Investigation) on the same date i.e. 14.03.1996 and he also stated in reply to Question No. 10 that he has one bank account in his name with PNB, Nauroji Nagar, New Delhi. It was also stated that he does not remember the account number and there is one more account in the same branch of PNB which is in the joint name of himself, Shri Shibhu Soren, MP, Shri Suraj Mandal, MP and Shri Shailandra Mahto, MP and it was also submitted that copies of bank statement of both these bank accounts will be supplied within one month and if there is any other bank account in addition to these two bank accounts, he will send the copy of such bank accounts also. When this question was raised, as to what are the details of FDRs with PNB, Nauroji Nagar, New Delhi as per Question No. 11, it was submitted in reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the FDR No. is 196 dated 01.08.1993 and it was also submitted that an amount of ₹ 39.80 lacs was deposited in the FDR and subsequently on 08.10.1993 an amount of ₹ 20 lacs was transferred from his FDR account to saving bank account No. 18983. When he was regarding the source of the deposits of ₹ 39.80 lacs in the FDR it was replied that this money is belonging to the JMM Party and the same was collected by the party as donation in various public meetings and since he was General Secretary of the party, this amount was deposited in his name in the bank. 36. Similarly, statement of Shri Suraj Mandal was also recorded by ADI (Investigation), New Delhi under section 131 on 14.03.1996. Question No. 4 was regarding details of bank accounts of himself and his family members. In reply he has narrated full details of various bank accounts which include even account with State Bank of India, Karmatand which is in his name and there is one account with State Bank of India at Patna, Vidhan Sabha Branch in which his salary as MLA was being deposited. It was also submitted that there is one account with the State Bank of India, Godda Branch and it was also submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings. Thereafter, reference was made to statements recorded under Section 131 on 14th March, 1996 and on 18th and 19th of March, 1996. The gists of the statements given by different assessees have been quoted. What is clearly noticeable is that the assessees throughout had pleaded and claimed that the money deposited in the bank accounts did not belong to them but was money of JMM. Thus, the Tribunal has come to the conclusion that before the date of search, the full relevant facts had been brought to and duly disclosed and, therefore, the deposits would not and cannot be treated as undisclosed income under Section 158B(b) read with Section 158BB. According to us, the aforesaid conclusion of the Tribunal is clearly fallacious for several reasons which are elucidated below:- (1) Statements recorded under Section 131 of the Act were pre-cursor to the search and cannot be read in isolation without reference to attending circumstances. The attending circumstances in the present case were that no return of income had been filed by the individual assessees for the block period except return by Shibu Soren for the assessment year 1994-95 which was filed on 31st March, 1996 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b)undisclosed income is gold, bullion, money etc. or income which has not been or would have not been disclosed for the purpose of the act. She submitted that admittedly, no return has ever been filed by these assessee and thus, there is no question of lying disclosed in the present cases. She submitted that mere statement as a part of pre search inquiry cannot amount to disclosure of income possessed by the assessee chargeable to tax. She submitted that the main issue is whether such income was ever disclosed by the assessee at any stage. (5) Noticeably, JMM had not filed income tax returns for any of the assessment years subject matter of the block assessment order, except return filed on 12th July, 1996 in response to the notice under Section 148 of the Act that relating to the assessment years 1992-93 and 1993-94. As far as the individual assessees are concerned, none of them filed the income tax returns under Section 139 apart from Shibu Soren who filed a return for the assessment year 1994-95 on 31st March, 1996 under Section 139(4), i.e. belated return. This return was subsequently revised on 23rd April, 1996 i.e. 3 days before the search at Punjab National Bank, Nauroji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1994-95, ₹ 30,00,000/- relating to FDRs in the joint holding of the four individual assessees was not included; (f) Sushil Kumar who had introduced the four individual assessees to the bank, in his statement had confessed that the money was brought in suitcase which carried slips of Canara Bank, Bangalore, hence the money did not represent alleged donations; (g) donation slips as propounded were printed later on and not during the relevant period by M/s. Seth Art Printers. M/s R.R. Papers Stores, Bokaro could not have printed the donation slips as suggested; (h) donation receipts did not mention names of the person who had received the donation or the name of the donor; (i) one S. Bhattacharya who had joined JMM in April, 1994, could not have handled the donations in July, 1993 as was pleaded; (j) Ms. Anjali Jain, CA had accepted and admitted that she did not verify the donation coupons. (k) books of accounts etc. including the cash books allegedly recovered and seized were prepared and written belatedly and were not contemporaneously recorded; (l) cash books for assessment years 1993-94 consisted of three sets, locally bound. It bore signature of S. Bhatt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any return of income was filed by the assessee under section 139 nor any notice was issued by the concerned A.O. under section 142(1) or under section 148 asking the assessee to file a return of income and only notice issued was under section 158BC. In the backdrop of this legal and factual position, now we examine the other facts of the present case. 32. We would like to deal with the said reasoning sentence wise and in detail. Observation that the block assessment is in addition to regular assessment is correct, but the finding that any addition is required to be or is eligible to be made in the regular assessment cannot be added in the block assessment as a universal affirmative proposition is incorrect. It would depend upon whether or not the income concerned is undisclosed income as defined in Section 158B(b) read with applicable subsection to Section 158BB of the Act. We have already dealt with the observations of the Tribunal and highlighted the ratio decidendi of the decision of the Supreme Court in A.R. Enterprises (supra). As recorded above, Section 158B(b) is to be read along with applicable clause of Section 158BB of the Act. Similarly, the observations with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. These details were relevant to examine and consider the contention of the respondent individual assessee that the money did not belong to them but to the political party, JMM. It would be, therefore, incorrect or improper to state that the search did not reveal or unearth relevant material or evidence relating to undisclosed income as defined under Section 158B(b) of the Act. 34. This takes us to the judgments relied upon by the counsel for the assessee and we would like to examine whether the findings recorded above deviate from the legal position elucidated in these judgments in light of the decision of the Supreme Court in A.R. Enterprises (supra). We would first begin with the judgment of the Gujarat High Court in N.R. Paper and Board Ltd. Ors. (supra). At the outset, we notice that this judgment does not take into consideration the retrospective amendment made by Finance Act 2002 w.r.e.f. 1st July, 1995. In the said case, writ petitions were filed by persons who had been subjected to search and block assessment orders, on the ground that once block assessment orders had been passed, notice under Section 143(2) of the Act, for regular/normal assessment cannot be issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Chapter. Under sub-section (3) of section 158BA, where the date of filing the return of income under section 139(1) for any previous year has not expired, and the income of that previous year or the transactions relating to such income are duly recorded, then such income is not required to be included in the block period. This obviously means that the regular assessment of that previous year which has remained pending, will proceed notwithstanding that it was falling in the block period. The same would be the case where the block period includes only a part of the previous year of which the return is filed for regular assessment, and the regular assessment can proceed notwithstanding that the undisclosed income for a part of that previous year was within the block period. 35. There is another reason why we have referred to the decision in N.R. Paper Board Ltd. (supra) at the first instance. The Tribunal in the impugned order has specifically referred and quoted the following passage from the decision of the Supreme Court in L.R. Gupta and Ors. Vs. Union of India Ors. [1992] 194 ITR 32 :- Sub-clause (c) refers to money, bullion or jewellery or other valuable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or asset in an effort to escape assessment. Section 132(1)(c) has been incorporated in order to enable the Department to take physical possession of those movable properties or articles which are or represent undisclosed income or property. The words undisclosed income must mean income which is liable to be taxed under the provisions of the Income-tax Act but which has not been disclosed by an assessee in an effort to escape assessment. Not disclosed must mean the intention of the assessee to hide the existence of the income or the asset from the Income-tax Department while being aware that the same is rightly taxable. 36. L.R. Gupta s case (supra) related to validity of search under Section 132 and whether pre-conditions stipulated in sub-section (1) clauses (a), (b) and (c) were satisfied. While examining clause (c) to Section 132(1) of the Act, the Supreme Court observed that what was disclosed and was known to the department was not hidden and could not be treated as undisclosed income, either wholly or partly. The said observations were made in the context of clause (c) to Section 132(1) of the Act. Search and seizure has serious and deleterious consequences as it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion on the questions of law by the High Court or the Supreme Court, the Tribunal has to pass such orders as are necessary to dispose of the case conformably to such judgment, as provided in section 260 of the Act. The Commissioner also has revisional powers under section 263 to enhance or modify the assessment, or cancel it and direct a fresh assessment. All these may entail changes in the original assessment or fresh regular assessments in respect of the previous years falling in the block period. The fact that block assessment of undisclosed income is pending or is made, will not take away all these statutory powers, the exercise of which would affect the regular assessments already made or may entail fresh regular assessment for a previous year falling in the block period for assessment of undisclosed income. It would produce startling results of denuding all these authorities of their statutory powers in respect of the regular assessments made or to be made for the previous years falling in the block period. That surely is not intended by the Legislature and no such disastrous result is contemplated by introducing special procedure for assessment of searchcases in Chapter XIV- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parate proceedings. 37. The aforesaid paragraph notices that undisclosed income relating to block period has to be taxed at 60% as per the rate prescribed under Section 113 of the Act, irrespective of the fact whether regular assessment for any one or more years was pending. Reference was specifically made to the immunity from specified interest and penalty contemplated by Section 158BF but only in respect of undisclosed income determined in the block assessment and had no bearing on the assessment made otherwise i.e. the regular/normal assessment. However, the legal position underwent a change with the enactment of Section 158BFA by way of Income Tax (Amendment) Act, 1997 w.e.f. 1st January, 1997 in respect of searches undertaken under Section 132 or requisition under Section 132A on or after 1st January, 1997, authorising levy of interest and penalty in certain cases. However, Section 158BFA would not be applicable as the search in the present case was prior to 1st January, 1997. 38. At this stage, we would now like to deal with and examine judgments of the Delhi High Court. In CIT vs. Ravi Kant Jain [2001] 250 ITR 141 (Del), this Court dismissed the appeal filed by the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed discussion on the provisions of Chapter XIV B, and it has been held that the said chapter was applicable to undisclosed income i.e. income which had not been or would not have been disclosed and such income should be unearthed as a result of search or requisition. The block period in the said case was from 1987-88 to 1997-98, and the additions related to the assessment years 1993-94, 1994-95, 1995-96 and 1997-98. Addition of ₹ 4,00,000/- relating to the assessment year 1993-94 was an expense which had been debited in the Profit Loss A/c, which was accepted by the Revenue in the regular assessment. The assessee had also produced documents and confirmations of the recipient. Similarly, in the assessment year 1994-95, payments received from buyers and the receipts and documents produced were duly noticed in the regular assessment. For the aforesaid two years, no material was found during the search to show that the accounts or entries of ₹ 4,00,000/- each were bogus or were not genuine. With regard to assessment year 1995-96, a wrong addition of ₹ 50,000/- was made and the same was deleted. Assessment year 1997-98 was the year in which the search had take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and material gathered in search and subsequent enquiries thereafter. Scope and what should be treated as undisputed income has to be determined with reference to Section 158B clause (b) and 158BB of the Act. In the present case, as no return of income had been filed under Section 139(1) and incriminating material was found during the search, as such the undisclosed entries would be undisclosed in the light of the statutory provisions and as elucidated by the Supreme Court in the case of A.R. Enterprise (supra). 41. In CIT vs. Vivek Dougall [2008] 305 ITR 270 (Del.), search was conducted in the premises of a person named Gulati on 8th July, 1999 and certain documents were seized. Subsequently, a notice was issued to the assessee in question under Section 158BC, who filed return declaring NIL undisclosed income. However, much before the date of search, the assessee had filed regular return for assessment year 1988-89 and had disclosed certain amounts received as non-compete fee and claimed that they were not chargeable to tax. In the block assessment proceedings, the Assessing Officer brought the said amount to tax, holding that the same was actually paid for change of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned represented or was his income. The Revenue, therefore, succeeded in the High Court on the basis that the question of benami ownership came to the light and their knowledge after passing of the block assessment order. In the said case, in fact proceedings under Sections 147/148 were initiated pursuant to the said new information and facts. The said decision is, therefore, clearly distinguishable and does not support the case of respondent assessees herein. 43. Now we would like to deal with the decisions of other High Courts cited before us by the counsel for the assessee. CIT vs. Shambhulal C. Bachkaiwala [2000] 245 ITR 488 (Guj.) follows the decision in N.R. Paper and Board Ltd. (supra) pointing out distinction between undisclosed income which could be made subject matter of block assessment proceedings and normal income which could be a subject matter of the regular assessment. In CIT vs. N.T. John [2003] 259 ITR 224, a Division Bench of the Kerala High Court reversed the judgment of the Single Judge reported as [1997] 228 ITR 214, relying upon N.R. Paper and Board Ltd. (supra) and decision of the Calcutta High Court in Caltradeco Steel Sales (P) Ltd. vs. Deputy CIT [200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation or basis regarding undisclosed income etc. Presence and knowledge of the said perceptible information may well be a pre-requisite for conducting search. Logically and as a sequitur if the ratio in G.K. Senniappan (supra) is strictly applied, no block assessment can be made in respect of information/material available at the time of search and even when this information/material was the foundation of the search. In fact, when full and complete details/documents are available, search may not be required or necessitated. The expression undisclosed income would refer to the disclosures made by the assessee in the form of return of income of the past years or entries in the books of accounts and documents of the current year, when due date has not expired. Something which is hidden and not disclosed by the assessee, would not lose and forego its character as undisclosed income because the Revenue authorities have come to know or have collected some or partial information or details regarding the said undisclosed income at any time before or prior to the search. However, if the material found during the survey has nothing to do with the material and evidence found during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions were followed by the Madras High Court in Commissioner of Income Tax versus P.K. Ganeshwar, (2009) 308 ITR 124 (Mad) though the said judgment also makes reference to decision in Ravi Kant Jain (supra) which we have already examined above. The assessee in his block assessment return had declared ₹ 36.10 lacs as undisclosed income. However, in the block assessment order, ₹ 2.56 crores were added, relying upon investigation that followed the search as a letter was found that led to discovery of fixed deposits in the name of fictitious persons amounting to ₹ 2.83 crores. The additions were deleted on the ground that undisclosed income was not detected as a result of search but by investigation which followed the search. In the said decision except for following earlier judgments in S. Ajit Kumar and G.K. Senniappan B (supra) does not lay down any ratio or observation, which detracts or affects the legal conclusion and the findings recorded by us. 46. In different paragraphs, we have dealt with the appeal in the case of JMM. As noticed above, the Tribunal allowed the appeal of the assessee JMM, asserting that no incriminating material evidence/information ..... X X X X Extracts X X X X X X X X Extracts X X X X
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