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TMI Blog2025 (4) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel appearing for Mr.P.Ramesh Kumar, learned counsel on record for the appellants (legal heirs of the deceased first appellant) and Mr.Karthik Ranganathan, learned Senior Standing Counsel for the Revenue. 3. The substantial question admitted for consideration are as follows:- '1.Whether in the facts and circumstances of the case, the additions made under the block assessment should be only on the basis of evidence gathered during the course of search? 2.Whether in the facts and circumstances of the case, additions under the block assessment can be made solely on the basis of the statement recorded under Section 132(4) of the Income Tax Act, 1961, without any other material evidence to corroborate with? 3.Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal is right in upholding the addition made by the assessing officer on the issue of expenses incurred on construction of house property without giving credit for the expenses borne by the father of the appellant, when in fact, there was material available on record to demonstrate that a portion of the expenses was borne by the father of the appellant herein? 4.Whether in the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r plots from Mannargudi Housing Co-operative Society Ltd. Rs.1,72,584/- Rs.1,72,584/- 8. Rent paid for the house property at No.26A, Arulananda Nagar, Tanjore Rs.48,000/- Rs.48,000/- 12 Estimated marriage expenses Rs.25,00,000/- Rs.12,50,000/- 8. The first issue relates to articles found in the course of search. The authority had sought the sources for the purchase of 21 articles that were found in the course of search. In some cases, seized materials had been found to indicate contradictions/discrepancies in the statement recorded/explanations tendered. One of the explanations tendered at the time of assessment was that those articles from part of the wealth tax returns and this submission has been eschewed, and rightly, on the premise that movable assets that are personal in nature would not form part of taxable wealth. 9. The assessing authority had valued the movables at a sum of Rs.3,25,000/- treating the same as undisclosed income of the assessee for assessment year (AY) 1997-98 under Section 69A of the Act. As far as the value of air conditioners is concerned, no addition was made on this account as they had been considered under the head 'investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the returns. The assessee's representative has not furnished any evidence that the valuables are reflected in the WT returns. The valuables found at the time of search are all movable properties and personal in nature and will not form taxable wealth. The assessee in his sworn statement recorded u/s 132(4) of the I.T.Act on the date of search has stated that one TV was received by him as gift at the time of marriage and 2 TVs were purchased by his father. His father-in-law has given him one TV as gift and another TV was purchased in the year 1994. In respect of the VCR, he has stated that they are old. He has stated that his father has purchased two refrigerators and one refrigerator was given to him at the time of marriage as a gift. The assessee's representative has not furnished the name and address of the person from whom he has received the TV and refrigerator as a gift. A perusal of the seized documents reveal that the assessee has purchased an Onida Colour TV for Rs.16,000/- on 10-05-95 from M/s Punniyamoorthy Pillai Departmental Stores. The bill was seized vide page No.64/MC/B & D/S-11. Hence the assessee's explanation that the TV was received at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs.18.75 lakhs for the following reasons. (i) The Seized materials vide exhibit MC/B&D/S-11 pages 82-84 indicate that the cost of marbles purchased is Rs.8,71,438/-. These marbles are purchased from Rajasthan. The assessee has purchased marbles for Rs.2,30,000/- from M/s.Pushpa Marbles as per the seized document MC/B&D/S-3. The marble value alone is Rs.11,01,438/-. (ii) If the laying (labour) charges are taken into account at the rate of Rs.220/- per sq.metre, the total investment in laying charges would be around Rs.1,93,600/-. (888 sq.m x 220) (iii) The total cost on marble and laying charges alone is Rs.12,95,038/- (8,71,438 + 2,30,000 + 1,93,600). (iv) If cement and other materials required for flooring is taken into account, the flooring charge could be easily taken at Rs.13.25 lakhs. Therefore the entire investment on the basis of seized material as furnished below amounting to Rs.29,54,342/- is assessed as the Undisclosed Income of the assessee. 1) Marble Rs.11,01,438.00 2) Laying charges Rs. 1,93,600.00 3) Cement and other materials Rs. 29,962.00 4) Fans and lights Rs. 1,37,625.00 5) Switches Rs. 35,916.00 6) Wires Rs. 47,324.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e them. In the statement recorded on 25.09.1996, the assessee has admitted a sum of Rs.82 lakhs as undisclosed income in the property. 17. It is in the above facts and circumstances that the assessing officer proceeds to estimate the investment in the property. He takes into account the cost of construction as per Return dated 23.08.1995 at a sum of Rs.18.75 lakhs and brings to tax a sum of Rs.29.54 lakhs (as emanating from the seized materials) plus Rs.51.70 lakhs, in all an addition of Rs. 51,70,658/-, as undisclosed income for AY 1995-96 under Section 69 of the Income Tax Act. Incidentally, he had also referred the property to valuation and the District Valuation Officer had estimated the cost of construction at a sum of Rs.81,97,134/-. 18. As regards the reference to the departmental valuer, we find the same incidental and merely supportive of the assessment ultimately made. Hence, there is no infirmity created in this matter by reference to the issue to the District Valuation Officer as ultimately what has been adopted as cost of construction by the Assessing Officer is only based on the materials found in the course of search and not the results of the report of the Distric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the Supreme Court (i) Bannalal Jat Constructions (P.) Ltd. v. Assistant Commissioner of Income-tax (264 Taxmann 5) (ii) Orma Marble Palace P. Ltd. v. Commissioner of Income-tax (267 Taxmann 165) and the decision of the Delhi High Court in the case of Smt.Dayawanti v. Commissioner of Income-tax (390 ITR 496). 26. The search in the present case was conducted on 24/25.09.1996 and the block period in question is 01.04.1996. Admittedly, the appellant had filed regular returns for all the years prior to search. No block return was filed in response to the notice under Section 158BC. A statement had been recorded under Section 132(4) of the Act establishing categorically that the returns filed initially are incorrect as there are variations between the income disclosed/expenditure incurred in the returns and in the statement recorded. 27. One of the arguments put forth by the appellant is that the additions to income should be attributed to the appellant's father, who had passed away in 1993. There is no merit in this submission as it is unsupported by any material such as books maintained by his father or returns filed by him offering income/claiming expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also. Assessing Officers should rely upon the evidence/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.' 31. This is not a case where the appellant has retracted the statement despite having had the opportunity to do so. Hence, the statement remains part of the record as a reliable document. Moreover, the appellant has also not responded to Notice under Section 158BC dated 06.12.1996 by filing a block return. Hence, in the absence of a return and the fact that the Appellant has stood by the recorded statement, we are not inclined to intervene. The Departmental Instruction states that the computation of undisclosed must be based on evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e best of his judgment. The AO was perfectly justified in carrying out an assessment on the best of judgment, making estimations on the basis of the materials recovered. As has been found in Hotel Meriya, it cannot be assumed that a dealer who practises suppression would retain the materials disclosing suppression, for long years; in the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment. Question Nos.(i) and (ii) are answered in favour of the Revenue and against the assessee. We hence set aside the order of the Tribunal and the first appellate authority and confir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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