IN INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI, BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, CCOUNTANT MEMBER I.T.(SS) A. No. 91 Mds 2006 Block Assessment Period: 1.4.1986 to 31.3.1996 and 1.4.1996 to 24.9.1996 Shri Vive Sudhakar Deputy Commissioner of (Formerly known as VN.Sudhagaran) v. Income Tax, 4, 9th Cross Street, Central Circle II(2), Sri Kapaleeshwarar Nagar, Chennai - 600 034. Neelankarai, Chennai - 600 041. PAN : AMDPS 2184 ( Appellant) ( Respondent) Appellant by : Shri S. Sridhar, Advocate Respondent by : Shri T.R. Senthil Kumar, Sr. Standing Counsel Date of Hearing : 31.08.2016 Date of Pronouncement : 23.09.2016 ORDER PER N.R.S. GANESAN, JUDICIAL MEMBER: This appeal of assessee is directed against order of assessment dated 30.03.2006 and pertains to block period from 01.04.1986 to 31.03.1996 and block period from 01.04.1996 to 24.09.1996. 2 I.T.(SS) A. No.91 Mds 06 2. Shri S. Sridhar, Ld.counsel for assessee, submitted that there was search in premises of assessee under Section 132 of Income-tax Act, 1961 (in short 'the Act') on 24.09.1996. In response to notice issued under Section 158BC of Act, assessee has furnished return for block period admitting undisclosed income of ` 63,93,720 -. In original round of litigation, this Tribunal set aside order of Assessing Officer and directed Assessing Officer to furnish certain documents, which were said to be seized by Enforcement Directorate. Referring to Section 158BB(1) of Act, Ld.counsel for assessee submitted that present assessment is under old scheme of block assessment under Section 158BC of Act, therefore, Assessing Officer has to confine himself only to evidence found during course of search operation and such other material which are relevant with material found during course of search operation. In case before us, according to Ld. counsel, no material was found during course of search operation. so- called material seized by Enforcement Directorate is not connected with any other material found during course of search operation. In fact, no material was found in course of search operation, 3 I.T.(SS) A. No.91 Mds 06 therefore, material available with Enforcement Directorate may be relevant for purpose of completing regular assessment under Section 143(3) of Act and certainly such material are not relevant for purpose of completing block assessment under Section 153BC of Act. 3. Referring to assessment order, Ld.counsel submitted that for assessment year 1992-93, Assessing Officer assessed `37,890 - as undisclosed income for block period. Referring to page 112 of paper-book, Ld.counsel submitted that this is copy of return filed by assessee before Assessing Officer for block period and assessee himself made addition of `37,890 - as undisclosed income for block period. Referring to assessment year 1993-94, Assessing Officer found that assessee disclosed undisclosed income of `9,46,239 - before allowing deduction under Section 80L of Act. However, Assessing Officer found that while giving break-up of income admitted to extent of `9,39,240 -, assessee admitted cash receipt of ` 8,00,000 - from business. Assessing Officer has also found that credit of `1,22,380 - was found in bank account and `5,710 - towards insurance charges. This 4 I.T.(SS) A. No.91 Mds 06 insurance charge was said to be paid towards Swaraj Mazda van. According to Ld. counsel, no search material was found either with regard to credit of `1,22,380 in bank account or payment of insurance charges for Swaraj Mazda van. What was disclosed by assessee was admittedly interest income, hence eligible for deduction under Section 80L of Act. According to Ld. counsel, when undisclosed income was computed for block period, assessee is eligible for deduction under Section 80L of Act also. Therefore, according to Ld. counsel, Assessing Officer is not justified in making addition without any search material. 4. Similarly, for assessment year 1994-95, Ld.counsel for assessee submitted that assessee himself disclosed sum of `8,39,380 - as undisclosed income for block period. However, Assessing Officer found that there was cash receipt of `3,60,000 - and another credit of `1,00,329 - in bank account. Assessing Officer has also found that assessee has invested sum of `4,85,000 - in land. However, no material was available on record to suggest investment and no material was found during course of search operation either for 5 I.T.(SS) A. No.91 Mds 06 depositing of money in bank account or investment made in landed properties. In absence of any material during course of search operation, according to Ld. counsel, Assessing Officer is bound to take income disclosed by assessee for block period in return of income to extent of `8,39,380 -. If at all there is any material for making investment in landed properties and credit in bank account, it is for Assessing Officer to frame assessment under Section 143(3) of Act in regular curse. According to Ld. counsel, Assessing Officer cannot bring material, which was not relatable to material found during course of search operation for block period, therefore, Assessing Officer is not justified in computing undisclosed income at `13,19,380 -. 5. Referring to assessment year 1995-96, Ld.counsel for assessee submitted that assessee himself admitted undisclosed income of `27,20,130 - and paid taxes. assessee also disclosed gross income of `78,50,003 -, including cash receipt of `29,00,000 - from business and remuneration from M s Anjaneya Printers Pvt. Ltd. After considering expenditure of `51,12,112 -, assessee has 6 I.T.(SS) A. No.91 Mds 06 disclosed net income for taxation to extent of `27,37,891 - and same was offered for block period for taxation. Assessing Officer without any material found during course of search operation or information which is relevant to material found during course of search operation, estimated income at `1,22,80,330 -. According to Ld. counsel, in absence of any search material, there is no justification in making addition towards commission, investment in bank account, investment in lorry, etc. Referring to Section 158BB(1) of Act, Ld.counsel submitted that Assessing Officer cannot travel beyond provisions of Section 158BB(1) of Act. In other words, according to Ld. counsel, Assessing Officer cannot go beyond material found during course of search operation and information which is relatable to material found during course of search operation. 6. For assessment year 1996-97, assessee himself disclosed income of `18,57,080 -. During course of block assessment, Assessing Officer found that assessee admitted receipt of gift to extent of `10,00,000 - in net wealth statement and also admitted gold jewellery to extent of 7 I.T.(SS) A. No.91 Mds 06 `17,00,000 - and `3,00,000 - respectively. assessee explained before Assessing Officer that gold jewellery was not belonging to him and it was owned by assessee s sister Mrs. Sridholadevi. Moreover, no material was found during course of search operation. In absence of any search material, according to Ld. counsel, Assessing Officer cannot travel beyond material found during course of search operation. For assessment year 1997-98, according to Ld. counsel, assessee has disclosed undisclosed income to extent of `39,130 -. However, Assessing Officer ignored income declared by assessee and made addition of `1,10,000 -. Therefore, according to Ld. counsel, entire block assessment made by Assessing Officer is not justified. Ld.counsel further submitted that assessee paid taxes on undisclosed income disclosed in block return to extent of `63,93,720 -, therefore, addition made by Assessing Officer over and above income disclosed in block return cannot be sustained. 7. On contrary, Shri T.R. Senthil Kumar, Ld. Sr. Standing Counsel for Revenue, submitted that it is not correct to say that 8 I.T.(SS) A. No.91 Mds 06 there was no material found during course of search operation. This Tribunal in first round of litigation, directed Assessing Officer to furnish material seized by Enforcement Directorate to assessee and thereafter complete assessment. Ld. Sr. Standing Counsel further submitted that direction of this Tribunal in earlier round of litigation is extracted by Assessing Officer at page 2 of impugned order of assessment. Referring to assessment order, Ld. Sr. Standing Counsel submitted that assessee has not filed any return of income before search. assessee has not maintained any books of account in regular course. During course of search operation, Revenue authorities found cash of `76,400 -. This is also admitted by assessee in return of income filed, copy of which is available at page 111 of paper-book. Revenue authorities have also found that 5987 gms of gold jewellery, out of which, 4500 gms were seized. Revenue authorities have also found that silver articles of 98 Kgs were also seized by Revenue authorities. On query from Bench whether Revenue authorities found any material other than cash of `76,400 -, jewellery of 5987 gms and silver articles of 98 Kgs? Ld. Sr. Standing Counsel submitted that searched material were not available with him. Assessing 9 I.T.(SS) A. No.91 Mds 06 Officer was also present during course of hearing, clarified that he could not trace out searched material. 8. Referring to Section 158BB of Act, Ld. Sr. Standing Counsel submitted that Assessing Officer has to determine undisclosed income on basis of material available on records. undisclosed income under Section 158B(b) of Act is comprehensive one and includes money, bullion, jewellery and other valuable articles found, which would not have been disclosed to Department for taxation. Therefore, what is required to be considered is whether assessee would have disclosed income if there was no search? In this case, assessee would not have disclosed income if it was not unearthed during course of search operation. Therefore, according to Ld. Sr. Standing Counsel, when assessee has no intention to disclose income and it was disclosed only after search, such income would have characteristics of undisclosed income as envisaged in Section 158B(b) of Act. In case before us, assessee has not filed any return of income before date of search and it was filed only after search for block period. books of account of assessee were not maintained in regular course 10 I.T.(SS) A. No.91 Mds 06 of business. Therefore, Assessing Officer has rightly computed undisclosed income for block period. Referring to earlier assessment order dated 29.10.1997, Ld. Sr. Standing Counsel submitted that what was found during course of search operation is cash, gold jewellery and silver articles. copy of earlier assessment order dated 29.10.1997 is available at page 58 of paper-book. 9. We have considered rival submissions on either side and perused relevant material available on record. In case before us, there was search operation in premises of assessee on 24.09.1996. block period is 1992-93 to 1997-98. Almost twenty years has expired after search in premises of assessee. In earlier assessment order dated 29.10.1997, Assessing Officer has referred to material found during course of search operation, which are as follows:- (1) Cash : ` 76,400 (2) Gold jewellery : 5987 gms. (3) Silver articles : 98 Kgs. 11 I.T.(SS) A. No.91 Mds 06 Apart from this, there was no reference about searched material in assessment order. We have carefully gone through provisions of Section 158BB(1) of Act which reads as follows:- (1) undisclosed income of block period shall be aggregate of total income of previous years falling within block period computed, in accordance with provisions of this Act, on basis of evidence found as result of search or requisition of books of account or other documents and such other materials or information as are available with Assessing Officer and relatable to such evidence, as reduced by aggregate of total income, or, as case may be, as increased by aggregate of losses of such previous years, determined,-- (a) where assessments under section 143 or section 144 or section 147 have been concluded prior to date of commencement of search or date of requisition, on basis of such assessments ; (b) where returns of income have been filed under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148 but assessments have not been made till date of search or requisition, on basis of income disclosed in such returns ; (c) where due date for filing return of income has expired, but no return of income has been filed, as nil ; (d) where previous year has not ended or date of filing return of income under sub-section (1) of section 139 has not expired, on basis of entries relating to such income or transactions as recorded in books of account and other documents maintained in normal course on or before date of search or requisition relating to such previous years ; (e) where any order of settlement has been made under sub- section (4) of section 245D, on basis of such order ; 12 I.T.(SS) A. No.91 Mds 06 (f) Where assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on basis of such assessment. Explanation For purposes of determination of undisclosed income,-- (a) total income or loss of each previous year shall, for purpose of aggregation, be taken as total income or loss computed in accordance with provisions of Chapter IV without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 ; (b) of firm, returned income and total income assessed for each of previous years falling within block period shall be income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being working partner : Provided that undisclosed income of firm so determined shall not be chargeable to tax in hands of partners, whether on allocation or on account of enhancement ; (c) assessment under section 143 includes determination of income under sub-section (1B) of section 143. (2) In computing undisclosed income of block period, provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply and references to "financial year" in those sections shall be construed as references to relevant previous year falling in block period including previous year ending with date of search or of requisition. (3) burden of proving to satisfaction of Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by assessee before commencement of search or of requisition, as case may be, shall be on assessee. (4) For purposes of assessment under this Chapter, losses brought forward from previous year under Chapter VI or unabsorbed depreciation under sub-section (2) of section 32 shall not be set off against undisclosed income determined in 13 I.T.(SS) A. No.91 Mds 06 block assessment under this Chapter, but may be carried forward for being set off in regular assessments. In view of this Section, undisclosed income of block period shall be computed on basis of evidence found as result of search operation or other documents or such other material or information as are available with Assessing Officer and relatable to evidence found during course of search operation. As rightly submitted by Ld.counsel for assessee, Parliament in their wisdom devised special mechanism procedure for computing undisclosed income for block period. While computing undisclosed income for block period, Assessing Officer cannot travel beyond evidence found during course of search operation or documents or such other material or information available with Assessing Officer and relatable to material found during course of search operation. 10. We have carefully gone through provisions of Section 158B(b) of Act which defines undisclosed income . Undisclosed income includes any money, bullion, jewellery or other valuables articles, etc. which has not been or would not have been disclosed for purpose of taxation or any expense, deduction or allowance claimed by assessee under this Act 14 I.T.(SS) A. No.91 Mds 06 which was found to be false. This is definition of undisclosed income . For purpose of computing undisclosed income as defined in Section 158B(b) of Act, Assessing Officer has to necessarily follow procedure provided in Section 158BB(1) of Act. If any money, bullion, jewellery or any other materials are not found during course of search operation, then Assessing Officer cannot make any addition on basis of definition of undisclosed income . procedure prescribed by Section 158BB(1) of Act assumes sanctity and Assessing Officer cannot travel beyond language employed by Parliament. Therefore, this Tribunal is of considered opinion that Assessing Officer has to necessarily confine himself only to material found during course of search operation and documents or information which are relatable to material found during course of search operation. In case before us, either in earlier assessment order or in present assessment order, which is impugned before Tribunal, Assessing Officer is not referring to any other material found during course of search operation. Ld. Sr. Standing Counsel for Revenue submitted that what was found during course of search operation is cash, gold jewellery and silver articles. Admittedly, no addition was made 15 I.T.(SS) A. No.91 Mds 06 by Assessing Officer in respect of cash, jewellery and silver articles found during course of search operation. 11. Assessing Officer, who was present before this Tribunal during course of hearing, claimed that he could not trace out any seized material. What was said to be seized during course of search is cash, gold jewellery and silver articles. Therefore, Revenue cannot say that seized material could not be traced out. This appeal is pending before this Tribunal for last ten years. No addition was made with regard to cash, gold jewellery and silver articles for block period. Assessing Officer made addition on basis of post search information, which are not relatable to evidence found during course of search operation. 12. Now coming to addition made by Assessing Officer for assessment year 1992-93, Assessing Officer computed undisclosed income at `37,890 -. In fact, this was admitted by assessee in block return filed consequent to notice issued under Section 158BC of Act. assessee has also paid taxes. Assessing Officer has not made any addition other than `37,890 - which was disclosed in block return. 16 I.T.(SS) A. No.91 Mds 06 13. Now coming to assessment year 1993-94, Assessing Officer computed undisclosed income at `9,51,950 -, while making addition of interest income to extent of `29,569 - and unexplained cash credit of `1,22,380 -. We have carefully gone through impugned order of assessment. assessee himself disclosed `9,46,239 - before allowing deduction under Section 80L of Act. After claiming deduction under Section 80L of Act, income for block period was `9,39,240 -. Assessing Officer found on basis of information, subsequent to date of search, that there are credits in bank account and interest income to extent of `29,569 - was also credited. This Tribunal is of considered opinion that no search material was available on record for assessment year 1993-94. Assessing Officer has not referred to or placed reliance on any of seized material found during course of search operation. If Assessing Officer had some material, which was found during course of enquiry after search, this Tribunal is of considered opinion that that may be good material for purpose of making addition in regular assessment under Section 143(3) of Act. In absence of any material during course of search operation, any information or document which is not relatable to material found 17 I.T.(SS) A. No.91 Mds 06 during course of search operation cannot be basis for making addition for assessment year 1993-94. In other words, addition if any can be made in regular assessment under Section 143(3) of Act and definitely not under Section 158BC of Act. Assessing Officer has to confine himself to income only to extent of `9,39,240 -, which was admittedly disclosed by assessee. This Tribunal is of considered opinion that Assessing Officer cannot travel beyond language employed by Parliament under Section 158BB(1) of Act. In other words, Assessing Officer cannot go beyond material found during course of search operation. In absence of any material during course of search operation, addition made by Assessing Officer cannot be sustained. Accordingly, order of assessment is set aside and Assessing Officer is directed to accept income disclosed by assessee in block period return for 1993-94. 14. Now coming to assessment year 1994-95, assessee disclosed sum of `8,39,380 - as undisclosed income for block period. Assessing Officer found that assessee has received cash of `3,60,000 - and `1,00,329 -, which were credited by way of 18 I.T.(SS) A. No.91 Mds 06 cheque DD in bank account. From assessment order para 7.4, it appears that assessee has purchased 30.13 acres of agricultural land at Siruthavur Village during February, 1994. owner of land appears to have admitted payment of on- money over and above sale consideration before Directorate of Vigilance and Anti Corruption, Chennai. Based on statement made by owner of land, Assessing Officer found that aggregate sale consideration was `9,65,000 -. Therefore, he found sum of `4,85,000 -, which was said to be paid by way of on- money over and above sale consideration disclosed in sale deed, was undisclosed income for block period. As observed earlier, Section 158BB(1) of Act clearly says that Assessing Officer has to compute aggregate undisclosed income for block period on basis of evidence found during course of search operation and document or material or other information available with Assessing Officer and relatable to material found during course of search operation. 15. In case before us, neither sale deed nor statement said to be made by owner of land before Directorate of Vigilance and Anti Corruption was part of material 19 I.T.(SS) A. No.91 Mds 06 found during course of search operation. information now said to be available with Assessing Officer are not relatable to material found during course of search operation. Therefore, this Tribunal is of considered opinion that Assessing Officer cannot travel beyond language employed by Parliament under Section 158BB(1) of Act. If land owner declared that he received on-money for sale of land over and above price disclosed in sale deed after search operation, this information may be good for purpose of making assessment under Section 143(3) of Act. Block assessment under Section 158BC of Act being special procedure, Assessing Officer cannot travel himself beyond language employed by Parliament. This Tribunal is of considered opinion that material collected by Directorate of Vigilance and Anti Corruption with regard to on-money payment and cash credit found in bank account are best material available before Assessing Officer for making regular assessment under Section 143(3) of Act. Therefore, Assessing Officer has to necessarily confine himself only to income disclosed by assessee in block return consequent to notice issued under Section 158BC of Act. In other words, Assessing Officer 20 I.T.(SS) A. No.91 Mds 06 has to take `8,39,380 - as disclosed by assessee in block return for assessment year 1994-95. In view of above discussion, addition made by Assessing Officer over and above `8,39,380 - is deleted. 16. Now coming to assessment year 1995-96, assessee himself disclosed sum of `27,20,130 - for block period. Assessing Officer, during assessment proceeding, found that assessee was awarded contract by Directorate of Information and Public Relations, Government of Tamil Nadu, for video and film coverage for 8th Tamil World Conference held at Thanjavur between 01.01.1995 and 05.01.1995. Assessing Officer observed that assessee has received amount of `49,87,000 - during year under consideration, namely, 1995-96. After considering expenses, Assessing Officer computed net income at `37,88,151 -. Assessing Officer has also found that assessee acquired Ashok Leyland cargo lorry at cost of `5,05,000 -. Assessing Officer further found that there was unexplained credit of `22,00,000 - from M s Bharani Beach Resorts Pvt. Ltd. and ultimately computed undisclosed income at `1,22,80,330 -. 21 I.T.(SS) A. No.91 Mds 06 17. We have carefully gone through order of assessment. Assessing Officer has not referred to any of search material found during course of search operation. search materials are not brought on record by Assessing Officer. Even in paper-book filed before this Tribunal, Revenue could not file any of copies of search material. As observed earlier, Assessing Officer has to confine himself only to material found during course of search operation and information which are relatable to material found during course of search operation. It is admitted case of Revenue that what was found during course of search operation is cash of `76,400 -, jewellery of 5987 gms and silver articles of 98 Kgs. This is obvious from page 1 of paper-book. At page 1, Revenue filed its comments on grounds of appeal filed before Tribunal. It is specific case of Revenue that no material was found during course of search operation. This is further confirmed by Ld. Sr. Standing Counsel and comments made by Revenue, copy of which is available at paper-book 1 that other than cash, jewellery and silver articles, no other material was found. It is admitted fact that no addition was made in respect of cash, jewellery and 22 I.T.(SS) A. No.91 Mds 06 silver articles. In absence of any search material found during course of search operation, this Tribunal is of considered opinion that addition made by Assessing Officer in assessment order for assessment year 1995-96 is not justified. As observed earlier, for assessment year 1995-96, assessee himself disclosed income of `27,20,130 -. addition made by Assessing Officer is not supported by any search material or information relatable to material found during course of search operation. In absence of any search material, this Tribunal is of considered opinion that Assessing Officer has to confine himself to income disclosed by assessee in return filed consequent to notice issued under Section 158BC of Act. In view of above, we are unable to uphold order of Assessing Officer. Accordingly, order of Assessing Officer is set aside and entire addition is deleted and Assessing Officer has to confine himself to undisclosed income disclosed by assessee to extent of `27,20,130 - for assessment year 1995-96 which was returned in block period. 18. Now coming to assessment year 1996-97, assessee admittedly disclosed sum of `18,57,080 - as undisclosed income 23 I.T.(SS) A. No.91 Mds 06 for block period. assessee claimed cash gift of `10,00,000 -. Assessing Officer has not referred any search material in impugned for block period. Without placing any reliance on search material, Assessing Officer claims that gift was received from strangers and also added sum of `3,47,634 - as income from hiring of van. Assessing Officer referred to all information and material gathered either from Enforcement Directorate or otherwise subsequent to search operation. This Tribunal is of considered opinion that material relied on by Assessing Officer, which were collected by Enforcement Directorate and Assessing Officer himself after search operation, are good material for purpose of making assessment under regular course under Section 143(3) of Act. Since no search material was found in respect of so-called gift, income from hiring of van, receipt of amount from Directorate of Information and Public Relations contract, etc. these cannot be included as undisclosed income for block period. In other words, Assessing Officer cannot travel beyond material found during course of search operation for purpose of computing undisclosed income for block period. In view of above, we are unable to uphold addition of `62,21,920 - as 24 I.T.(SS) A. No.91 Mds 06 undisclosed income for assessment year 1996-97. Accordingly, order of Assessing Officer is set aside and Assessing Officer is directed to accept income disclosed by assessee to extent of `18,57,080 - for assessment year 1996-97 and addition made by Assessing Officer over and above `18,57,080 - is deleted. 19. Similarly, for assessment year 1997-98, assessee disclosed sum of `39,130 - as undisclosed income for block period. However, Assessing Officer ignored income disclosed by assessee and made addition of `1,00,000 - on behalf of Super Duper TV on basis of letter of assessee dated 23.10.1997. Assessing Officer has also made addition of `10,000 - on basis of income statement filed by assessee for assessment year 1997-98. Admittedly, search took place on 24.09.1996. No material was found with regard to Super Duper TV. Therefore, letter of assessee dated 23.10.1997 may be information which is not relatable to material found during course of search operation. letter of assessee dated 23.10.1997 may be information and evidence for regular assessment under Section 143(3) of Act. This Tribunal is of 25 I.T.(SS) A. No.91 Mds 06 considered opinion that such information in letter of assessee is not relatable to material found during course of search operation, therefore, same cannot be basis for making any addition for block period. Hence, addition of `1,10,000 - for assessment year 1997-98 is deleted. 20. In result, appeal of assessee is allowed. Order pronounced on 23rd September, 2016 at Chennai. sd - sd - ( . ) ( . . . ) (A. Mohan Alankamony) (N.R.S. Ganesan) Accountant Member Judicial Member Chennai, rd Dated, 23 September, 2016. Kri. Copy to: 1. Appellant 2. Respondent 3. CIT, Central-II, Chennai 4. DR 5. GF. Vive Sudhakar (Formerly known as VN.Sudhagaran) v. Deputy Commissioner of Income-tax, Central Circle II(2), Chennai