Commissioner of Income-tax, Chennai v. S. Ajit Kumar
[Citation -2018-LL-0502-40]

Citation 2018-LL-0502-40
Appellant Name Commissioner of Income-tax, Chennai
Respondent Name S. Ajit Kumar
Court SUPREME COURT
Relevant Act Income-tax
Date of Order 02/05/2018
Judgment View Judgment
Keyword Tags computation of undisclosed income • assessment of undisclosed income • block assessment • cash payment • survey proceeding
Bot Summary: D) The Assessing Officer, vide order dated 31.08.2004, after having regard to the facts and circumstances of the case, completed the block assessment and, inter alia, held that the said amount is liable to tax as undisclosed income of the block period. Learned CIT, vide order dated 15.02.2005, held that it was due to the search action that the Department had found that the assessee had engaged the services of M/s. ECIL. Hence, the order of block assessment was upheld. Point(s) for consideration:- 5) The short point for consideration which arises in this appeal is as to whether in the light of present facts and circumstances of the instant case, the material found in the course of survey in the premises of the builder could be used in Block Assessment of the assessee Rival contentions: 6) At the outset, learned senior counsel for the Revenue contended that the High Court failed to consider that the information gathered as a result of search is not the details of 4 appointment of interior decorator rather it is information regarding the cash payments made over and above the cheques payments and not accounted by the assessee. In the present case, the moot question is whether the fact of cash payment of Rs 7 95.16 lakhs can be added under the head of the undisclosed income of the assessee in block assessment. A notice dated 25.02.2003, under Section 158BC of the IT Act, was issued to the assessee and he was asked to file block assessment. Chapter XIV-B provides for an assessment of the undisclosed income unearthed as a result of search without affecting the regular assessment made or to be made. The income assessable in block assessment under Chapter XIV-B is the income not disclosed but found and determined as the result 10 of search under Section 132 or requisition under Section 132-A of the Act.


REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 10164 of 2010 Commissioner of Income Tax, Chennai .Appellant(s) Versus S. Ajit Kumar . Respondent(s) WITH CIVIL APEAL NO. 10917 OF 2013 CIVIL APPEAL NO. 4449 OF 2015 CIVIL APEAL NO. 5255 OF 2015 CIVIL APPEAL NO. 10165 OF 2010 JUDGMENT R.K. Agrawal, J. 1) This appeal has been filed against impugned judgment and order dated 22.11.2006 passed by High Court of Judicature at Madras in Tax Case (Appeal) No. 2620 of 2006 whereby Division Bench dismissed appeal filed Signature Not Verified Digitally signed by ASHA SUNDRIYAL Date: 2018.05.02 17:21:16 IST by appellant herein while upholding decision passed Reason: 1 by Income Tax Appellate Tribunal (for short Tribunal ) dated 28.04.2006. Along with this appeal, other appeals are also tagged. Since moot question in all these appeals is same, all these appeals would stand disposed off through this common judgment. Brief facts:- Civil Appeal No. 10164 of 2010 2) In order to appreciate facts of present case in appropriate manner, purpose would be served if we mention facts in summarized way which is as under:- a) appellant herein is Revenue whereas respondent is assessee. b) search was conducted by officers of Income Tax Department in premises of assessee on 17.07.2002 which was concluded on 21.08.2002. On same date, there was survey in premises of Elegant Constructions and Interiors Ltd. (hereinafter referred to as M/s. ECIL ) - builder and interior decorator who constructed and decorated house of assessee at Valmiki Nagar. 2 c) Pursuant to same, fact that assessee having engaged above contractor for construction of house came out. At same time, from survey in builder s premises, fact of assessee having paid Rs 95,16,000/- to M/s ECIL in cash was revealed which was not accounted for. d) Assessing Officer, vide order dated 31.08.2004, after having regard to facts and circumstances of case, completed block assessment and, inter alia, held that said amount is liable to tax as undisclosed income of block period. e) Being aggrieved with order dated 31.08.2004, assessee filed appeal before Commissioner of Income Tax (Appeals). Learned CIT (Appeals), vide order dated 15.02.2005, held that it was due to search action that Department had found that assessee had engaged services of M/s. ECIL. Hence, order of block assessment was upheld. f) Being dissatisfied, assessee brought matter before Tribunal by way of appeal. Tribunal, vide order 3 dated 28.04.2006, set aside decisions of Assessing Officer and learned CIT (Appeals) and allowed appeal. g) Being aggrieved, Revenue filed appeal before High Court. High Court, vide order dated 22.11.2006, dismissed appeal. 3) Consequently, Revenue has filed this instant appeal before this Court. 4) Heard arguments advanced by learned senior counsel for parties and perused relevant records of case placed before us. Point(s) for consideration:- 5) short point for consideration which arises in this appeal is as to whether in light of present facts and circumstances of instant case, material found in course of survey in premises of builder could be used in Block Assessment of assessee? Rival contentions: 6) At outset, learned senior counsel for Revenue contended that High Court failed to consider that information gathered as result of search is not details of 4 appointment of interior decorator rather it is information regarding cash payments made over and above cheques payments and not accounted by assessee. Further, it was also contended that it is standard practice in Department that when search takes place in case of assessee, many related business premises are simultaneously covered under survey. Learned senior counsel further contended that though it is called survey, it is very much part of search process and inquiry and investigation is one process. This is to be distinguished from surveys which are stand-alone surveys, totally unconnected to any search. In order to substantiate his claim, learned senior counsel has referred to decision of this Court in Assistant Commissioner of Income Tax and Another vs. Hotel Blue Moon (2010) 3 SCC 259 and contended that impugned decision of High Court is liable to be set aside. 7) Per contra, it is submitted by learned senior counsel for assessee that High Court rightly dismissed appeal of appellant after placing reliance on decision of Madras High Court in Commissioner of Income Tax vs. G.K. 5 Senniappan 284 ITR 220. It was also submitted that fact of cash payment found in survey conducted at premises of M/s ECIL does not fall within ambit of Block Assessment. Learned senior Counsel has relied upon following decisions, viz., Commissioner of Income Tax vs. S. Ajit Kumar (2008) 300 ITR 152 (Mad.), Commissioner of Income Tax vs. N.K. Laminates Pvt. Ltd. (2014) 365 ITR 211 (All.), Commissioner of Income Tax vs. Bimal Auto Agency (2009) 314 ITR 191 (Gauhati), Commissioner of Income Tax vs. Khushlal Chand Nirmal Kumar (2003) 263 ITR 77 (MP), Commissioner of Income Tax vs. Dr. Rattan Kumar Singh (2013) 357 ITR 35 (All.), Commissioner of Income Tax, Chennai vs. S. V. Sreenivasan (2017) SCC Online 17211 (Mad.), Commissioner of Income Tax vs. Pinaki Misra (2017) 392 ITR 347 (Delhi), Commissioner of Income Tax vs. R.M.L. Mehrotra (2010) 320 ITR 403 (All.), Sree Meenakshi Mills Ltd. vs. Commissioner of Income Tax, Madras (1957) 21 ITR 28 (S.C.), Commissioner of Income Tax vs. P.V. Kalyanasundaram (2007) 294 ITR 49 (S.C.), Commissioner of Income Tax vs. Smt. Anita Chouhan (2008) 296 ITR 691 6 (M.P.) and Commissioner of Income Tax, Punjab vs. Indian Wollen Textiles Mills (1964) 51 ITR 291. Learned senior counsel finally submitted that in view of above decisions, this appeal deserves to be dismissed at threshold. Discussion:- 8) In present case, period for Block Assessment is 01.04.1996 to 17.07.2002. Section 153A of Income Tax Act, 1961 (for brevity IT Act ) provides procedure for completion of assessment where search is initiated under Section 132 of IT Act or books of account or other documents or any asset are requisitioned under Section 132A of IT Act. 9) It is cardinal principle of law that in order to add any income in block assessment, evidence of such must be found in course of search under Section 132 of IT Act or in any proceedings simultaneously conducted in premises of assessee, relatives and/or persons who are connected with assessee and are having transaction/dealings with such assessee. In present case, moot question is whether fact of cash payment of Rs 7 95.16 lakhs can be added under head of undisclosed income of assessee in block assessment. 10) In instant case, office and residential premises of assessee searched on 17.07.2002 and finally concluded on 21.08.2002. During course of search, certain evidence were found which showed that assessee had indulged in understatement of his real income relating to block period from 01.04.1996 to 17.07.2002. Consequently, notice dated 25.02.2003, under Section 158BC of IT Act, was issued to assessee and he was asked to file block assessment. In reply to such notice, assessee filed return on 11.08.2003, admitting undisclosed income as NIL . 11) In present case, it is admitted position that cost of investment was disclosed to Revenue in course of return filed by assessee. assessee also disclosed detail of transaction between assessee and M/s ECIL in assessment year 2001-2002. However, he had not disclosed payment of Rs. 95,16,000/- in cash made to M/s. ECIL. 8 12) method of calculating undisclosed income of block period is provided under Section 158BB of IT Act. It would be appropriate to re-produce relevant part of Sections 158BB and 158 BH of IT Act which is as follows: 158BB. Computation of undisclosed income of block period.-(1) undisclosed income of block period shall be aggregate of total income of previous year failing 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 year determined 158BH. Application of other provisions of this Act Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter. (Emphasis supplied by us) 13) On perusal of above provision, it is evident that for purpose of calculating undisclosed income of block period, it can be calculated only on basis of evidence found as result of search or requisition of books of accounts or other documents and such other materials or information as are available with Assessing Officer and relatable to such 9 evidence. Section 158BB has prescribed boundary which has to be followed. No departure from this provision is allowed otherwise it may cause prejudice to assessee. Needless to say that it is cannon of tax law that it should be interpreted strictly. 14) However, Section 158BH of IT Act has made all other provisions of IT Act applicable to assessments made under Chapter XIVB except otherwise provided under this Chapter. Chapter XIV B of IT Act, which relates to Block Assessment, came up for consideration before this Court in Hotel Blue Moon (supra) wherein it has been held as under: 18. Chapter XIV-B provides for assessment of undisclosed income unearthed as result of search without affecting regular assessment made or to be made. Search is sine qua non for block assessment. special provisions are devised to operate in distinct field of undisclosed income and are clearly in addition to regular assessments covering previous years falling in block period. special procedure of Chapter XIV-B is intended to provide mode of assessment of undisclosed income, which has been detected as result of search. It is not intended to be substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to regular assessment already done or to be done. assessment for block period can only be done on basis of evidence found as result of search or requisition of books of accounts or documents and such other materials or information as are available with assessing officer. Therefore, income assessable in block assessment under Chapter XIV-B is income not disclosed but found and determined as result 10 of search under Section 132 or requisition under Section 132-A of Act. 28. Section 158-BH provides for application of other provisions of Act. It reads: 158-BH. Application of other provisions of this Act.- Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter. This is enabling provision, which makes all provisions of Act, save as otherwise provided, applicable for proceedings for block assessment. provisions which are specifically included are those which are available in Chapter XIV-B of Act, which includes Section 142 and sub-sections (2) and (3) of Section 143. 15) power of survey has been provided under Section 133A of IT Act. Therefore, any material or evidence found/collected in Survey which has been simultaneously made at premises of connected person can be utilized while making Block Assessment in respect of assessee under Section 158BB read with Section 158 BH of IT Act. same would fall under words and such other materials or information as are available with Assessing Officer and relatable to such evidence occurring in Section158 BB of Act. In present case, Assessing Officer was justified in taking adverse material collected or 11 found during survey or any other method while making Block Assessment. 16) In view of foregoing discussions, we are of considered opinion that decisions relied upon by learned senior counsel for assessee do not lay down correct law. 17) In result, all appeals succeed and are allowed. impugned orders are set aside and orders passed by Assessing Officer making Block Assessment are restored. However, parties shall bear their own cost. J. (R.K. AGRAWAL) . . J. (ABHAY MANOHAR SAPRE) NEW DELHI; MAY 2, 2018. 12 Commissioner of Income-tax, Chennai v. S. Ajit Kumar
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