High Court Of Madhya Pradesh
CIT vs. Khushlal Chand Nirmal Kumar
Sections 158BB, 260A
Asst. Year Block period 1st April, 1986 to 24th Dec., 1996
Dipak Misra & A.K. Shrivastava, JJ.
IT Appeal No. 58 of 2000
14th April, 2003
Counsel Appeared
Rohit Arya, for the Appellant : Sumit Nema, for the Respondent
ORDER
DIPAK MISRA, J. :
In this appeal preferred under s. 260A of the IT Act, 1961 (for brevity ‘the Act’), the Revenue has called in question the legal propriety of the order passed by the Tribunal, Jabalpur Bench, Jabalpur (for brevity ‘the Tribunal’).
2. The facts which are essential to be stated are that in respect of the business premises of the respondent-firm a search and seizure operation was carried out under s. 132 of the Act whereby certain amount in cash and jewelleries were found. A notice under s. 158BC was issued on 7th July, 1997, and the respondent was asked to furnish return in respect of the block period 1st April, 1986, to 31st March, 1996, and also for 1st April, 1996 to 24th Dec., 1996. In pursuance of the notice the assessee filed the return and the AO proceeded with assessment. While dealing with investment in construction the AO came to hold that the investment for the respective years was Rs. 10,18,000. To arrive at the conclusion the AO placed reliance on the report obtained from the Departmental Valuation Officer. He expressed the view that the assessee could not explain the valuation report obtained from the Departmental Valuation Officer and in the absence of any oppugnation the same deserve acceptance. We may hereby clarify that in this appeal we are only concerned with the aforesaid facet and nothing else.
3. Being dissatisfied the assessee preferred an appeal before the Tribunal. The Tribunal dealt with various aspects, but we are not concerned with the same. However, in para 11 while dealing with this particular spectrum the Tribunal expressed the view as under : “11. We have carefully gone through the orders of the authorities below. Rival submissions were also considered. Admittedly, not an iota of evidence was found during the course of search to establish that the assessee has spent more on renovation on residential house than what was recorded in the books of accounts. The order of this Tribunal in the case of Agarwal Motors vs. Asstt. CIT (supra) is squarely applicable to the facts of the case. We are, therefore, of the opinion that AO is not at all justified in making impugned addition in block assessment framed under s. 158BC of the IT Act. We, therefore, hereby delete the addition of Rs. 1,88,042 made by the AO in assessment framed under s. 158BC on account of alleged unexplained investment in construction.”
4. Assailing the aforesaid order it is submitted by Mr. Rohit Arya, learned counsel for the Revenue, that the Tribunal has misconstrued the provision engrafted under s. 158BB of the Act inasmuch as the said provision unequivocally lays postulate that AO can take into consideration the information at the time of assessment and the report of the Department Valuation Officer is an information and material one and legally obtainable under the provision. He has also drawn our attention to s. 131 (1)(d) of the Act. To bolster his submission he has placed reliance on the decisions rendered in the case of C.T. Laxmandas vs. Asstt. CIT & Anr. (1994) 208 ITR 859 (Mad) and William De Noronha & Ors. vs. Asstt. CIT & Ors. (1998) 145 CTR (All) 222 : (1997) 227 ITR 27 (All). Mr. Sumit Nema, learned counsel for the assessee, per contra, contended that scope of s. 158BB cannot be enlarged to collect information by way of expert report once it is not collectable with the material brought forth in course of search as that would not be the evidence as per law. He has drawn inspiration from the Division Bench decision rendered in the case of CIT vs. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom). The learned counsel has also commended us to the circular of the CBDT issued on 27th Aug., 2002. To appreciate the rivalised submissions, it is appropriate to refer to s. 158BB(1) of the Act which occurs in Chapter XIV-B of the Act. It reads as under : “158BB.—(1) The undisclosed income of the block period shall be the aggregate computed, in accordance with the provision of Chapter-IV, on the basis of evidence found as a result of search or requisition of books of account documents and such other materials or information as are available with the AO, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined : (a) where assessments under s. 143 or s. 144 or s. 147 have been concluded, on the basis of such assessments; (b) where returns of income have been filed under s. 139 or s. 147 but assessments have not been made till the date of search or 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, as nil; (d) where the previous year has not ended or the date of filing the return of income under sub-s. (1) of s. 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 or before the date of the search or requisition relating to such previous years; (e) where any order of settlement has not been made under sub-s. (4) of s. 245D, on the basis of such order; (f) where an assessment of undisclosed income had been made earlier under cl. (c) of s. 158BC, on the basis of such assessment. Explanation : For the purposes of determination of undisclosed income : (a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of Chapter IV without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under subs. (2) of s. 32; (b) of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called to any partner not being a working partner : Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement; (c) assessment under s. 143 includes determination of income under sub-s. (1) or sub-s. (1B) of s. 143.”
7. Mr. Arya, learned counsel for the Revenue, has placed emphasis on the words ‘such other materials or information as are available with the AO’. It is contended by him that the said provision has to be read conjointly with s. 131(1)(b) of the Act which confers power on the AO regarding discovery or production of evidence, etc. Sec. 131(1)(d) of the Act deals with issuing of commission. Submission of Mr. Arya is that an information can be gathered by issuing necessary direction for collection of report as that would be in tune and harmony with the language employed under ss. 158BB and 131(1)(d) of the Act. Mr. Nema would like us to interpret the aforesaid provision in the backdrop that unless the information is in continuance of the document or material seized in course of search, an independent report cannot form the foundation for computation of undisclosed income of the block period.
8. Before we refer to the circular of CBDT, we would like to refer to the citations made at the Bar. In the case of C.T. Laxmandas (supra) the learned Single Judge of the Madras High Court expressed the view that the ITO has power to determine market value of capital asset under s. 55A of the Act. In the case of William Sons (supra) a Division Bench of the Allahabad High Court dealt with certain aspects in relation to WT Act. On a perusal of the aforesaid judgments we are of the considered view, the same have no applicability to the present case. At this juncture, we may refer with profit to the decision rendered in the case Vinod Danchand Ghodawat (supra). In the said case the Bombay High Court was directly in seisin of the issue in question. The question No. 3 which was framed in that case read as under : “Question No. 3 : Whether in law, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the addition of Rs. 2,49,350 made on account of unexplained expenses in the construction of the residential bungalow at Jaysingpur, when the same was properly made by the AO.”
9. While dealing with said question the view was expressed as under : “The said question refers to an addition of Rs. 2,49,350 made on account of unexplained expenses in the construction of a residential bungalow by the assessee. Here also, Chapter XIV-B has no application. The Tribunal, rightly, found that the addition is made on the basis of the report of the Departmental valuer. According to the AO, during the course of assessment it was found that the assessee had incurred expenses of Rs. 4.16 lakhs. The AO, thereafter, referred the matter to the Departmental valuer, who valued the property at Rs. 6.66 lakhs and, accordingly, the difference has been added to the income of the assessee as undisclosed income. The above basis clearly shows that the Department has not understood the scope of Chapter XIV-B of the IT Act. By not stretch of imagination, the impugned addition fell within the Chapter XIV-B. There would be no finality, if the Department is permitted to add back to the income of the assessee on the basis of Departmental valuer’s report obtained subsequent to the order of the regular assessment. Hence, the Tribunal was right in deleting the said addition. Accordingly, question No. 3 is answered in the affirmative, i.e., in favour of the assessee and against the Department.”
10. If the provision of s. 158BB is read in proper perspective, we are inclined to respectfully agree with the view expressed by the Bombay High Court. Quite apart from the above, the CBDT circular which has been referred above in para 61.3.2 has laid down as under : “61.3.2—The Finance Act, 2002, has amended s. 158BB to clarify that the block assessment of undisclosed income is to be based on the evidence found in the search and material or information gathered in post-search inquiries made on the basis of evidence found in the search.” We have referred to the aforesaid clarification for the simple reason, Mr. Arya submitted that amendment was effected to s. 158BB in the year 2002, w.e.f. 1st July, 1995, and the amendment would be applicable to the present case as block period covers 10 years commencing 1986 to 1996. On a perusal of the unamended and amended provisions and the CBDT circular, we are of the considered view that there has been no specific effect as far as this facet is concerned. Emphasis has been given on the fact evidence must have been found during search and only thereafter, the question of gathering any material information would arise based on the search, inquiry. It is not disputed at the Bar, that during search in the premises of the assessee nothing was found with regard to the investment in the house. However, it is contended by Mr. Arya that the valuation report of the Departmental Valuation Officer was obtained and was confronted to the assessee but he was not able to give any explanation and, therefore, it should be accepted as evidence. We are afraid, the aforesaid submission does not commend acceptance in view of statutory provisions and law laid down in the case of Vinod Kumar (supra) with which we have respectfully agreed. In view of the aforesaid, we do not find any substantial question of law involved in this appeal Resultantly, the appeal, being sans merit, stands dismissed.
[Citation : 263 ITR 77]
