Commissioner Of Income Tax vs Kanti Bhai Damani
2012 Latest Caselaw 717 Del

$~R-65.
*IN THE HIGH COURT OF DELHI AT NEW DELHI


+       ITA 190/2006


        COMMISSIONER OF INCOME TAX       ..... Appellant
                    Through Mr. Kamal Sawhney, Sr.
                    Standing Counsel.

                        versus

        KANTI BHAI DAMANI                           ..... Respondent
                      Through Nemo.

         CORAM:
         HON'BLE MR. JUSTICE SANJIV KHANNA
         HON'BLE MR. JUSTICE R.V.EASWAR

                      ORDER

% 02.02.2012

In the present appeal under Section 260A of the Income

Tax Act, 1961 (Act, for short), which relates to block assessment

period 1st April, 1988 to 27th October, 1998, we are required to

answer the following substantial question of law:-

"Whether the Income Tax Appellate Tribunal was right in law in deleting the addition made by the Assessing Officer in the block assessment and directing him to treat the protective assessment as having been made on substantive basis?"

2. The respondent assessee is an individual and was

working as a broker/agent in aluminum market. Search and

seizure operation under Section 132 of the Act was conducted

on 27th October, 1998. Thereafter, statutory notice under

Section 158BC of the Act was issued to which the respondent

assessee had filed the return dated 24th December, 1999

declaring „nil‟ undisclosed income.

3. The respondent assessee had earlier made a disclosure of

Rs.2,85,00,000/- on 23rd December, 1997 under Voluntary

Disclosure of Income Scheme, 1997. Thereafter, certificate

under Section 68(2) under the said scheme was issued to him

on 24th December, 1997. As per the said certificate, the cash

and bank balance declared as on 31st March, 1997 was

Rs.1,28,58,390/-.

4. During the course of search, it appears that the

respondent assessee had surrendered and cash amount of

Rs.30,10,000/- was found.

5. In the block assessment proceedings, the Assessing

Officer issued notice dated 14th September, 2000 why

Rs.30,10,000/- found in cash should not be treated as

undisclosed income of the respondent assessee for the period

1st April, 1998 to 28th October, 1998 and added in the block

assessment. In response to this notice, the respondent

assessee contended that amount of Rs.30,10,000/- was not

actually found but was disclosed by him as his income to the

search party. The respondent assessee had stated that he had

informed the search party that he was having cash of

Rs.25,00,000/- in lump sum on the date of the search, but no

adverse inference should be drawn against him.

6. The Assessing Officer examined the said contention and

held that cash amount of Rs.30,10,000/- was not reflected in the

books of accounts. He, however, noticed that Rs.4,66,855/- had

been recorded as cash received in the name of the respondent

assessee during the period 1st July, 1998 to 26th October, 1998.

Accordingly, difference between Rs.30,10,000/- and

Rs.4,66,855/-, i.e., Rs.25,43,145/- was held as unexplained or

undisclosed income and an addition to this extent was made in

the block assessment proceedings.

7. It appears that the Assessing Officer in the regular

assessment proceedings had made an addition of a similar

amount on protective basis out of abundant caution.

8. In the first appeal, the respondent succeeded as the

CIT(Appeals) deleted the said addition holding that the cash

found of Rs.30,10,000/- was disclosed by the respondent

assessee voluntarily. He observed that the Assessing Officer

was required to restrict the block assessment proceedings to

recoveries in the course of search and not look into the income

declared under the Voluntary Disclosure of Income Scheme,

1997. He had held that Rs.30,10,000/- was clearly reflectible

and was a part of the disclosure of Rs.2,85,00,000/- made under

the Voluntary Disclosure of Income Scheme, 1997.

9. The Revenue appealed against this order before the

tribunal. The tribunal noticed the time gap between the

voluntary disclosure which was made on or about 23rd

December, 1997 and the date of search, i.e., 27th October, 1998

and observed that the cash amount of Rs.30,10,000/-, which

was not recorded in the books of accounts, cannot be attributed

to the voluntary disclosure. To this extent, the contention of the

Revenue was accepted and the finding recorded by the

CIT(Appeals) was held to be bad and was reversed. Thereafter,

the tribunal held that addition of Rs.25,43,145/- should not be

made in the block assessment proceedings as the Assessing

Officer had made a similar addition in the regular assessment

proceedings on protective basis. The tribunal relied upon

decision of Calcutta High Court in Shaw Wallace versus ACIT,

(1999) 238 ITR 13 (Cal.).

10. The aforesaid decision of the single Judge was made

subject matter of challenge before a Division Bench and the

decision of the Division Bench is reported as Deputy

Commissioner of Income Tax and Others versus Shaw

Wallace and Company Limited, (2001) 248 ITR 81 (Cal.). The

Division Bench noticed the amendments made in Chapter XIV-B

and addition by way of insertion of an explanation to Section

158BA in view of the conflicting decisions or opinions expressed

by various courts. The said explanation was inserted by

Finance (No. 2) Act, 1998 with retrospective effect from 1st July,

1995 and reads as under:-

"[Explanation.- For the removal of doubts, it is hereby declared that-

(a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period;

(b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period;

(c) The income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.]"

11. Referring to the said Explanation, it has been held by the

Division Bench in Shaw Wallace and Company Limited

(supra) that both regular assessment as well as the block

assessment can be continued separately. Undisclosed income

is a subject matter of the block assessment proceedings,

whereas in the regular assessment proceedings the Assessing

Officer is to compute the regular income as disclosed in the

books of accounts after applying the relevant provisions of the

Act. It has been held:-

" Considering the fact that if the regular assessment is not allowed there may be scope for escapement of assessable income. The interpretation suggested by learned counsel for the assessee, Shri Bajoria, will run counter to the intention of the Legislature. Therefore, we are in agreement with the view expressed by the Gujarat High Court in N.R. Paper and Board Ltd. v. Deputy CIT[1998] 234 ITR 733, and also the view taken by this court in the case of Caltradeco Steel Sales (P.) Ltd. [2000] 243 ITR 643, that there can be a regular assessment in addition to the assessment made under Chapter XIV-B and both the proceedings that is assessment of income under section 143(3) and assessment in the block period under Chapter XIV-B can go on simultaneously. As income assessable under Chapter XIV-B is an "undisclosed income" while the income assessable under Section 143(3) is not an "undisclosed income" that has been clarified in the Explanation that the undisclosed income relating to that block period shall not include the income assessed in the regular

assessment. Therefore, if any income is assessed under the regular assessment that cannot be taxed twice while making the assessment of the block period. But in the returns if some deductions have been claimed which are not permissible under the provisions of the Act of 1961, they can be assessed and taxed only in the regular assessment."

12. In view of the aforesaid legal position, we have to hold that

the findings recorded by the tribunal that the addition could not

have been made in the block assessment, is incorrect. The

facts noted above clearly show that income/cash of

Rs.30,10,000/- had been found at the time of search and was

undisclosed income that can be brought to tax in the block

assessment proceedings. Question of law is accordingly

answered in negative, i.e., in favour of the Revenue and against

the respondent assessee.

The appeal is disposed of. No costs.

SANJIV KHANNA, J.

R.V. EASWAR, J.

FEBRUARY 02, 2012 VKR