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Judgment
F.M. Ibrahim Kalifulla, J.—The brief facts which are required to be stated are that the respondent assessee is the wife of Mr.
S.D.Rajandran, an officer in M/s. Oriental Insurance Company Limited. She is the younger sister of Mrs. Prema Dyaneswaran, w/o Mr.
Dyaneswaran. Mr. Dyaneswaran was an officer belonging to the Indian Administrative Services and was the then Chairman of M/s. Tamil Nadu
Minerals Ltd.,
There was a search on Mr. Dyaneswaran u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') on 19/20.01.1996. In
connection with the said search, the residence of Mr. S.D. Rajendran, the husband of the respondent assessee was also searched.
According to the appellant, number of documents were seized in the course of the search evidencing the fact that the respondent assessee had
''undisclosed income'' assessable to tax u/s 158BD read with Section 158BC. Proceedings were initiated u/s 158BD and notice u/s 158BC dated
07.03.1997, was issued to the respondent. The Notice was served on 18.03.1997, and the assessee filed her return of income in Form No. 2D in
response to the notice on 26.05.1997. She admitted an undisclosed income of Rs. 2,31,098/- and paid tax of Rs. 1,38,659/-.
Thereafter, notice u/s 143(2) dated 29.05.1997, was issued calling for details. The respondent represented through an Income Tax Practitioner
and submitted the details. In the course of the assessment proceedings, after detailed hearing afforded to the respondent, the block assessment
covering the period between 1986-87 to 1996-97 (upto 19.01.1996) was computed. The total undisclosed income was determined in a sum of
Rs. 1,15,75,840/- and the tax thereon was determined at Rs. 69,06,905/-.
The respondent filed an appeal before the Income Tax Appellate Tribunal, hereinafter referred to as ''the Tribunal''. By the impugned order
dated 14.02.2003, the Tribunal revised the income tax to a sum of Rs. 3,82,173/-. Challenging the above said order of the Tribunal, the appellant
has come forward with this appeal.
The Substantial Question of Law that arises for consideration was framed as under:
Whether in the facts and circumstances of the case, the Tribunal was right in holding that the particulars furnished by the assessee to the
Department otherwise than by filing a return and on the basis of a notice, would amount to disclosure for the purpose of the Act?
Assailing the order of the Tribunal, Mr. K. Subramaniam, learned senior standing counsel for the appellant by referring to Sections 158B(b),
158BB, 158BC, 158BD, Form 2B, as well as a decision of a learned single Judge of this Court reported in B. Noorsingh Vs. Union of India and
Others, , contended that the claim of the assess that the so-called ''undisclosed income'' as held by the department cannot be accepted as the same
were already disclosed by the assessee in her reply dated 15.03.1995, to the summons issued u/s 131 of the Act is not acceptable unless such
disclosure had been made by filing a return. In other words, according to the learned standing counsel, if the assessee were to claim that the
department in a block assessment cannot treat certain amounts as undisclosed income, there must have been a valid return filed by the assessee
disclosing the said amount in the manner set out u/s 139(1) of the Act.
To put it differently, according to the learned standing counsel, the assessee cannot be permitted to rely upon any other material other than a
''valid return'' in order to claim that the allegation of ''undisclosed income'' of the department in a block assessment cannot be true, in as much as,
such undisclosed income had already been disclosed by the assessee in a valid return and that such return was filed within the period for filing such
return u/s 139(1) of the Act, even if there was a search prior to the time within which such return could have been filed u/s 139(1) of the Act.
The learned standing counsel contended that in the case of the respondent assessee since the materials were unearthed in the course of search
on her brother-in-law Mr. Dyaneswaran, Section 158BD was attracted and consequently when notice u/s 158BC came to be issued, unless there
had been a valid return filed by the assessee disclosing the income as per the statutory provisions, the Tribunal was not justified in relying upon the
reply filed by the respondent assessee to a summon issued u/s 131 of the Act, to hold that the income was already disclosed and on that footing set
aside the order of the assessing authority.
The learned standing counsel relied upon the decisions reported in:
(i) The Assistant Commissioner of Income Tax Vs. A.R. Enterprises,
(ii) Lakshmi Jewellary Vs. Deputy Commissioner of Income Tax,
(iii) Premjibhai and Sons Vs. Joint Commissioner of Income Tax,
(iv) Manish Maheshwari Vs. Asstt. Commissioner of Income Tax and Another,
(v) The Chief Commissioner of Income Tax and Another Vs. Pamapathi,
As against the above submissions, Mr. C.V. Rajan, learned Counsel appearing for the respondent assessee submitted that the materials which
were relied upon by the assessing authority were not found as a result of the search held on 19/20.01.1996, that the taxing Statute should always
be strictly interpreted and therefore if there was no material for the assessing authority out of the search to rely upon for making the block
assessment u/s 158BB, which is a draconian provision and the tax liability is in the order of 60%, it was incumbent upon the assessing authority to
have satisfactorily stated what were the materials which were unearthed in the course of the search of the persons other than the assessee which
justify such assessment.
According to the learned Counsel, the response letter dated 15.05.1995, sent in response to notice issued u/s 131 of the Act was a disclosure
for the purpose of the Act as defined u/s 158B(b) of the Act and therefore when the various particulars mentioned in the order of assessment of
the original authority were culled out from the said letter and the submissions made therein on behalf of the assessee, there was no scope for the
assessing authority to have made the block assessment u/s 158BB of the Act.
The sum and substance of the submissions of the learned Counsel for the respondent was that there was no materials found in the search, that
the assessing authority relied upon the materials furnished by the assessee in her letter dated 15.05.1995, which was her reply to the notice issued
u/s 131 of the Act and that u/s 158BB undisclosed income would be computed only on the basis of material evidence unearthed in the search and
therefore the findings of the Tribunal was well justified and cannot be interfered with.
The learned Counsel therefore contended that the statutory conditions imposed u/s 158BB, not having been satisfied to make a block
assessment, the order of the Tribunal in having set aside that part of the order of the assessing authority which was not inconsonance with Section
158BB of the Act was fully justified.
In support of the above contentions, the learned Counsel appearing for the respondent assessee placed reliance upon the following decisions
reported in:
(i) Commissioner of Income Tax-III Vs. Premier Tobacco Packers Pvt. Ltd.,
(ii) Commissioner of Income Tax Vs. S. Ajit Kumar,
(iii) Commissioner of Income Tax Vs. P.K. Ganeshwar,
(iv) Assistant Commissioner of Income Tax and Another Vs. Hotel Blue Moon,
(v) The Assistant Commissioner of Income Tax Vs. A.R. Enterprises, and
(vi) Dr. Brijesh Lahoti Vs. Commissioner of Income Tax and Others,
Having heard the learned standing counsel for the appellant as well as the learned Counsel for the respondent, to appreciate the contention of
the parties, it is worthwhile to make a detailed reference to the relevant provisions of the Income Tax Act. Sections 158B to 158BI have been set
out in Chapter XIV-B of the Act. We are concerned with the definition of ''undisclosed income'' u/s 158B(b), the procedure prescribed for
computation of undisclosed income of the block period as set out in Section 158BB and procedure for block assessment as set out in Section
158BC. In the case on hand the block assessment came to be made based on a search held on the person other than the respondent assessee and
therefore Section 158BD also gets attracted.
The definition of undisclosed income is defined u/s 158B(b), which reads as under:
Section 158B(b): ''undisclosed income'' includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry
in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of
account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for
the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false.
*****
Under Section 158BB(1) the computation of undisclosed income of the block period is set out, which is to the following effect:
Computation of undisclosed income of the block period:
Section 158BB(1): The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the
block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books
of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence,
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 u/s 143 or Section 144 or Section 147 have been concluded prior to the date of commencement of the search or the date
of requisition, on the basis of such assessments;
(b) where returns of income have been filed u/s 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 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,--
(A) on the basis of entries 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 where such entries result in computation of loss for any previous year falling in the block period; or
(B) on the basis of entries 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 where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block
period;
(2).....
(3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of
income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee.
(4).....
*****
Procedure for block assessment:
Section 158BC:Where any search has been conducted u/s 132 or books of account, other documents or assets are requisitioned u/s 132A, in the
case of any person, then,--
(a) the Assessing Officer shall--
(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th day of June, 1995, but before
the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days;
(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve
a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be
specified in the notice a return in the prescribed form and verified in the same manner as a return under Clause (i) of Sub-section (1) of Section
142, setting forth his total income including the undisclosed income for the block period:
Provided that no notice u/s 148 is required to be issued for the purpose of proceeding under this Chapter:
Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;
(b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the
provisions of Section 142, Sub-sections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply;
(c) the Assessing Officer, on determination of the undisclosed income of the block period in accordance with this Chapter, shall pass an order of
assessment and determine the tax payable by him on the basis of such assessment;
(d)....
*****
Undisclosed income of any other person:
Section 158BD: Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to
whom search was made u/s 132 or whose books of account or other documents or any assets were requisitioned u/s 132A, then, the books of
account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person
and that Assessing Officer shall proceed u/s 158BC against such other person and the provisions of this Chapter shall apply accordingly.
Keeping the above statutory provisions in mind, when we examine the facts relating to the respondent assessee, the following undisputed facts
emerge:
(a) There was a search u/s 132 of the Act on Mr. Dyaneswaran, brother-in-law of the respondent assessee, as well as, the premises of her
husband Mr. S.D. Rajendran.
(b) In the course of the search number of documents and other materials were seized.
(c) The respondent assessee was issued with a notice u/s 131 of the Act on 01.03.1995, and that the respondent sent two replies dated
11.03.1995 and 15.05.1995.
(d) There was no valid return of income filed by the assessee in the prescribed format for any of the years of the block period.
(e) By virtue of the search made on Mr. Dyaneswaran and the premises of the assessee''s husband and based on the seizure of number of
documents Section 158BD was invoked based on which a notice u/s 158BC came to be issued on 07.03.1997, to the respondent assessee which
was served on her on 18.03.1997.
(f) In response to the notice u/s 158BC, the respondent assessee submitted the return of income in Form No. 2B on 26.05.1997, admitting an
undisclosed income of Rs. 2,31,098/- and paid tax of Rs. 1,38,659/-.
In the above stated background, when we analyse the contentions of the parties, in the foremost, it was contended on behalf of the respondent
assessee that the appellant was not legally justified in invoking the provisions contained in Chapter XIV-B of the Act in the premise that there was
undisclosed income on the part of the respondent assessee.
The sole basis for the said contention was that in response to the summons issued u/s 131, when the respondent submitted a detailed reply
dated 15.05.1995, which contained all her transactions, the said conduct of the respondent would fall within the excluded category of undisclosed
income as defined in Section 158B(b) of the Act.
Mr. C.V. Rajan, learned Counsel for the respondent, in his submissions contended that the definition of undisclosed income specifically
excluded such of the income ""which has not been or would not have been disclosed for the purposes of this Act"" and that when the reply dated
15.05.1995, of the respondent assessee was in response to the summons issued u/s 131 of the Act which contained all the details, the said
conduct and the act done would squarely fall within those set of expressions and whatever details disclosed in the said letter of the respondent
would be covered by that exempted part of the definition of ''undisclosed income'' and therefore the appellant could not have ignored the very
many details furnished in the said communication while proceeding against the respondent under Chapter XIV-B of the Act.
Based on the above submissions, the learned Counsel placed reliance upon the following decisions reported in:
(i) The Assistant Commissioner of Income Tax Vs. A.R. Enterprises,
(ii) Commissioner of Income Tax Vs. S. Ajit Kumar,
(iii) Commissioner of Income Tax Vs. P.K. Ganeshwar, and
(iv) Dr. Brijesh Lahoti Vs. Commissioner of Income Tax and Others,
Though in the first blush such a contention appears to be sound, on a close scrutiny of the other provisions contained in the said Chapter XIV-
B, we are not persuaded to accept such a contention raised on behalf of the respondent.
In the first place, the submission made on the set of expression contained u/s 158B(b) cannot be considered in isolation. The various provisions
contained in Chapter XIV-B has been specifically captioned under the head ''Special Procedure for Assessment of Search Cases''. The contention
that the various disclosures in the letter dated 15.05.1995, should be construed as one disclosed for the purpose of this Act, if has to be accepted
as an abstract proposition, then the various other procedures and prescriptions set out in the rest of the provisions of the said Chapter would
become otiose. For instance, u/s 158BB(1), while prescribing the method of computation of undisclosed income of the block period, it is stipulated
that it should be on the basis of evidence found as a result of search or requisition of books of account or other documents and such other
materials or information as are available with the Assessing Officer and relatable to such evidence. The main thrust is the evidence found as a result
of search which should form the basis and all other situations should be relatable to such evidence. Therefore, the main ingredient while computing
the ''undisclosed income'' of any block period to be satisfied is the evidence found as a result of a search which should form the basis.
Further u/s 158BB(1)(c), such determination of undisclosed income for the block period can be made where the due date for filing the return
of income has expired, but no return of income has been filed.
u/s 158BB(1)(ca), such determination can also be made even in respect of cases not falling u/s 158BB(1)(c) and where the due date for filing
the return of income has expired, but no ''nil'' return has been filed.
A conjoint reading of the substantial part of Section 158BB(1) and the other sub-clauses in the said Section, in particular Sub-clause (c) and
(ca), makes it clear that the determination of the ''undisclosed income'' of the block period based on evidence found in the course of search can be
made where no return had been filed within the due date and where a search has been conducted after the expiry of the due date and any material
evidence came to be unearthed in the course of such search. Conversely, once the return has been filed within the due date, the scope of
determining the ''undisclosed income'' would be to a very limited extent of such income which had been failed to be disclosed in the return and
which came to be deducted in the course of search based on any materials gathered in the form of evidence as a result of such search.
Therefore, if one were to contend that the allegation of undisclosed income based on Section 158BB cannot be accepted, one who takes such
a stand has to necessarily show that alleged ''undisclosed income'' had already been disclosed in the return filed before the expiery of the due date.
Therefore, the set of expression ""income or property which has not been or would not have been disclosed for the purposes of this Act"".,
contained in the definition clause of ''undisclosed income'' u/s 158B(b) will have to be read and understood as explained u/s 158BB(1) of the Act.
The expression ''for the purposes of this Act'' cannot have the expanded meaning to the whole of the Act, but in our considered opinion, should be
read in the context in which it is used in the various provisions contained in Chapter XIV-B of the Act. For this proposition of law, reference can
be made to the decision reported in 107 IC 161 (Mirch v. Russel) where it has been held as under-
By the application of the maxim ejusdem generis, which is only an illustration or specific application of the broader maxim noscitur a sociis, general
and specific words which are capable of an analogous, meaning being, associated together, take colour from each other, so that the general words
are restricted to a sense, analogous, to the less general.
The above statement of ours based on Sections 158B(b) and 158BB(1) of the Act is further strengthened by a specific provision contained in
Section 158BB(3) of the Act, which specifically mandates that the burden of proving to the satisfaction of the Assessing Officer that any
''undisclosed income'' had already been disclosed in any return of income filed by the assessee before the commencement of search or of the
requisition, as the case may be, shall be on the assessee. Such a stringent stipulation by way of casting the onus on the assessee to discharge the
burden makes it amply clear that one cannot claim the disclosure of any income, much less, ''undisclosed income'' based on any other material
other than the return filed before the expiry of the due date and where after any search takes place.
A reading of Section 158BC(b), further makes it clear that the determination of undisclosed income for the block period can be made by the
assessing officer only in the manner laid down u/s 158BB. Once the sub-SeC. 158BC, reinforces the fact that Chapter XIV-B will have to be
treated as a separate code by itself for the purpose of making a determination of the undisclosed income of the block period, in as much as, the
said sub-clause ''c'' makes it clear that the Assessing Officer, on determination of the undisclosed income for the block period in the said Chapter,
pass an order of assessment and determine the tax payable based on such assessment.
Therefore, a conjoint reading of Sections 158B(b), 158BB(1) & (3), 158BC, second proviso to Section 158BC(a) and 158BC(b) & (c),
leaves no room for doubt that if one were to claim that there was a prior disclosure of income in order to contend that there cannot be any
determination by way of block assessment under Chapter XIV-B of the Act, it will be his/her bounden duty to establish that such undisclosed
income had already been disclosed in his/her return filed before the expiry of the due date for filing such return.
Once we steer clear of the said legal position and examine the case on hand, we are unable to accept the contention of the learned Counsel for
the respondent assessee that disclosure made in the letter dated 15.05.1995, should be taken as a disclosure of the ''undisclosed income'' spelt out
in the assessment order. In the present case on hand as discussed earlier admittedly the assessee did not file any return before the proceedings
under 131 and thereafter the search made u/s 132 of the Income Tax Act, 1961. The only action on the part of the assessee before the said
proceedings was by way of sending a reply to the notice issued to her u/s 131 of the Act. Admittedly, the assessee kept quite after the reply by not
complying with the provisions of the Income Tax Act by filing a return. What is submitted by way of a reply was certain incorrect particulars as
found by the assessing officer on a consideration of the materials placed before him. Therefore for the inaction on the part of the assessee in
disclosing the income by way of filing the return, she cannot take advantage of the mere reply sent to the notice issued u/s 131 of the Act and
thereafter contend that she has disclosed the income.
Going by the admitted facts which shows that there was a search made u/s 132 and thereby Section 158BD was attracted which empowered
the Assessing Authority to proceed under Chapter XIV-B, the question for consideration is whether in the course of such search any material was
seized, which form the required evidence for proceeding against the respondent assessee u/s 158BB and 158BC of the Act. It is relevant to note
and stress that it was not the case of the respondent assessee that in the course of the search no materials were seized. In the elaborate order
passed by the Assessing Authority, while we find a specific reference to the seizure of materials as per the Panchanama dated 20.03.1996, as
stated in paragraph 2.4.2, in no part of the order of the Assessing Authority, there was any reference to any contentions raised on behalf of the
respondent assessee that nothing was seized in the course of search.
The various reference to different transactions of the respondent assessee in the block period makes no reference to the respondent assessee''s
replies dated 11.03.1995 and 15.05.1995, claimed to have been submitted to the summons issued u/s 131 of the Act. In fact the respondent was
represented by its Income Tax Practitioner and several of the contentions made on behalf of the respondent assessee have been specifically
referred by the assessing authority in the order while recording his conclusions. Even while preferring the appeal before the Tribunal while there
was no specific allegation to the effect that there was no incriminating materials seized in the course of the search.
The contentions recorded in the order of the Tribunal makes it clear that the assessment was solely based on the materials seized and the reply
of the respondent assessee had no role to play. In paragraph 19 of the order of the Tribunal, the Tribunal itself has recorded the contentions made
on behalf of the assessee to the following effect:
...The assessee submits that the details of the borrowings were already available in the notings found in the seized documents on 19.01.1996
and 20.01.1996. When the notings are available against the loan credits disclosed by the assessee, there is no basis for the assessing officer to
treat the same as the undisclosed income of the assessee. It is the case of the assessee that the information available from the seized records should
be read in its entirety and in a logical manner. The assessing officer cannot accept a portion of the seized material and reject another portion of the
seized materials. The assessee also contends that confirmation letters were filed before the assessing officer in respect of those loan credits and
affidavits were filed, and therefore absolutely there is no basis to treat the loan credits as the undisclosed income of the assessee....The assessee
also submits that there is no basis for the assessing officer to treat Rs. 30,000/- as the undisclosed income out of the sum of Rs. 32,150 found in
the course of search.
In fact in the present impugned order of the Tribunal, major part of the order of the assessing authority came to be set aside. The Tribunal
entertained three additional grounds raised by the respondent assessee.
According to the respondent assessee, there was no proper notice served on the assessee to invoke the jurisdiction u/s 158BD and
consequently the entire block assessment was not justified. The second additional ground was that u/s 158BD necessary reasons should have been
recorded before making the block assessment and on that ground also the assessment was invalid. Both the above first two additional grounds
were rejected by the Tribunal and the respondent has not made any challenge to the said part of the order of the Tribunal by way of raising
substantial questions of law. The last of the additional ground was to the following effect:
22(iii). The information and materials used by the assessing officer to complete the impugned block assessment u/s 158BD had in fact already been
furnished to the Asstt. Director of Investigation, Madurai as early as on 15.05.1995 itself, who sought relevant information from the assessee. In
the course of search, no documents, materials or information other than those documents, materials or information furnished to the Asstt. Director
of Investigation, Madurai on 15.05.1995, have been recovered. Therefore, there is no ""undisclosure"" as far as the case of the assessee is
concerned and therefore the impugned assessment is void ab initio.
In which the specific contention raised was that all the information where already disclosed in the reply dated 15.05.1995, itself and that in the
course of search no document or materials was recovered or information gathered other than what was disclosed in the reply dated 15.05.1995.
Therefore, it was for the first time that too by way of an additional ground, the contentions based on the letter dated 15.05.1995, came to be
made. Having regard to the fact that prior to the raising of the said additional ground, the respondent assessee never raised the contention viz.,
about the absence of any materials seized in the course of search and the fact that while on the other hand a specific reference to the seizure of
materials based on the Panchanama dated 20.03.1996, as well as the reference to various contentions made on behalf of the assessee in the order
of the Tribunal itself making specific reference to the seized materials, we wonder how a contention could have been entertained as has been made
in the additional grounds to the effect that no materials were seized other than what was available in the letter dated 15.05.1995. On that very
ground, we find no substance in the submission made on behalf of the respondent assessee in stating that there was no material evidence found in
the course of the search.
It was unfortunate that in the light of the above facts specifically noted by us, in the order of the assessing authority as well as in the Tribunal''s
order itself, there was no scope for the Tribunal to conclude that the entirety of the information was only based on the letter dated 15.05.1995 and
consequently major part of the order of assessment u/s 158BD of the Act cannot be sustained.
In other words, having regard to the uncontroverted statements found in the assessing authority''s order about the seized materials covered in
the Panchanama dated 20.03.1996 and the various submissions made on behalf of the assessee by the authorised representative before the
Tribunal making specific reference to the seized materials, the ultimate conclusion of the Tribunal in stating that the assessing authority''s order of
assessment about the ''undisclosed income'' were all relatable to the reply dated 15.05.1995, of the respondent assessee was wholly unjustified
and un-called for.
It is unfortunate that the Tribunal was twined by the feeble contention raised in the third additional ground by stating that no materials were
seized in the course of the search and that all the information found in the order of assessment were disclosed in the reply dated 15.05.1995.
While such a contention of the respondent assessee found favour with the Tribunal as noted by us earlier, in the very same order, the Tribunal
had itself recorded the submission of the authorised representative of the assessee herself wherein the contentions were raised questioning the
assessment based on ''undisclosed income'' with particular reference to several seized materials as untenable. Apparently the Tribunal completely
lost sight of those related factors when it entertained the third additional ground and chose to accept the same. Of course, in that process, the
Tribunal has not considered the merits of the conclusions made by the assessing authority in respect of various items of ''undisclosed income'' and
the correctness of those evidence made by the assessing authority.
Having regard to our above conclusions, we are not able to countenance the plea of the learned Counsel for the respondent assessee that there
was no materials found in the search and that what was relied upon by the assessing authority were based on the information furnished in the letter
dated 15.05.1995. We are not also able to appreciate the contention that there was no material evidence unearthed in the course of the search in
order to satisfy the stipulation contained in Section 158BB(1) of the Act. We also do not find any support in the contention of the learned Counsel
for the respondent assessee that all information were already disclosed and that therefore there was no scope to make an assessment of
undisclosed income.
When we examine the various decisions relied upon by the learned Counsel for the respondent assessee, the decision reported in The Assistant
Commissioner of Income Tax Vs. A.R. Enterprises, was a case where the Division Bench distinguished the decision of the learned Single Judge
reported in B. Noorsingh Vs. Union of India and Others, . While distinguishing the decision, the Division Bench has held as under in paragraph 16:
We are, therefore, of the considered opinion, that the observations made in B. Noorsingh Vs. Union of India and Others, , would only have a
bearing on the point whether the assessee is entitled to file the return after the expiry of the due date, particularly after the conduct of search, but
would not eschew the statutory consequence of advance tax paid by the assessee while deciding the income alleged to have been undisclosed by
the assessee in spite of the self-assessment made u/s 139 read with Section 140A of the Act, while paying his advance tax.
In the above decision the assessee though did not file a return for the relevant assessment year, had paid the advance tax and the assessing
authority however opined that since the assessee failed to file the return as on the date of the search, there was income which remain undisclosed.
The Division Bench taking note of the advance tax paid by the assessee held that the said circumstance cannot be lightly disregarded as it had its
own statutory consequence. Having regard to such a specific circumstance of payment of advance tax noted by the Division Bench in that case,
which demonstrate that the assessee had no idea of withholding disclosure of any income, the Division Bench held that the non-filing of the return
before the due date and as on the date of search cannot be held against the assessee. The Division Bench held that the very payment of advance
tax by the assessee would show that the assessee by making a self assessment u/s 139 read with Section 140A of the Act paid the advance tax
and therefore the proceedings under Chapter XIV-B was not justified.
The learned Senior Standing Counsel appearing for the Income Tax Department submitted that the judgment of the Division Bench is pending
consideration before the Hon''ble Apex Court. However, we only venture to consider the applicability of the judgment as discussed above.
In any case, having regard to the distinguishable feature namely the assessee in that case paid advance tax based on its own self assessment u/s
139 read with Section 140A of the Act, the said case is clearly distinguishable.
Chapter 17 of the Act speaks about Collection and Recovery of Tax. Part-C of the said Chapter speaks about the Advance Payment of Tax.
Section 207 of the Act speaks about liability for payment of advance tax of the Act. Section 208 and 209 speaks about conditions of liability to
pay advance tax and the consequential computation. Similarly Section 210 provides for the payment of advance tax by the assessee of his own
accord or in pursuance of order of Assessing Officer and Section 234B deals with interest for defaults in payment of advance tax. A conjoint
reading of the above said provisions would clearly show that an assessee can pay the advance payment tax either of his own or at the instance of
the assessing officer as the case may be. An advance tax is the payment of tax. Therefore an action which involves a payment of tax indicating the
source of income cannot be treated on par with any intimation given on the part of the assessee. In the former case, the action is voluntary or as
per the directions of the officer whereas in the later case it is only by way of an explanation. Therefore, we are of the considered view that the
judgment reported in The Assistant Commissioner of Income Tax Vs. A.R. Enterprises, is not applicable to the present case on hand and is
distinguishable. We also make it clear that we express no opinion of the ratio laid down in the said judgment.
The above decision was relied upon by the Madhya Pradesh High Court-Indore Bench in the decision reported in Dr. Brijesh Lahoti Vs.
Commissioner of Income Tax and Others, , in paragraph 10, the Division Bench held as under:
We agree with Mr. Chaphekar, learned senior counsel for the appellant, that where the assessee discloses his income to the Department
before the date of search in some manner or the other, it may be difficult to hold that such income is to be treated as undisclosed income for the
purpose of assessment in accordance with Chapter XIV-B of the Act....
Having regard to the implications of the relevant provisions of Chapter XIV-B as discussed by us in this order in paragraphs 23 to 31, with great
respect, we are not inclined to subscribe to such a wide proposition stated in the said decision to the effect that the disclosure by the assessee of
his income before the date of search in some manner or the other would defeat the assessment being made under Chapter XIV-B of the Act.
It is further to be seen that the facts involved in the said judgment of the Division Bench of the Madhya Pradesh High Court are totally different.
In the said case the assessee has not filed any return or advance tax before the search. Therefore the Hon''ble Division Bench was pleased to
observe in the absence of the material the income will have to be treated as ''undisclosed income''. Further the scope of Chapter XIV-B has not
been gone into in the said case. It is well established principle of law that for a judgment to be treated as a precedent will have to involve a
conscious consideration of the issue raised in the case to which it is sought to be applied. In other words, a passing remark or observation made
cannot be a binding precedent unless the issue is taken into consideration and decided by applying the provisions of law.
It is also a well established principle of law that a judgment cannot read like a statute and the ratio laid down therein will have to apply in the
facts of the case. In Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, , the Hon''ble Supreme Court in
paragraph 52 has observed as follows:
...It is a well-settled principle in law that the court cannot read anything into a statutory provision or a stipulated condition which is plain and
unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. Similar is the
position for conditions stipulated in advertisements.
Words and phrases are symbols that stimulate mental references to referents. The object of interpreting a statute is to ascertain the intention of the
Legislature enacting it. See Institute of Chartered Accountants of India Vs. Price Waterhouse and Another, . The intention of the legislature is
primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been
said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as
meaningless has to be avoided. As observed in Crawford v. Spooner (1846) 6 Moo PC 1 the courts cannot aid the legislature''s defective
phrasing of an Act, they cannot add or mend, and by construction make up deficiencies which are left there. See State of Gujarat and Others Vs.
Dilipbhai Nathjibhai Patel and Another, . It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do
so. See Stock v. Frank Jones (Tipton) Ltd. (1978) 1 All ER 948 (HL). Rules of interpretation do not permit the courts to do so, unless the
provision as it stands is meaningless or of doubtful meaning. The courts are not entitled to read words into an Act of Parliament unless clear reason
for it is to be found within the four corners of the Act itself. (Per Lord Loreburn, L.C. in Vickers Sons)
The question is not what may be supposed and has been intended but what has been said. ''Statutes should be construed not as theorems of
Euclid'', Judge Learned Hand said, ''but words must be construed with some imagination of the purposes which lie behind them"". See Lenigh
Valley Coal Co. v. Yensavage 218 FR 547. The view was reiterated in Union of India and Others Vs. Filip Tiago De Gama of Vedem Vasco De
Gama, .
In D.R. Venkatachalam and Others Vs. Dy. Transport Commissioner and Others, it was observed that the courts must avoid the danger of a priori
determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to
be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation.
While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of
process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. See Commissioner of Sales Tax, Madhya Pradesh Vs.
M/s. Popular Trading Company, Ujjain, . The legislative casus omissus cannot be supplied by judicial interpretative process....
Hence applying the said ratio to the facts of the present case on hand, we are of the opinion that the judgments relied upon by the assessee
reported in The Assistant Commissioner of Income Tax Vs. A.R. Enterprises, and Dr. Brijesh Lahoti Vs. Commissioner of Income Tax and
Others, are not applicable to the present case on hand.
The reliance placed upon the decision reported in Commissioner of Income Tax Vs. S. Ajit Kumar, , is also not helpful to the assessee in as
much as there was a categorical finding in paragraph 5 which is as follows:
...Admittedly, no material was found during the course of search operation in respect of the amount said to be paid in cash over and above the
cheque payment. Hence, the Tribunal correctly come to the conclusion that the information or material found during the course of survey operation
at the premises of M/s. Elegant Constructions were not relatable to any material found during the course of search operation. Therefore, the
Tribunal is right in its view that material or information found at the premises of M/s. Elegant Constructions, in the course of survey proceeding,
could not be a basis for making any addition in the block assessment....
Having regard to the peculiar facts noted above in the said decision, it can have no application to the facts of this case.
In the decision reported in Commissioner of Income Tax Vs. P.K. Ganeshwar, the facts disclosed that based on a search carried out on the
assessee u/s 132 of the Act, certain items were seized and assessment was made for the block period. Thereafter, in an investigation, certain fixed
deposits in fictitious names were found which were treated as undisclosed income. The Tribunal held that since the fixed deposit amounts were not
detected as a result of search but by the investigation which followed the search, the same could not be included in the ''undisclosed income'' of the
block period. Having regard to the uncontroverted fact that the fixed deposits were not materials seized in the course of the search, the same was
not treated as evidence unearthed in the course of the search. In the said circumstances, the said decision is also not helpful to the respondent
assessee.
On the other hand, the decision of the learned Single Judge reported in B. Noorsingh Vs. Union of India and Others, , in our considered
opinion is inconsonance with the specific stipulation contained in the provisions of Chapter XIV-B of the Act. In the penultimate paragraph at page
382, the learned Single Judge has held as under:
The payment of advance tax by itself does not establish an intent to disclose the income. The disclosure is to be made by filing the return. Even in
search cases were the time for filing the return u/s 139(1) has not expired, income disclosed in the books of account is not treated as undisclosed
income. All that is denied to the assessee in search cases is the opportunity to file a return after the period specified in Section 139(1) and to claim
that the income that he would have disclosed in a belated return is not to be regarded as undisclosed income. The reason for denying such
opportunity in search cases is obvious. After having suffered a search, the assessee is not to be enabled to escape the consequences of his failure
to disclose all his income by filing a return after the search and after the expiry of the time prescribed u/s 139(1) and by disclosing therein income
which had remained undisclosed upto the date of the search. Section 158BB(1)(c) is not in any way unconstitutional.
The above statement of law of the learned Judge is fully inconsonance with the provisions contained in Sections 158BB(1)(c) and 158BB(3) of the
Act. We fully endorse and approve the above said proposition of law laid down by the learned Judge.
It will be worthwhile to refer to the principles laid down by the Hon''ble Supreme Court while working out the provisions under Chapter XIV-
B of the Act for making block assessment of ''undisclosed income''. In the decision reported in Assistant Commissioner of Income Tax and
Another Vs. Hotel Blue Moon, , where the Hon''ble Supreme Court has held as under in paragraph 12:
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. Search is the sine qua non for the block assessment. The special provisions are devised to operate in the distinct field of
undisclosed income and are clearly in addition to the regular assessments covering the previous years falling in the block period. The special
procedure of Chapter XIV-B is intended to provide a mode of assessment of undisclosed income, which has been detected as a result of search.
It is not intended to be substituted for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in
addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence
found as a result of search or requisition of books of account or documents and such other materials or information as are available with the
Assessing Officer. Therefore, the income assessable in block assessment under Chapter XIV-B is the income not disclosed but found and
determined as the result of search u/s 132 or requisition u/s 132A of the Act.
Similarly in the decision reported in Manish Maheshwari Vs. Asstt. Commissioner of Income Tax and Another, it has been held as under in
paragraph 11:
The condition precedent for invoking a block assessment is that a search has been conducted u/s 132, or documents or assets have been
requisitioned u/s 132A. The said provision would apply in the case of any person in respect of whom search has been carried out u/s 132A or
documents or assets have been requisitioned u/s 132A. Section 158BD, however, provides for taking recourse to a block assessment in terms of
Section 158BC in respect of any other person, the conditions precedent wherefor are:(i) satisfaction must be recorded by the Assessing Officer
that any undisclosed income belongs to any person, other than the person with respect to whom search was made u/s 132 of the Act; (ii) the
books of account or other documents or assets seized or requisitioned had been handed over to the Assessing Officer having jurisdiction over such
other person; and (iii) the Assessing Officer has proceeded u/s 158BC against such other person.
All the three ingredients have been satisfied by the Assessing Authority while passing the order of assessment.
The decision relied upon by the learned standing counsel for the appellant reported in The Chief Commissioner of Income Tax and Another
Vs. Pamapathi, though a converse case, fully supports the case of the appellant. The Division Bench has held as under in para 11:
11.When the said letter cannot be made use of against the assessee, then the question to be considered by this Court is whether such letter can be
treated as a return filed under the provisions of the Income Tax Act to enable the Assessing Officer to pass an order of assessment. The learned
Counsel for the Revenue fairly submits that the letter dated January 25, 1995, cannot be treated as a return. It is also not in dispute that return has
to be filed in the proforma prescribed under the Income Tax Act. The letter dated January 25, 1995, is not in such proforma. After a perusal of the
letter dated January 25, 1995, it is clear to us that there is no unconditional disclosure of income by the assessee....
Applying the above principles to the facts of this case, we find the necessary ingredients set down therein have been satisfactorily complied
with by the assessing authority while passing the order of assessment under Chapter XIV-B of the Act and in the absence of any illegality or
irregularity in making such assessment of individual items pointed out by the Tribunal, the interference with the order of the assessing authority by
the Tribunal was not justified.
As pointed out by us earlier since the Tribunal had proceeded on the footing that except such of those items noted by it in paragraph 46, in
respect of the rest of items, the information was already disclosed by the respondent assessee in her communication dated 15.05.1995, and on that
ground, the assessing authority''s order was set aside, we are of the view, while setting aside the order of the Tribunal and as rightly stated by the
learned standing counsel for the appellant it calls for a remittal of the matter back to the Tribunal for passing fresh orders on various items of
''undisclosed income'' found by the assessing authority other than what has been found by the Tribunal in paragraph 46 of its order.
Therefore, while setting aside the order impugned in this appeal, the matter is remitted back to the Tribunal only to consider the order of the
assessing authority on merits with reference to each of the items based on which the assessing authority determined the undisclosed income as held
in paragraph 4.11.13 of its order and pass appropriate orders in accordance with law. This appeal is allowed and the matter is remitted back. The
question of law is answered in favour of the appellant. All M.Ps are closed. No order as to costs.