Commissioner of Income Tax vs T. Sivaprabhaskar

F.M. Ibrahim Kalifulla, J.—The substantial questions of law raised in this appeal are as under: 1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in quashing the block assessment made u/s 158BC read with section 158BD of the income tax Act?

Whether on the facts and in the circumstances of the case, the Tribunal is right in law in not considering the judgments of the Kerala High Court in the case of Commissioner of Income Tax Vs. Deep Arts, and that of the Commissioner of Income Tax Vs. Indore Constructions (P) Ltd., which had clearly held that even if no search is conducted in the premises of the assessee, the Assessing Officer has jurisdiction to make assessment on the material unearthed in a search conducted on another premises?

Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the statement recorded from the assessee during the search and the evidence gathered during the post-search enquires did not constitute valid material for completion of the assessment for the block period even though the Tribunal has held the assumption of jurisdiction by the Assessing Officer u/s 158BC read with section 158BD was valid?

It is an order of block assessment made based on a search held u/s 132 of the IT Act, of the assessee''s premises at Tennur, Trichirapalli on 21-3-1996. After the search, based on the information gathered, proceedings u/s 158BD of the Act, were initiated on 5-11-1997 and the assessee was called upon to submit his block return of income in Form No. 2B for the block period 1986-87 to 1996-97.

As there was no response from the assessee, a notice u/s 142(1) of the Act, was issued to the assessee requiring him to furnish the block return positively by 20-7-1998. A penalty notice was also subsequently issued and thereafter, a proposal was sent to the assessee for completion of the block assessment ex parte by proceedings dated 22-10-1998 along with a notice u/s 142(1) of the Act. The assessee was required to produce the supporting evidence in respect of the investments specified in the proposal sent on 22-10-1998 and such production was directed to be made by 5-11-1998. Even to that proposal, there was no response from the assessee.

A summons was issued for his appearance on 19-11-1998. On 19-11-1998, for the first time, a sworn statement of the assessee was recorded. The assessee also filed his block return in Form No. 2B showing ''nil'' income on the same day namely, 19-11-1998. The assessee filed his cash flow statement on 23-11-1998. Thereafter, the appellant issued a detailed letter along with a notice u/s 142(1) of the Act, on 24-11-1998 indicating the additions proposed to be made. On behalf of the assessee, the objections were filed on 25-11-1998.

It is in the above stated background, the block assessment for the block period 1986-87 to 1996-97 was completed, wherein the income was determined in a sum of Rs. 8,20,327 and the tax in a sum of Rs. 4,92,196 at the rate 60 percent came to be determined.

When the issue was taken up on appeal at the instance of the respondent/assessee before the Tribunal, the Tribunal having set aside the order of block assessment, giving liberty to the appellant to make a regular assessment or reassessment on the basis of the information available as per the provisions of the Act, the appellant has come forward with this appeal.

We heard Mr. K. Subramaniam, learned senior standing counsel for the appellant and Mr. V.D. Gopal, learned counsel for the respondent/assessee.

A perusal of the order of the assessing authority as well as that of the Tribunal discloses that even while considering the cash flow statement filed by the respondent/assessee, what was mainly relied upon by the assessing authority was not based on any search materials, but were based on the statement of one T. Sivaprabhaskar. The Tribunal also noted that in the acknowledgement enclosed with the letter of ITO, Ward-III(1), Trichy dated 14-11-2006, there was no mention about any seized material except the sworn statement of the said T. Sivaprabhaskar dated 3-4-1996 and that of the assessee dated 21-3-1996.

It is well-settled that in order to cast a liability by way of an order of block assessment under Chapter XIV-B, the period comprising previous years relevant to ten assessment years preceding a previous year in which the search was conducted u/s 132 of the Act, such assessment can be made on the basis of evidence found as a result of the search and such other material or information that were available with the Assessing Officer, which were also relatable to such evidence.

A perusal of the order of the assessing authority discloses that there was no such evidence, which was available and unearthed in the course of the search held on 21-3-1996 or such information, which was relatable to such evidence found in such material.

In such circumstances, the conclusion of the Tribunal that the reliance placed upon any other material, which did not form part of such search material based on the search conducted u/s 132 of the Act, of the assessee''s premises on 21-3-1996, can form the basis for making the block assessment (sic). Therefore, we do not find any illegality in the conclusion of the Tribunal in having set aside the block assessment and giving liberty to the assessing authority to make regular assessment or reassessment based on the information available as per the provisions of the IT Act. The questions of law raised are therefore answered against the appellant and in favour of the assessee. The appeal fails and the same is dismissed. No costs.