Vengat Bava vs Commissioner of Income Tax

C.N. Ramachandran Nair, J.—This appeal is filed by the assessee against the order of the Tribunal partly confirming and partly cancelling the Commissioner of income tax (Appeals)''s order on the block assessment completed on the appellant-assessee for the period commencing from 1988-89 to 1998-99. A search was carried out in the premises of the assessee, a non-resident Indian, on September 30, 1997. In the search, the Department detected massive investments made by the assessee in 23 items of property including construction of a house. Cash flow statement was called for by the Assessing Officer to prove the investments and expenditure. Even though the assessee furnished the same, it was not accepted in full. The Assessing Officer made addition towards unexplained investments and expenditure. On appeal filed by the assessee, substantial relief was granted by the Commissioner of income tax (Appeals) inasmuch as he reduced one item of addition of Rs. 9,90,000 to Rs. 5,57,500. So far as addition on account of cash credit is concerned, the amount assessed at Rs. 16.25 lakhs was reduced by the Commissioner of income tax (Appeals) to Rs. 13 lakhs. Even though the other additions are sustained by the Commissioner of income tax (Appeals) the Tribunal deleted the entire additions except the above two additions sustained by the Commissioner of income tax (Appeals). It is against this order the assessee has filed this appeal. We have heard Sri P. Balakrishnan, counsel appearing for the appellant-assessee, and senior standing counsel appearing for the respondent.

The contention raised by the assessee''s counsel is that block assessment u/s 158BC itself is not tenable because it is not based on any evidence gathered in the course of search. Counsel has relied on the Central Board of Direct Taxes circular found at [2002] 258 ITR (St.) 58, wherein it is stated that amendment to Section 158BB by the Finance Act, 2002 authorises block assessment of undisclosed income only based on evidence found in the search and material information gathered in post-search enquiries made on the basis of evidence found in the search. Even though counsel cited several decisions of High Courts on this issue, we do not think on the facts of this case, the petitioner can successfully contest the assessment confirmed in appeal by the Tribunal because in the course of search investments in several items of properties and expenditure of various types were detected by the Department. However, search led to enquiry, and in the course of enquiry even though the assessee furnished detailed cash flow statement and furnished names and addresses of debtors who have advanced loans to the assessee, and also withdrawals from his own NRI account, the Assessing Officer only accepted part of the explanation and made additions under various heads. In two stages of appeals, the assessee got substantial relief. The question is whether this Court will be justified in interfering with the balance additions sustained. It is obvious that the additions are made u/s 69 of the income tax Act on unexplained investments and u/s 68 on unexplained cash credit because enquiry was specifically directed against specific investments and cash credits furnished by the assessee in the course of furnishing cash flow statement. Section 260A authorises this Court to interfere with Tribunal''s order only on substantial questions of law. In this case, the issue involved is only whether the lower authorities including the Tribunal were justified in rejecting the explanations regarding investments and expenditure which are attempted to be proved through the cash flow statement containing borrowals taken from several relatives. However, additions were sustained in part only because relatives did not prove the transactions of advances made to the assessee and the assessee could not prove even substantial amount of withdrawals from his own account. We do not find any substantial question of law is involved on findings on this issue which are based on documentary evidence. The question raised by the assessee that is whether assessment u/s 158BC is a self-contained procedure for assessment is a broad proposition which even if answered in favour of the assessee is not going to benefit the assessee in the form of any relief in appeal. Moreover, in this case we find that assessment was based on materials gathered on inspection, that is proof of investments in landed properties and expenditure in course of time under various heads. As already stated, additions under Sections 68 and 69 are also permitted in an assessment u/s 158BC of the Act and all that the Assessing Officer has done is to make the assessment only in terms of the provisions of Chapter XTV-B of the Act. Moreover, except additions of two items, all other additions are cancelled by the lower authorities.

Therefore, we do not find any ground to interfere with the order of the Tribunal. Consequently, the appeal filed by the assessee is dismissed.