By Sri K v. Aravind, Advocate

IN THE HIGH COURT OF KARNATAKA AT BANGALORE Dated this the 19[th]day of August, 2014| PRESENT THE HON’BLE MR. JUSTICE N KUMAR ANTI THE HON’BLE MRS. JUSTICE RATHNAKALA ITA No.649 of 2008 BE TW BE Ll.The Commissioner ot Income Tax.Central Circle C.R. BuildingQueens Road|BangaloreCentral Circle C.R. BuildingQueens Road|Bangalore iaThe Assistant Commissioner of Income Tax| Central Circle-I]C.R. BuildingQueens Road.Bangalore.. AppellantC.R. BuildingQueens Road.Bangalore.. Appellant (By Sri K. V. Aravind, Advocate) AND: ohri G. P. Goyal6A & OB, Sah Jeevan Apartment|RMV ExtensionBangalore... Respondent o (Sri B.N. Jayadeva, ADvocate) This ITA filed under Section 260-A of IT Act, 1961arising out of order dated 13-12-2007 passed in IT(SS)A|No.131/BNG/1997, for the Assessment year 1987-88 to|1997-98, praying to (i) formulate the substantial questions oflaw stated therein; (11) allow the appeal and set aside the|orderpassedbytheITATBangaloreinIT(SS)ANo.131/BNG/1997, dated 13-12-2007 confirm the order of the Appellate Commissioner confirming the order passed by|the Assistant Commissioner of Income Tax, Central Circle-Il, Bangalore. This ITA coming on for hearing this day,N. KUMAR Jdelivered the following: JU DBGMENT The revenue has preferred this appeal challenging the|order passed by the Tribunal partly allowing the appeal ofthe assessee and granting relief to him. 2. The subject matter of this appeal is as under:- (1)Investments made by certain share holders in|M/s Bellaire Apartments Limited;M/s Bellaire Apartments Limited; (11)Investments made in M/s Syndicate RoadCarriers;Carriers; (111)Investments made in M/s Bullion Investments|and Financial Services; andand Financial Services; and (iv)Cost otf construction which was discoveredduring the course of search.during the course of search. 3. The Tribunal has held that, in all these cases theundisclosed income is not detected as a result of search.The block assessment proceedings require the income to be|computed based on the evidence gathered as a result of|search. It is not permissible to make an addition without|reference to any material gathered at the time of search and,therefore, the Tribunal interfered with the order passed by|the lower authorities and granted relief to the assessee. 4. Therefore, the two substantial questions whicharise for our consideration in this appeal are as under:- 1.Whether the Tribunal was correct in holding|thattheadditionsOF.accountofunexplained investment in shares, bullionetc., do not constitute undisclosed incomethattheadditionsOF.accountofunexplained investment in shares, bullionetc., do not constitute undisclosed income v when these transactions were not recorded|in the books of accounts of the assesseeand the same was not liable to be broughtto tax in accordance with Section 158BB ofthe Act? | D2 Whether the Tribunal was correct in holding|thatthedepartmenthad.alreadyknowledge of the denial of investment)made by certain share holder in the case of)M/s. Bellaire Apartment Ltd., and thereforethe detention cannot be undisclosed incomeandconsequently|additionofRs.11,05,000/- was deleted? 5. The §undisclosed incomeis defined under Section| 158B (b) of the Income Tax Act, 1961 (hereinafter for short|referred to as ‘the Act’) as under:- © “158B. Definitions. (a)NXX XXXX (b)|“undisclosed income” includes any money,bullion, jewellery or other valuable article or thingor any income based on any entry in the books of B account or other documents or _ transactionswhere such money, bullion, jewellery, valuablearticle, thing, entry in the books of account orother document or transaction represents whollyor partly income or property which has not beenor would not have been disclosed for thepurposes of this Act, or any expense, deduction orallowance claimed under this Act which is foundto be false.” 5. The §undisclosed incomeis defined under Section| 158B (b) of the Income Tax Act, 1961 (hereinafter for short|referred to as ‘the Act’) as under:- © “158B. Definitions. (a)NXX XXXX (b)|“undisclosed income” includes any money,bullion, jewellery or other valuable article or thingor any income based on any entry in the books of B account or other documents or _ transactionswhere such money, bullion, jewellery, valuablearticle, thing, entry in the books of account orother document or transaction represents whollyor partly income or property which has not beenor would not have been disclosed for thepurposes of this Act, or any expense, deduction orallowance claimed under this Act which is foundto be false.” 6. However, the computation of undisclosed income of|the block period is to be done under Section 158BB. Sub-section (1) reads as under:- “Computation of undisclosed income of the|block period. JT58BB(1) The undisclosed income of the block|period shall be the aggregate of the total income.of the previous years falling within the blockperiodcomputed,inaccordance.withtheprovisions of this Act, on the basis of evidence|found as a result of search or requisition of booksof account or other documents and such othermaterials or information as are available with the 6 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 theaggregate of the losses of such previous years,determined,— XXX XXXXXX 7. A reading of the aforesaid Section makes it clear|that the undisclosed income of the block period shall be theundisclosed income as defined under Section 158BA, BB andother documents and such other materials or information asare available with the assessing officer and relatable to suchevidence. Taking into consideration both these, thecomputation of undisclosed income of the block period is tobe determined. The Tribunal has not looked into Section 158BB (1) of the Act in coming to its conclusion. Therefore, theimpugned order in so tar as the aforesaid four items areconcerned, are set aside and the matter is remitted to theTribunal for consideration in respect of the investmentsmade in those four items taking into consideration the|aforesaid provision of law. The Tribunal shall give such| �--�&��%����������������&�:����������������%')���%������'&���+�(�$�%����%��������-�&��%���%�<������1���%'�������������%�������&��������-�����������&��&��� 'A)9+� �$%����&'� �$%����&'�