Commissioner Of Income Taxchennai v. Shri R.b.choudaryno.1, Dr.radhakrishnan Salaimylapore,Chennai – 600 004

T.C.No.588 of 2008 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.08.2024 CORAM : THE HONOURABLE DR.JUSTICEANITA SUMANTHandTHE HONOURABLE MR.JUSTICE G. ARUL MURUGAN T.C.No.588 of 2008 Commissioner of Income TaxChennai. .. Appellant vs Shri R.B.ChoudaryNo.1, Dr.Radhakrishnan SalaiMylapore,Chennai – 600 004. .. Respondent Prayer : Appeal filed under Section 260A of the Income-Tax Act, 1961 against order passed by the Income Tax Appellate Tribunal dated 31.08.2007 in IT (SS) A No. 107/Mds/2005. For Appellant:Mr.Karthik Ranganathan For Respondent:Mr.K.Raviand Mr.Varun RanganathanJUDGMENT (Delivered by Dr. ANITA SUMANTH.,J) :Mr.K.Raviand Mr.Varun Ranganathan This is an appeal challenging an order of the Income-Tax Appellate Tribunal relating to the block period 01.04.1996 – 27.06.2002. The question of law that has been admitted for resolution is as follows:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that routine disallowances cannot form part of the block assessment proceedings unless the expenses are found to be false, when the CIT, Central I, was denied T.C.No.588 of 2008 an opportunity for investigating the genuineness of vouchers produced with regard to the film production expenses?” 2.The Tribunal had allowed the appeal of the assesse / respondent as against which the present appeal has been filed. 3.The first argument put forth by the learned Senior Standing Counsel for the Income-Tax Department is that the first Appellate Authority had obtained a remand report from the Joint Commissioner of Income-Tax and not from the assessing authority, who is the Additional Commissioner of Income-Tax. Hence, there is a violation of the principles of natural justice. 4.We do not see the relevance of this submission for the reason that the issue relates to disallowances of certain expenses on the ground that they were not properly vouched. The assessment has been framed in terms of the procedure for block assessment under Chapter IX B of the Income-Tax Act, 1951 (‘Act’) pursuant to a search under Section 132 of Act. 5.The authorities are bound by the stipulation under Section 158BB of the Act, which states that assessment is to be based only on 'such other information materials or information as are available with the assessing officer'. Hence it was not possible for the Income-Tax Authorities to have effected disallowances of expenditure in a block assessment unless such disallowances emanate from materials found in the course of search. The argument relating to investigation of vouchers or denial of opportunity to cause such investigation would perhaps held to be relevant in the case of a regular assessment, but not in the case of a block assessment that is a consequence of a search and materials seized in the context of that search. 6.This very question has been considered by this Court in the case of Commissioner of Income-Tax, Coimbatore v G.K.Senniappan [284 ITR 220] wherein at paragraphs 3 and 4 the Bench has stated as follows:- “3. Section 158BB occurs in Chapter XIV-B, which provides for special procedure for assessment of search cases. The computation of undisclosed income of block period is contemplated under section 158BB. As per the section, the undisclosed income of the block period should 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 the evidence found as a result of such 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. “3. Section 158BB occurs in Chapter XIV-B, which provides for special procedure for assessment of search cases. The computation of undisclosed income of block period is contemplated under section 158BB. As per the section, the undisclosed income of the block period should 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 the evidence found as a result of such 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. 4. A mere reading of the above provision clearly indicate that the sentence 'such other information materials or information as are available with the Assessing Officer' cannot be bisected or taken in isolation for the purpose of computation. Such other materials or information as are available with the Assessing Officer, should as per the section relatable to such evidence. The word 'such' used as a prefix to the word 'evidence' assumes much significance, in this provision, as it indicates only the evidence found, as a result of search or requisition of books of account or other documents, at the time of search. Any other material cannot form basis for computation of undisclosed income of the block period. Hence, we are of the view that the Commissioner as well as the Tribunal have the issue in accordance with the statutory provisions, requires no interference. The appeal is accordingly dismissed.” 7.The Tribunal has rendered a finding of fact in its order that there is no material found in the course of search based on which the subject disallowances could have been made. Hence, the substantial question of law is answered in favour of the assessee and this appeal is dismissed. No costs. Neutral Citation:Yesssm [A.S.M., J] [G.A.M., J] 27.08.2024 https://www.mhc.tn.gov.in/judis 5/5 T.C.No.588 of 2008 DR. ANITA SUMANTH,J.andG. ARUL MURUGAN.,J ssm T.C.No.588 of 2008 27.08.2024