Ita/1504/2009 Of The Commissioner Of Income Tax (Central) v. Smt.c.sabira

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.M.JOSEPH & THE HONOURABLE MR. JUSTICE M.L.JOSEPH FRANCIS TUESDAY, THE 30TH MARCH 2010 / 9TH CHAITHRA 1932 ITA.No. 1504 of 2009 ---------------------- AGAINST THE ORDER DATED 08/12/2006 IN (S & S) IN ITA.124/COCH/2005 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT/REVENUE ----------------------------------------------- THE COMMISSIONER OF INCOME TAX(CENTRAL), COCHIN. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): RESPONDENT/ASSESSEE ---------------------------------------------------------------- SMT.C.SABIRA,PROP.MANZOOR HOSPITAL, KANHANGAD,KASARAGOD. BY ADV. SRI.S.ARUN RAJ THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 02/03/2010, THE COURT ON 30.3.2010 DELIVERED THE FOLLOWING: K. M. JOSEPH & M.L. JOSEPH FRANCIS, JJ. -------------------------------------------------- I.T.APPEAL NO.1504 OF 2009 --------------------------------------------------- Dated this the 30th March, 2010 JUDGMENT K.M. Joseph, J. The respondent/assessee is the proprietrix of a hospital. Asearch was carried out under Section 132 of the Indian IncomeTax Act, 1961 (hereinafter referred to as the Act) in the hospitalpremises and also the assessee's residence. The search wasfinally concluded on 3.9.2002. Proceedings were initiatedagainst the respondent for block assessment. Pursuant to thenotice issued, the respondent filed a block return showingundisclosed income of Rs.62,77,417/= for the assessment years1997 - 1998 to 2003 - 2004. The assessment was completed on30.8.2004 determining an undisclosed income for the blockperiod at Rs.3,38,96,980/=. In Appeal, the Appellate Authorityordered deletion of various amounts and finally sustained an undisclosed income of Rs.72,08,230/=. The appellant impugned the matter before the Tribunal. The Tribunal dismissed theAppeal. 2. The following are the substantial questions of lawwhich are purported to raise in this Appeal: “ 1.(a) Whether, on the facts and in thecircumstances of the case and in the light of thereasons given by the Assessing Officer in theassessment order (vide last paragraph of page 8 ofthe assessment order), the Tribunal is right in law ininterfering with the addition of Rs.45,19,238/=? b) Whether, on the facts and in thecircumstances of the case and in the absence of anymaterial evidence either during the assessmentproceedings or during the appeal proceedings toprove that the receipt of Rs.45,19,238/= was acomputer error, the Tribunal is right in law indeleting the addition of Rs.45,19,238/=? c) Did the assessee discharge the burden ofproof ? d) Whether, on the facts and in thecircumstances of the case, the Tribunal is right inlaw in allowing the claim of the assessee that the receipt entry in respect of bill No.42 forRs.45,19,238/= reflected in the computer print outas a computer error and is not the allowance by theCIT(A) and the Tribunal being not based onlysupporting material or evidence or proof by theassessee, against the law and uncalled for ? e) Should not the Tribunal, in the light of thefailure of the assessee to discharge the burden,either confirmed the addition or remitted the case tothe Assessing Officer for a de novo consideration inthe light of 131 ITR 451 (S.C) followed in 280 ITR55 (Ker) ? 2.Whether, on the facts and in the circumstancesof the case: i. The assessee is entitled to claimdepreciation for the assessment year 2002 - 03 inthe Block assessment and the Tribunal is right inlaw in allowing the same ? ii. Should not the assessee have claimeddepreciation in the regular assessment eitherinitially or on a revised Return before the AssessingOfficer and the Tribunal is right in law in allowingthe same in the block assessment ? 3.(a) Whether, on the facts and in the e) Should not the Tribunal, in the light of thefailure of the assessee to discharge the burden,either confirmed the addition or remitted the case tothe Assessing Officer for a de novo consideration inthe light of 131 ITR 451 (S.C) followed in 280 ITR55 (Ker) ? 2.Whether, on the facts and in the circumstancesof the case: i. The assessee is entitled to claimdepreciation for the assessment year 2002 - 03 inthe Block assessment and the Tribunal is right inlaw in allowing the same ? ii. Should not the assessee have claimeddepreciation in the regular assessment eitherinitially or on a revised Return before the AssessingOfficer and the Tribunal is right in law in allowingthe same in the block assessment ? 3.(a) Whether, on the facts and in the circumstances of the case, the Tribunal is right inlaw in confirming the deletion of the addition ofRs.12,75,035/= being undisclosed income for theperiod 1.4.2001 to 2.5.2001 estimated on the basisof actual receipt for the remaining 333 days ? (b) Whether on the facts and in thecircumstances of the case and also in view of thefact that there was no books of account for theperiod and no case for the assessee that the incomefor the period is included in the Return, the Tribunalis justified in interfering with the estimation ofincome made by the Assessing Officer and is not theinterference against law, logic and absolutelyperverse and whimsical ? 4. Whether, on the facts and in thecircumstances of the case and also in view of thefact that the cost was determined by the AssessingOfficer based on the statement of Shri Kunhammed,the assessee's father, recorded u/s. 132(4) of the ITAct at the time of search, the Tribunal is justified indeleting the addition of Rs.1,95,41,744/= made onaccount of unexplained cost of construction ? ” I.T.A.NO.1504 OF 2009 3. We heard Shri Jose Joseph, learned counsel for the appellant and Shri T.N. Seetharaman, learned senior counselappearing for the respondent. 4. As far as the first question of law is concerned, thefollowing is the submission of the learned counsel for theappellant: From the computer print out which was seized, the receiptentry in respect of Bill No.42 for Rs.45,19,238/=, the case ofthe respondent was that it is an error. According to therespondent, the bill amount was Rs.1,715/=. The assessingOfficer rejected the claim of the respondent while the AppellateAuthority and the Tribunal accepted the case of the respondentthat it was a case of an error. Learned counsel for the appellantwould point out that in terms of the provisions relating to blockassessment, the assessing Officer was justified in relying uponthis material which was unearthed in the search, namely thecomputer print out which unambiguously revealed that therespondent had received Rs.45,19,238/=. It is his contention I.T.A.NO.1504 OF 2009 that there was no evidence before the assessing officer to showthat the correct amount is Rs.1,715/=. He would submit that thebill for Rs.1,715/= was manually written up as against the otherdocuments which were machine generated. Therefore, he wouldcontend that the Tribunal erred in sustaining the finding of theAppellate Authority that the correct amount is Rs.1,715/=. 5. Per contra, learned senior counsel for the respondentpoints out that the very fact that the amount is so colossal andthat it related to a receipt in a single day was itself reflective of itbeing an error. The Tribunal held as follows: I.T.A.NO.1504 OF 2009 that there was no evidence before the assessing officer to showthat the correct amount is Rs.1,715/=. He would submit that thebill for Rs.1,715/= was manually written up as against the otherdocuments which were machine generated. Therefore, he wouldcontend that the Tribunal erred in sustaining the finding of theAppellate Authority that the correct amount is Rs.1,715/=. 5. Per contra, learned senior counsel for the respondentpoints out that the very fact that the amount is so colossal andthat it related to a receipt in a single day was itself reflective of itbeing an error. The Tribunal held as follows: “6. We have heard rival submissions andconsidered the facts and materials on record. Thereis no dispute about the fact that in the pre-assessment notice dated 15.6.2004, issued by theassessing Officer, the assessing Officer hasexplicitly deducted the sum of Rs.45,19,238/= with anarration “income credited at Sl.No.42(A1)”. Asrightly observed by the Commissioner of Income-tax(Appeals), the assessing Officer has not set out anyreason in the assessment order for changing hismind and including the same as undisclosed income in the assessment order. We also find that theassessing Officer has not made any attempt to findout whether it was an error in the computer printout or otherwise, even though the assessee hasproduced the actual bill for the amount ofRs.1,715/= against IP No.1. In this view of thematter, we do not find any infirmity in the order offirst appellate authority and as such we uphold the-order of the Commissioner of Incometax (Appeals)by rejecting this ground of appeal of the revenue.” 6. We notice that the Tribunal has taken note of thecontention of the respondent that no inpatients who had thecapacity to pay such huge amount as treatment will get admittedto a hospital in a village, mainly specialised in Gynecology. Wealso note the contention of the respondent that the hospital wasnot having such sophisticated machineries to conduct suchcostly high tech treatments. It is pointed out that when this waspointed out to the assessing Officer during the proceedings, hehad reduced the amount while issuing the pre-assessmentproposal. But, it was while completing the assessment, the said I.T.A.NO.1504 OF 2009 amount was also added. Learned counsel for the appellantwould point out that it may be true that the includability of theamount of Rs.45,19,238/= was not mentioned in the pre-assessment notice. He would submit that in such circumstances,what the Appellate Authority should have done, was he shouldhave remanded the matter for a fresh consideration. 7. After having considered the matter, we are of the viewthat the appellant has failed to establish a substantial question oflaw in regard to the matter. Findings have been entered into bythe Appellate Authority and the Tribunal that the inclusion ofmore than Rs.45 Lakhs under a single receipt, is essentially anerror. It is also not in dispute that the assessing Officer himselfdid not choose to include the same in the pre-assessment notice.We cannot overlook the argument of the respondent that in thecourse of the proceedings, the respondent was apparently able toconvince the assessing Officer of the nature of the error. In suchcircumstances, we reject the contention of the appellant. Wealso do not think that a case is made out for remanding it back to the assessing Officer. 8. As regards the second substantial question of law which is raised and pressed before us is concerned, the contentions ofthe appellant are as follows: the assessing Officer. 8. As regards the second substantial question of law which is raised and pressed before us is concerned, the contentions ofthe appellant are as follows: For the assessment year 2002 - 2003, before the search, theclaim of the assessee on account of depreciation wasRs.8,64,823/=. But, in the block return, the assessee made aclaim for depreciation at Rs.22,79,586/= as on 31.3.2002. Thecontention of the appellant is that if the respondent had a claimfor a higher amount as depreciation, the proper course for therespondent was to have filed a revised return and claimed whatshe was advised to claim therein. Appellant contends that inproceedings for block assessment pursuant to a search, it wasnot open to the Authority to allow the higher amount which wasclaimed in the return filed for the block period contrary to whatwas claimed by the respondent herself while filing the regularreturn for the assessment year in question. I.T.A.NO.1504 OF 2009 9. Per contra, learned senior counsel for the respondentwould submit that the relevant provisions of the Act do notprohibit the assessee from claiming the benefit of thedepreciation legally available to the assessee under the Act, evenin a proceeding for determination of the undisclosed income forthe block period. 10. In order to answer the question, we must advert to thefollowing provisions contained in Chapter XIVB whichprovides for a special procedure. Section 158BA(1) reads asfollows: “158BA. Assessment of undisclosed income as a result of search: (1) Notwithstanding anything contained in anyother provisions of this Act, where after the 30[th] dayof June, 1995 a search is initiated under Section 132or books of account, other documents, or any assetsare requisitioned under Section 132A in the case ofany person, then, the Assessing Officer shall proceedto assess the undisclosed income in accordance withthe provisions of this Chapter.” Section 158BB provides for the computation of the undisclosed income of the block period. Sub-section (1)(d) reads as follows: “S.158BB. Computation of undisclosedincome of the block period: (1) The undisclosed income of the blockperiod shall be the aggregate of the total income ofthe previous years falling within the block periodcomputed, in accordance with the provisions of thisAct, on the basis of evidence found as a result ofsearch or requisition of books of account or otherdocuments and such other materials or informationas are available with the Assessing Officer andrelatable to such evidence as reduced by theaggregate of the total income, or as the case maybe, as increased by the aggregate of the losses ofsuch previous years, determined- Explanation in Section 158BB reads as follows; “Explanation.- For the purposes ofdetermination of undisclosedincome,- (a) the total income or loss of each previousyear shall, for the purpose of aggregation, be taken I.T.A.NO.1504 OF 2009 as the total income or loss computed in accordancewith the provisions of this Act without giving effectto set off of brought forward losses under ChapterVI or unabsorbed depreciation under sub-section(2) of Section32: Provided that in computing deductions underChapter VIA for the purposes of the saidaggregation, effect shall be given to set off ofbrought forward losses under Chapter VI orunabsorbed depreciation under sub-section (2) ofSection 32.” We further notice Section 158BH which reads as follows: “Sec.158BH: Application of other provisionsof this Act: Save as otherwise provided in thisChapter, all other provisions of this Act shall applyto assessment made under this Chapter. Thus, Section 158BH makes all the other provisions applicableto the assessment under Chapter XIVB unless it is otherwiseprovided for. Therefore, we would have to examine whetherthere is anything in Chapter XIVB which taboos the assesseesetting up a claim for depreciation as permitted under the Act, Provided that in computing deductions underChapter VIA for the purposes of the saidaggregation, effect shall be given to set off ofbrought forward losses under Chapter VI orunabsorbed depreciation under sub-section (2) ofSection 32.” We further notice Section 158BH which reads as follows: “Sec.158BH: Application of other provisionsof this Act: Save as otherwise provided in thisChapter, all other provisions of this Act shall applyto assessment made under this Chapter. Thus, Section 158BH makes all the other provisions applicableto the assessment under Chapter XIVB unless it is otherwiseprovided for. Therefore, we would have to examine whetherthere is anything in Chapter XIVB which taboos the assesseesetting up a claim for depreciation as permitted under the Act, I.T.A.NO.1504 OF 2009 even though a lesser amount was claimed by the assessee in theregular return filed by her. The key provision appears to beSection 158BB itself. It, inter alia, provides that the undisclosedincome shall be the aggregate of the total income of the previousyears within the block period which is to be computed inaccordance with the provisions of this Act. The aforesaidprovisions would lead us to the irresistible conclusion that thelearned counsel for the respondent is correct in contending thateven in a block assessment, under Chapter XIVB, the assessingOfficer must allow the claim of the assessee for the depreciationwhich is legally permitted under the provisions of the Act. Ofcourse, we have referred to the Explanation. On the one hand,the main provision of the Explanation provides that incomputing the total income or loss for the purpose ofaggregation, unabsorbed depreciation under Sub-section (2) ofSection 32 is not to enter into the reckoning. The provisodeclares that in computing deduction under Chapter VIA for thepurpose of the said aggregation, effect is to be given, inte alia, to unabsorbed depreciation under Sub-section (2) of Section 32.Learned counsel for the appellant has not placed reliance on themain clause as aforesaid in his submissions and hence we arenot to be detained by the said provision. At any rate, in view ofthe direction given by the Appellate Authority as confirmed bythe Tribunal, necessarily when the matter is computed, theOfficer must necessarily bear in mind the provisions of theExplanation. Subject to the same, we see no merit at all in thecontention of the learned counsel for the appellant. Hence, weanswer the second substantial question of law against theRevenue and in favour of the assessee and we hold that subjectto the restrictions imposed in the Explanation to Section 158BB,there is no embargo against the assessee claiming the benefit ofthe depreciation as per the provisions of the Act and the Rules.It is entitled to in law, even in proceedings under Chapter XIVBto do so, and further, notwithstanding the fact that the amount ofdepreciation claimed is higher than the amount claimed by theassess in the regular return filed by her. 11. In regard to the third substantial question of law which is purported to be raised, learned counsel for the appellantwould submit as follows: The controversy is raised in respect of the period 1.4.2001 to 2.5.2001. The assessing Officer noting that no income wasdisclosed for the aforesaid period, ascertained the undisclosedincome for the period by estimating the income on the basis ofthe actual receipt for the remaining 333 days in the year. Hewould submit that there is no basis for the Tribunal not to haveaccepted the complaint of the appellant that the AppellateAuthority erred in interfering with the amount of undisclosedincome for the aforesaid period which was arrived at on arational basis. In this regard, he would submit the followingfacts before us: 11. In regard to the third substantial question of law which is purported to be raised, learned counsel for the appellantwould submit as follows: The controversy is raised in respect of the period 1.4.2001 to 2.5.2001. The assessing Officer noting that no income wasdisclosed for the aforesaid period, ascertained the undisclosedincome for the period by estimating the income on the basis ofthe actual receipt for the remaining 333 days in the year. Hewould submit that there is no basis for the Tribunal not to haveaccepted the complaint of the appellant that the AppellateAuthority erred in interfering with the amount of undisclosedincome for the aforesaid period which was arrived at on arational basis. In this regard, he would submit the followingfacts before us: In the course of the proceedings, a Statement was given bynone other than the father of the respondent who, infact, wasmanaging the entire affairs of the hospital. The case of therespondent was that the hospital had become fully functional I.T.A.NO.1504 OF 2009 only from 1.5.2001 and hence estimating the income for theperiod 1.4.2001 to 2.5.2001 on the basis of the actual collectiondetails seized for the period 3.5.2001 to 31.3.2002 would beunsustainable. The assessing Officer, however, took the viewthat the estimation of income for the period in question wasbeing considered on the basis of the actual receipts for therespondent for the subsequent 333 days. He found that theestimation proposed was far less than ten per cent of the totalnumber of days of the financial year. He also noted that therespondent did not produce copies of the bills or any otherdocuments in regard to the actual receipts for the hospital for the32 days. The Appellate Authority took the view that nomaterials are available as regards the income for the period from1.4.2001 to 2.5.2001. Thereafter, it is stated that whenconsidered with the contention of the respondent that thehospital started functioning in a fullfledged manner with effectfrom 1.5.2001 and in the absence of any material regardingincome for 1.4.2001 to 2.5.2001, there is no justification for the assessing Officer in estimating the income for the period inquestion based on the income of the subsequent period of theyear. The finding of the Tribunal is as follows: “11. We heard rival submissions andconsidered the facts and materials on record. Thereis no dispute about the fact that no materials wereseized for the period from 1.4.2001 to 2.5.2001. Inthe block assessment income is to be determinedbased on the seized materials. Even though theestimate is permissible it should be with referenceto the seized materials only. When there was nomaterial found for the period 1.4.2001 to 2.5.2001,we do not find any force in the contention of thelearned departmental representative that estimatecan be made for that period also. We find force inthe contentions of the learned counsel for theassessee in confirming the order of theCommissioner of Income-tax (Appeals) for thereasons stated therein. Thus, this ground of appealof the revenue also fails.” 12. Section 158BB permits ascertainment of undisclosed income in the case of a search on the basis of evidence found and such other materials or information as are available with theassessing Officer and relatable to such evidence. In this regard,learned counsel for the appellant would refer to the statement ofShri Kunhammed under Section 132(4) of the Act. In answer toa query as to when the hospital commenced its activities, it is,inter alia, stated as follows: 12. Section 158BB permits ascertainment of undisclosed income in the case of a search on the basis of evidence found and such other materials or information as are available with theassessing Officer and relatable to such evidence. In this regard,learned counsel for the appellant would refer to the statement ofShri Kunhammed under Section 132(4) of the Act. In answer toa query as to when the hospital commenced its activities, it is,inter alia, stated as follows: “”Manzoor Hospital” commerced itsactivities in the new building in the year 1996. Theland on which the hospital building wasconstructed has been received by my wife as giftwhich she subsequently gifted to my daughter Smt.C. Sabira. The construction work of the hospitalwas commenced in the year 1994. Three floors onone side of the hospital was completed in the year1996 and the hospital started its functioning. Byaround 1999 three floors on the adjacent side toowas completed. By March, 2001 construction of allthe seven floors, on both the sides were fullycompleted. Each floor of the hospital buildingadmeasures 731.24 sq. mt. Thus the totalconstructed area for all the 7 floors when puttogether is 5,118.68 sq.mt. There are 29 rooms in each of the first five floors including ground floorand each of such rooms is bath attached.” In fact, the assessing Officer has noted that in regard to thequestion of investment in the hospital construction (whichincidentally, we will be dealing as the last question of law),though the respondent stated that she did not know anythingabout it and all the details are known only to her husband Shri .Kunhammed. Learned counsel for the appellant would submit,therefore, that the hospital was functioning since 1996 and forthe period 1.4.2001 to 2.5.2001, if on the basis of the income forthe remaining period in the financial year, estimation is made inthe facts of this case, the Tribunal ought not to have confirmedthe finding of the Appellate Authority. Learned counsel for therespondent, on the other hand, supported the reasoning of theTribunal. He would submit that there was no material unearthedin relation to the period in question for justifying an estimationof undisclosed income as was done. Learned counsel wouldplace reliance on the decision of the Bombay High Court I.T.A.NO.1504 OF 2009 -reported in Commissioner of Incometaxv. C.J. Shah & Co. ((2000) 246 ITR 671) and the decision in Commissioner ofIncome Taxv. Smt. Usha Tripathi((2001) 249 ITR 4Allahabad). 13. We see merit in the contention of the respondent.There is no case for the appellant that there is any materialunearthed during the search which would disclose any income for the period 01.04.2001 to 02.05.2001. However, theappellant would apparently resort to the process of estimation ofthe income for the said period on the basis of the income arrivedat for the remaining period of the financial year. That apart, ofcourse, the appellant would also seek to take advantage of thestatement given on behalf of the appellant that the hospital wasfunctioning since 1996. In other words, there would be incomefor the broken period in question and in a situation where noincome is disclosed on the basis that the hospital became fullyoperational only in 2001 also, the Authorities have proceeded tocompute the income for the broken period in question, it is submitted. for the period 01.04.2001 to 02.05.2001. However, theappellant would apparently resort to the process of estimation ofthe income for the said period on the basis of the income arrivedat for the remaining period of the financial year. That apart, ofcourse, the appellant would also seek to take advantage of thestatement given on behalf of the appellant that the hospital wasfunctioning since 1996. In other words, there would be incomefor the broken period in question and in a situation where noincome is disclosed on the basis that the hospital became fullyoperational only in 2001 also, the Authorities have proceeded tocompute the income for the broken period in question, it is submitted. 14. We would think that having regard to the nature of theproceedings under Chapter XIV B which is geared toascertainment of the undisclosed income, but based on theevidence unearthed during the search and other materials andinformation relatable to such evidence, the approach of theassessing Officer is insupportable. As we have already noted,no evidence was available as a result of the search related to thebroken period in question. There is no material or informationwith him relatable to such evidence also, in regard to the incomefrom the broken period in question. What is done is estimationof the income on the basis of the income ascertained for theremaining period on the basis of probability. We do not thinkthat the provisions of the Act in question support the Officer inhis endeavour. Accordingly, we find no merit in the contentionof the appellant and we answer the said substantial question oflaw against the appellant. 15. In regard to the last substantial question of law which is purported to be raised, the learned counsel for the appellantwould make the following submissions before us: The assessing Officer estimated the cost of construction of the building at Rs.3 Crores. In this regard, it is pointed out theStatement given by Shri Kunhammed under Section 132(4). Hehas further stated apart from what we have extracted earlier, asfollows: “OTIS Lift has been installed in the hospitalfor an approximate cost of Rs.10 Lakhs. As far as Iremember, an amount of Rs.1 Crore has beenapproximately spent on construction of the hospitalbuilding. I do not exactly remember how much hadbeen spent. The accounts of the construction workare lying with Shri Dinesh Babu who is keeping myAccounts also.” The assessing Officer found that on verification of the income tax returned for the assessment year 2001 - 2002, it was seenthat the total expenditure shown by the assessee on the hospitalbuilding upto 31.3.2001 is Rs.89,51,229/=. In the return of I.T.A.NO.1504 OF 2009 income for the assessment year 2002 - 2003, which was filedbefore the date of search, the total construction cost isRs.1,04,58,256/=. In the cash flow statement for the periodended 29.8.2002, the assessee has shown to have spent a furthersum of Rs.26,55,000/= on the hospital, taking the totalinvestment in the building at Rs.1,31,13,256/=. Thereafter, heentered the following reasoning: “Considering the total constructed area of thehospital building, which is an RCC framed 7storeyed structure having total built up area of5,118.68 sq.mt. the total cost of construction shownis substantially suppressed. As per the Schedule ofRates being adopted by the CPWD for RCC framedhospital structures, the rate per sq. mt. for the year1992, was Rs.2,920/= per sq. mt. Considering theadditional rate to be adopted in cases of structurehaving more than 6 floors, the water supply andsanitation, electrical work, external services,flooring, windows etc. addition of at least 25% tothe basic rate is required to be given. Also,considering the fact that the basic rate ofRs.2,920/= per sq. mt. was applicable to the year “Considering the total constructed area of thehospital building, which is an RCC framed 7storeyed structure having total built up area of5,118.68 sq.mt. the total cost of construction shownis substantially suppressed. As per the Schedule ofRates being adopted by the CPWD for RCC framedhospital structures, the rate per sq. mt. for the year1992, was Rs.2,920/= per sq. mt. Considering theadditional rate to be adopted in cases of structurehaving more than 6 floors, the water supply andsanitation, electrical work, external services,flooring, windows etc. addition of at least 25% tothe basic rate is required to be given. Also,considering the fact that the basic rate ofRs.2,920/= per sq. mt. was applicable to the year 1992, appropriate cost indexation on the rate persq. mt. will have to be applied in this case, as theconstruction of the hospital building was completedin various stages from the year 1994 to March2001.” It is thereafter by applying the parameters indicated, it wasfound that even by any conservative estimate, the cost ofconstruction was determined as Rs.3 Crores (rounded offfigure). Thereafter, the assessing Officer reasons that theassessee was utilising gifts received by her for constructionwork and purchase of immovable properties. She did not haveany other source of income. The difference between theestimated cost of construction and the cost of constructionactually shown by her upto 31.3.2002 was, inter alia, found torepresent the undisclosed income which was determined asRs.1,95,41,744/=. The Tribunal has entered the followingfinding: “14. We have heard rival submissions andconsidered the facts and materials on record. In thedecisions relied upon by the learned counsel for theassessee, it has been held that in the blockassessment, even DVO's report cannot be reliedupon. In this case on hand, the assessing officer hasnot even referred the matter of valuation to theValuation Cell, but has made his own valuation byadopting CPWD rates. There is force in thecontention of the learned counsel for the assesseethat even statement recorded u/s.132(4) from ShriKunchammed, the cost of construction was stated tobe only Rs.1 Crore, which was far below the valueshown in the accounts at Rs.1,31,13,256/=. In thisview of the matter, we find that the block assessmentwas made on estimate basis without any seizedmaterial. This method of assessment is not permittedunder the Act. Hence, we are inclined to confirm theorder of the Commissioner of Income-tax (Appeals)by rejecting this ground of appeal of the revenue.” Learned counsel for the appellant would submit that havingregard to the known source of income, which was gifts received by the respondent, and the nature and extent of the contributions admittedly made by the respondent, estimation by the Officer onthe basis of the search and the statement given ought not to have been interfered with by the Appellate Authority. 16. Per contra, learned counsel appearing on behalf of the respondent would impress upon us the purport of Section158BB of the Act. He cited before us the following case law: “1) Commissioner of Incometaxv. Vinod Danchand Ghodawat((2001) 247 ITR 448 (Bom.)). Ghodawat((2001) 247 ITR 448 (Bom.)). -2) Commissioner of Incometax, DelhiVII, New Delhi v. Ashok Khetrapal((2007) 294 ITR 143 (Del)). v. Ashok Khetrapal((2007) 294 ITR 143 (Del)). 3) CITv. Pramod Kumar Gupta((2000) 320 ITR 400 (Delhi)). (Delhi)). It is submitted that the Supreme Court has dismissed the SLP filed against the last Judgment by its Judgment reported in(2009) 312 ITR (St)6. He would contend that the assessingOfficer has in this case gone to the extent of estimating theincome all by himself with reference to some criteria. But, hewould contend that this is beyond the powers conferred on him under Chapter XIV B. “1) Commissioner of Incometaxv. Vinod Danchand Ghodawat((2001) 247 ITR 448 (Bom.)). Ghodawat((2001) 247 ITR 448 (Bom.)). -2) Commissioner of Incometax, DelhiVII, New Delhi v. Ashok Khetrapal((2007) 294 ITR 143 (Del)). v. Ashok Khetrapal((2007) 294 ITR 143 (Del)). 3) CITv. Pramod Kumar Gupta((2000) 320 ITR 400 (Delhi)). (Delhi)). It is submitted that the Supreme Court has dismissed the SLP filed against the last Judgment by its Judgment reported in(2009) 312 ITR (St)6. He would contend that the assessingOfficer has in this case gone to the extent of estimating theincome all by himself with reference to some criteria. But, hewould contend that this is beyond the powers conferred on him under Chapter XIV B. 17. We are of the view that there is no merit in thecontention of the appellant. Chapter XIV B deals withascertainment of the undisclosed income of the party for theblock period. In the case of a search, the undisclosed incomemust be determined with reference to the evidence unearthedduring the search and also the other materials or informationavailable which are relatable to such evidence. Therefore, thefocus must be on the evidence which were unearthed during thecourse of the search or other material or information relating tosuch evidence. There is no relevant matter as such which canbe relied on by the appellant to justify the finding about the costof construction being what was estimated. In the statement, infact, what is stated is, as already noted, approximately one Croreof rupees was spent. The assessing Officer could not have byway of estimation in proceedings under Chapter XIV B,determined the cost of construction and therefrom arriving at theundisclosed income by deducting the alleged admitted cost of I.T.A.NO.1504 OF 2009 construction. Accordingly, we answer the aforesaid substantial question of law against the Revenue and in favour of the assessee. TheAppeal is dismissed. Sd/= K.M. JOSEPH, JUDGE Sd/= M.L. JOSEPH FRANCIS, JUDGE kbk. // True Copy // PS to Judge