Ita/18/2005 Of Shri Venat Bava v. Commisioner Of Incometax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 24TH JUNE 2008 / 3RD ASHADHA 1930 ITA.No. 18 of 2005() -------------------- IT(S&.S)A 29/COCH//2004 of I.T.A.TRIBUNAL,COCHIN BENCH,COCHIN .................... APPELLANT/APPELLANT: ------------------------------------- SHRI VENGAT BAVA, FEROKE, PEETTAH. BY ADV. SRI.P.BALAKRISHNAN (E) RESPONDENTS: RESPONDENT: ------------------------ THE COMMISSIONER OF INCOME TAX, CALICUT. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) FOR R1 SRI.GEORGE K. GEORGE, SC FOR IT FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24/06/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR &V.K. MOHANAN, JJ. -------------------------------------------- I.T.A. No. 18 OF 2005 -------------------------------------------- Dated this the 24th day of June, 2008 JUDGMENT Ramachandran Nair,J. This appeal is filed by the assessee against the order of theTribunal partly confirming and partly cancelling CIT (Appeals)'s orderon the block assessment completed on the appellant-assessee for theperiod commencing from 1988-89 to 1998-99. A search was carriedout in the premises of the assessee, a non-resident Indian, on 30.9.1997.In the search department detected massive investments made by theassessee in 23 items of property including construction of a house.Cash flow statement was called for by the assessing officer to prove theinvestments and expenditure. Even though assessee furnished thesame, it was not accepted in full. The assessing officer made additiontowards unexplained investments and expenditure. On appeal filed bythe assessee, substantial relief was granted by the CIT (Appeals) in asmuch as he reduced one item of addition of Rs. 9,90,000/- lakhs 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 CIT(Appeals) to Rs. 13 lakhs. Even though other additions are sustainedby the CIT (Appeals) the Tribunal deleted entire additions except theabove two additions sustained by the CIT (Appeals). It is against thisorder the assessee has filed this appeal. We have heard Sri. P.Balakrishnan, counsel appearing for the appellant-assessee, and seniorstanding counsel appearing for the respondent. 2. The contention raised by the assessee's counsel is that blockassessment under Section 158 BC itself is not tenable because it is notbased on any evidence gathered in the course of search. Counsel hasrelied on the CBDT circular found at 258 ITR (Statutes) page 58,wherein it is stated that amendment to Section 158BB by Finance Act,2002 authorises block assessment of undisclosed income only based onevidence found in the search and material information gathered in postsearch enquiries made on the basis of evidence found in the search.Even though counsel cited several decisions of High Courts on thisissue, we do not think on the facts of this case, petitioner cansuccessfully contest the assessment confirmed in appeal by the 2. The contention raised by the assessee's counsel is that blockassessment under Section 158 BC itself is not tenable because it is notbased on any evidence gathered in the course of search. Counsel hasrelied on the CBDT circular found at 258 ITR (Statutes) page 58,wherein it is stated that amendment to Section 158BB by Finance Act,2002 authorises block assessment of undisclosed income only based onevidence found in the search and material information gathered in postsearch enquiries made on the basis of evidence found in the search.Even though counsel cited several decisions of High Courts on thisissue, we do not think on the facts of this case, petitioner cansuccessfully contest the assessment confirmed in appeal by the Tribunal because in the course of search investments in several items ofproperties and expenditure of various types were detected by thedepartment. However, search led to enquiry, and in the course ofenquiry even though assessee furnished detailed cash flow statementand furnished names and addresses of debtors who have advancedloans to the assessee, and also withdrawals from his own NRI account,the assessing officer only accepted part of the explanation and madeadditions under various heads. In two stages of appeals, the assesseegot substantial relief. The question is whether this Court will bejustified in interfering with the balance additions sustained. It isobvious that the additions are made under Section 69 of the IT Act onunexplained investments and under Section 68 on unexplained cashcredit because enquiry was specifically directed against specificinvestments and cash credits furnished by the assessee in the course offurnishing cash flow statement. Section 260A authorises this Court tointerfere with Tribunal's order only on substantial questions of law. Inthis case, the issue involved is only whether lower authorities includingthe Tribunal were justified in rejecting the explanations regarding investments and expenditure which are attempted to be proved throughcash flow statement containing borrowals taken from several relatives.However, additions were sustained in part only because borrowers didnot prove the transactions of advances made to the assessee andassessee could not prove even substantial amount of withdrawals fromhis own account. We do not find any substantial question of law isinvolved on findings on this issue which are based on documentaryevidence. The question raised by the assessee that is whetherassessment under Section 158BC is a self-contained procedure forassessment is a broad proposition which even if answered in favour ofthe assessee is not going to benefit the assessee in the form of any reliefin appeal. Moreover in this case we find that assessment was based onmaterials gathered on inspection, that is proof of investments in landedproperties and expenditure in course of time under various heads. Asalready stated, additions under Sections 68 and 69 are also permitted inassessment under Section 158BC of the Act and all what the assessingofficer has done is to make assessment only in terms of the provisionsof Chapter XIV 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 orderof the Tribunal. Consequently, appeal filed by the assessee isdismissed. (C.N.RAMACHANDRAN NAIR)Judge. (V. K. MOHANAN) Judge. kk