Shri Ghasilal Lohawala (Huf), Sambhar Lake, Jaipur v. The Asstt. Commr. Of Income Tax,Circle-7, Jaipur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR. D.B. Income Tax Appeal No. 25/2008. Shri Ghasilal Lohawala (HUF), Sambhar Lake, Jaipur. … Appellant. Versus The Asstt. Commr. Of Income Tax,Circle-7, Jaipur. … Respondent DATE OF ORDER ::: 30.09.2016 HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE BANWARI LAL SHARMA None present, for the appellant.Mr. Sameer Jain, for the respondent. BY THE COURT (Per Hon’ble Jhaveri,J.) 1.By way of this appeal, the appellant-original assesseehas challenged the judgment and order of the Tribunalwhich has decided the appeal partly in favour of Departmentand partly reversing the view taken by the CIT (A) andconfirming the order of the AO. 2.The facts, in brief, are that before the first appellateauthority, the assessee questioned the initiation of theproceedings under Section 158BD, read with Section 158BCof the Act in absence of finding of incriminating documentsrelating to the assessee during the course of searchproceedings. It was contended further that satisfaction hasto be reached and recorded by the AO under section 158BDon the basis of material revealing undisclosed income of the assessee. The assessee also opposed the addition of Rs.6,00,000/- made by the AO on account of undisclosedincome for the entire block period without referring to anyseized paper leading to the conclusion that the assessee hadundisclosed income and that the undisclosed income needs to be determined year-wise. Several decisions in thisregard, relied upon by the assessee before the id. CIT(A),which find mention at Page Nos. 6 to 11 of the firstappellate order. The id. CIT(A) though upheld the action ofinitiation of proceedings under the provisions of section158BD, read with section 158BC by the AO against theassessee but he came to the conclusion that when there isno material at all in relation to a particular previous yearfalling within the block, no undisclosed income could bedetermined for that year and deleted the additions made bythe AO. 2.1. This Court while admitting the appeal vide his orderdated 23[rd] July, 2008 framed the following substantialquestions of law:- 1.Whether estimation of income falls withinthe scope of block assessment proceedings ? 3.The Assessing Officer while assessing the block assessment year in paragraph 3 and 4 observed as under:- “3. Search operation u/s 132 was carried out onresidential premises as well as business premises of 2.1. This Court while admitting the appeal vide his orderdated 23[rd] July, 2008 framed the following substantialquestions of law:- 1.Whether estimation of income falls withinthe scope of block assessment proceedings ? 3.The Assessing Officer while assessing the block assessment year in paragraph 3 and 4 observed as under:- “3. Search operation u/s 132 was carried out onresidential premises as well as business premises of Shri Shyam Sunder Goyal, who is Karta of this HUFM/s. Ghashi Lal Lohewala, Sambherlake. Here it ispertinent to mention that in this case of Shri ShyamSunder Goyal, assessment u/s 158BC was completedin his individual capacity on 30.11.2000 on totalundisclosed income of Rs. 6600370/-. During thecourse of search, statement of Shri Shyam SunderGoyal was recorded, in which it is stated by him thatvalue of stock of Timber good is about Rs. 67,000/-.Cash book of ledger was not written. Statement ofShri Prahalad S/o Shri Shyam Sunder, Karta was alsorecorded on 10.9.1998. He has stated that ShriShyam Sunder Goyal is a proprietor of this concern.There are two godowns, one is situated in GhasMandi, Sambharlake which belongs to the family.Another godown was situated at Teli Gate and rentwas paid to Shri Babu Khan Kabadi. Timber goods,coal and iron were found lying in these godowns andgoods stored in these godowns were claimedbelonging to the firm. Inventory of these goodswere prepared on 10.9.1998, in huge stock wasfound and which has been verified by Shri PrahaladAgarwal who looks-after this shop vide `punchnamadated 10.9.98. As stated above, assessee is notcooperating with the Department and also not givinginformation about what is undisclosed income of thisHUF and what are the stock or incriminatingdocuments relating to this HUF. Besides the abovebusiness of Timber iron, money-lending businessmay be done by this HUF. From the old records, it isseen that return of income upto assessment year 95-96 was furnished to the Department in the capacityof HUF, in which nominal income was shown by theassessee; for example, in assessment year 95-96,total income shown at Rs. 46,429/-, in 94-95 at Rs.47,370/- etc. As stated above, assessee is not co-operating with the Department and also not showingwhich books relates to individual or which booksrelates to HUF. The same is case with documentsseized as names are the same of individual of thefirm. 4.Considering all above facts, I am left with noalternative but to estimate the undisclosed income ofassessee for block period on reasonable basis afterconsidering past returns filed and income shownaverage Rs. 48000/- p.a. thereof and position ofstock held average Rs. 5-6 lakhs p.a. It would be fair and to consider undisclosed income of theassessee at Rs. 6,00,000/- for the block period. Subject to above remarks, total undisclosedincome for the block period of assessed at Rs.6,00,000/-. Income tax thereon is charged @ 60%at Rs. 3,60,000/-. Charge interest u/s 158BFA(1) ofthe I.T. Act as per law. Penalty notice u/s 158BFA(2)is being issued separately for concealment. Issuenecessary forms.” 4.CIT (Appeals) partly allowed the appeal by holding as under: 4.Considering all above facts, I am left with noalternative but to estimate the undisclosed income ofassessee for block period on reasonable basis afterconsidering past returns filed and income shownaverage Rs. 48000/- p.a. thereof and position ofstock held average Rs. 5-6 lakhs p.a. It would be fair and to consider undisclosed income of theassessee at Rs. 6,00,000/- for the block period. Subject to above remarks, total undisclosedincome for the block period of assessed at Rs.6,00,000/-. Income tax thereon is charged @ 60%at Rs. 3,60,000/-. Charge interest u/s 158BFA(1) ofthe I.T. Act as per law. Penalty notice u/s 158BFA(2)is being issued separately for concealment. Issuenecessary forms.” 4.CIT (Appeals) partly allowed the appeal by holding as under: “Section 158BB lays down the rules of computationof undisclosed income of the block period. Eventhough undisclosed income assessed is for theblock period, that undisclosed income shall be theaggregate of total income of the previous yearfalling within the block period; of course, subjectto the adjustment of income or loss alreadyreturned or assessed. Even though aggregate ofincome is taken, income has to be computed foreach previous year separately, and that incomehas to be computed on basis of evidence found outas a result of search. The law stated in thisprovision is that undisclosed income has to becomputed for the previous years separately on thebasis of evidence found as a result of search. Inorder to compute the income separately for everyprevious year, under these provisions, there has tobe evidence found out as a result of search foreach previous year falling within the blockseparately. In order to determine the undisclosedincome of a previous year falling within the blockperiod, there should be corresponding andmatching material available for that previous year.This matching principle is very important.” 5.The same was affirmed by the Tribunal while dealingwith the same and reversing the order of the CIT (A)observing as under:- “The assessee, thus, cannot take advantageof its own lapse by referring the principle thatundisclosed income could not be determined forthat year in the absence of material in relation to aparticular previous year falling within the block. Inpara Nos. 1 and 2 of the assessment order, the AOhas mentioned the details of opportunities affordedto the assessee. He has also mentioned about theservice of notices upon the assessee on differentdates. No explanation about this non-complianceon the part of the assessee has been furnishedbefore us. Under these circumstances, we are notinclined to agree with the findings of the ld. CIT(A)that estimation of income for the entire blockperiod without computing the income year-wiseseparately by the AO was not sustainable whiledeleting the addition. We, thus, while setting asidethe first appellate order in question, restore theaddition made by the AO.” 5.1. In our view, the view taken by the Tribunal is just andproper. The question is required to be answered in favour ofDepartment and against the assessee.proper. The question is required to be answered in favour ofDepartment and against the assessee. 6.The appeal is accordingly dismissed. (Banwari Lal Sharma), J. (K.S. Jhaveri), J. /bm gandhi 50