The Commissioner Of Income Tax-Central-1 v. Jerry Varghese International Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. INCOME TAX APPEAL NO.2301 OF 2009 The Commissioner of Income Tax-Central-1..Appellant. Vs. Jerry Varghese International Ltd...Respondent. .... Mr.B.M.Chatterji with Ms Anamika Malhotra for the Appellant.Mr. P.J.Pardiwala, Senior Advocate with Ms Beena Pillai for the Respondent. .... CORAM : DR. D.Y.CHANDRACHUD & J.P. DEVADHAR, JJ. 14[th] January, 2010. P.C.: 1.The question of law which has been formulated by the revenue in the appeal against the judgment of the Tribunal is as follows : “Whether on the facts and circumstances of the case and in law theHon ble Tribunal and the CIT (A) were justified in deleting the’additions by holding that they were based upon materials found during the course of survey u/s 133 A and not during search?” 2.The subject matter of the present appeal is two additions made by the assessing officer, the first being in the amount of Rs.55.93 lacs and the second in the amount of Rs.14.29 lacs during the course of the block assessment. In appeal the Commissioner of Income Tax issued an order directing the assessing officer to report as to whether the materials referred to in paragraphs 6.3 and 6.4 of the assessment order were seized during the course of the search under Section 132 or were found during the course of the survey under Section 133-A. After considering the report of the assessing officer, the CIT (A) observed as follows : “From the above, it is seen, the additions have been made underpara 6.3. & 6.4, both the additions Rs.55,93,566/- & Rs.14,29,111/- respectively made vide above paras only on the basis of material found during the Survey U/s133A, but not based on material found during the Search.” 3.Section 158-BB of the Income Tax Act provides inter alia that the undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of the Act on the basis of evidence found as“a result of search 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 . These provisions show that a computation of”undisclosed income during the block period has to proceed on the basis of (i) evidence found as a result of the search; or (ii) evidence found as a result of requisition of the books of account or other documents; or (iii) such other materials or information as is available with the assessing officer and relatable to such evidence. The expression “relatable to such evidence” would mean evidence which is referred to in the earlier part of the Section, meaning thereby, evidence found as a result of search or requisition of the books of account or other documents. 4.In the present case, the finding of fact which was recorded by the CIT (A) and which has not been disturbed by the Tribunal is to the effect that the additions of Rs.55.93 lacs and Rs.14.29 lacs were made only on the basis of material found during a survey under Section 133-A and were not relatable to the material found during the search. In view of this finding of fact it is clear that the additions made were not on the basis of material relatable to such“evidence within the meaning of sub section (1) of Section 158-BB. In that”view of the matter, it is not necessary for this Court to entertain the appeal. evidence which is referred to in the earlier part of the Section, meaning thereby, evidence found as a result of search or requisition of the books of account or other documents. 4.In the present case, the finding of fact which was recorded by the CIT (A) and which has not been disturbed by the Tribunal is to the effect that the additions of Rs.55.93 lacs and Rs.14.29 lacs were made only on the basis of material found during a survey under Section 133-A and were not relatable to the material found during the search. In view of this finding of fact it is clear that the additions made were not on the basis of material relatable to such“evidence within the meaning of sub section (1) of Section 158-BB. In that”view of the matter, it is not necessary for this Court to entertain the appeal. 5.The Tribunal has held that additions in the course of the block assessment can be made only on the basis of unaccounted income which has resulted due to search action; that the assessing officer is obliged to make additions on the basis of the material found during the course of the search and that if he comes across some other material during the course of any other proceedings, such as a survey under Section 133-A, he can utilize that material for finalizing the regular assessment for the relevant year. However, according to the Tribunal material collected in survey proceedings cannot be utilized while finalizing the block assessment. The principle of law which is laid down by the Tribunal in the present case overlooks the provisions of Section 158-BB. As already noted earlier, sub section (1) of Section 158-BB as amended by the Finance Act of 2002 with retrospective effect from 1[st] July, 1995 does not confine the assessment of income during the block period only to evidence which is found as a result of search. The provisions as they stood earlier have now been modified by the amendment of 2002 to incorporate the words relatable“to such evidence . Consequently, so long as the material that is relied upon is”relatable to evidence which is gathered during the course of the search or material available on the requisition of the books of account or other documents, it would be permissible to rely upon such material. 6.In the present case, however, it is not necessary to entertain the appeal since on the basis of the facts as they emerge from the record, it is clear that the requirement that the material be relatable to evidence gathered during the search or upon the requisition of the books of account has not been fulfilled. In this view of the matter, the appeal would not raise a substantial question of law and would accordingly stand disposed of. (Dr. D.Y.Chandrachud, J.) (J.P. Devadhar, J.)