The Commissioner Of Income Tax v. M/S K.s. Conduit

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.37 of 2002 Date of decision: 14.10.2010 The Commissioner of Income Tax. Vs. M/s K.S. Conduit. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. T.K. Joshi, Advocatefor the appellant. for the appellant. Mr. Ashok Aggarwal, Sr. Advocate withMr. S.K. Mukhi, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. Nos.37 and 38 of 2002, as common questions have been raised in both the appeals. 2. On 24.9.2010, following order was passed:- “1. ITA No. 37 of 2002 has been preferred by therevenue under Section 260A of the Income Tax Act,1961 (in short “the Act”) against the order of theIncome-tax Appellate Tribunal, Chandigarh Bench,Chandigarh (hereinafter referred to as “theTribunal”) passed in ITA No. 14/Chandi/96 on25.7.2001 for the block assessment years 1986-87and 1996-97 proposing following substantialquestions of law:- (i) Whether in the facts and circumstancesof the case, the ITAT was right in holdingthat provision of section 145(2) are notapplicable to block assessmentsespecially when section 158BHspecifically states that save as otherwiseprovided in this Chapter, all otherprovisions of the Act shall apply toassessment made under this chapter?of the case, the ITAT was right in holdingthat provision of section 145(2) are notapplicable to block assessmentsespecially when section 158BHspecifically states that save as otherwiseprovided in this Chapter, all otherprovisions of the Act shall apply toassessment made under this chapter? (ii) Whether in the facts and circumstancesof the case, the ITAT was right indeleting the addition, when the power ofestimation is inherent in section 143(3)itself and the Assessing Officer was dutybound to estimate the income in thecircumstances of the case?of the case, the ITAT was right indeleting the addition, when the power ofestimation is inherent in section 143(3)itself and the Assessing Officer was dutybound to estimate the income in thecircumstances of the case? (iii) Whether in the facts and circumstancesof the case, the ITAT was right inallowing depreciation and excise duty forthe assessment year 1994-95 when nosuch deduction was admissible in view ofthe provisions of section 158BB(i) as nosuch deduction was claimed in theoriginal return of income filed u/s 139?”of the case, the ITAT was right inallowing depreciation and excise duty forthe assessment year 1994-95 when nosuch deduction was admissible in view ofthe provisions of section 158BB(i) as nosuch deduction was claimed in theoriginal return of income filed u/s 139?” 2. Search was conducted on the premises of theassessee on 23.11.1995. On the basis of materialso found, the Assessing Officer made blockassessment and in the course of assessmentrejected the books of account but on appeal thesame was set aside by the Tribunal on the groundthat block assessment under Chapter XIVB of the Act could not travel beyond the searched material byinvoking Section 145 of the Act. 3. During the course of arguments, learnedcounsel for the revenue states that the blockassessment order was based on material foundduring search and inference is drawn therefrom and,thus, the substantial question of law which arises forconsideration is: “Whether in the facts and circumstances ofthe case, the assessment based on materialfound during search could be set aside on theground that Section 145 (2) was notapplicable?”the case, the assessment based on materialfound during search could be set aside on theground that Section 145 (2) was notapplicable?” 4. We allow question (i) to be modifiedaccordingly.accordingly. 5. Learned counsel for the assessee states thathe is not ready to proceed further on the amendedquestion. 6. List again on 14.10.2010.” 3. During the course of arguments, learnedcounsel for the revenue states that the blockassessment order was based on material foundduring search and inference is drawn therefrom and,thus, the substantial question of law which arises forconsideration is: “Whether in the facts and circumstances ofthe case, the assessment based on materialfound during search could be set aside on theground that Section 145 (2) was notapplicable?”the case, the assessment based on materialfound during search could be set aside on theground that Section 145 (2) was notapplicable?” 4. We allow question (i) to be modifiedaccordingly.accordingly. 5. Learned counsel for the assessee states thathe is not ready to proceed further on the amendedquestion. 6. List again on 14.10.2010.” 3. Learned counsel for the assessee submits thatwhatever be the earlier interpretation, there is an expressamendment to Section 158 BC(b) by Finance Act, 2002,applicable w.e.f. 1.7.1995 making Section 145(2) of the Actapplicable to block assessment. He submits that the matter willhave to be reconsidered by the Tribunal in the light of applicabilityof Section 145 of the Act. 4. Accordingly, we answer the question in favour ofrevenue and hold that the assessment based on material found during search could not be set aside only on the ground thatSection 145(2) of the Act was not applicable. The appeal isallowed, order of the Tribunal is set aside and the matter isremanded to the Tribunal for fresh decision on merits inaccordance with law. 5. Parties may appear before the Tribunal for furtherproceedings on 20.12.2010. (ADARSH KUMAR GOEL) JUDGE October 14, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE