“Whether On The Facts And Circumstances Of Thecase, The Tribunal Was Right In Holding That Thematerial Found In The Course Of Survey Which Wasconverted To A Sea v. Heard The Learned Counsel Appearing For Therespondent/ Assessee, Who Fairly Conceded The Submission Madeon The Side Of The Appellant / Revenue, In View Of The R

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 21.06.2022 Coram: THE HONOURABLE MR. JUSTICE R. MAHADEVANandTHE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ Commissioner of Income Tax(Central – I)Chennai...Appellant/Respondent Golden Refineries P. Ltd.,Karathupalayam,Mulanur Road,Vellakoil – 638 111...Respondent/Appellant Tax Case Appeal filed under Section 260 (A) of the IncomeTax Act, 1961 against the order passed by the Income TaxAppellate Tribunal Madras 'D' Bench in IT(SS)A.No.100/Mds/2004dated 28.12.2006, against the order dated 16/06/2004 made in ITAppeal No.382-C/02-03 on the file of the Commissioner of IncomeTax (Appeals)-II, Coimbatore for the Assessment year 1991-1992to 2001-2002 and against the order dated 18/02/2003 made inAABCG1071F on the file of the Assistant Commissioner of IncomeTax, Central Circle-I, Coimbatore. (Judgment of the Court was delivered by R.MAHADEVAN, J.) This Tax Case Appeal has been preferred by theappellant/revenue against the order dated 28.12.2006, passed bythe Income Tax Appellate Tribunal Madras 'D' Bench (forbrevity, 'ITAT') in IT(SS)A.No.100/Mds/2004, for the blockassessment period from 01.04.1991 to 06.02.2001. 2. The respondent/assessee is a company engaged in thebusiness of refining and trading of edible oils. On06.02.2001, a search under Section 132 of the Income Tax Act,1961 (in short, “the Act”) was conducted at the business premises as well as residential premises of therespondent/assessee, as a result of which, action under section133A was initiated. Consequently, notice dated 23.03.2001 underSection 158BC of the Act was issued, to which, therespondent/assessee filed its return of income in Form 2B, on10.08.2001, declaring the undisclosed income of Rs.47.21 Lakhs.On the basis of the materials collected during the course ofsearch, the Assessing Officer completed the block assessmentfor the period in question, relating to the assessment years1991-92 to 2001-02 under section 143(3) read with section 158BCof the Act and worked out the undisclosed income atRs.2,21,48,784/- vide assessment order dated 18.02.2003. 3. Aggrieved by the order dated 18.02.2003 passed by theAssessing Officer, the respondent/assessee preferred an AppealinI.T.A.No.382-C/02-03beforetheAppellateAuthority/Commissioner of Income Tax (Appeals) – II, Coimbatore(in short, “CIT(A)”), who after hearing both sides, reduced theblock assessment arrived at by the Assessing Office fromRs.2,21,48,784/- to Rs.48,54,803/- and accordingly, partlyallowed the appeal. 4. Challenging the order of the CIT(A), therespondent/assessee went on further appeal before the IncomeTax Appellate Tribunal. By order dated 26.12.2006, the Tribunalallowed the appeal by concluding that the materials gathered inthe course of inspection are to be treated as disclosed for thepurpose of the Income Tax Act and it cannot be used forcomputation of undisclosed income of the block period undersection 158BB. Aggrieved against the same, the appellant/Revenue is before this court with this Tax Case Appeal. 5. On 22.02.2011, this Tax Case Appeal was admitted onthe following substantial question of law: “Whether on the facts and circumstances of thecase, the Tribunal was right in holding that thematerial found in the course of survey which wasconverted to a search on the same day could not beused in the block assessment?” 5. On 22.02.2011, this Tax Case Appeal was admitted onthe following substantial question of law: “Whether on the facts and circumstances of thecase, the Tribunal was right in holding that thematerial found in the course of survey which wasconverted to a search on the same day could not beused in the block assessment?” 6. According to the learned senior standing counselappearing for the appellant/revenue, any material or evidencefound / collected in a survey which has been simultaneouslymade at the premises of a connected person, can be utilized,while making block assessment in respect of an assessee undersection 158 BB read with section 158 BH, in the light of thedecision of the Hon'ble Supreme Court in CIT v. S.Ajit Kumar[(2018) 93 taxmann.com 294 (SC)]. However, the Tribunal erredin holding that the material gathered in the course of surveyare to be treated as disclosed for the purpose of Income TaxAct and it cannot be used for computation of undisclosed incomeof block period under Section 158BB and allowed the appeal infavour of the respondent / assessee. Hence, the learned counselprayed to set aside the impugned order of the Tribunal andremand the matter to the Tribunal for reconsideration. 7.Heard the learned counsel appearing for therespondent/ assessee, who fairly conceded the submission madeon the side of the appellant / Revenue, in view of the ratiolaid down in the decision of the Hon'ble Supreme court inS.Ajit Kumar case (supra). 8.Admittedly, in the present case, based on thematerials collected during the course of inspection, theassessing officer made assessment for the block assessmentperiod in question, by determining the undisclosed income atRs.2,21,48,784/-, which was reduced to Rs.48,54,803/- by theCIT(A). However, the Tribunal set aside the order of the CIT(A)and decided the case in favour of the assessee, by holding thatthe material gathered in the course of survey are to be treatedas disclosed for the purpose of Income Tax Act and it cannot besued for computation of undisclosed income of block periodunder section 158BB. This court is of the opinion that thefinding so rendered by the Tribunal is erroneous and bad inlaw, in the light of the decision of the Hon'ble Supreme Courtin S.Ajit Kumar case (supra), wherein, it was held as under: “12) The method of calculating the undisclosedincome of the block period is provided under Section158BB of the IT Act. It would be appropriate to re-produce the relevant part of Sections 158BB and 158BH of the IT Act which is as follows: “158BB. Computation of undisclosed income ofthe block period.-(1) The undisclosed incomeof the block period shall be the aggregateof the total income of the previous yearfailing within the block period computed, inaccordance with the provisions of this Act,on the basis of evidence found as a resultof search or requisition of books of accountor other documents and such other materialsor information as are available with theAssessing Officer and relatable to suchevidence, as reduced by the aggregate of thetotal income , or, as the case may be, asincreased by the aggregate of the losses ofsuch previous year determined…… 158BH. Application of other provisions ofthis Act – Save as otherwise provided inthis Chapter, all other provisions of thisAct shall apply to assessment made underthis Chapter.” (Emphasis supplied by us) 13) On a perusal of the above provision, it isevident that for the purpose of calculating theundisclosed income of the block period, it can becalculated only on the basis of evidence found as aresult of search or requisition of books of accountsor other documents and such other materials orinformation as are available with the AssessingOfficer and relatable to such evidence. Section 158BBhas prescribed the boundary which has to be followed.No departure from this provision is allowed otherwise (Emphasis supplied by us) 13) On a perusal of the above provision, it isevident that for the purpose of calculating theundisclosed income of the block period, it can becalculated only on the basis of evidence found as aresult of search or requisition of books of accountsor other documents and such other materials orinformation as are available with the AssessingOfficer and relatable to such evidence. Section 158BBhas prescribed the boundary which has to be followed.No departure from this provision is allowed otherwise it may cause prejudice to the assessee. Needless tosay that it is the cannon of tax law that it shouldbe interpreted strictly. 14) However, Section 158BH of the IT Act hasmade all other provisions of the IT Act applicable toassessments made under Chapter XIVB except otherwiseprovided under this Chapter. Chapter XIV B of the ITAct, which relates to Block Assessment, came up forconsideration before this Court in Hotel Blue Moon(supra) wherein it has been held as under: “18. Chapter XIV-B provides for anassessment of the undisclosed incomeunearthed as a result of search withoutaffecting the regular assessment made or tobe made. Search is the sine qua non for theblock assessment. The special provisions aredevised to operate in the distinct field ofundisclosed income and are clearly inaddition to the regular assessments coveringthe previous years falling in the blockperiod. The special procedure of ChapterXIV-B is intended to provide a mode ofassessment of undisclosed income, which hasbeen detected as a result of search. It isnot intended to be a substitute for regularassessment. Its scope and ambit is limitedin that sense to materials unearthed duringsearch. It is in addition to the regularassessment already done or to be done. Theassessment for the block period can only bedone on the basis of evidence found as aresult of search or requisition of books ofaccounts or documents and such othermaterials or information as are availablewith the assessing officer. Therefore, theincome assessable in block assessment underChapter XIV-B is the income not disclosedbut found and determined as the result ofsearch under Section 132 or requisitionunder Section 132-A of the Act. 28. Section 158-BH provides for applicationof the other provisions of the Act. Itreads:“158-BH. Application of other provisions ofthis Act.- Save as otherwise provided inthis Chapter, all other provisions of thisAct shall apply to assessment made underthis Chapter.” This is an enabling provision, which makesall the provisions of the Act, save asotherwiseprovided,applicableforproceedings for block assessment. Theprovisions which are specifically includedare those which are available in ChapterXIV-B of the Act, which includes Section 142 and sub-sections (2) and (3) of Section143.” 15) The power of survey has been provided underSection 133A of the IT Act. Therefore, any materialor evidence found/collected in a Survey which hasbeen simultaneously made at the premises of aconnected person can be utilized while making theBlock Assessment in respect of an assessee underSection 158BB read with Section 158 BH of the IT Act.The same would fall under the words “and such othermaterials or information as are available with theAssessing Officer and relatable to such evidence”occurring in Section158 BB of the Act. In the presentcase, the Assessing Officer was justified in takingthe adverse material collected or found during thesurvey or any other method while making the BlockAssessment. 16) In view of the foregoing discussions, we areof the considered opinion that the decisions reliedupon by learned senior counsel for the assessee donot lay down the correct law.” 16) In view of the foregoing discussions, we areof the considered opinion that the decisions reliedupon by learned senior counsel for the assessee donot lay down the correct law.” 9. Thus, considering the facts and circumstances of thecase and having regard to the submissions so made by thelearned counsel on either side and also following the decisionof the Hon'ble Supreme Court referred to above, the substantialquestion of law raised herein is decided in favour of theappellant / Revenue and the order impugned herein is set aside.Consequently, the matter is remanded to the Tribunal forreconsideration, on merits and in accordance with law, afteraffordingdueopportunityofhearingtotherespondent/assessee. Such an exercise shall be completed by theTribunal, within a period of eight weeks from the date ofreceipt of a copy of this judgment. Accordingly, this Tax CaseAppeal stands disposed of. No costs. //True Copy// Sd/- Assistant Registrar (CS-VII) mrr/rsh Sub Assistant Registrar To 1.Income Tax Appellate Tribunal 'D' Bench, Chennai. Chennai. 2.The Commissioner of Income Tax (Central – I), Chennai. 3.The Commissioner of Income Tax (Appeals)-II Coimbatore. Coimbatore. 4.The Asst. Commissioner of Income Tax, Central Circle-I, Coimbatore. Central Circle-I, Coimbatore. +1cc to M/s.G.R.Associates, Advocates SR. No. 38100 SR (CO)PR (15/07/2022) TCA No.1480 of 2010