40. Ramnath Santu
Angolkar vs. Dy. CIT [2020] 422 ITR 508 (Kar.) Date of order: 27th November, 2019 B.P.: 1991-92 to 1998-99
Search and seizure – Block assessment – Sections
132, 158BC, 292CC of ITA, 1961 – Validity of search must be established before
block assessment – Computation of income should be based on undisclosed income
discovered during search; B.P. 1991-92 to 1998-99
The appellant is an individual dealing in real estate and is engaged in
the activity of providing service to landowners for getting compensation in
case of land acquisition for promoting housing schemes, land development and
selling of plots on behalf of the owners on commission or service charges. The
appellant filed his return of income for the A.Ys. 1991-92 to 1998-99. The
aforesaid returns were processed u/s 143(1). On 19th November, 1998,
a search u/s 132 of the Act was conducted in the residential premises of the
appellant and a notice u/s 158BC was issued to the appellant by which he was
required to file his return of income. In response to the aforesaid notice, the
appellant filed the return of income for the block period, i.e., 1st April,
1988 to 19th November, 1998 and declared an additional income of Rs.
4,53,156. Thereafter, a notice u/s 143(2) was issued to the appellant and he
was directed to produce all the details. The A.O. passed an order of assessment
on 28th November, 2000 u/s 158BC(c) and determined undisclosed
income of the appellant at Rs. 1,63,54,846.
Being aggrieved, the appellant filed an appeal before the Commissioner
of Income-tax (Appeals). The appeal was decided by an order dated 23rd
August, 2002 which was partly allowed. The Revenue being aggrieved by this
order, filed an appeal before the Income-tax Appellate Tribunal. The appellant
filed a cross-objection in the aforesaid appeal, to the extent that the appeal
was decided against the appellant. The Tribunal by an order dated 18th
January, 2007, set aside the order of the Commissioner of Income-tax (Appeals)
and remitted the matter to the Commissioner of Income-tax (Appeals) and
directed the issues to be adjudicated afresh by affording an opportunity of
hearing to the parties in accordance with law. The Commissioner thereafter, by
an order dated 30th May, 2008, decided the appeal and partly allowed
the appeal filed by the appellant. The appellant and the Revenue being
aggrieved by this order, again filed appeals before the Tribunal. The Tribunal,
by an order dated 9th September, 2011, partly allowed both the
appeals.
The appellant filed an appeal before the High Court and raised the
following questions of law:
‘(1) Whether the assessment order passed for the block period u/s
158BC(c) of the Act in the name of the individual, when the warrant of
authorisation issued in the joint name of the appellant and others is valid in
law on the facts and circumstances of the case?
(2) Whether the authorities below ought to have examined the validity of
the search and then only proceeded to initiate block assessment proceedings on
the facts and circumstances of the case?
(3) Whether the Tribunal was justified in law in holding that there is
no merit to challenge the action of the A.O. to assess u/s 158BC of the Act
when the conditions precedent are not existing as much as for computation of
income u/s 158BC shall be restricted to seized material on the facts and
circumstances of the case?’
The Karnataka High Court held as under:
‘i) Section 292CC of the
Income-tax Act, 1961 merely provides that it shall not be necessary to issue an
authorisation u/s 132 or make a requisition u/s 132A separately in the name of
each person. However, it is pertinent to note that where an authorisation is
made in the name of more than one person, the section does not provide that the
names of such persons need not be mentioned in the warrant of authorisation.
ii) The authorities are under an
obligation to examine the validity of the search and only thereafter proceed to
initiate the block assessment proceedings.
iii) From a perusal of section
158BC it is evident that while computing the undisclosed income for the block
period, the evidence found as a result of search or requisition of books of
accounts or other books of accounts and such other material or information as
is available with the A.O. and relatable to such evidence, has to be taken into
consideration. In other words, it is evident that the computation of
undisclosed income should be based on such evidence which is seized during the
search which is not accounted in the regular books of accounts.
iv) The assessment order passed
for the block period u/s 158BC(c) of the Act in the name of the individual,
when the warrant of authorisation was issued in the joint names of the assessee
and others, was not valid in law. Moreover the authorities ought to have
examined the validity of the search and only then proceeded to initiate block
assessment proceedings on the facts and circumstances of the case.
v) From a
perusal of the material on record, it was evident that there was no seizure
with regard to the A.Ys. 1988-89 and 1989-90 during the course of the search
and seizure operations. However, the A.O. while computing the undisclosed
income had taken into account the income in respect of these years also and
thus the order passed by the A.O. was in violation of section 158BC(c). The
order of block assessment was not valid.’
