45. Babu
Manoharan vs. Dy. CIT; [2019] 415 ITR 83 (Mad.) Date of order: 4th
June, 2019; A.Ys.: B.P. from 1st April, 1989 to 31st March,
2000
Sections 69, 132 and 158BC of ITA 1961 – Search and seizure – Block
assessment – Undisclosed income – Search at premises of assessee’s
father-in-law – Valuation of cost of construction of property called for
pursuant to search – Addition to income of assessee as unexplained investment
based on report of Departmental Valuer – Report available with Department prior
to search of assessee’s premises – Addition unsustainable
During a search operation u/s 132 of the Income-tax
Act, 1961 conducted in the premises of the assessee’s father-in-law on 12th
August, 1999 it had been found that a house property was owned by the assessee
and his spouse equally and a valuation was called for from the assessee. After
the assessee submitted the valuation report, the Department appointed a valuer
who subsequently submitted his report in December, 1999. Thereafter, on 13th
January, 2000, a search and seizure operation was conducted in the premises of
the assessee. In the block assessment made u/s 158BC, the AO made an addition
to the income of the assessee on account of unexplained investment in the
construction of the house property.
Both the Commissioner (Appeals) and the Tribunal
upheld the addition.
On appeal by the assessee, the Madras High Court
reversed the decision of the Tribunal and held as under:
‘i) In the
absence of any material being found during the course of search in the premises
of the assessee with regard to the investment in the house property, the
assessee could not be penalised solely based on the valuation report provided
by the Department. The house property of the assessee was found during the
search conducted in the premises of the father-in-law of the assessee on 12th
August, 1999 and a valuation report was called for from the assessee as well as
the Departmental valuer. The valuation report was prepared much earlier to the
search conducted on 13th January, 2000 in the assessee’s premises.
Therefore, the valuation report was material which was available with the
Department before the search conducted in the assessee’s premises and it could
not have been the basis for holding that there had been an undisclosed
investment.
ii) The
assessee had not been confronted with any incriminating material recovered
during the search. According to the valuation report submitted in the year
1999, it was only to determine the probable cost of construction and the valuer
in his report had stated that the construction was in progress at the time of
inspection on 12th August, 1999 on the date of search of the premises
of the assessee’s father-in-law. Therefore, the assessee could not be faulted
for not filing his return since he had time till September, 2001 to do so. The
order passed by the Tribunal holding that the investment in the house property
represented the undisclosed income of the assessee was set aside.’
