IN THE HIGH COURT OF JUDICATURE AT PATNA MA No.188 of 2006 Deputy Commissioner of Income Tax, Central Circle-2, Patna ……………………….Appellant Versus Shri Ganesh Dubey E-195,Greater Kailash, New Delhi ………..Assessee/Respondent ----------- For the Appellant: Mr. Harshwardhan Prasad, SSC and Mr. Rishi Raj Sinha. For the Respondent: Mr. K.N. Prasad and Mr. KCK Sinha, Advocates. ----------- Present: Hon’ble Mr. Justice Dipak Misra, Chief Justice Hon’ble Mr. Justice Mihir Kumar Jha ------------------------------------------------------------------------------- ORDER (21.05.2010) As per Dipak Misra, C.J.- In this appeal preferred under Section 260A of the Income Tax Act, 1961 (for short `the Act’), the challenge is to the order dated 20.01.2006 passed in I.T.A. NO. 70/Pat/2004 for the block period 90- 91 to 2000-01. 2. A search and seizure operation was conducted at the residential premises of the respondent-assessee at Ranchi and Delhi on 13.01.2000 under Section 132(1) of the Act. During the search and seizure certain loose sheets and documents were found and those were seized. Those documents indicated assessee’s investment in 2 immoveable properties and foreign exchange dealings. A notice under section 158BC of the Act was issued on 15.09.2000 and served on the assessee requiring him to file a true and correct return of the total income. The assessee filed his return for the block period 01.04.1999 to 13.01.2000 by indicating that the total undisclosed income is Rs. 5,17,000/- Thereafter, the assessing officer took up the assessment and determined the total income for the block period at Rs. 4,98,47,849/-. A sum of Rs. 69,23,564/- has been lessened as per Section 158BC of the income disclosed in the return of the income filed before search. 3. The assessee being dissatisfied preferred an appeal. The appellate authority dealing with the factum of deduction under Section 158BC of the Act held as follows: “22. I have considered the facts relating to this asset. I have also perused the case laws cited by the appellant and also the judgment of Hon‟ble High Court of Bombay reported at 247 ITR 448. However, even before considering the merit of the issue, I find that the asset has been declared by the appellant in his regular return for the related year. His two sons have shown this asset in their returns for AY 1998-99 which were filed before the search. Certificate u/s 230A was applied for before the search and was obtained. This asset was not, therefore, undisclosed nor was is detected as a result of the search. This asset, therefore, has to be considered in the regular assessments of the concerned persons and cannot be considered in block assessment following the judgment of Hon‟ble High Court of Delhi in the case of LR Gupta vs. Union of India on (194 ITR 32) and the judgment of Hon‟ble High Court of Calcutta in the case of Bhagwati Prasad Kedia vs. CIT (248 ITR 562). In this view of the matter, so far as this block 3 assessment is concerned, the addition of Rs. 41,85,000/- is deleted. 23. Similarly, the additions relating to properties at Sainik Farm Meharauli (Rs. 43,55,000/-), B-30, Swami Nagar, New Delhi (Rs. 2,94,43,425/-), E-195, Greater Kailash, New Delhi (Rs. 1,00,000/-), B-41 & 42, West Vinod Nagar, New Delhi (Rs. 4,35,160/-) and 61B, Sainik Farm, New Delhi (Rs. 24,41,700/-) are also deleted from this block assessment as these assets have been declared to the Department before the search and as the same have to be examined in regular assessments.” 4. Being dissatisfied with the order, the assessee preferred an appeal before the tribunal. The tribunal being of the view that the first ground is general dismissed the same. The tribunal dealt with the second ground as under: “3. Second ground reads as under: - “For that in the facts and circumstances of the case the ld. CIT(A) is not justified in confirming the addition of Rs.10,90,800/- made by the assessing officer as undisclosed bank deposit. It is erroneous to hold that the deposits in the bank account owned and held by Sanjay Kumar Mangalam and Vijay Kumar Mangalam aggregated to Rs.10,90,800/- during the period relevant to the assessment year 1993-94, 1995-96 and 1996-97 was undisclosed and remain undisclosed and was thus undisclosed income of the assessee. The evidences and explanation furnished have been brushed aside. The Assessing Officer has made this addition on account of the following credits in the bank accounts of Shri Sanjay Kr. Mangalam and Shri Vijay Kumar Mangalam, sons of the assessee: 4 Sl. No. Name of the a/c holder Account No. & Bank Deposit date Explanation of the assessee Agreement of rejection 4. Sanjay Mangalam SB- 4166 OBC New Delhi 2000 30.5.92 Gift No evidence 5. Do Do 10000 30.4.92 Cash No evidence 6. Do Do 19900 27.10.94 Gift Give details as to whom and why 7. Do Do 300000 18.10.95 Loan from Mahesh N. Lal Raj Kumar & Usha Kumari Agrawal All these persons have failed to confirm loan 8. Do Do 210000 24.10.95 Loan from Guljarmal & Sumitra Do 9. Do Do 25000 Loan from Usha Kumar Agrawal Do 10. Vijay Manglam SB 4165 OBC New Delhi 21000 03.04.92 Gift Evidence 12. Do Do 19900 27.10.94 Gift Give details 14. Do Do 400000 24.10.95 Loan from Sumitra Agrawal Produced the person confirmation 5 Thereafter, the tribunal after analyzing the facts in paragraph 5 held as follows: “5.Heard both the parties and perused the record and we find that all the deposits made in the bank accounts of sons Shri Vijay Manglam and Shri Sanjay Mangalam of the assessee are upto the year 1995. Both the sons of the assessee have filed their IT returns for the assessment years 1998-99 and 1999-00 prior to the date of search i.e. 13th January, 2000. In annexure „A‟ enclosed with the return of income they have disclosed particulars of their savings bank account, current assets, loans and advances and other investments made by them including unsecured loans with the Oriental Bank of Commerce. In view of these undisputed fact that Mr. Vijay Kumar Mangalam and Sanjay Kumar Mangalam have filed their IT returns for the assessment years 1998-99 and 1999-2000 and the fact that the deposit in their bank account were upto the year 1995, we are unable to agree with the lower authorities that the deposit in their bank accounts is the undisclosed income of the assessee for the block period. The same is, therefore, deleted. Third ground of appeal reads as under:- “For that in the facts and circumstances of the case, the ld.CIT(A) has erred in confirming the addition of Rs.1,95,000/- made by the Assessing Officer on account of alleged unexplained investment in personal effects during the period relevant to the assessment year 1994- 95 and 1995-96, the addition as made is based on mere misconception and is, thus, wholly untenable”. During the course of search operation conducted at residential premises of the assessee 2 TVs (Sony and BPL), one computer (Adhite) and 6 AC Briten (1.5 tones each) were found. The assessee was asked to 15. Do Do 65000 30.11.95 Do Do” 6 indicate the source of such investment and to explain why the value of Rs.15,000/- per TV, Rs.60,000/- for computer and Rs.30,000/- per AC should not be assessed for the year in which they have been found during the block period and assessed to tax. The assessee‟s explanation was that Sony TV was purchased in 1987-88 and the BPL TV in 1993-94 out of the drawings and petty savings of the assessee and his family members. The computer was claimed to that of M/s Mangalam Medical Services (P) Ltd. Regarding 6 Acs no source was explained. As such Rs.15,000/- were treated as undisclosed investment of the assessee in purchase of BPL TV in the financial year 1993-94 and Rs.1,80,000/- undisclosed investment in purchase of 6 ACs during the financial year 1993-94 relevant to the assessment year 1994-95. Before the ld. CIT (A), the contention of the assessee was that these were household goods, which were not acquired by the assessee in the block period. However, he confirmed the addition by holding that it was the assessee to establish that the assets concerned were acquired before the block period.” 5. In our considered opinion the said finding is correct and does not require interference. Be it noted, as far as the other grounds are concerned, the tribunal has taken note of that and reproduced the same which reads as under: “6. Before us, the ld. Counsel for the assessee reiterated the stand taken before the lower authorities that these items were purchased before the block period and no material was found at the time of search to suggest that any of the items was purchased during the block period. The valuation of the items has also been made on estimate basis. The ld. DR on the other hand relied on the order of the ld. CIT (A). 7. Heard both the parties and perused the record. We find force in the contention of the ld. Counsel for the assessee that no material was found during the search to establish that these 7 goods were purchased during the block period. The Assessing Officer has made the valuation only on estimate basis without certifying the actual value of the goods. Even for making estimate of a thing concrete basis is to be pointed out which the Assessing Officer has failed to bring on record. In this view we are not inclined to uphold the order of the CIT (A). His order on this point is reversed and the addition is deleted.” 6. The tribunal has addressed to the same in detail and expressed the view that the valuation was without quantifying the actual value of the goods. The tribunal has observed that for making an estimate of the things some concrete basis has to be brought on record. The tribunal being of the same view deleted the addition from the record. The learned counsel for the Revenue has urged before us that the reasons given by the tribunal are perverse as the returns were filed by minors and the concept of best judgment assessment has been taken recourse to. The learned counsel for the assessee supported the order passed by the tribunal. 7. In Commissioner of Income Tax v. Ravi Kant Jain [2001] 250 ITR 141, a Bench of the Delhi High Court has opined as follows: “Block assessment under Chapter XIV-B of the Income-tax Act, 1961, is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer. Evidence found as a result of search is clearly relatable to sections 132 and 132A” 8 8. Learned counsel for respondent has also commended us to the decisions in DCIT v. Shaw Wallace, 248 ITR 81 (Cal), CIT v. M.K.E. Menon, 248 ITR 310 (Bombay), CIT v. Jupiter Builders ,287 ITR 287 (Del), CIT v. P.K. Ganeshwar, 308 ITR 124 (Madras) and Karnani Properties Ltd. V. CIT, 82 ITR 547 (SC). 9. In the case at hand, on a perusal of the order passed by the tribunal, it is vivid that the tribunal has rightly expressed the view that it cannot be treated as undisclosed income of the assessee for the block period. In our considered opinion, the view expressed by the tribunal is absolutely justified. 10. In view of aforesaid, we do not perceive any substantial question in this appeal. Accordingly, the same stands dismissed. (Dipak Misra) (Mihir Kumar Jha) Chief Justice Judge Patna High Court. The 21st May, 2010. Dilip.