- (1.) This appeal under Section 260A of the Income-tax Act is at the instance of an assessee and is directed against order dated March 30, 2001, passed by the Income-tax Appellate Tribunal, E Bench, Calcutta, in Income-tax Appeal bearing IT (SS) A No.69/(Cal) of 1997 for the block-period April 1, 1985 to February 12, 1996. Being dissatisfied, the assessee has come up with the present appeal.
(2.) The facts giving rise to filing of the present appeal may be summed up thus: a) During the previous year ended March 31, 1993 relevant to the Assessment Year 1993-94, the assessee allegedly purchased for the purpose of resale 141.075 MTs of HTS wire from M/s. D. K. Hardware Stores at the cost of Rs.39,78,315/-. Payment in respect of the said purchase was made by account payee cheques partly during the previous year ended March 31, 1993 and partly during the subsequent year. The entire quantity of 141.075 MTs was allegedly sold during the previous year ended March 31, 1993 to M/s. Sahuwala Cylinders Limited for a total price of Rs.42,67,518.75p. giving rise to a profit of Rs.2,89,203.75p. The entire sale-price was allegedly received by the assessee during the previous year ended March 31, 1993 itself by account payee cheque deposited into the bank on 31st March, 1993. b) The said transactions relating to purchase and sale of HTS wire were duly accounted in the regular books of account for the previous year ended March 31, 1993, relevant to the Assessment Year 1993-94 and those were reflected in the assessee s audited profit and loss account for the previous year ended March 31, 1993. c) The income-tax return for the Assessment Year 1993-94 showing an income of Rs.3,41,570/- was filed on June 16, 1994 along with, inter alia, audited balance sheet and profit and loss account for the previous year ended March 31, 1993. In respect of the said return, intimation under Section 143(1) (a) of the Act was issued by the Assessing Officer on August 22, 1994. d) In course of an operation of search and seizure on December 21, 1995, a copy of the assessee s audited account for the previous year ended March 31, 1993 which was already on the record of the department was seized. Upon scrutiny of the said audited account, the Assessing Officer required the assessee to furnish details in respect of the transactions with M/s. D. K. Hardware Stores which was shown as a creditor in the said account for the balance amount due to the said party. The assessee furnished to the Assessing Officer copies of the bills and challans relating to the alleged purchase made from the said party as also details of payment made. e) The Assessing Officer caused enquiry to be made through Departmental Inspector who could not find the person at the relevant address mentioned in the documents. The assessee, however, explained to the Assessing Officer that the entire materials purchased from the said party were sold by the assessee during the previous year ended March 31, 1993 itself and furnished to the Assessing Officer copies of its sale-bills and evidence to show that the sale-price had been received by cheque and those transactions were duly recorded in the books of account for the relevant previous year. The Assessing Officer, however, proceeded on the assumption as if the material was shown in the assessee s account as consumed in the fabrication work. The Assessing Officer held that the assessee did not require HTS wire for the fabrication work and as such, concluded that the assessee had inflated its expenses by claiming bogus purchases to the extent of Rs.39,78,315/-. The Assessing Officer, thus, treated the said sum of Rs.39,78,315/- as undisclosed income for the Financial Year 1992-93 for inclusion in the block assessment. f) Another issue arose in course of the block assessment proceedings as regards to two payments of Rs.10 lakh each shown in the regular books of account allegedly made to M/s. Faissan Construction and M/s. Sakti Construction Co. on August 24, 1995 and August 25, 1995 respectively. The books of account reflecting the said payments were seized in course of the search. The search took place as indicated earlier on December 21, 1995 before the close of the Financial Year 1995-96 and the assessee s return for the Assessment Year 1996-97 relevant to the Financial Year 1995-96 was due to be filed much later. g) The Assessing Officer asked the assessee to explain as to why the payments in the names of the parties should not be treated as fictitious. According to the Assessing Officer, the payments were shown as against old dues but the two parties were not shown as Sundry Creditors as on March 31, 1995. One Sri Umesh Narayan Jha, an employee of a proprietary concern of the Managing Director of the assessee was shown as the proprietor of M/s. Sakti Construction Company, trade license relating to which was found in the assessee s office. It was duly explained to the Assessing Officer that the cheques issued in the names of the said parties were Account Payee but the endorsement in this behalf was cancelled and cash was drawn against the cheques by the assessee s cashier which was thereafter sent to Budge Budge site for payment of wages to the contractors and labourers where its receipts and subsequently disbursements were duly recorded which was duly verified by the Assessing Officer. The Assessing Officer, however, held that the payments were fictitious and bogus and included the same as undisclosed income for the Financial Year 1995-96 in the block assessment. h) Being dissatisfied, the assessee preferred an appeal before the Incometax Appellate Tribunal and the Tribunal by the order impugned in this appeal upheld both the additions made by the Assessing Officer. i) Being dissatisfied, the assessee has come up with the present appeal. A Division Bench of this Court at the time of admission of the appeal formulated the following substantial questions of law: i) Whether sum of Rs.39,78,315/- and Rs.20.00 lakh reflected in the regular books of account relating to the assessment years 1993-94 and 1996-97 could form subject matter of the block assessment. ii) In the event, the answer to Question No.1 is in the affirmative, whether the purported findings of the Tribunal upholding the disallowance of purchase of Rs.39,78,315/- for the financial year 1992-93 are arbitrary unreasonable and perverse. iii) If the answer to Question No.1 is in the affirmative whether the purported findings of the Tribunal upholding the addition of Rs.20.00 lakh for the financial year 1995-96 are arbitrary, unreasonable and perverse. iv) Whether in the case of block assessment, the income-tax payable on the undisclosed income @60% as specified in Section 113 of the Income-tax, 1961, can be increased by the levy of any surcharge.
(3.) Mr. Poddar, the learned Senior Advocate appearing on behalf of the appellant, has raised a pure question of law in support of the present appeal. According to Mr. Poddar, aforesaid two transactions being reflected in the return of the assessee and being also supported by the entries made in the books of account produced by the assessee, there was no justification of making assessment in respect of those transactions in block assessment. In other words, according to Mr. Poddar those two items of transactions being reflected in the account of the assessee, if those were disbelieved and treated to be fictitious, at the most, the Assessing Officer could pass necessary order in the regular assessment, but there was no scope of passing such order in block assessment when the findings recorded by the Assessing Officer were not based on any material recovered at the time of search and seizure. Mr. Poddar submits that it appears from the materials on record that in course of search and seizure, no incriminating papers were recovered from the office of the assessee and as such, the findings in respect of the aforesaid two items, are not based on any documents seized in course of search and seizure. In support of such contention, Mr. Poddar relies upon the following decisions: 1. ACIT Vs. Hotel Blue Moon, 2010 321 ITR 362; 2. CIT Vs. Bimal Auto Agency, 2009 314 ITR 191; 3. CIT Vs. P. K. Ganeshwar, 2009 308 ITR 124; 4. CIT Vs. Balaji Wire P. Ltd., 2008 304 ITR 393; 5. CIT Vs. Jupiter Builders P. Ltd., 2006 287 ITR 287; 6. CIT Vs. Vishal Aggarwal, 2006 283 ITR 326; 7. CIT Vs. Khushlal Chand Nirmal Kumar, 2003 263 ITR 77; 8. CIT Vs. Ravi Kant Jain, 2001 250 ITR 141; 9. Bhagwati Prasad Kedia Vs. CIT, 2001 248 ITR 562; 10. CIT Vs. N. r. Papers and Boards Ltd., 2001 248 ITR 526.;