K.S.JHAVERI,J. - (1.) By way of this appeal, the assessee has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee and dismissed the appeal of the Department.
(2.) The facts of the case are that the search operations were carried out on 16.5.1997. During the course of search operations the residential and factory premises of the assessee were covered and certain assets were found and seized, besides incriminating papers. The notice under section 158BC was issued to the assessee on 20.7.1998 requiring the assessee to papers a true and correct return of his total income including the undisclosed income within 45 days of service of the notice. In compliance, no return was filed up to 16.3.1999 and therefore a show cause notice was issued along with a notice under section 142(1) of the Act on 16.3.1999 requiring the assessee to furnish explanation with regard to the assets found and seized from his premises and also to explain all the incriminating seized papers. The return was filed on 29.4.1999 declaring therein undisclosed income of Rs. 30 lakh's. While furnishing the return a brief note was annexed describing therein the history of the assessee and also the basis of showing such undisclosed income. The brief note so annexed is reproduced hereunder for ready reference:- "1. The assessee was born in the year 1950 in a poor family. The assessee's Sh. Mohd. Umar was doing cycle repairing work and to meet the livelihood the assessee started helping his father in his work at a very early age. Thereafter the assessee started his own cycle repairing centre in the year 1965 in Ramganj Bazar, Jaipur. He is still popularly known as Yasin Cyclewala in his area. The lady members of the family were also engaged in the job work of Purari and Bindai to support the family. 2. The assessee got married to Smt. Rahmat Bano in the year 1971. He has two daughters namely Yasmeen and Shaheen and one son namely Mohd. Arif Yasmeen got married to Mehrajudeen on 29.3.1994 and Arif got married on 2.5.1997 to Sabnam. The son of assessee Mr. Arif and son in law Mr. Mehrajudeen are assisting to assessee in his work. 3. The assessee in course of time left the work of cycle repairing and started the business of brokerage of precious and semi-precious stones and jewellery some time in the year 1989. Thereafter he started a proprietary concern in the name of M/s Umar Gems in the year 1993. The assessee has filed regular income tax return from A.Y. 1992-93. 4. There was a search of assessee's premises on 16.5.1997. In course of search certain loose papers, bills and vouchers of his proprietary concern M/s Munar Gems were found and seized. However, the regular books of M/s Umar Gems were not found since they were with the accountant of the assessee. These books of accounts were produced before the ADIT on 23.5.1997, in confirmation of which a letter dated 27.5.1997 was filed to the ADIT. On the basis of these books the income for the A.Y. 1996-97 and 1997-98 has been worked out. Since substantial sale during these years was export sales, the income of the assessee from this concern was not chargeable to tax. For A.Y. 1997-98 due date of filing of return had not expired. This return was filed on 31.3.1999 at income of Rs. 2330/- after considering deduction under section 80HHC at Rs. 1406759/-. This income is taken as disclosed income in the block return. For A.Y. 1996-97 also the total sale is export sale. The return for this year was not filed but the total income is NIL after considering deduction 80HHC at Rs. 421273/- copy of P &L account, Balance-sheet 80HHC certificate and computation of total income for this year is enclosed. 5. In course of search stocks of semi-precious and precious stones valued at Rs. 19,27,778/- was found and seized. Besides this, certain papers indicating the investment in properties, household expenses, marriage expenses etc. were found. From these papers it is not possible to work out year wise positive income. Hence, the undisclosed income for the block period is being worked out by deductive method in which all the undisclosed investments and estimated unexplained expenditure is aggregated. For this purpose investments held in the name of family members of the assessee are also considered in the hands of the assessee. In case of any such investment is considered in the hand of any other member, corresponding deduction be given in the assessee's case. This amount is equal to income since income is either spent or invested. On this basis the investment/expenditure for the block period is determined as under:- a) Cash:- Total cash found was Rs. 39,105/- from the residence of assessee. Out of which 19,105/- was released and balance Rs. 20,000/- is seized. The cash balance available as per cash book of M/s Umar Gems as on 16.5.1997 is Rs. 21,301/- and further a sum of Rs. 5,000/- is considered as the savings of family members. The balance of Rs. 12,804/- is considered as unexplained. b) Stock:- Total stock of precious and semiprecious stones were found and seized was valued at Rs. 19,27,778/-. Out of which the book stock as on 31.3.1997 is Rs. 96,586/-. The purchases from 1.4.1997 to 15.5.1996 amounts to Rs. 4,19,492/-. There is no sale during the period. Thus, stock as per books as on the date of search is Rs. 5,16,078/-. The balance stock of Rs. 14,11,700/- is considered as unexplained. c) Immovable properties:- During the block period the assessee has purchased residential house at 38-39 Dhanna Das Ki Bagichi, Jaipur for Rs. 2,00,000/- approx. Further a sum of Rs. 2,00,000/- was spent on repairs, addition and alteration from time to time. This residential plot is purchased in the name of Rahmat and Arif. Thus, total investment in this property is estimated to Rs. 4 lakhs which is being offered in the block return. Further a house in the name of Rahmat and Arif was purchased in 1989-90 at 1375-76 Kamela Gali, MD Road, Jaipur. At present this house is being used as works office of M/s Umar Gems. Total investment in this house is estimated to Rs. 1.75 lakhs which is being offered in the block return. The assessee also have a house at Dhanna Das Ji Ki Bagichi purchased in the year 1994-95 in the name of Rahmat and Shaheen. This house was purchased for Rs. 1,11,000/-. Presently Sh. Mchrajudeen is living in this house. The investment in this house is being offered in the block return of the assessee. d) Maruti Esteem:- During the block period the assessee's son Mr. Mohd. Arif has purchased a Maruti Esteem Car. This car was financed from Lloyds Finance Co. The assessee has invested following sums, which is offered in the block return:- JUDGEMENT_101_LAWS(RAJ)11_2016.jpg e) Marriage expenses:- During the block period two marriage were performed:- i) Miss Yasmeen, daughter of Sh. Yasin 29.3.1994 ii) Mr. Mohd. Arid, Son of Shri Yasin 2.5.1997 Both the marriages were performed locally and in a simple manner. Not more than 300 persons attended the ceremony. The food served was according to the customs of Muslim community. Total expenditure on these two marriages and as coming from the loose papers are estimated to Rs. 4 lacs which is being offered in the block return. f) Further a sum f Rs. 2,22,961/- is being offered additionally to cover any other uncovered expenditure/investment and ot make the above undisclosed income offered in the block return to a round sum of Rs. 30 lacs. Therefore, if any other assets, expenditure is found uncovered from loose papers and statements the same be covered out of the additional income so offered. Accordingly, the above amount of Rs. 30 lacs is included in the block return of Mohd. Yasin in a fair and reasonable manner. If department wants to compute income in the individual hand of family members, then corresponding deduction be given in the case of assessee. Further the total undisclosed income for the block period is offered to tax in the search year i.e. A.Y. 98-99 as the rate of tax is same for the entire block period. If department computes year wise income then corresponding deduction be given in A.Y. 98-99 to that extent".
(3.) This Court while admitting the appeal framed the following substantial questions of law vide order dated 6.3.2002:- "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that assessment order passed under section 158 BC/143(3) dated 16.08.1999 is not barred by limitation as per explanation 2 to section 158/BE (1) (b) of the Act?" "Whether on the facts and in the circumstances of the case, the Tribunal was justified in not allowing deduction under section 80HHC on account of export income from business for the assessment year 1996-97 at Rs. 4.23,073/- and for assessment year 1997-98 At Rs. 14,10,700/- in view of the provisions of Section 158 BA (3) of the Act?" "Whether on the facts and in the circumstances of the case, the Tribunal was justified in not allowing credit of purchases made between 31.3.1997 to 16.05.1997 at Rs. 4.19,495/- from the stock fund during the course of the search?" "Whether on the fact and in the circumstances of the case, the Tribunal was justified in holding that credit of income can not be given for various family members for which no returns were filed?" ;