Full Judgment
D. K. Jain
C. JC. M. No. 22700 of 2004:
For the reasons stated in the application, it is allowed and the delay in 2 filing the appeal is condoned.
I.T. A. No. 336 of 2004:
This appeal, by the assessee, under section 260A of the Income Tax Act, 1961 (for short, 'the Act'), is directed against order dated 19-3-2004, passed by the Income Tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as, 'the Tribunal'), in Appeals Nos. 8 and 16 (ASR)/2003, in respect of the block period 1-4-1998 to 17-11-1999. According to the assessee, the order involves the following substantial question of law :
'Whether, under the facts and circumstances of the case, the Tribunal was justified in upholding the addition of Rs. 50,000 on the true interpretation of the provisions of Chapter XIV-B for making an assessment of undisclosed income for the block period without being based on any evidence or material found during the course of the search relatable to this addition of Rs. 50,000 ?'
The background facts, giving rise to the appeal, in brief, are as follows :
The assessee, a partnership firm, is engaged in the business of hotelier, catering and giving on hire crockery and furniture, under the name and style of M/s. Hotel Kumar Palace. On 17-11-1999, a search under section 132 of the Act was conducted at the business premises of the assessee. During the course of search, it declared an undisclosed income of Rs. 8,18,864.
In its return of income, for the aforementioned block period, the assessee declared income from catering business at Rs. 4,74,000. While completing the assessment for the said period, the assessing officer estimated the income from catering at Rs. 6 lakhs, inter alia, on the basis that crockery was shown to have been issued 176 times during the period from 29-10-1995 to 22-10-1999, meaning hereby that at least 100 times catering would have been done by the assessee. Estimating a gathering of approximately 300 persons at each of the functions and applying a profit rate of Rs. 20 per person, the assessing officer worked out an undisclosed income of the assessee on this account at Rs. 1,50,000.
Aggrieved, the assessee preferred appeal to the Commissioner of Income-tax (Appeals). The Commissioner, taking into consideration the statement of a partner of the assessee, namely, Shri Raj Kumar, wherein he had stated that receipts from catering business were not fully recorded in the books of account, as well as three diaries, seized during the course of search, containing part of the details of the bookings made by the assessee in respect of the catering business on various dates, held that it would be just and fair to peg the addition at Rs. 50,000 instead of Rs. 1,50,000 made by the assessing officer.
Not being satisfied, the assessee as well as the revenue took the matter in further appeal to the Tribunal. By the impugned order, the Tribunal has upheld the view taken by the Commissioner. Hence, the present appeal.
We have heard Mr. P. C. Jain, learned counsel appearing for the assessee. Learned counsel has assailed the view taken by the lower appellate authorities mainly on the ground that the addition of Rs. 50,000, for the block period from 1-4-1989 to 17-11-1999, was unwarranted because the assessee had commenced its business only from 1-4-1998. It is also urged that income under section 158BB of the Act can be computed only on the basis of the, evidence found as a result of search and there is no scope for any estimation of income. In support of the proposition, learned counsel has placed reliance on a decision of this court in CIT v. Faqir Chand Chaman Lal and a decision of the Delhi High Court in CIT v. Ravi Kant Jain (2001) 250 ITR 141. It is pointed out that special leave petition against the decision in Faqir Chand's case has also been dismissed by the Supreme Court.
We are unable to persuade ourselves to agree with learned counsel. From a bare reading of section 158BB of the Act, it is clear that undisclosed income of the block period has to be computed on the basis of the evidence found as a result of the search or requisition of books or documents and such other materials as are available with the assessing officer. The incident of search is the foundation for applicability of Chapter XIV-B of the Act. In the instant case, as noticed by the Commissioner, income from catering business was estimated by the assessing officer, on the basis of the statement of the partner, recorded during the course of search, and the diaries seized in these proceedings. The Tribunal has also observed that in his statement, partner-Raj Kumar admitted that income from catering business was not fully recorded in the books of account. This finding was never under challenge.
In view of the factual scenario, as emerging from concurrent findings of fact recorded by the two appellate authorities below.