S.S. Gems International Vs. Deputy Commissioner of Income Tax - Court Judgment

Excerpt:
1. these cross-appeals arise from the order of learned cit(a), rajasthan-iii, jaipur, for the block period 1st april, 1987, to 15th may, 1997, since common grounds have been raised, both the appeals are directed to be disposed of under a common order.2. in itssa no. 2/jp/2000 the first ground of appeal raised by the assessee reads as under : "under the facts and circumstances of the case, the learned cit(a) has erred in confirming an addition on account of unexplained investment in the construction of house property on the basis of the dvo's report instead of accepting the cost of construction already declared in the regular return which is supported by the cost of construction determined by the registered valuer. he has also erred in only directing reduction of 15 per cent from the cpwd rates and 10 per cent for self-supervision and not allowing any deduction for various other objections raised by the assessee on the dvo's report." whereas the revenue in itssa no. 13/jp/2000 has raised the following ground; "the learned cit(a), rajasthan-iii, jaipur, has erred on the facts and in the circumstances of the case and in law : (i) in directing to allow 15 per cent deduction for pwd rate and 10 per cent deduction for self-supervision. both the grounds relate to the valuation of the property, thus the same are disposed of simultaneously.3. the learned authorised representative submitted that the assessee is a partnership firm comprising of two partners, namely, shri sunil duggar and smt. saroj duggar. a search in this case was carried out on 16th may, 1997, and in response to notice under section 158bc the return was filed which has been assessed among various additions, by taking unexplained investment in house construction at rs. 9,82,916.the land in respect of property no. a-8 saket colony, was purchased from jaipur development authority at rs. 12,62,000 in the year 1992 and the construction thereon was carried out by the assessee and completed in march, 1994. the total cost of construction has been disclosed in the balance sheet furnished with the return at rs. 10,50,000 thereby the total cost of the property at rs. 23,12,000. however, during the course of search, shri navrattan duggar, husband of the lady partner, stated that the cost of the property is rs. 25 lacs and he, therefore, in his statement made a surrender of rs. 2 lacs as undisclosed investment m the construction of the property. copy of the statement of shri navrattan duggar has been placed at assessee's paper book pp. 13, 14, 21 and 29. since the department found some papers relating to land, construction, lease money and house-tax placed at paper book pp. 55 to 58 and 83 to 114, the adi referred the matter to the valuation cell for determining cost of construction. the dvo has estimated the cost of construction at rs. 19,65,040 as against rs. 10,35,174 declared by the assessee. the ao accepted the valuation made by the dvo and discarded the valuation report furnished by the registered valuer, copy of which has been placed in paper book pp. 23 to 38. the valuation of the dvo has thus been accepted at face value and even the declared cost of rs. 10,35,174 has been taken at rs. 9,82,124. this has resulted into an addition of rs. 9,82,916 by the ao in which the learned cit(a) allowed reduction of 15 per cent on account of cpwd rates and 10 per cent on account of self-supervision and directed the ao to verify and allow claim of assessee regarding lease money and house-tax not debited in books in the account of cost of construction. he has also upheld that the reference to the valuation cell could not be faulted as certain documents were found and also held that the report of the registered valuer is not acceptable because it was submitted after 21 months of the dvo's report and the dvo's report is more detailed and exhaustive.the learned authorised representative contends that such an action of the learned cit(a) is erroneous inasmuch as no estimation can be done under block assessment scheme. reliance has been placed on the decision of cit v. vinod danchand ghodawat (2000) 247 itr 448 (bom) on the plea that under chapter xiv-b, the ao could not refer the valuation of assessee's house property to the dvo and make addition on the business of report of such valuer. it was also contended that the papers found during the course of search do not show incurring of any unexplained expenditure. the reference was drawn to pp. 55 to 58 which are for incurring expenditure on woodwork at rs. 1,55,000 and the same are recorded as part of cost of construction recorded in the books by taking amounts spent on construction. similarly, it was contended that paper book pp. 83 to 93 related to the purchase cost of the land and the same are also duly recorded in the books and the ao has himself accepted this position. furthermore, the papers found at pp. 94 to 114 are bills related to cement, steel, marble, etc. and are part of construction cost which are duly recorded in the books of the assessee maintained in the regular course of business. the learned authorised representative further contends that any statement given by shri navrattan duggar cannot be used against the assessee since that person was not a partner of the firm and if any addition was to be made for the surrender made by him, it has to be looked in his assessment and not in the assessment of the assessee-firm. on merits also the learned authorised representative contends that sustenance of addition is patently wrong and has relied upon the synopsis of the arguments from paper book pp. 4 to 6.4. on the other hand, learned departmental representative contends that books of account were not found at the time of search. even the audit report was not found during the course of search and the chartered accountant has given evasive statement. the assessee is making a doublespeak that the books were produced before the adi but the ao has found this fact to be wrong. as a matter of fact, the loose papers were found for expenses incurred on property. this was considered as extra investment and accordingly the matter was referred for valuation to the dvo. accordingly, the reference was a valid reference. reliance has been placed on the decision of rajasthan high court in the case of cit v. pratap singh and ors. (1993) 200 itr 788 (raj). the assessee was duly confronted with the report of the dvo and the assessee has filed objection and approved valuer's report filed as late as on 21st june, 1999, was duly considered by the ao. it is only after consideration of approved valuer's report, the report of the dvo was adopted. the dvo has allowed rebate of 15 per cent so as to match with the state pwd rate and as such no further deduction is called for.5. rival submissions have been heard in the light of material placed on record and case laws referred by both the parties. the learned counsel for the assessee has contended that the loose papers found and seized during the course of search did not show any investment outside the books made by the assessee. books of account also produced by the assessee were given to learned departmental representative for verification of the claim made by the assessee. after examination of the books, the learned departmental representative has submitted that the account furnished by the assessee only refers to the amounts withdrawn by him for the purpose of expenditure/ investment in property, and there are no further details available in this account from which the expenditure under a particular head can be ascertained as to how much expenditure on purchase of iron, cement, bricks, labour or other related heads was made by the assesses. since the ledger account does not contain separate details and only the details regarding datewise withdrawal of cash for investment in the property construction are available, it cannot be said that the expenditure recorded in the loose papers is duly accounted for in the ledger account.6. from the above submission of the learned departmental representative, it is evident that the assessee has made withdrawals for the construction of the property in question. it cannot, therefore, conclusively be said that the assessee has not withdrawn the amount for the purpose of making expenditure as found recorded in the loose papers, more particularly in respect of woodwork to the extent of rs. 1,55,000, nor does the report say that sufficient amount was not withdrawn during the period of incurring of such expenditure by the assessee. since neither the ao nor the learned departmental representative has been able to produce any material on record to show that the loose papers so found reveal incurring of any expenditure outside the books or that the expenditure incurred by the assessee is in fact more than what the assessee has declared in the returns furnished by him, the reference made to the valuation by the department and adopting the estimation thereof for assessing the undisclosed income was beyond the scope of chapter xiv-b of the it act. the ao is also not found to have rejected the books of account maintained by the assessee, and, therefore, the reliance on the decision of cit v. pratap singh and ors. (supra), by the learned departmental representative does not apply to the facts and circumstances of the case. we have also referred to the statement made by shn navrattan duggar, who is husband of the lady partner. any surrender made by him shall not bind the partnership as he is neither a partner nor an employee the department has also not produced any material nor brought any authority of said shri navrattan duggar on record under which he could have been said to have made a valid surrender on behalf of the assessee-firm. thus, any action on account of surrender made by shri navrattan duggar could have only been taken in the hands of shri navrattan duggar and not in the hands of the assessee before us. in the light of the facts and circumstances and the findings as brought out hereinabove, we hold that no addition could have been made on the basis of report of dvo under chapter xiv-b of the it act, 1961. accordingly, the ground of the assessee is allowed and that of the revenue is rejected.7. ground no. 2 in assessee's appeal relates to disallowance of conveyance expenses, telephone expenses, depreciation, interest on car loan and motor car expenses totalling to rs. 12,559 for previous year 1995-96, rs. 3,903/- for previous year 1996-97 and rs. 3,710 for previous year 1997-98.8. the learned authorised representative contends that the disallowances were made on estimation basis. no documents were seized which could be said to represent assessee's income or property. the assessee being an exporter, any disallowance so made was eligible for deduction under section 80hhc of the it act. reliance has been made on the decision of cit v. rajendm prasad gupta. (2001) 248 itr 350 (raj) on the plea that no addition can be made on estimation basis. the assessee has also relied on the decision of tribunal patna. tribunal in the case of kamkap india v. dy. cit (1998) 67 itd 237 (pat) on the plea that expenses cannot be brought within the purview of chapter xiv-b.also the assessee contends that the bangalore bench of the tribunal in the case of microland ltd. v. asstt. cit (1999) 63 ttj (bang) 710 : (1998) 67 itd 446 (bang) has taken a view that disallowance of expenses like depreciation, etc. cannot be held as undisclosed income 9. on the other hand, the learned departmental representative placed strong reliance on the findings of the ao and the decision arrived at by learned cit(a). it was contended that the personal element in the expenditure so incurred cannot be denied and, therefore, the authorities below were fully justified in making disallowance even in the block assessment proceedings.10. rival submissions have been heard in the light of material placed on record and case laws relied upon. there is no material on record which suggest incurring of any expenditure for personal purpose by any of the partners or by the assessee nor any such document was found from which it could be said that the same represented assessee's undisclosed income or property. we, therefore, direct the ao to delete the disallowance of expenses as taken on ground no. 2 by the assessee.11. next ground relates to the claim of deduction under section 80hhc at rs. 68,506.12. the learned authorised representative contends that the ao has erred in not allowing the deduction under section 80hhc of the act as the audit report dt. 31st may, 1996 as placed at paper book pp. 117 to 126 was furnished to the ao whereas the search took place on 16th may, 1997. the ao himself has examined the auditors, who have confirmed the existence of books of account and, therefore, there was no case of the ao to merely disagree to allow the claim on the basis of suspicion. it is wrong to say that the audit report was not obtained in regular course and regular return was not filed. the learned cit(a) has also erred in holding that deduction under section 80hhc cannot be given, more particularly when the chapter xiv-b as contained in section 158bb(1) speaks of total income of the previous year falling in block period on the basis of evidence found as a result of search from which the income is to be adjusted as per provisions of section 158bb(1)(a) to section 158bb(1)(f). since the law uses the word "total income" and the same as per section 80a(1) makes the assessee eligible for deduction as contained in sections 80c to 80u for arriving at the total income makes the assessee eligible for deduction under section 80hhc.keeping in view the scheme of the special provisions under chapter xiv-b, the return form devised for furnishing of block return also envisaged for allowing the deduction under chapter vi-a of the it act.the assessee's entire turnover being export turnover, therefore, the export profits are fully exempt under section 80hhc and the same cannot, therefore, be treated as undisclosed income in view of the definition of undisclosed income given in section 158b(b) of the act.reliance has been placed in the case of rajendra kedia v. dy. cit [itssa no. 43/jp/1998, dt 22nd april, 1999]. kedia international v. dy.cit [itssa no. 38/jp/1998, dt 18th april, 1999], satpal singh v. asstt.cit (2000) 67 ttj (chd) 602, addl cit v. jai engineering works ltd. (1978) 113 itr 389 (del) and uma chaian shaw & bros co. v. cit (1959) 37 itr 271 (sc).13. on the other hand, the learned departmental representative placed reliance on the decision of authorities below and contended that in view of the decision of the tribunal in the case of bhag chand jain v.cit (1998) 65 ttd 11 (cal) there is no error in denying the deduction to the assessee.14. after hearing rival submissions and careful consideration of material on record, we find that the deduction under section 80hhc under dispute is relatable to the previous year 1995-96 relevant to asst. yr 1996-97 for which the assessee did not furnish the return of income in the regular course on the due date. however, there is no dispute about the fact that the assessee's entire turnover is the export turnover nor does the ao denies that the author's report was not obtained or furnished before him. time-limit under section 139(4) of the act in this case has also not expired for furnishing of belated return by the assessee and the accounts are duly audited and accepted by the ao also. we have also perused the provisions of s 158bb(1) of the act as contained in chapter xiv-b thereof which deals with the computation of undisclosed income of the block period. according to this section, the undisclosed income of the block period has to be taken as the aggregate of total income falling within the block period and such an income is to be computed on the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the ao. in this step, the emphasis is on the total income and the same has not been defined under chapter xiv-b dealing with special procedure for assessment of search cases. for the deduction of word 'total income' as used by the legislation in section 158bb(1), one has to resort to the definition of the word 'total income' as contained under section 2(45) of the it act, 1961, which reads as under : "section 2(45)-- 'total income' means the total amount of income referred to in section 5, computed in the manner laid down in this act." from this definition it is clear that the total income is to be computed in the manner laid down in this act and, therefore, we have to resort to the deductions also to be made in computing the total income as contained under section 80a of the act, which prescribes deductions to be made as contained in section 80c to 80u from the gross total income of a person. in this view of the matter, for adopting aggregate of total income of various years the deductions as specified in section 80c to 80u have to be made from the gross total income of each previous year comprised in the block period, which shall result into allowance of deduction to the assessee under section 80hhc for adopting the total income for the purpose of section 158bb(1) of the act and therefrom nil income has to be reduced in the case of the assessee as no return was made by him on the due date for filing of return which has expired. the ao is, therefore, directed to calculate the deduction under section 80hhc and work out the total income in the light of above findings.from such total income he shall reduce nil income so as to work out the undisclosed income of the previous year 1995-96 for aggregation of total income in block period. before doing so, he shall afford reasonable opportunity of being heard to the assessee.15. next ground of appeal relates to cash credit in the name of four persons, namely, ghyanchand jain rs. 10,000, ramesh chand khandelwal rs. 9,000, giriraj prasad rs. 6,000 and radha mohari rs. 7,000.16. the ao has made the addition by treating the same as unexplained deposit within the meaning of section 68 of the it act as the assessee has not furnished any return of income upto the due date for filing the return, which had expired prior to the date of search. the learned cit(a) confirmed the action of the ao holding that the assessee has failed to produce all such creditors. the learned authorised representative for the assessee contends that confirmations from all these persons were furnished to the ao, which inter alia contained all the particulars of the assessee. the assessee was never asked to produce the cash creditors. the ao was duty bound to ensure attendance of such persons in case he was not satisfied. but as the ao has failed to exercise his jurisdiction, there was no justification in' treating the amount of deposit as undisclosed income of the assessee. reliance has been placed on the decision of nathu ram premchand v. cit (1963) 49 itr 561 (all) and also emc. works (p) ltd. v. ito (1963) 49 ffr 650 (all).17. on the other hand, the learned departmental representative placed strong reliance on the decision rendered by the learned cit(a). it was vehemently argued that the cash credit? appeared in the books of account produced before the ao but the assessee has failed to furnish return of income by due date and also the learned cit(a) has given a finding that assessee was asked to produce such creditors, which the assessee has failed to produce before the ao.18. rival submissions have been heard in the light of material brought on record as well as case laws relied upon by the assessee. it is not the case of the revenue that the books of account had not been maintained by the assessee in the regular course of business nor do we find from the order of the ao where he had asked the assessee to produce the cash creditors before him for explaining deposits within the meaning of section 68. no such show-cause notice appears to have been given to the assessee in this case. the learned cit(a) appears to have jumped to the conclusion without bringing any specific material on record. however, in the interest of justice, we restore this issue back to the ao, who shall examine the issue afresh in the light of observations made by us and given reasonable opportunity of being heard to the assessee before taking appropriate action as per provisions of law.19. next ground relates to the addition of rs. 7,74,796 on account of alleged unexplained investment in stock.20. the learned authorised representative contends that during the course of search, stock of precious and semi-precious stones pertaining to assessee-firm was found and valued at rs. 8,23,781. this valuation was made by the departmental valuer at market rate. the assessee claimed a reduction of 25 per cent being the margin of profit thereon so as to arrive at the cost. accordingly the value of stock found was rs. 6,16,579. the books of account produced by the assessee reveal stock as per books at rs. 2,85,202 and the balance of rs. 3,31,377 was surrendered by the assessee for tax purposes as undisclosed income of the block period. the ao having accepted the opening stock of rs. 3,16,611 but did not deduct the margin of profit from the value of stock determined by the departmental valuer. besides this, out of total purchases of rs. 5,61,292, purchases of the value of rs. 3,36,217 were not accepted on the ground that books of account, purchase vouchers, etc. were not found at the time of search and the payment for such purchases is not through banking channel. also he did not accept sale of rs. 1 lac for financial year 1996-97 as these were cash sales. thus, he worked out excess stock of rs. 7,74,796 against rs 3,31,377 declared by the assessee. this decision of the ao has been confirmed by the learned cit(a) holding that the addition on account undisclosed stock has to be made of the value of stock which means the fair market value as referred to by him at internal p. 5 of his order. he has also not accepted the claim of the assessee that books of account were produced before the adi. by doing so, it is contended that the ao as well as the learned c1t(a) have grossly erred in not adopting the cost of the stock but by taking market rate even the profits, which have not accrued to the assessee on the stock in the possession of the assessee and have also brought to tax the same as undisclosed income of the block period.furthermore, the ao himself has accepted the gross profit rate 25 per cent of the sales, essentially, therefore, the assessee was eligible for deduction of 25 per cent margin on the estimated value taken by the departmental valuer. besides, the assessee has also relied upon written synopsis filed from pp. 13 to 15 and case laws referred therein.21. the learned departmental representative, on the other hand, contends that the vouchers were not found and the purchases so declared are from unregistered dealers. labour employed by the assessee is not capable of selling the goods as claimed by the assessee. the assessee merely produced internal vouchers, order-sheet entry dt. 26th july, 1999, relevant to the facts to the case, copy of which has also been produced. the value adopted by the registered valuer is not the market value and the assessee did not raise any question at the time of valuation done by the departmental valuer during the course of search.the learned cit(a) was legally right in adopting the value taken by the registered valuer as unexplained investment in stock and confirming the action of the ao in treating the same as undisclosed income. the assessee is also not entitled for any deduction on account of margin of profit as contended by him and even otherwise if this hon'ble tribunal is pleased to allow some margin, the assessee is not entitled to deduction of margin more than 15 per cent. furthermore, the ao has disallowed only those purchases which have not been found genuine and trading account has been recasted by him. the cash sales also have been disallowed on ad hoc basis. in the light of decision taken by authorities below, the order of learned cit(a) needs to be upheld.22. rival submissions have been heard in the light of material placed on record and the case laws referred by the assessee's counsel. the ao did not accept the claim of purchase of rs. 3,33,216 on the ground that the same are not supported by bank payments and are from unregistered dealers for which cash payment have been made after the lapse of one year or so. this being an abnormal trend, the ao was of the view that this act of the assessee is suggestive and leads to the conclusion that the purchases have been shown with calculative motive of increasing its stocks. from this findings given at internal p. 12 of the order of the ao, it is evident that the ao has not doubted the making of the payment to all these parties even though such payments are stated to have been made after the lapse of one year or so. the purchase vouchers were also available with the ao in which the names and addresses of the supplier, who are unregistered dealers and are from unorganised sector, but the ao has not exercised his jurisdiction to summon such parties and dislodge the claim of the assesses. in the absence of such an exercise and also there being no adverse material available on record and more particularly having found out that the payments have been made after the lapse of one year or so, there was no justification in the action of the ao not to treat the purchases of rs. 3,36,216 as genuine.accordingly, the claim made by the assessee is tenable the trading account recasted by the ao for the financial year 1995-96 gives profit rate of 20 per cent. similarly, the ao recasted the trading account for subsequent year 1996-97 by excluding sales of rs. 1 lac on estimate basis treating the amount as abnormal act and being calculative motive of creating stock in the books. the recasted trading account gives a profit rate of 28 per cent on the sale after excluding sales of rs. 1 lac. we have carefully considered the findings of the authorities below and do not find any justification in excluding the sales of rs. 1 lac from the total sales made by the assessee on the suspicion that such sales were made only to create stock by the assessee, as this has been done without bringing on record any findings that while making the sale, the assessee has not transferred the title in goods to the person to whom such sales have been made. accordingly the recasted trading account shall give profit rate of about 2 per cent. accordingly, we direct the ao to consider the purchase of rs. 3,36,216 as genuine and reduce the value thereof from the stock determined as unexplained and also reverse the effect of sales of rs. 1 lac, which has not been considered by him as genuine. the ao has also given a finding that the assessee has made a feeble attempt to justify his claim with the help of a single purchase bill no. 189, dt. 2nd may, 19 (sic) of m/s. abdul ghafoor & sons, jaipur, but the same was not accepted by him merely because this bill was not found at the time of search from the assessee. since the ao did not doubt the payment of this bill as well as the purchase was not reduced for working out the gross profit as recasted by the ao, he was therefore, not justified in rejecting the claim of the assessee with respect to the fact that the valuation has been done at the consumer price which was equated to the market price.besides this, we also find that the assessee is a dealer in the items of stock found from his premises which are locally sold or exported by him. the same are not held for the purpose of investment. the ao having accepted the value of stock at cost while determining the unexplained stock by way of recasting the trading account, could not have given a different treatment to such stocks found and estimated by the valuer, while determining undisclosed income of the appellant. accordingly, there was no case to adopt the value thereof on estimate basis, which has been described as fair market value by the learned cit(a) at internal p. 5 of his order. in case the fair market value is permitted to be adopted in this case, it will result into taxation of income from the assessee himself, which in fact has neither accrued nor arisen to him. moreso, because one cannot be said to earn income from himself.such a concept of fair market value approved by the learned cit(a) in view of the facts as found out is beyond the scope of provisions of chapter xiv-b of the act and accordingly we hold that the learned cit(a) erred in approving the action of the ao in adopting the fair market value of the stock for determining the undisclosed income of the assessee as against the cost claimed by him. accordingly, we direct the ao to recast the trading "account of the assessee for the previous year 1995-96 and 1996-97 in the light of observations and findings given by us in our order and work out the profit thereupon. he shall, thereafter, take average of such profit and reduce that margin from the value of stock so worked out by the departmental valuer and arrive at the cost for determining the undisclosed income of the assessee for the block period. the ao shall also allow appropriate credit of the purchases of rs. 3,36,216 as well as the take the effect of sales of rs. 1 lac which have to be treated as genuine. before doing so, he shall give a reasonable opportunity of being heard to the assessee.23. the last ground in assessee's appeal relates to the charging of interest.24. the assessee contends that the ao has charged interest for two months as a notice under section 158bc was issued on 20th july, 1998 which was served on the assessee on 24th july, 1998 and if a time of 45 days is allowed then the return falls due for filing on 7th sept., 1998. the assessee filed the return on 6th oct., 1998. therefore, the delay was only for 29 days. in this light of the matter, it has been claimed that interest under section 158bfa(1) can be charged only for one month.25. after hearing the rival submissions and careful consideration of material on record, we restore this issue back to the ao, who shall verify the fact as stated by the assessee and charge the correct interest, after giving a reasonable opportunity of being heard to the assessee.26. in the departmental appeal no. 13/jp/2000, the second ground of appeal is regarding set off of losses of rs.10,769.27. the learned departmental representative vehemently contended that the assessee worked for only one and a half month during the relevant previous year in which the search was carried out on him. the sales were only rs. 22,308 and no purchases have been made by the assessee.the assessee has worked out a loss of rs. 10,768 and thus such a loss could not have been set off against the income of block period as the return was not due for filing. in any case, the assessee wanted set off of any such loss. the same could have been allowed in the regular assessment for which the assessee was required to file a separate return of income.28. on the other hand, the learned authorised representative has supported the findings of the learned cit(a).29. after hearing the rival submissions and careful consideration of material on record, we find that the search in this case was carried on 16th may, 1997. the return of income was not due as the previous year has not ended nor the date of filing the return of income under section 139(1) had expired. any loss claimed by the assessee on the basis of entries relating to the transaction as recorded in the books of account and other documents maintained in the normal course on or before the date of search for which the previous year has not ended or the date of filing of the return of income under section 139(1) has not expired, could not be allowed to be set off alone as per scheme of computation of undisclosed income prescribed under section 158bb(1) of the act.accordingly, no set off of such a loss was permissible while computing undisclosed income of the block period, which was relatable to the previous year, which has not ended in the case of the assessee from 1st april, 1997 to 15th may, 1997 but the loss was worked out on the basis of books of account found maintained in regular course the learned cit(a), therefore, has erred in allowing set off of loss for computation of undisclosed income of the block period. accordingly, the ground of the revenue is allowed.

Judgment:
1. These cross-appeals arise from the order of learned CIT(A), Rajasthan-III, Jaipur, for the block period 1st April, 1987, to 15th May, 1997, Since common grounds have been raised, both the appeals are directed to be disposed of under a common order.

2. In ITSSA No. 2/Jp/2000 the first ground of appeal raised by the assessee reads as under : "Under the facts and circumstances of the case, the learned CIT(A) has erred in confirming an addition on account of unexplained investment in the construction of house property on the basis of the DVO's report instead of accepting the cost of construction already declared in the regular return which is supported by the cost of construction determined by the registered valuer. He has also erred in only directing reduction of 15 per cent from the CPWD rates and 10 per cent for self-supervision and not allowing any deduction for various other objections raised by the assessee on the DVO's report." whereas the Revenue in ITSSA No. 13/Jp/2000 has raised the following ground; "The learned CIT(A), Rajasthan-III, Jaipur, has erred on the facts and in the circumstances of the case and in law : (i) in directing to allow 15 per cent deduction for PWD rate and 10 per cent deduction for self-supervision.

Both the grounds relate to the valuation of the property, thus the same are disposed of simultaneously.

3. The learned authorised representative submitted that the assessee is a partnership firm comprising of two partners, namely, Shri Sunil Duggar and Smt. Saroj Duggar. A search in this case was carried out on 16th May, 1997, and in response to notice under Section 158BC the return was filed which has been assessed among various additions, by taking unexplained investment in house construction at Rs. 9,82,916.

The land in respect of property No. A-8 Saket Colony, was purchased from Jaipur Development Authority at Rs. 12,62,000 in the year 1992 and the construction thereon was carried out by the assessee and completed in March, 1994. The total cost of construction has been disclosed in the balance sheet furnished with the return at Rs. 10,50,000 thereby the total cost of the property at Rs. 23,12,000. However, during the course of search, Shri Navrattan Duggar, husband of the lady partner, stated that the cost of the property is Rs. 25 lacs and he, therefore, in his statement made a surrender of Rs. 2 lacs as undisclosed investment m the construction of the property. Copy of the statement of Shri Navrattan Duggar has been placed at assessee's paper book pp. 13, 14, 21 and 29. Since the Department found some papers relating to land, construction, lease money and house-tax placed at paper book pp. 55 to 58 and 83 to 114, the ADI referred the matter to the Valuation Cell for determining cost of construction. The DVO has estimated the cost of construction at Rs. 19,65,040 as against Rs. 10,35,174 declared by the assessee. The AO accepted the valuation made by the DVO and discarded the valuation report furnished by the registered valuer, copy of which has been placed in paper book pp. 23 to 38. The valuation of the DVO has thus been accepted at face value and even the declared cost of Rs. 10,35,174 has been taken at Rs. 9,82,124. This has resulted into an addition of Rs. 9,82,916 by the AO in which the learned CIT(A) allowed reduction of 15 per cent on account of CPWD rates and 10 per cent on account of self-supervision and directed the AO to verify and allow claim of assessee regarding lease money and house-tax not debited in books in the account of cost of construction. He has also upheld that the reference to the Valuation Cell could not be faulted as certain documents were found and also held that the report of the registered valuer is not acceptable because it was submitted after 21 months of the DVO's report and the DVO's report is more detailed and exhaustive.

The learned authorised representative contends that such an action of the learned CIT(A) is erroneous inasmuch as no estimation can be done under block assessment scheme. Reliance has been placed on the decision of CIT v. Vinod Danchand Ghodawat (2000) 247 ITR 448 (Bom) on the plea that under Chapter XIV-B, the AO could not refer the valuation of assessee's house property to the DVO and make addition on the business of report of such valuer. It was also contended that the papers found during the course of search do not show incurring of any unexplained expenditure. The reference was drawn to pp. 55 to 58 which are for incurring expenditure on woodwork at Rs. 1,55,000 and the same are recorded as part of cost of construction recorded in the books by taking amounts spent on construction. Similarly, it was contended that paper book pp. 83 to 93 related to the purchase cost of the land and the same are also duly recorded in the books and the AO has himself accepted this position. Furthermore, the papers found at pp. 94 to 114 are bills related to cement, steel, marble, etc. and are part of construction cost which are duly recorded in the books of the assessee maintained in the regular course of business. The learned authorised representative further contends that any statement given by Shri Navrattan Duggar cannot be used against the assessee since that person was not a partner of the firm and if any addition was to be made for the surrender made by him, it has to be looked in his assessment and not in the assessment of the assessee-firm. On merits also the learned authorised representative contends that sustenance of addition is patently wrong and has relied upon the synopsis of the arguments from paper book pp. 4 to 6.

4. On the other hand, learned Departmental Representative contends that books of account were not found at the time of search. Even the audit report was not found during the course of search and the chartered accountant has given evasive statement. The assessee is making a doublespeak that the books were produced before the ADI but the AO has found this fact to be wrong. As a matter of fact, the loose papers were found for expenses incurred on property. This was considered as extra investment and accordingly the matter was referred for valuation to the DVO. Accordingly, the reference was a valid reference. Reliance has been placed on the decision of Rajasthan High Court in the case of CIT v. Pratap Singh and Ors. (1993) 200 ITR 788 (Raj). The assessee was duly confronted with the report of the DVO and the assessee has filed objection and approved valuer's report filed as late as on 21st June, 1999, was duly considered by the AO. It is only after consideration of approved valuer's report, the report of the DVO was adopted. The DVO has allowed rebate of 15 per cent so as to match with the State PWD rate and as such no further deduction is called for.

5. Rival submissions have been heard in the light of material placed on record and case laws referred by both the parties. The learned counsel for the assessee has contended that the loose papers found and seized during the course of search did not show any investment outside the books made by the assessee. Books of account also produced by the assessee were given to learned Departmental Representative for verification of the claim made by the assessee. After examination of the books, the learned Departmental Representative has submitted that the account furnished by the assessee only refers to the amounts withdrawn by him for the purpose of expenditure/ investment in property, and there are no further details available in this account from which the expenditure under a particular head can be ascertained as to how much expenditure on purchase of iron, cement, bricks, labour or other related heads was made by the assesses. Since the ledger account does not contain separate details and only the details regarding datewise withdrawal of cash for investment in the property construction are available, it cannot be said that the expenditure recorded in the loose papers is duly accounted for in the ledger account.

6. From the above submission of the learned Departmental Representative, it is evident that the assessee has made withdrawals for the construction of the property in question. It cannot, therefore, conclusively be said that the assessee has not withdrawn the amount for the purpose of making expenditure as found recorded in the loose papers, more particularly in respect of woodwork to the extent of Rs. 1,55,000, nor does the report say that sufficient amount was not withdrawn during the period of incurring of such expenditure by the assessee. Since neither the AO nor the learned Departmental Representative has been able to produce any material on record to show that the loose papers so found reveal incurring of any expenditure outside the books or that the expenditure incurred by the assessee is in fact more than what the assessee has declared in the returns furnished by him, the reference made to the valuation by the Department and adopting the estimation thereof for assessing the undisclosed income was beyond the scope of Chapter XIV-B of the IT Act. The AO is also not found to have rejected the books of account maintained by the assessee, and, therefore, the reliance on the decision of CIT v. Pratap Singh and Ors. (supra), by the learned Departmental Representative does not apply to the facts and circumstances of the case. We have also referred to the statement made by Shn Navrattan Duggar, who is husband of the lady partner. Any surrender made by him shall not bind the partnership as he is neither a partner nor an employee The Department has also not produced any material nor brought any authority of said Shri Navrattan Duggar on record under which he could have been said to have made a valid surrender on behalf of the assessee-firm. Thus, any action on account of surrender made by Shri Navrattan Duggar could have only been taken in the hands of Shri Navrattan Duggar and not in the hands of the assessee before us. In the light of the facts and circumstances and the findings as brought out hereinabove, we hold that no addition could have been made on the basis of report of DVO under Chapter XIV-B of the IT Act, 1961. Accordingly, the ground of the assessee is allowed and that of the Revenue is rejected.

7. Ground No. 2 in assessee's appeal relates to disallowance of conveyance expenses, telephone expenses, depreciation, interest on car loan and motor car expenses totalling to Rs. 12,559 for previous year 1995-96, Rs. 3,903/- for previous year 1996-97 and Rs. 3,710 for previous year 1997-98.

8. The learned authorised representative contends that the disallowances were made on estimation basis. No documents were seized which could be said to represent assessee's income or property. The assessee being an exporter, any disallowance so made was eligible for deduction under Section 80HHC of the IT Act. Reliance has been made on the decision of CIT v. Rajendm Prasad Gupta. (2001) 248 ITR 350 (Raj) on the plea that no addition can be made on estimation basis. The assessee has also relied on the decision of Tribunal Patna. Tribunal in the case of Kamkap India v. Dy. CIT (1998) 67 ITD 237 (Pat) on the plea that expenses cannot be brought within the purview of Chapter XIV-B.Also the assessee contends that the Bangalore Bench of the Tribunal in the case of Microland Ltd. v. Asstt. CIT (1999) 63 TTJ (Bang) 710 : (1998) 67 ITD 446 (Bang) has taken a view that disallowance of expenses like depreciation, etc. cannot be held as undisclosed income 9. On the other hand, the learned Departmental Representative placed strong reliance on the findings of the AO and the decision arrived at by learned CIT(A). It was contended that the personal element in the expenditure so incurred cannot be denied and, therefore, the authorities below were fully justified in making disallowance even in the block assessment proceedings.

10. Rival submissions have been heard in the light of material placed on record and case laws relied upon. There is no material on record which suggest incurring of any expenditure for personal purpose by any of the partners or by the assessee nor any such document was found from which it could be said that the same represented assessee's undisclosed income or property. We, therefore, direct the AO to delete the disallowance of expenses as taken on ground No. 2 by the assessee.

11. Next ground relates to the claim of deduction under Section 80HHC at Rs. 68,506.

12. The learned authorised representative contends that the AO has erred in not allowing the deduction under Section 80HHC of the Act as the audit report dt. 31st May, 1996 as placed at paper book pp. 117 to 126 was furnished to the AO whereas the search took place on 16th May, 1997. The AO himself has examined the auditors, who have confirmed the existence of books of account and, therefore, there was no case of the AO to merely disagree to allow the claim on the basis of suspicion. It is wrong to say that the audit report was not obtained in regular course and regular return was not filed. The learned CIT(A) has also erred in holding that deduction under Section 80HHC cannot be given, more particularly when the Chapter XIV-B as contained in Section 158BB(1) speaks of total income of the previous year falling in block period on the basis of evidence found as a result of search from which the income is to be adjusted as per provisions of Section 158BB(1)(a) to Section 158BB(1)(f). Since the law uses the word "total income" and the same as per Section 80A(1) makes the assessee eligible for deduction as contained in Sections 80C to 80U for arriving at the total income makes the assessee eligible for deduction under Section 80HHC.Keeping in view the scheme of the special provisions under Chapter XIV-B, the return form devised for furnishing of block return also envisaged for allowing the deduction under Chapter VI-A of the IT Act.

The assessee's entire turnover being export turnover, therefore, the export profits are fully exempt under Section 80HHC and the same cannot, therefore, be treated as undisclosed income in view of the definition of undisclosed income given in Section 158B(b) of the Act.

Reliance has been placed in the case of Rajendra Kedia v. Dy. CIT [ITSSA No. 43/Jp/1998, dt 22nd April, 1999]. Kedia International v. Dy.

CIT [ITSSA No. 38/Jp/1998, dt 18th April, 1999], Satpal Singh v. Asstt.

CIT (2000) 67 TTJ (Chd) 602, Addl CIT v. Jai Engineering Works Ltd. (1978) 113 ITR 389 (Del) and Uma Chaian Shaw & Bros Co. v. CIT (1959) 37 ITR 271 (SC).

13. On the other hand, the learned Departmental Representative placed reliance on the decision of authorities below and contended that in view of the decision of the Tribunal in the case of Bhag Chand Jain v.CIT (1998) 65 TTD 11 (Cal) there is no error in denying the deduction to the assessee.

14. After hearing rival submissions and careful consideration of material on record, we find that the deduction under Section 80HHC under dispute is relatable to the previous year 1995-96 relevant to asst. yr 1996-97 for which the assessee did not furnish the return of income in the regular course on the due date. However, there is no dispute about the fact that the assessee's entire turnover is the export turnover nor does the AO denies that the author's report was not obtained or furnished before him. Time-limit under Section 139(4) of the Act in this case has also not expired for furnishing of belated return by the assessee and the accounts are duly audited and accepted by the AO also. We have also perused the provisions of s 158BB(1) of the Act as contained in Chapter XIV-B thereof which deals with the computation of undisclosed income of the block period. According to this section, the undisclosed income of the block period has to be taken as the aggregate of total income falling within the block period and such an income is to be computed on the basis of evidence found as a result of search or requisition of books of account or documents and such other material or information as are available with the AO. In this step, the emphasis is on the total income and the same has not been defined under Chapter XIV-B dealing with special procedure for assessment of search cases. For the deduction of word 'total income' as used by the legislation in Section 158BB(1), one has to resort to the definition of the word 'total income' as contained under Section 2(45) of the IT Act, 1961, which reads as under : "Section 2(45)-- 'total income' means the total amount of income referred to in Section 5, computed in the manner laid down in this Act." From this definition it is clear that the total income is to be computed in the manner laid down in this Act and, therefore, we have to resort to the deductions also to be made in computing the total income as contained under Section 80A of the Act, which prescribes deductions to be made as contained in Section 80C to 80U from the gross total income of a person. In this view of the matter, for adopting aggregate of total income of various years the deductions as specified in Section 80C to 80U have to be made from the gross total income of each previous year comprised in the block period, which shall result into allowance of deduction to the assessee under Section 80HHC for adopting the total income for the purpose of Section 158BB(1) of the Act and therefrom Nil income has to be reduced in the case of the assessee as no return was made by him on the due date for filing of return which has expired. The AO is, therefore, directed to calculate the deduction under Section 80HHC and work out the total income in the light of above findings.

From such total income he shall reduce Nil income so as to work out the undisclosed income of the previous year 1995-96 for aggregation of total income in block period. Before doing so, he shall afford reasonable opportunity of being heard to the assessee.

15. Next ground of appeal relates to cash credit in the name of four persons, namely, Ghyanchand Jain Rs. 10,000, Ramesh Chand Khandelwal Rs. 9,000, Giriraj Prasad Rs. 6,000 and Radha Mohari Rs. 7,000.

16. The AO has made the addition by treating the same as unexplained deposit within the meaning of Section 68 of the IT Act as the assessee has not furnished any return of income upto the due date for filing the return, which had expired prior to the date of search. The learned CIT(A) confirmed the action of the AO holding that the assessee has failed to produce all such creditors. The learned authorised representative for the assessee contends that confirmations from all these persons were furnished to the AO, which inter alia contained all the particulars of the assessee. The assessee was never asked to produce the cash creditors. The AO was duty bound to ensure attendance of such persons in case he was not satisfied. But as the AO has failed to exercise his jurisdiction, there was no justification in' treating the amount of deposit as undisclosed income of the assessee. Reliance has been placed on the decision of Nathu Ram Premchand v. CIT (1963) 49 ITR 561 (All) and also EMC. Works (P) Ltd. v. ITO (1963) 49 ffR 650 (All).

17. On the other hand, the learned Departmental Representative placed strong reliance on the decision rendered by the learned CIT(A). It was vehemently argued that the cash credit? appeared in the books of account produced before the AO but the assessee has failed to furnish return of income by due date and also the learned CIT(A) has given a finding that assessee was asked to produce such creditors, which the assessee has failed to produce before the AO.18. Rival submissions have been heard in the light of material brought on record as well as case laws relied upon by the assessee. It is not the case of the Revenue that the books of account had not been maintained by the assessee in the regular course of business nor do we find from the order of the AO where he had asked the assessee to produce the cash creditors before him for explaining deposits within the meaning of Section 68. No such show-cause notice appears to have been given to the assessee in this case. The learned CIT(A) appears to have jumped to the conclusion without bringing any specific material on record. However, in the interest of justice, we restore this issue back to the AO, who shall examine the issue afresh in the light of observations made by us and given reasonable opportunity of being heard to the assessee before taking appropriate action as per provisions of law.

19. Next ground relates to the addition of Rs. 7,74,796 on account of alleged unexplained investment in stock.

20. The learned authorised representative contends that during the course of search, stock of precious and semi-precious stones pertaining to assessee-firm was found and valued at Rs. 8,23,781. This valuation was made by the Departmental valuer at market rate. The assessee claimed a reduction of 25 per cent being the margin of profit thereon so as to arrive at the cost. Accordingly the value of stock found was Rs. 6,16,579. The books of account produced by the assessee reveal stock as per books at Rs. 2,85,202 and the balance of Rs. 3,31,377 was surrendered by the assessee for tax purposes as undisclosed income of the block period. The AO having accepted the opening stock of Rs. 3,16,611 but did not deduct the margin of profit from the value of stock determined by the Departmental Valuer. Besides this, out of total purchases of Rs. 5,61,292, purchases of the value of Rs. 3,36,217 were not accepted on the ground that books of account, purchase vouchers, etc. were not found at the time of search and the payment for such purchases is not through banking channel. Also he did not accept sale of Rs. 1 lac for financial year 1996-97 as these were cash sales. Thus, he worked out excess stock of Rs. 7,74,796 against Rs 3,31,377 declared by the assessee. This decision of the AO has been confirmed by the learned CIT(A) holding that the addition on account undisclosed stock has to be made of the value of stock which means the fair market value as referred to by him at internal p. 5 of his order. He has also not accepted the claim of the assessee that books of account were produced before the ADI. By doing so, it is contended that the AO as well as the learned C1T(A) have grossly erred in not adopting the cost of the stock but by taking market rate even the profits, which have not accrued to the assessee on the stock in the possession of the assessee and have also brought to tax the same as undisclosed income of the block period.

Furthermore, the AO himself has accepted the gross profit rate 25 per cent of the sales, essentially, therefore, the assessee was eligible for deduction of 25 per cent margin on the estimated value taken by the Departmental Valuer. Besides, the assessee has also relied upon written synopsis filed from pp. 13 to 15 and case laws referred therein.

21. The learned Departmental Representative, on the other hand, contends that the vouchers were not found and the purchases so declared are from unregistered dealers. Labour employed by the assessee is not capable of selling the goods as claimed by the assessee. The assessee merely produced internal vouchers, order-sheet entry dt. 26th July, 1999, relevant to the facts to the case, copy of which has also been produced. The value adopted by the registered valuer is not the market value and the assessee did not raise any question at the time of valuation done by the Departmental Valuer during the course of search.

The learned CIT(A) was legally right in adopting the value taken by the registered valuer as unexplained investment in stock and confirming the action of the AO in treating the same as undisclosed income. The assessee is also not entitled for any deduction on account of margin of profit as contended by him and even otherwise if this Hon'ble Tribunal is pleased to allow some margin, the assessee is not entitled to deduction of margin more than 15 per cent. Furthermore, the AO has disallowed only those purchases which have not been found genuine and trading account has been recasted by him. The cash sales also have been disallowed on ad hoc basis. In the light of decision taken by authorities below, the order of learned CIT(A) needs to be upheld.22. Rival submissions have been heard in the light of material placed on record and the case laws referred by the assessee's counsel. The AO did not accept the claim of purchase of Rs. 3,33,216 on the ground that the same are not supported by bank payments and are from unregistered dealers for which cash payment have been made after the lapse of one year or so. This being an abnormal trend, the AO was of the view that this act of the assessee is suggestive and leads to the conclusion that the purchases have been shown with calculative motive of increasing its stocks. From this findings given at internal p. 12 of the order of the AO, it is evident that the AO has not doubted the making of the payment to all these parties even though such payments are stated to have been made after the lapse of one year or so. The purchase vouchers were also available with the AO in which the names and addresses of the supplier, who are unregistered dealers and are from unorganised sector, but the AO has not exercised his jurisdiction to summon such parties and dislodge the claim of the assesses. In the absence of such an exercise and also there being no adverse material available on record and more particularly having found out that the payments have been made after the lapse of one year or so, there was no justification in the action of the AO not to treat the purchases of Rs. 3,36,216 as genuine.

Accordingly, the claim made by the assessee is tenable The trading account recasted by the AO for the financial year 1995-96 gives profit rate of 20 per cent. Similarly, the AO recasted the trading account for subsequent year 1996-97 by excluding sales of Rs. 1 lac on estimate basis treating the amount as abnormal act and being calculative motive of creating stock in the books. The recasted trading account gives a profit rate of 28 per cent on the sale after excluding sales of Rs. 1 lac. We have carefully considered the findings of the authorities below and do not find any justification in excluding the sales of Rs. 1 lac from the total sales made by the assessee on the suspicion that such sales were made only to create stock by the assessee, as this has been done without bringing on record any findings that while making the sale, the assessee has not transferred the title in goods to the person to whom such sales have been made. Accordingly the recasted trading account shall give profit rate of about 2 per cent. Accordingly, we direct the AO to consider the purchase of Rs. 3,36,216 as genuine and reduce the value thereof from the stock determined as unexplained and also reverse the effect of sales of Rs. 1 lac, which has not been considered by him as genuine. The AO has also given a finding that the assessee has made a feeble attempt to justify his claim with the help of a single purchase bill No. 189, dt. 2nd May, 19 (sic) of M/s. Abdul Ghafoor & Sons, Jaipur, but the same was not accepted by him merely because this bill was not found at the time of search from the assessee. Since the AO did not doubt the payment of this bill as well as the purchase was not reduced for working out the gross profit as recasted by the AO, he was therefore, not justified in rejecting the claim of the assessee with respect to the fact that the valuation has been done at the consumer price which was equated to the market price.

Besides this, we also find that the assessee is a dealer in the items of stock found from his premises which are locally sold or exported by him. The same are not held for the purpose of investment. The AO having accepted the value of stock at cost while determining the unexplained stock by way of recasting the trading account, could not have given a different treatment to such stocks found and estimated by the valuer, while determining undisclosed income of the appellant. Accordingly, there was no case to adopt the value thereof on estimate basis, which has been described as fair market value by the learned CIT(A) at internal p. 5 of his order. In case the fair market value is permitted to be adopted in this case, it will result into taxation of income from the assessee himself, which in fact has neither accrued nor arisen to him. Moreso, because one cannot be said to earn income from himself.

Such a concept of fair market value approved by the learned CIT(A) in view of the facts as found out is beyond the scope of provisions of Chapter XIV-B of the Act and accordingly we hold that the learned CIT(A) erred in approving the action of the AO in adopting the fair market value of the stock for determining the undisclosed income of the assessee as against the cost claimed by him. Accordingly, we direct the AO to recast the trading "account of the assessee for the previous year 1995-96 and 1996-97 in the light of observations and findings given by us in our order and work out the profit thereupon. He shall, thereafter, take average of such profit and reduce that margin from the value of stock so worked out by the Departmental Valuer and arrive at the cost for determining the undisclosed income of the assessee for the block period. The AO shall also allow appropriate credit of the purchases of Rs. 3,36,216 as well as the take the effect of sales of Rs. 1 lac which have to be treated as genuine. Before doing so, he shall give a reasonable opportunity of being heard to the assessee.

23. The last ground in assessee's appeal relates to the charging of interest.

24. The assessee contends that the AO has charged interest for two months as a notice under Section 158BC was issued on 20th July, 1998 which was served on the assessee on 24th July, 1998 and if a time of 45 days is allowed then the return falls due for filing on 7th Sept., 1998. The assessee filed the return on 6th Oct., 1998. Therefore, the delay was only for 29 days. In this light of the matter, it has been claimed that interest under Section 158BFA(1) can be charged only for one month.

25. After hearing the rival submissions and careful consideration of material on record, we restore this issue back to the AO, who shall verify the fact as stated by the assessee and charge the correct interest, after giving a reasonable opportunity of being heard to the assessee.

26. In the Departmental appeal No. 13/Jp/2000, the second ground of appeal is regarding set off of losses of Rs.10,769.

27. The learned Departmental Representative vehemently contended that the assessee worked for only one and a half month during the relevant previous year in which the search was carried out on him. The sales were only Rs. 22,308 and no purchases have been made by the assessee.

The assessee has worked out a loss of Rs. 10,768 and thus such a loss could not have been set off against the income of block period as the return was not due for filing. In any case, the assessee wanted set off of any such loss. The same could have been allowed in the regular assessment for which the assessee was required to file a separate return of income.

28. On the other hand, the learned authorised representative has supported the findings of the learned CIT(A).

29. After hearing the rival submissions and careful consideration of material on record, we find that the search in this case was carried on 16th May, 1997. The return of income was not due as the previous year has not ended nor the date of filing the return of income under Section 139(1) had expired. Any loss claimed by the assessee on the basis of entries relating to the transaction as recorded in the books of account and other documents maintained in the normal course on or before the date of search for which the previous year has not ended or the date of filing of the return of income under Section 139(1) has not expired, could not be allowed to be set off alone as per scheme of computation of undisclosed income prescribed under Section 158BB(1) of the Act.

Accordingly, no set off of such a loss was permissible while computing undisclosed income of the block period, which was relatable to the previous year, which has not ended in the case of the assessee from 1st April, 1997 to 15th May, 1997 but the loss was worked out on the basis of books of account found maintained in regular course The learned CIT(A), therefore, has erred in allowing set off of loss for computation of undisclosed income of the block period. Accordingly, the ground of the Revenue is allowed.