Dy. Cit Vs. Sanmukhdas Wadhwani - Court Judgment

Excerpt:
the order of the learned commissioner (appeals)-i, nagpur dated 30-3-1999 has been challenged by the revenue in this appeal on the following grounds : 1. on the facts and in the circumstances of the case the learned commissioner (appeals) erred in directing to adopt undisclosed income revised at the time of assessment at rs. 6,60,633 as against originally returned at rs. 7,00,000.2. on the facts and in the circumstances of the case the learned commissioner (appeals) erred in deleting addition of rs. 42,500 being unexplained in investment in shares.first we take up ground no. 2 relating to the addition of rs. 42,500 made by the assessing officer on account of unexplained investment in shares which has been deleted by the learned commissioner (appeals).the assessee carries on the business of dealing in cloth on wholesale basis under the name and style of his proprietary concern mr. shobhraj & company. a search under section 132(1) was conducted at the business and residential premises of the assessee on 16-1-1997 wherein various documents were found and seized by the department. in response to notice issued under section 158bc, a return of income for the block period was filed by the assessee on 18-8-1997 declaring a undisclosed income of rs. 7.00 lakhs. during the course of assessment proceedings, the assessee submitted that his total undisclosed income for the block period works out to rs. 6,60,633 comprising of rs. 3,64,309 on account of balancing figure being excess of assets over liabilities worked out on the basis of entries appearing in the various diaries and a further sum of rs. 2,89,324 on account of difference in opening capital appearing in the said diaries which was more than the capital appearing in the regular books as on 1-4-1990. the working of the undisclosed income at rs. 6,60,633 furnished by the assessee was verified and found to be correct by the assessing officer. he, however, made a further addition of rs. 42,500 on account of value of shares found during the search on the basis of offer made by the assessee in the statement recorded by the adi under section 132(4). the contention of the assessee raised in this regard during the assessment proceedings that the said shares were purchased by him out of withdrawals from rough diaries and therefore no such addition could separately be made was not accepted by the assessing officer. he proceeded to make the said addition mainly on the basis of income surrendered by the assessee on this count in his statement recorded under section 132(4). the learned commissioner (appeals), however, deleted this addition made by the assessing officer observing that the facts of the case were sufficient to show that the investment in shares was made by the assessee from the withdrawals made from the diaries.the learned departmental representative submitted that the shares found during the course of search were not disclosed by the assessee in his books of account and in his statement recorded under section 132(4) by the adi, the assessee had admitted that the said shares belong to him and that he is ready to surrender this investment as his undisclosed income. she, therefore, contended that the assessing officer was right in adding this amount relying on the clear cut admission made by the assessee in his statement and there being nothing brought on record by the assessee to prove to the contrary, the learned commissioner (appeals) was not justified in deleting the same.the learned counsel for the assessee submitted that the addition on this count was made by the assessing officer merely on the basis of statement of the assessee recorded under section 132(4) by the adi. he submitted that the investment in shares was made by the assessee out of withdrawals from diaries which were already subjected to tax and this fact was not disputed by the assessing officer. he submitted that a balancing figure of all the debit and credit entries recorded in the rough diaries was declared by the assessee in the return for block period and thus the withdrawals shown in the rough diaries were available with the assessee as source for purchase of shares amounting to rs. 42,500. he contended that the assessing officer having assessed the source, application of the same in the form of investment in the shares cannot be again assessed in his hands. he further contended that the total undisclosed income of rs. 5.00 lakhs was offered by the assessee in his statement recorded under section 132(4) by the adi whereas in the return of income filed in response to notice under section 158bc, the assessee declared the total undisclosed income at rs. 6,60,663 which was much more than the disclosure made before the adi. he, therefore, contended that the addition on this count made by the assessing officer was not correct and the learned commissioner (appeals) was fully justified in deleting the same.we have considered the rival submissions and also perused the relevant material on record. it is observed that the unaccounted transactions in respect of cloth business recorded in various rough diaries were aggregated by the assessee and the balancing figure worked out on the basis of the same at rs. 3,64,309 was declared as his undisclosed income on the basis of rough diaries found during the search.. this working furnished by the assessee was verified by the assessing officer and he had also found the same to be correct. in these circumstances, the explanation of the assessee that the withdrawals shown in the rough diaries were available with him for making the investment in shares was quite plausible and in our opinion the assessing officer was not justified in making addition on this count relying merely on the statement recorded by the adi under section 132(4) without even disputing the said explanation. as a matter of fact, the sum of rs. 5.00 lakhs was offered by the assessee in his statement recorded by the adi as his undisclosed income as a result of search and the assessee having declared the total income of rs. 6,60,633 before the assessing officer, the separate addition made by the assessing officer on account of investment in shares, the source of which was already subjected to tax, was not called for even on the basis of statement of the assessee recorded by the adi under section 132(4). as such, considering all the facts of the case, we are of the opinion that there is no infirmity in the impugned order of the learned commissioner (appeals) in deleting the said addition made by the assessing officer. the same is, therefore, upheld on this issue.in ground no. 1, the revenue has challenged the action of the learned commissioner (appeals) in directing the assessing officer to adopt the undisclosed income of the assessee at rs. 6,60,633 on the basis of submission made during the course of assessment proceedings as against the undisclosed income of rs. 7.00 lakhs declared originally in the return for block period.referring to the second proviso to clause (a) of section 158bc, the learned departmental representative submitted that a person who has furnished a return of undisclosed income for the block period under the said clause is not entitled to revise the same with effect from 1-1-1997. she contended that the return of income filed by the assessee is a starting point of the block assessment proceedings and the acceptance of the income returned by the assessee cannot be said to have caused any grievance to the assessee as held by the honble bombay high court in the case of rameshchandra & co. v. cit (1987) 168 itr 375 (bom). she submitted that keeping in view the specific prohibition imposed by inserting second proviso (2) to clause (a) of section 158bc with effect from 1-1-1997, it was not within the mandate of learned commissioner (appeals) to direct the assessing officer to assess the income of the assessee for a block period at lower amount than that declared in the return.the learned counsel for the assessee submitted that a search operation was simultaneously conducted in the group cases related to the assessee and the undisclosed income estimated in a consolidated manner taking all the cases together was declared in the returns of income of all the group members on ad hoc basis. he submitted that the exact bifurcation of the total undisclosed income of the group as a result of search was not available and in the absence of such details, the undisclosed income was declared in the hands of different assessees on estimated basis. he submitted that after filing the said returns, the assessee obtained the copies of relevant seized documents and after doing the necessary working of undisclosed income assessable in the hands of different assessees, submission was made before the assessing officer for assessing the exact amount of undisclosed income as per the provisions of section 158bc after verifying the said working. he submitted that in the case of the assessee, the actual undisclosed income for block period as per the detailed working made by the assessee was worked out to rs. 6,60,633 and the said working submitted by the assessee before the assessing officer was also verified by him and found to be correct. he submitted that since the assessee had returned the undisclosed income for block period at rs. 7.00 lakhs, the assessing officer proceeded to make a further unwarranted addition of rs. 42,500 just to assess the total income at an amount more than the returned income of rs. 7.00 lakhs. he submitted that the learned commissioner (appeals) however deleted the said addition and also directed the assessing officer to assess the income of the assessee for block period at rs. 6,60,633 as against the income originally returned at rs. 7.00 lakhs considering that the relevant provisions of chapter xiv-b provides for determination of undisclosed income on the basis of evidence found during the search and once such income was determined at rs. 6,60,633, the assessment ought to have been made on the said amount. relying on the decision of honble bombay high court in the case of cit v. shamlal balram gurbani (2001) 249 itr 501(bom), he contended that the income assessed can be lower than the returned income. he further contended that the assessee is liable to be assessed in the special assessment for block period of undisclosed income on the basis of evidence or material found in the course of search and if the income so assessable in the hands of the assessee had been determined at rs. 6,60,633, there was no justification in completing the assessment on a total income of rs. 7.00 lakhs merely on the basis of income declared by the assessee in the return of income. for this contention, he relied on the decisions of pune bench of income tax appellate tribunal in the case of chander mohan mehta v. asstt. cit (1999) 71 itd 245 (pune) and in the case of control touch electronics (pune) (p) ltd. v. asstt. cit (2001) 77 itd 522 (pune). he also cited the decision of honble mumbai bench of income tax appellate tribunal in the case of sunder agencies v. dy. cit for the proposition that the undisclosed income of the block period is to be computed in accordance with the provisions of chapter xiv-b and such computation should be on the basis of evidence found as a result of search.we have considered the rival submissions and also perused the relevant material on record. it is observed that the stand of the revenue that the undisclosed income assessed in the block assessment cannot be lower than that returned by the assessee is based mainly on the second proviso to clause (a) of section 158bc whereby the assessee is prohibited from revising his return originally filed for the block period. the analogy sought to be drawn by the revenue from the said proviso is that the admission made by the assessee in the return is conclusive and he cannot go back on the same. before we proceed to consider the text and context of the said proviso inserted with effect from 1-1-1997, it would be worthwhile to consider the exact meaning of the expression "undisclosed income" contemplated in chapter xiv-b and the manner and method of computation of the same for the block period.the "undisclosed income" as defined in clause (b) of section 158b includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of the income tax act. the manner and method of computation of undisclosed income of the block period is given in section 158bb according to which the undisclosed income of the block period, in simple terms, shall be the aggregate of the total income (undisclosed income as well as disclosed income) of the previous years falling within the block computed in accordance with the provisions of chapter iv as reduced by aggregate of total income or increased by aggregate of losses (i.e.disclosed income) of such previous years. the aggregate of such total income referred to in section 158bb is to be computed on the basis of evidence found as a result of the search/requisition and such other materials or information as available with the assessing officer at the time of making the block assessment. clause (c) of section 158bc envisages passing an order of assessment and determination of the tax payable after determination of the undisclosed income of the block period and the order of the assessment so passed by the assessing officer should specify the manner in which the undisclosed income of the block period has been computed by him. it is, thus, clear that chapter xiv-b, which is a self contained code, defines the expression "undisclosed income" chargeable to tax in the special assessment and the manner and method of computation of such income is also specified therein. in accordance with these special provisions, the assessing officer is required to determine the undisclosed income of the block period in a specific manner and the findings of the assessing officer regarding the undisclosed income are to be based on the material found as a result of search. a combined reading of these provisions makes it clear that the amount which is taxable as "undisclosed income" in the block assessment should fall within the scope and ambit of the definition expressly given in chapter xiv-b and the amount which is not covered by the said definition cannot be subjected to tax in the block assessment even though declared as such by the assessee in the return of income for block period. the procedure laid down in chapter xiv-b also reveals that the assessing officer has to determine the undisclosed income of the block period in the manner specified in section 158bb and this exercise is independent of the return filed by the assessee for the block period. at this stage, it is useful to refer to the observations recorded by the pune bench of income tax appellate tribunal in the case of control touch electronics (pune) (p) ltd. (supra) to the effect that if any income is not taxable by virtue of any provision of the act, then it cannot be taxed merely because it was offered by the assessee in his return of income and there cannot be any such estoppel against statute.it is observed that a similar issue in the context of regular assessment arose for consideration before the honble delhi high court in the case of cit v. bharat general insurance co. ltd. (1971) 81 itr 303 (del) wherein it was held by their lordships that even if an assessee declares an income in the return, the assessing officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. in the case of narayanan v. gopal air 1960 sc 235 the honble supreme court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. it is well-established that the object of an assessment is to determine the correct income and consequently the correct tax liability. in our opinion, this settled position equally holds good in the matter of block assessment also since the scope of undisclosed income assessable in the block assessment is specifically provided and the procedure for determination of such income is also clearly laid down. in these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be assessed as such merely for the reason that the same was declared by the assessee in the return for block period and there cannot be such estoppel against the statute. it, therefore, follows that if the assessee commits a patent mistake of fact or law while filing his return of undisclosed income under section 158bc, he cannot be assessed on such incorrect income merely on the basis of admission made in the return.it is worthwhile to note here that the computation of undisclosed income of the block period as provided by 158bb(1) is highly technical and complicated and it would be rather unjust to require an assessee to compute his undisclosed income correctly and precisely in a short period available for filing the block return. in the present case, a search and seizure operation was conducted simultaneously in the group cases related to the assessee and considering the various documents found during the course of search from the possession of different assessees, there was apparently no alternative but to compute the undisclosed income of the entire group in a consolidated manner and declare the same in the hands of different assessees belonging to one group on ad hoc basis. this is also evident from the fact that the assessee himself returned his undisclosed income for the block period at rs. 7.00 lakhs on ad hoc basis without giving any break up of the said amount. in such circumstances, when a detailed working made subsequently by the assessee of undisclosed income revealed that the total undisclosed income assessable in the hands of the assessee was lower than the returned income, we are of the opinion that the same has to be assessed at such lower amount going by the concept of real income especially when the said working was verified and found to be correct by the assessing officer.reverting back to the second proviso to clause (a) of section 158bc, it is observed that the said proviso was inserted in the statute with effect from 1-1-1997 along with section 158bfa containing the provisions relating to levy of interest and penalty in certain cases.as per the said provisions, penalty is made imposable in a case where the undisclosed income of the assessee is found to be more than the returned one and such penalty is leviable with reference to the excess of amount of undisclosed income assessed by the assessing officer over the amount of undisclosed income shown in the return. it appears that the very purpose of inserting the second proviso to clause (a) of section 158bc prohibiting the assessee from filing the revised return is to prevent the assessee from revising his income originally returned from time to time depending on the developments that take place and the findings of the assessing officer during the course of assessment proceedings, to get away with the penalty imposable under section 158bfa. the plain language used in the said proviso conveys explicitly the legislative intention to prevent the assessee from revising the income returned originally in an upward manner to avoid the penal consequences and in our opinion the same cannot be extended to draw an analogy, as sought by the revenue, that the admission made by the assessee in the return of block period is conclusive and he cannot withdraw it subsequently. this is so also because a genuine claim for reduction in the returned income is not always required to be made by filing a revised return and the assessee can very well stake such claim in any other manner during the course of assessment proceedings or for that matter even during the appellate proceedings which is considered to be a continuation of assessment proceedings for this purpose by the honble supreme court in the case of cit v. mcmillan & co. (1958) 33 itr 182 (sc). moreover, clause (iv) of first proviso to sub-section (2) of section 158bfa itself contemplates a situation of the assessee filing an appeal against the block assessment of that part of income which is shown in the return and this provision inserted in chapter xiv-b simultaneously with second proviso to clause (1) of section 158bc makes it abundantly clear that the assessee is very much entitled to dispute even the income declared by him in the return for block period. keeping in view this position clearly emanating from the relevant provisions, the contention of the learned departmental representative that the admission made by the assessee in the block return binds him as a result of second proviso to clause (a) of section 158bc and no reduction in the same is permissible appears to be far fetched and we find it difficult to accept the same. as such considering all the facts and circumstances of the case and for the reasons given herein above, we are of the considered opinion that the undisclosed income of the assessee for the block period finally determined at rs. 6,60,633 only was chargeable in the block assessment and revenues case of assessing the same at rs. 7.00 lakhs relying merely on the income returned by the assessee to that extent is not tenable in law. in that view of the matter, we hold that the learned commissioner (appeals) was fully justified in directing the assessing officer to adopt the undisclosed income finally determined at rs. 6,60,633 as against the income originally returned by the assessee at rs. 7.00 lakhs. his impugned order on this issue is therefore upheld.ground no. 1 of the assessees cross-objection being it(ss) a. no.9/nag./99 (co no. 96/nag./99) is only supportive in nature whereas ground 2 raised therein has not been pressed by the learned counsel for the assessee before us.in the result, the appeal of the revenue as well as the cross objection of the assessee are dismissed.

Judgment:
The order of the learned Commissioner (Appeals)-I, Nagpur dated 30-3-1999 has been challenged by the revenue in this appeal on the following grounds : 1. On the facts and in the circumstances of the case the learned Commissioner (Appeals) erred in directing to adopt undisclosed income revised at the time of assessment at Rs. 6,60,633 as against originally returned at Rs. 7,00,000.

2. On the facts and in the circumstances of the case the learned Commissioner (Appeals) erred in deleting addition of Rs. 42,500 being unexplained in investment in shares.

First we take up Ground No. 2 relating to the addition of Rs. 42,500 made by the assessing officer on account of unexplained investment in shares which has been deleted by the learned Commissioner (Appeals).

The assessee carries on the business of dealing in cloth on wholesale basis under the name and style of his Proprietary concern Mr. Shobhraj & Company. A search under section 132(1) was conducted at the business and residential premises of the assessee on 16-1-1997 wherein various documents were found and seized by the department. In response to notice issued under section 158BC, a return of Income for the block period was filed by the assessee on 18-8-1997 declaring a undisclosed income of Rs. 7.00 lakhs. During the course of assessment proceedings, the assessee submitted that his total undisclosed income for the block period works out to Rs. 6,60,633 comprising of Rs. 3,64,309 on account of balancing figure being excess of assets over liabilities worked out on the basis of entries appearing in the various diaries and a further sum of Rs. 2,89,324 on account of difference in opening capital appearing in the said diaries which was more than the capital appearing in the regular books as on 1-4-1990. The working of the undisclosed income at Rs. 6,60,633 furnished by the assessee was verified and found to be correct by the assessing officer. He, however, made a further addition of Rs. 42,500 on account of value of shares found during the search on the basis of offer made by the assessee in the statement recorded by the ADI under section 132(4). The contention of the assessee raised in this regard during the assessment proceedings that the said shares were purchased by him out of withdrawals from rough diaries and therefore no such addition could separately be made was not accepted by the assessing officer. He proceeded to make the said addition mainly on the basis of income surrendered by the assessee on this count in his statement recorded under section 132(4). The learned Commissioner (Appeals), however, deleted this addition made by the assessing officer observing that the facts of the case were sufficient to show that the investment in shares was made by the assessee from the withdrawals made from the diaries.

The learned Departmental Representative submitted that the shares found during the course of search were not disclosed by the assessee in his books of account and in his statement recorded under section 132(4) by the ADI, the assessee had admitted that the said shares belong to him and that he is ready to surrender this investment as his undisclosed income. She, therefore, contended that the assessing officer was right in adding this amount relying on the clear cut admission made by the assessee in his statement and there being nothing brought on record by the assessee to prove to the contrary, the learned Commissioner (Appeals) was not justified in deleting the same.

The learned counsel for the assessee submitted that the addition on this count was made by the assessing officer merely on the basis of statement of the assessee recorded under section 132(4) by the ADI. He submitted that the investment in shares was made by the assessee out of withdrawals from diaries which were already subjected to tax and this fact was not disputed by the assessing officer. He submitted that a balancing figure of all the debit and credit entries recorded in the rough diaries was declared by the assessee in the return for block period and thus the withdrawals shown in the rough diaries were available with the assessee as source for purchase of shares amounting to Rs. 42,500. He contended that the assessing officer having assessed the source, application of the same in the form of investment in the shares cannot be again assessed in his hands. He further contended that the total undisclosed income of Rs. 5.00 lakhs was offered by the assessee in his statement recorded under section 132(4) by the ADI whereas in the return of income filed in response to notice under section 158BC, the assessee declared the total undisclosed income at Rs. 6,60,663 which was much more than the disclosure made before the ADI. He, therefore, contended that the addition on this count made by the assessing officer was not correct and the learned Commissioner (Appeals) was fully justified in deleting the same.

We have considered the rival submissions and also perused the relevant material on record. It is observed that the unaccounted transactions in respect of cloth business recorded in various rough diaries were aggregated by the assessee and the balancing figure worked out on the basis of the same at Rs. 3,64,309 was declared as his undisclosed income on the basis of rough diaries found during the search.. This working furnished by the assessee was verified by the assessing officer and he had also found the same to be correct. In these circumstances, the explanation of the assessee that the withdrawals shown in the rough diaries were available with him for making the investment in shares was quite plausible and in our opinion the assessing officer was not justified in making addition on this count relying merely on the statement recorded by the ADI under section 132(4) without even disputing the said explanation. As a matter of fact, the sum of Rs. 5.00 lakhs was offered by the assessee in his statement recorded by the ADI as his undisclosed income as a result of search and the assessee having declared the total income of Rs. 6,60,633 before the assessing officer, the separate addition made by the assessing officer on account of investment in shares, the source of which was already subjected to tax, was not called for even on the basis of statement of the assessee recorded by the ADI under section 132(4). As such, considering all the facts of the case, we are of the opinion that there is no infirmity in the impugned order of the learned Commissioner (Appeals) in deleting the said addition made by the assessing officer. The same is, therefore, upheld on this issue.

In Ground No. 1, the revenue has challenged the action of the learned Commissioner (Appeals) in directing the assessing officer to adopt the undisclosed income of the assessee at Rs. 6,60,633 on the basis of submission made during the course of assessment proceedings as against the undisclosed income of Rs. 7.00 lakhs declared originally in the return for block period.

Referring to the second proviso to clause (a) of section 158BC, the learned Departmental Representative submitted that a person who has furnished a return of undisclosed income for the block period under the said clause is not entitled to revise the same with effect from 1-1-1997. She contended that the return of income filed by the assessee is a starting point of the block assessment proceedings and the acceptance of the income returned by the assessee cannot be said to have caused any grievance to the assessee as held by the Honble Bombay High Court in the case of Rameshchandra & Co. v. CIT (1987) 168 ITR 375 (Bom). She submitted that keeping in view the specific prohibition imposed by inserting second proviso (2) to clause (a) of section 158BC with effect from 1-1-1997, it was not within the mandate of learned Commissioner (Appeals) to direct the assessing officer to assess the income of the assessee for a block period at lower amount than that declared in the return.

The learned counsel for the assessee submitted that a search operation was simultaneously conducted in the group cases related to the assessee and the undisclosed income estimated in a consolidated manner taking all the cases together was declared in the returns of income of all the group members on ad hoc basis. He submitted that the exact bifurcation of the total undisclosed income of the group as a result of search was not available and in the absence of such details, the undisclosed income was declared in the hands of different assessees on estimated basis. He submitted that after filing the said returns, the assessee obtained the copies of relevant seized documents and after doing the necessary working of undisclosed income assessable in the hands of different assessees, submission was made before the assessing officer for assessing the exact amount of undisclosed income as per the provisions of section 158BC after verifying the said working. He submitted that in the case of the assessee, the actual undisclosed income for block period as per the detailed working made by the assessee was worked out to Rs. 6,60,633 and the said working submitted by the assessee before the assessing officer was also verified by him and found to be correct. He submitted that since the assessee had returned the undisclosed income for Block period at Rs. 7.00 lakhs, the assessing officer proceeded to make a further unwarranted addition of Rs. 42,500 just to assess the total income at an amount more than the returned income of Rs. 7.00 lakhs. He submitted that the learned Commissioner (Appeals) however deleted the said addition and also directed the assessing officer to assess the income of the assessee for block period at Rs. 6,60,633 as against the income originally returned at Rs. 7.00 lakhs considering that the relevant provisions of Chapter XIV-B provides for determination of undisclosed income on the basis of evidence found during the search and once such income was determined at Rs. 6,60,633, the assessment ought to have been made on the said amount. Relying on the decision of Honble Bombay High Court in the case of CIT v. Shamlal Balram Gurbani (2001) 249 ITR 501(Bom), he contended that the income assessed can be lower than the returned income. He further contended that the assessee is liable to be assessed in the special assessment for block period of undisclosed income on the basis of evidence or material found in the course of search and if the income so assessable in the hands of the assessee had been determined at Rs. 6,60,633, there was no justification in completing the assessment on a total income of Rs. 7.00 lakhs merely on the basis of income declared by the assessee in the return of income. For this contention, he relied on the decisions of Pune Bench of Income Tax Appellate Tribunal in the case of Chander Mohan Mehta v. Asstt. CIT (1999) 71 ITD 245 (Pune) and in the case of Control Touch Electronics (Pune) (P) Ltd. v. Asstt. CIT (2001) 77 ITD 522 (Pune). He also cited the decision of Honble Mumbai Bench of Income Tax Appellate Tribunal in the case of Sunder Agencies v. Dy. CIT for the proposition that the undisclosed income of the Block Period is to be computed in accordance with the provisions of Chapter XIV-B and such computation should be on the basis of evidence found as a result of search.

We have considered the rival submissions and also perused the relevant material on record. It is observed that the stand of the revenue that the undisclosed income assessed in the block assessment cannot be lower than that returned by the assessee is based mainly on the second Proviso to clause (a) of section 158BC whereby the assessee is prohibited from revising his return originally filed for the block period. The analogy sought to be drawn by the revenue from the said Proviso is that the admission made by the assessee in the return is conclusive and he cannot go back on the same. Before we proceed to consider the text and context of the said proviso inserted with effect from 1-1-1997, it would be worthwhile to consider the exact meaning of the expression "undisclosed income" contemplated in Chapter XIV-B and the manner and method of computation of the same for the block period.

The "undisclosed income" as defined in clause (b) of section 158B includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of the Income Tax Act. The manner and method of computation of undisclosed income of the block period is given in section 158BB according to which the undisclosed income of the block period, in simple terms, shall be the aggregate of the total income (undisclosed income as well as disclosed income) of the previous years falling within the block computed in accordance with the provisions of Chapter IV as reduced by aggregate of total income or increased by aggregate of losses (i.e.

disclosed income) of such previous years. The aggregate of such total income referred to in section 158BB is to be computed on the basis of evidence found as a result of the search/requisition and such other materials or information as available with the assessing officer at the time of making the block assessment. Clause (c) of section 158BC envisages passing an order of assessment and determination of the tax payable after determination of the undisclosed income of the block period and the order of the assessment so passed by the assessing officer should specify the manner in which the undisclosed income of the block period has been computed by him. It is, thus, clear that Chapter XIV-B, which is a self contained code, defines the expression "undisclosed income" chargeable to tax in the special assessment and the manner and method of computation of such income is also specified therein. In accordance with these special provisions, the assessing officer is required to determine the undisclosed income of the block period in a specific manner and the findings of the assessing officer regarding the undisclosed income are to be based on the material found as a result of search. A combined reading of these provisions makes it clear that the amount which is taxable as "undisclosed income" in the block assessment should fall within the scope and ambit of the definition expressly given in Chapter XIV-B and the amount which is not covered by the said definition cannot be subjected to tax in the block assessment even though declared as such by the assessee in the return of income for block period. The procedure laid down in Chapter XIV-B also reveals that the assessing officer has to determine the undisclosed income of the block period in the manner specified in section 158BB and this exercise is independent of the return filed by the assessee for the block period. At this stage, it is useful to refer to the observations recorded by the Pune Bench of Income Tax Appellate Tribunal in the case of Control Touch Electronics (Pune) (P) Ltd. (supra) to the effect that if any income is not taxable by virtue of any provision of the Act, then it cannot be taxed merely because it was offered by the assessee in his return of income and there cannot be any such estoppel against statute.

It is observed that a similar issue in the context of regular assessment arose for consideration before the Honble Delhi High Court in the case of CIT v. Bharat General Insurance Co. Ltd. (1971) 81 ITR 303 (Del) wherein it was held by their Lordships that even if an assessee declares an income in the return, the assessing officer cannot assess it merely on that basis and he has to consider its taxability in the light of other circumstances de hors the admission made in the return. In the case of Narayanan v. Gopal AIR 1960 SC 235 the Honble Supreme Court has held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It is well-established that the object of an assessment is to determine the correct income and consequently the correct tax liability. In our opinion, this settled position equally holds good in the matter of block assessment also since the scope of undisclosed income assessable in the block assessment is specifically provided and the procedure for determination of such income is also clearly laid down. In these circumstances, any amount which is not assessable as undisclosed income for the block period cannot be assessed as such merely for the reason that the same was declared by the assessee in the return for block period and there cannot be such estoppel against the statute. It, therefore, follows that if the assessee commits a patent mistake of fact or law while filing his return of undisclosed income under section 158BC, he cannot be assessed on such incorrect income merely on the basis of admission made in the return.

It is worthwhile to note here that the computation of undisclosed income of the block period as provided by 158BB(1) is highly technical and complicated and it would be rather unjust to require an assessee to compute his undisclosed income correctly and precisely in a short period available for filing the block return. In the present case, a search and seizure operation was conducted simultaneously in the group cases related to the assessee and considering the various documents found during the course of search from the possession of different assessees, there was apparently no alternative but to compute the undisclosed income of the entire group in a consolidated manner and declare the same in the hands of different assessees belonging to one group on ad hoc basis. This is also evident from the fact that the assessee himself returned his undisclosed income for the block period at Rs. 7.00 lakhs on ad hoc basis without giving any break up of the said amount. In such circumstances, when a detailed working made subsequently by the assessee of undisclosed income revealed that the total undisclosed income assessable in the hands of the assessee was lower than the returned income, we are of the opinion that the same has to be assessed at such lower amount going by the concept of real income especially when the said working was verified and found to be correct by the assessing officer.

Reverting back to the second proviso to clause (a) of section 158BC, it is observed that the said proviso was inserted in the statute with effect from 1-1-1997 along with section 158BFA containing the provisions relating to levy of interest and penalty in certain cases.

As per the said provisions, penalty is made imposable in a case where the undisclosed income of the assessee is found to be more than the returned one and such penalty is leviable with reference to the excess of amount of undisclosed income assessed by the assessing officer over the amount of undisclosed income shown in the return. It appears that the very purpose of inserting the second proviso to clause (a) of section 158BC prohibiting the assessee from filing the revised return is to prevent the assessee from revising his income originally returned from time to time depending on the developments that take place and the findings of the assessing officer during the course of assessment proceedings, to get away with the penalty imposable under section 158BFA. The plain language used in the said proviso conveys explicitly the legislative intention to prevent the assessee from revising the income returned originally in an upward manner to avoid the penal consequences and in our opinion the same cannot be extended to draw an analogy, as sought by the revenue, that the admission made by the assessee in the return of block period is conclusive and he cannot withdraw it subsequently. This is so also because a genuine claim for reduction in the returned income is not always required to be made by filing a revised return and the assessee can very well stake such claim in any other manner during the course of assessment proceedings or for that matter even during the appellate proceedings which is considered to be a continuation of assessment proceedings for this purpose by the Honble Supreme Court in the case of CIT v. Mcmillan & Co. (1958) 33 ITR 182 (SC). Moreover, clause (iv) of first proviso to sub-section (2) of section 158BFA itself contemplates a situation of the assessee filing an appeal against the block assessment of that part of income which is shown in the return and this provision inserted in Chapter XIV-B simultaneously with second proviso to clause (1) of section 158BC makes it abundantly clear that the assessee is very much entitled to dispute even the income declared by him in the return for block period. Keeping in view this position clearly emanating from the relevant provisions, the contention of the learned Departmental Representative that the admission made by the assessee in the block return binds him as a result of second proviso to clause (a) of section 158BC and no reduction in the same is permissible appears to be far fetched and we find it difficult to accept the same. As such considering all the facts and circumstances of the case and for the reasons given herein above, we are of the considered opinion that the undisclosed income of the assessee for the block period finally determined at Rs. 6,60,633 only was chargeable in the block assessment and revenues case of assessing the same at Rs. 7.00 lakhs relying merely on the income returned by the assessee to that extent is not tenable in law. In that view of the matter, we hold that the learned Commissioner (Appeals) was fully justified in directing the assessing officer to adopt the undisclosed income finally determined at Rs. 6,60,633 as against the income originally returned by the assessee at Rs. 7.00 lakhs. His impugned order on this issue is therefore upheld.Ground No. 1 of the assessees cross-objection being IT(SS) A. No.9/Nag./99 (CO No. 96/Nag./99) is only supportive in nature whereas Ground 2 raised therein has not been pressed by the learned counsel for the assessee before us.

In the result, the appeal of the revenue as well as the Cross Objection of the assessee are dismissed.