COMMISSIONER OF INCOME TAX Vs. A. M. FAZIL

JUDGEMENT

(1.) The respondent-assessee is engaged in film production and direction. Several of the films produced or directed by the respondent assessee were distributed through Sri. P.D. Abraham alias Sri. Appachan, Swargachitra Films. The Income Tax Department conducted search under Section 132 of the Income Tax Act (hereinafter called "the Act") in the residence and business premises of Sri. Appachan as well as the respondent-assessee and another film producer by name Sri. A.H. Khais who is the brother of the respondent-assessee from 24.7.1997 to 29.7.1997. During search, incriminating documents and accounts were seized from all the assessees which led to block assessment under Section 158BC of the Act in the name of three assessees namely, Sri. P.D. Abraham alias Appachan, respondent-assessee and also his brother Sri. A.H. Khais for the block period 1988-89 to 1997-98. We have heard the appeals relating to all the three assessees together and are disposing of the same by separate judgments. Search was conducted in the premises of the respondent assessee on 29.7.1997 wherein several documents and accounts were seized by the Income Tax department. Pursuant to notice under Section 158BC of the Act, assessee filed return in Form 2B returning undisclosed income for the entire block period totaling Rs. 38.58 lakhs. However, the Assessing Officer based on materials received during search in the premises of the respondent-assessee as well as the distributor namely, Sri. P.D. Abraham, Swargachitra Films, completed assessment on a total undisclosed income of Rs. 1,29,43,770/-. On appeal filed by the assessee, the first appellate authority substantially allowed the appeal by deleting most of the additions made in the assessment. The Revenue as well as the assessee filed appeals against the orders of the first appellate authority. The Tribunal by dismissing appeal filed by both sides sustained the order of the first appellate authority. It is against this order of the Tribunal, Revenue is in appeal before us. We have heard Senior counsel Sri. P.K.R. Menon appearing for the Revenue and Adv. Sri. Arun Raj appearing for the respondent- assessee.

(2.) The Revenue has challenged the deletion of entire additions made by the first appellate authority which are sustained by the Tribunal. Specific questions are raised with reference to each and every addition deleted by the Tribunal and the entire order of the Tribunal is challenged by raising a general question with reference to presumption available on the correctness of contents of books of accounts, documents etc. recovered during the course of search and also based on the evidentiary value of statements recorded under Section 132(4) of the Act.

(3.) Before proceeding to consider the various questions raised in the appeal, we have to consider the preliminary objection raised by the learned counsel for the respondent that no substantial question of law arises for consideration by this court with regard to the concurrent findings on fact recorded by the first appellate authority and confirmed by the Tribunal. Senior counsel appearing for the Revenue on the other hand contended that the appeal has to be considered by keeping in mind the special provisions of the Act contained in Chapter XIVB of the Act which specifically provide in Section 158BB that a block assessment has to be completed on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. We have to certainly consider the salient features of block assessment contemplated under Chapter XIVB which provides for block assessment for a maximum period of 10 years ending with the date of search. While Section 158BC provides for block assessment of the assessees searched under Section 132 of the Act or whose books of accounts are called under Section 132A of the Act, Section 158BD provides for block assessment of assessees other than searched assessees based on evidence or materials received in the course of search. The peculiar feature of this case is that the respondent-assessee is a film producer and director, while the other assessee simultaneously searched namely, Sri. P.D. Abraham @ Appachan of Swargachitra Films is the film distributor and both these persons have so much of extensive business connections and, therefore, the records seized from both the assessees and the statements recorded from both of them relate to one and the same transaction i.e. the income and expenditure from film making, direction and in distribution. We are very conscious of the fact that the appellate jurisdiction of this court under Section 260A is limited to substantial questions of law arising from orders of the Tribunal. The contention raised by counsel for the assessee that concurrent findings on appreciation of evidence recorded by two appellate authorities normally should not be interfered by this court to reach a different conclusion again by reappraising the evidence is quite a sound principle of law. However, the contention raised by Senior counsel for the Revenue is that when assessment of undisclosed income is based on concrete evidence received from the documents and accounts seized from the residence of assessee and the film distributor above referred, the Tribunal's refusal to uphold the assessment without any basis or material is a perverse finding which gives rise to a question of law. We find force in this contention because when block assessment of any item is made based on evidence collected in the course of search, the assessment under Section 158BC read with Section 158BD is supported by statutory provision namely, Section 158BB of the Act. The Tribunal cannot cancel the assessment of undisclosed income if the same is based on tenable and acceptable evidence recovered in the course of search and which is not disproved by the assessee. Keeping this in mind we proceed to consider the appeal on the various grounds raised and the questions raised with reference to specific additions.