COMMISSIONER OF INCOME-TAX Vs. S AJIT KUMAR

JUDGEMENT

(1.) THIS appeal is filed by the Revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income-tax Appellate Tribunal, Chennai, 'B' Bench dated 28.04.2006 in I.T.(S.S.)A.No.53/Mds/2005, raising the following substantial questions of law: 1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the material found in the course of survey in the premises of the builder could not be used in the block assessment of the assessee?

(2.) WHETHER on the facts and circumstances of the case, the Tribunal was right in holding only if evidence of cash payment to the builder had been found at the time of search, could the proof of the same found at the time of survey in the builder's premises be used, inspite of the fact that other details of employing that particular builder were found at the time of search? 2. The brief facts leading to the above questions of law are as under: The assessee is a Cine Actor. The office and residential premises of the assessee were searched on 17.07.2002 and the search was concluded on 21.08.2002. In the course of the search, evidences were noticed that the assessee had indulged in understatement of his real income relating to the block period 01.04.1996 to 17.07.2002. A notice dated 25.02.2003, under Section 158BC of the Income-tax Act (hereinafter referred to as the "Act"), was issued to the assessee and in response to the same, the assessee furnished the Return of income on 11.08.2003, admitting the undisclosed income as "Nil". On the date of search, there was a survey in the premises of M/s. Elegant Constructions and Interiors Ltd. ("Elegant Constructions" in short), the builder and interior decorator, who constructed and decorated the assessee's house at Seaward Road, Valmiki Nagar, Thiruvanmiyur. It was found that the assessee paid a sum of Rs.95.16 lakhs in cash and the same was not accounted. The Assessing Officer, completed the order making an addition of Rs.95,16,320/- and completed the block assessment, inter alia, bringing the said amount to tax as undisclosed income of the block period. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals) and contended that the materials found in the course of survey could not be utilised for computing the income of the block period. The C.I.T.(A) held that it was due to the search action, the Department had found that the assessee had engaged the services of M/s. Elegant Constructions, the builder and decorator and hence the same is directly related to the information obtained in the survey proceedings, and confirmed the order of assessment and dismissed the appeal. Aggrieved by the order of C.I.T.(A), the assessee filed an appeal to the Income-tax Appellate Tribunal (hereinafter referred to as the "Tribunal"). The Tribunal was of the view that information of materials found in the survey operation of the premises of M/s. Elegant Constructions, was not related to any material found during the course of search operation and hence the same cannot be a basis for making any addition in the block assessment.