COMMISSIONER OF INCOME TAX Vs. R M PATEL

JUDGEMENT

(1.) THE above tax case appeal is directed against the order of the Income-tax Appellate Tribunal in IT (SS)A no. 55/mds/2003 dated 18. 8. 2006.

(2.) THE relevant assessment is block period of 1988-89 to 1997-98 and 1. 4. 1998 to 5. 11. 1998. The assessee is a hindu Undivided Family (in short 'huf' ). A search under section 132 of the Income Tax Act was carried out at the residential and business premises of the Karta of the HUF, viz. Ratanshi Patel and his brother Khimji M Patel between 5. 11. 1998 and 30. 11. 1998. During the search, it was found that HUF assessee had a timber trading business by name Ram plylam during the assessment years 1996-97, 1997-98 and 1998-99. The materials seized indicated that the assessee had also undisclosed income from the business and therefore, notice under Section 158bd of the Act was issued to the assessee on 13. 6. 2000, as the proprietor of the concern Ram plylam. In response to the notice, the assessee filed a return in Form 2b on 3. 7. 2000 declaring undisclosed income as nil. 1]. Later, in response to the notice under Sections 142 (1) and 143 (2), the assessee was heard and an explanation was offered that the material seized during the search were in no way connected to the assessee. But, the Assessing officer, without appreciating the explanation offered by the assessee, passed an assessment order under Section 158bd read with 158bc and 143 (3), computing the undisclosed income as under, <FRM>JUDGEMENT_693_TLMAD0_2007Html1.htm</FRM> demanding income tax thereon at 60%, which worked out to rs. 43,88,716/- and proposed to initiate penalty proceedings under Section 158bfa (2) of the Act.

(3.) CONCEDEDLY, the seized materials did not relate to the assessee. On the other hand, what is contemplated under section 158bb is that the undisclosed income shall be computed only in accordance with the provisions of the Act on the basis of evidence found as a result of search and such other material or information which are relating to such material. If the material seized do not, in any way, connects the assessee indicating that the assessee had any undisclosed income, it may not be proper to proceed against the assessee under Section 158bd read with Sections 158bc and 143 (3) of the Act without any basis whatsoever, especially in the absence of any material indicating any suppression of sales or suppression of income by the assessee.