COMMISSIONER OF INCOME TAX Vs. ASANDAS KHATRI

JUDGEMENT

(1.) This is an appeal under Section 260A of the IT Act, 1961 (for short 'the Act'), filed by the CIT, Bhopal, against the order dt. 11th Dec, 2000 of the Tribunal, Indore Bench, Indore, passed in IT(SS) No. 66/Ind/1997.

(2.) The facts briefly are that search and seizure operations under Section 132 of the Act were carried out under the premises of the respondent, Shri Purushottam Khatri, Shri C.L. Khatri and their group during 18th Oct., 1996 to 30th Oct., 1996. Thereafter, block assessment was made under Section 158BC read with Section 143 by the AO on 29th Oct., 1997 for the block period 1st April, 1986 to 18th Oct., 1996 determining the total undisclosed income of the respondent as Rs. 7,22,537. Aggrieved by the said assessment, the respondent filed an appeal before the Income-tax Appellate Tribunal, Indore Bench, Indore (for short the Tribunal'). By order dt. 11th Dec, 2000, the Tribunal held that if the total income for those years in which returns were not filed before search remained below the taxable income after deduction claimed under Section 80L, the income of that year shall not be included in the undisclosed income of the block period. The Tribunal also found that during the block period various FDRs of different amounts were prepared in the name of respondent out of his NR(E) account on which the respondent earned interest but the AO has treated the interest on FDRs as part of the undisclosed income of the block period and the Tribunal held that the interest earned by the respondent on the FDRs made from NR(E) account were exempt from income-tax as per the provisions of Section 10(4)(ii) of the Act.

(3.) On 18th July, 2001, the Court at the time of admitting the appeal for hearing formulated the following two substantial questions of law for decision in this case: