The ACIT, Central Circle-2,, Baroda v. Shreeji Education Trust,, Baroda

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHERI T.K. SHARMA JM AND D.C.AGRAWAL AM SHREEJI EDUCATION TRUST C/O M.S.HOSTEL SAMA SAVLI ROAD BARODA. V/S . ASSTT.CIT CEN.CIR.2 6 TH FLOOR AAYAKAR BHAVAN RACE COURSE BARODA. AND ASSTT.CIT CEN.CIR.2 6 TH FLOOR AAYAKAR BHAVAN RACE COURSE BARODA. V/S . SHREEJI EDUCATION TRUST C/O M.S.HOSTEL SAMA SAVLI ROAD BARODA. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHERI U. S. BHATI AR REVENUE BY:- SHERI ANIL KUMAR CIT DR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER. THESE ARE TWO APPEALS ONE FILED BY THE ASSESSEE AN D THE OTHER FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATE D 20.05.2004. AS THE FACTS AND ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMON WE TAKE UP THEM TOGETHER FOR THE SAKE OF CONVENIENCE. IT(SS)A NO.218/AHD/2004 BLOCK PERIOD 1.4.95 TO 20.09.2001: IT(SS)A NO.223/AHD/2004 BLOCK PERIOD 1.4.95 TO 20.09.2001: 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL : ALL THE GROUNDS OF APPEAL IN THIS APPEAL ARE MUTUAL LY EXCLUSIVE AND WITHOUT PREJUDICE TO EACH OTHER 1. THE ID. CIT(A) ERRED IN LAW & ON FACTS IN REJECT ING THE CONTENTION OF THE APPELLANT THAT THE ID A O. HAD F RAMED THE ASSESSMENT AND MADE ADDITIONS WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEARD TO THE APPELLANT. THE ID. A.O HAD M ADE THE ADDITIONS WITHOUT GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND DENYING THE BASIC PRINCIPLES OF N ATURAL JUSTICE TO THE APPELLANT. 2. THE ID. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE LD. A.O. HAD MADE THE ADDITIONS TO TH E UNDISCLOSED INCOME OF THE APPELLANT WITHOUT VERIFYING WHETHER T HE INCOME SOUGHT TO BE ADDED IS INCLUDED AND IS PART OF THE B OOKS OF ACCOUNTS MAINTAINED IN NORMAL COURSE OF BUSINESS AND NO EVID ENCE WAS DETECTED DURING THE COURSE OF SEARCH TO POINT OUT A NY DISCREPANCY IN THE SAME. 3. THE LD R C1T(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION TO THE EXTENT OF RS 10 81 030/- OUT OF RS. 47 17 272/- MADE BY THE LD. A.O. BY DENYING EXEMPTION U/S 10(23C) OF THE INCOME TAX ACT 1961 FOR THE A.YS. 1999-00 AND 2000-01. 4. THE ID. C1T(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ADDITION OF RS.67 90 100/- MADE BY THE LD A O ON ACCOUNT OF PURCHASE OF MILK FROM M/S SHREEJI CATERERS. THE ID CLT.(A) FURTHER ERRED IN NOT APPRECIATING THE FACT THAT NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND THE ID. A.O HAD MADE THE ADDITION ONLY ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED 5. THE ID. C1T(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE ACTION OF THE ID A.O. IN LEVYING INTEREST U/S 158BFA(1) OF THE INCOME TAX ACT 1961. 6. YOUR APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEND THE GROUNDS OF APPEAL. 3 3. WHEREAS THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS IN ITS APPEAL:- 1. THE LD. CIT(A) HAS ON THE FACTS OF THE CASE AND IN LAW ERRED IN HOLDING THAT PROVISION OF SEC.40A(3) DOES NOT APPLY IN THE CASE OF BLOCK ASSESSMENT EVEN IN CASE OF NON-FILER OF RE TURN OF INCOME. 2. THE LD. CIT(A) HAS ON THE FACTS OF THE CASE AND IN LAW ERRED IN DELETING THE SURCHARGE IN SPITE OF EXPLICIT PROVISI ON CONTAINED IN PART-I OF THE FIRST SCHEDULE OF THE FINANCE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER ON THE ABOVE POINTS. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED TO THE ABOVE EXTENT. IT(SS)A NO.218/AHD/2004 ASSESSEES APPEAL. 4. GROUND NO.1 IS NOT PRESSED AND HENCE IT IS REJEC TED. 5. THE FACTS RELATING TO OTHER GROUNDS IN ASSESSEE S APPEAL ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF T HE ACT WAS CARRIED OUT AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASS ESSEE ON 20.09.2001. THE ASSESSEE IS A TRUST REGISTERED UNDER THE PROVIS IONS OF BOMBAY PUBLIC TRUSTS ACT 1950. IT IS MAINTAINING BOOKS OF ACCOUNT S AND SAME IS AUDITED WHICH FACT IS NOT CHALLENGED BY THE REVENUE. THE AU DIT REPORTS IN PRESCRIBED PROFORMA AS PER SCHEDULE IX-C OF BOMBAY PUBLIC TRUSTS ACT WERE REGULARLY FILED WITH THE OFFICE OF THE CHARITY COMMISSIONER OF 4 BARODA AND RELEVANT CERTIFICATES OBTAINED FROM THAT OFFICE ARE ALSO FILED WITH THE A.O. AND THE CIT(A). 6. IN RESPONSE TO NOTICE UNDER SECTION 158BC THE AS SESSEE FILED UNDISCLOSED INCOME AT NIL. IT WAS SUBMITTED THAT TH E TRUST IS RUNNING SEVERAL SCHOOLS AS UNDER :- A. AMBE VIDHYALAY (K.G.SECTION) B. AMBE VIDHYALAY (PRIMARY SECTION) C. AMBE VIDHYALAY (PRIMARY ENGLISH) D. AMBE VIDHYALAY (SECONDARY ENGLISH) E. AMBE VIDHYALAYA (SECONDARY GUJARATI) F. AMBE VIDHYALAYA (HIGHER SECONDARY COMMERCE GUJARATI ) G. AMBE VIDHYALAYA (HIGHER SECONDARY COMMERCE ENGLISH) H. AMBE VIDHYALAYA (HIGHER SECONDARY SCIENCE GUJARATI) I. AMBE VIDHYALAYA (HIGHER SECONDARY SCIENCE ENGLISH) ALL THE ABOVE SCHOOLS WERE MANAGED UNDER THE SAME T RUST I.E. THE ASSESSEE. HOWEVER NO REGISTRATION UNDER SECTION 10 (23(C) OF THE I T ACT OR UNDER SECTION 12A/12AA OF THE IT ACT WERE OBTAIN ED. SINCE THERE WERE NO REGISTRATION UNDER SECTION 12AA THE AO HELD THA T PROVISIONS OF SECTION 11 GRANTING EXEMPTION TO THE ASSESSEE COULD NOT BE INVOKED. WHEN ASKED TO EXPLAIN AS TO WHY THE INCOME OF THE T RUST BE NOT TAXED IT WAS EXPLAINED THAT ASSESSEE IS RUNNING SCHOOLS AND ITS INCOME IS EXEMPT UNDER SECTION 10(22) FOR WHICH NO SEPARATE REGISTRA TION OR CERTIFICATION IS REQUIRED. THERE IS NO REQUIREMENT OF ANY APPROVAL O F ANY AUTHORITY. EVEN AFTER AMENDMENT BY FINANCE (NO.2) ACT 1998 WITH EF FECT FROM 1.4.99 INCOME OF THE TRUST WOULD NOT BE TAXABLE BECAUSE IN COME OF EACH SCHOOL IS BELOW RS. 1 CRORE. REGISTRATION/APROVAL OF THE I NSTITUTION WOULD BE REQUIRED ONLY WHERE INCOME OF THE INSTITUTION OR SC HOOL WOULD BE ABOVE RS.1 CRORE. IT WAS EXPLAINED THAT EACH SCHOOL IS SE PARATELY REGISTERED WITH 5 GUJARAT PRIMARY EDUCATION BOARD OR GUJARAT SECONDAR Y EDUCATION BOARD AND NONE OF THE SCHOOLS HAD INCOME ABOVE RS.1 CRORE . THEREFORE ITS INCOME IS EXEMPT AS PER SECTION 10(23 C)(IIIAD) AN D THEREFORE NO SEPARATE APPROVAL OF CHIEF COMMISSIONER OF INCOME-TAX IS REQ UIRED AS PER SECTION 10(23C)(VI). THE AO DID NOT AGREE WITH THE ABOVE EX PLANATION AND HELD THAT IT IS A TRUST WHICH IS RUNNING SCHOOLS UNDER I TS MANAGEMENT AND NONE OF THE INDIVIDUAL SCHOOL ARE REGISTERED WITH COMMIS SIONER OF CHARITY GUJARAT. THUS THESE SCHOOLS HAVE NO SEPARATE IDENTI TY AS FAR AS APPLICABILITY OF SECTION 10(23C) IS CONCERNED. THE AO ACCORDINGLY HELD THAT THE RECEIPTS OF THE TRUST AS A WHOLE HAS TO BE CONSIDERED FOR DECIDING WHETHER RECEIPT IS ABOVE RS.1 CRORE OR LESS FOR FIN DING OUT WHETHER APPROVAL AS PER SECTION 10(23C)(VI) IS REQUIRED OR NOT. HE WORKED OUT THE TOTAL RECEIPT FOR THREE A.YS. AS UNDER :- SECTION ASST. YEAR 99-00 ASST. YEAR 00-01 ASST. YEA R 01-02 K.G. 1 917 375 1 69 500 2 633 800 PRIMARY GUJARATI 3 717 040 3 906 450 4 354 300 PRIMARY ENGLISH 2 862 640 3 194 750 3 726 250 SECONDARY GUJ. 989 859 1 192 025 1 349 400 SECNDARY ENG. 731 879 719 600 731 950 H.S.COMMERCE N.A. N.A. 112 825 H.S.SCIENCE N.A. N.A. 156 680 TOTAL 10 118 793 10 182 325 13 065 205 THE AO HELD THAT SINCE GROSS RECEIPTS IN ALL THE TH REE YEARS WAS EXCEEDED RS.1 CRORE AND THERE IS NO APPROVAL UNDER SECTION 1 0(23C)(VI) THE EXEMPTION UNDER SECTION 10(23C) WOULD NOT BE AVAILA BLE TO THE ASSESSEE TRUST AND ENTIRE RECEIPTS WILL BE TAXED AS AOP. AFT ER CONSIDERING THE EXPENSES AS CLAIMED IN THE BOOKS OF ACCOUNTS THE AO WORKED OUT TAXABLE INCOME FOR AYS 1995-96 TO 1999-2000 AT RS.47 17 27 2. IT IS APPARENT 6 THAT HE HAS ALLOWED EXEMPTION UNDER SECTION 10(22) UPTO FINANCIAL YEAR 1997-98. 7. IN ADDITION TO ABOVE THE AO FOUND THAT ASSESSEE HAS MADE PURCHASES OF MILK FROM ONE M/S SHREEJI CATERERS. DU RING THE COURSE OF ENQUIRIES STATEMENT OF ONE SHERI KISHOREBHAI GOSWA MI PROPRIETOR OF SHREEJI CATERERS WAS RECORDED ON 13.11.2001 AND 14. 12.2001 WHEREIN HE ADMITTED TO HAVE NOT SUPPLIED ANY MILK TO THE SCHOO LS BUT ONLY ACCOMMODATED THE MANAGING TRUSTEE OF THE ASSESSEE. FOR THE SAKE OF CONVENIENCE THE STATEMENT OF SHERI KISHOREBHAI GOSW AMI RECORDED ON 14.12.2001 IS REPRODUCED BELOW :- I HAVE ALREADY ACCEPTED IN MY STATEMENT RECORDED O N 14.12.01 THAT IN ORDER TO ACCOMMODATE SHERI MAHENDRABHAI R. SHAH I HAD SHOWN THE INCOME FROM SHREEJI CATERERS IN ASST. YEAR 1998-99 AND ASST. YEAR 99-00 . I AGAIN CONFIRM THAT I HAD NOT SUPPLIED ANY MILK TO ANY OF THE SCHOOLS OF AMBE VID HYALAYA SAMA SAVLI ROAD BARODA AND I HAD ONLY SHOWN THE RECEIPT FROM AMBE V IDHYALAYA IN THE NAME OF SHREEJI CATERERS AND OFFERED 5% NET PROFIT. ACTUALL Y THERE WAS NO RECEIPT IN MY HAND FROM AMBE VIDHYALAYA SAMA SAVLI ROAD BARODA IN AS ST. YEAR 98-99 AND 99-00. SIMILARLY I HAD FILED MY ORIGINAL RETURN OF INCOME FOR ASST. YEAR 2000-01 AND ASST. YEAR 2001-02 ON 26.7.01. BUT WHEN YOUR INQUIRY CAME IN THE CASE OF SHREEJI CATERERS FROM SHERI MAHENDRABHAI R. SHAH HE APPROACHED ME T O REQUEST ME TO FILE A REVISED RETURN SHOWING INCOME FROM SHREEJI CATERERS FOR ASS T. YEAR 2000-01 AND ASST. YEAR 2001-02. I TRIED TO ACCOMMODATE HIM BY GIVING THIS ENTRY OF SHREEJI CATERERS AGAIN IN MY IT RETURN AND I FILED REVISED RETURN OF INCOME F OR ASST. YEAR 2000-01 AND ASST. YEAR 2001-02. ACTUALLY THIS WAS AGAIN BOGUS INCOME SHOWN BY ME IN THE NAME OF SHREEJI CATERERS IN ASST. YEAR 2000-01 AND ASST. YE AR 2001-02 TO HELP SHERI MAHENDRABHAI R. SHAH. I CONFIRM THAT MY ONLY SOURCE OF INCOME IS FROM ROOPA TRAVELS AND I DO NOT GET ANY OTHER INCOME FROM ANY SOURCE INCLUDING SHREEJI CATERERS IN FY 97-98 98-99 99-00 AND 2000-01. THE ABOVE STATEMENT IS GIVEN BY ME IN SOUND MENTAL HEALTH AND WITHOUT ANY THREAT OR COERCION. I AGREE WITH EVERYTHING WRITTEN ABOVE. I HAVE SIGNED THIS STATEMENT AFTER READING IT. ON THE BASIS OF ABOVE STATEMENT FOLLOWING INFERENCE S WERE DRAWN BY THE AO :- 7 (I) THAT THE ALLEGED PROPERTIES OF SHREEJI CATERERS SHE RI KISHORE GOSWAMI IN HIS SIGNED STATEMENT ON TWO OCCASION HAS ADMITTED B EFORE SHERI M.R. SHAT THAT NO MILK WAS SUPPLIED AND ENTIRE TRANSACTION OF SHREEJI CATERER WAS BOGUS ENTRIES. (II) THAT THE CHEQUES ISSUES TO M/S SHREEJI CATERERS WER E ALL BEARER CHEQUES AND CASH WAS WITHDRAWN FOR THESE CHEQUES. (III) THAT THE SAID CASH WITHDRAWN SO FROM SHREEJI CATERE RS ACCOUNT WERE TAKEN BY THE TRUSTED EMPLOYER OF SHERI MAHENDRA R. SHAH CHIEF TRUSTEE VIZ. SHERI PRADEEP PATEL AND JAGDISHBHAI OR SANTOSH HASO TKAR. (IV) THAT THERE WAS NO HISTORY OF MILK PURCHASES BY AMBE Y VIDYALAYA AND THERE IS NO SEPARATE KITCHEN FOR THAT. AS PER STATEMENT O F SHRI JAGDISH PARMAR KITCHEN-IN-CHARGE OF M/S M.S. HOSTEL RECORDED US 13 2(4)ON 20.9.01; ENTIRE FOOD SUPPLY TO AMBE VIDYALAYA IS DONE FROM T HE KITCHEN OF M.S. HOSTEL FOR WHICH M.S. HOSTEL IS RECURRING INCOME FR OM AMBE VIDYALAYA. M/S M.S. HOSTEL IS A SEPARATE CANTEEN. THEREFORE T HERE IS NO QUESTION OF ANY SEPARATE MILK PURCHASE FOR AMBE VIDYALAYA. (V) THAT M/S M.S. HOSTEL HAS REGULAR MILK SUPPLIERS WHI CH ARE REFLECTED FROM LEDGER ACCOUNTS IN ANNX. A-12 SEIZED FROM THE HOSTE L PREMISES. BARODA DAIRY SHREEJI DAIRY BUMIYA DAIRY SHREENATHJI DAIRY UMA DAIRY 8. BY HOLDING THAT THE PURCHASES ARE BOGUS UNDISCL OSED INCOME ON THIS ACCOUNT WAS WORKED OUT AS UNDER :- ASST. YEAR AMOUNTS (RS.) 2001-02 19 08 200/- 2000-01 18 68 350/- 1999-00 15 88 950/- 1998-99 13 44 600/- TOTAL 67 90 100/- 8 THE AO ALSO FOUND CERTAIN CASH PURCHASES TO THE EXT ENT OF RS.64 80 826/- WHOSE DETAILS ARE GIVEN BY HIM IN HIS ORDER. HE ACC ORDINGLY DISALLOWED A SUM OF RS.12 96 165/- U/S 40A(3) WHICH WAS ADDED IN THE TOTAL INCOME. 9. THE LD. CIT(A) HELD THAT IN VIEW OF THE PROVISIO NS OF SECTION 10(22) INCOME OF THE ASSESSEE TRUST FOR AYS 95-96 96-97 A ND 97-98 ARE EXEMPT AND HE ACCORDINGLY DELETED ADDITION OF RS.38 36 242 /- BUT UPHELD THE ADDITION OF RS.10 81 030/- AS ACCORDING TO HIM ASSE SSEE WOULD NOT BE ENTITLED TO EXEMPTION UNDER SECTION 10(23C). HE IN THIS REGARD UPHELD THE ARGUMENTS OF THE AO THAT RECEIPTS OF THE TRUST AS A WHOLE IS TO BE SEEN FOR FINDING OUT WHETHER PROVISIONS OF SECTION 10(23C)(V I) FOR TAKING APPROVAL OF THE PRESCRIBED AUTHORITY (CCIT) COULD BE NEEDED OR NOT. SINCE IN THE PRESENT CASE GROSS RECEIPT OF THE TRUST FROM ALL TH E SCHOOLS IN AYS 1999- 2000 AND 2000-01 ARE MORE THAN RS.1 CRORE AND THERE IS NO APPROVAL FROM THE PRESCRIBED AUTHORITY THEN INCOME OF THE TRUST W OULD BE TAXABLE. 10. REGARDING ADDITION OF RS.67 90 100/- BEING ALLE GED BOGUS PURCHASES FROM M/S SHREEJI CATERER LD. CIT(A) SUST AINED THE ADDITION ON THE GROUND THAT PURCHASES ARE BOGUS AND AS SUCH ADD ITION CAN BE MADE IN BLOCK ASSESSMENT. 11. REGARDING ADDITION UNDER SECTION 40A(3) LD. CI T(A) DELETED THE ADDITION BY HOLDING THAT AO HAS REACHED A HASTY CON CLUSION WITHOUT ANALYZING THE NATURE OF THE BEARER CHEQUES WHICH WE RE RECORDED IN THE REGULAR BOOKS OF ACCOUNT. ACCORDING TO HIM SUCH TYP E OF ADDITION CANNOT BE MADE IN THE BLOCK ASSESSMENT. 12. THE LD. AR IN RESPECT OF ADDITION OF RS.10.81 030/- SUSTAINED BY LD. CIT(A) SUBMITTED THAT NO DOCUMENT HAS BEEN SEIZ ED DURING THE COURSE 9 OF SEARCH AND THEREFORE SUCH ADDITION COULD NOT B E SUSTAINED IN BLOCK ASSESSMENT. THE ADDITION HAS BEEN SQUARELY MADE ON THE BASIS OF REGULAR BOOKS OF ACCOUNT AND THEREFORE THIS ADDITION COUL D NOT BE SUSTAINED. HE HAS RELIED ON THE FOLLOWING JUDGMENTS:- 1. MORARJI GOCULDAS SPG. & WVG. CO. LTD. VS. DCIT 95 I TD 1(MUM)(TM). 2. CIT VS. R.M.L. MEHROTRA (2010) 320 ITR 403 (ALL) 3. CIT VS. P. K. GANESHWAR (2009) 308 ITR 124 (MAD) 4. CIT VS. RAVI KANT JAIN 250 ITR 141 (DEL) 5. NAGINDAS M. GORADIA VS. DCIT 83 TTJ (MUM) 151 6. DCIT VS. MRS. MEENA NAYAN CHANDAN (2006) 5 SOT 1 (M UM) 7. MANGE RAM MITTAL VS. ACIT 103 ITD 389 (DEL)(S.B.) 8. CIT VS. JUPITER BUILDERS 287 ITR 287 (DEL) 9. CIT VS. ASANDAS KHATRI 283 ITR 346; AND 10. CIT VS. PURUSHOTTAM KHATRI 290 ITR 260 (M.P.) 13. THE LD. AR SUBMITTED THAT LD. CIT(A) HAS ADMITT ED THAT ASSESSEE TRUST FULFILLS ALL THE REQUIREMENTS OF EDUCATIONAL TRUST AS HE HAS HIMSELF ALLOWED EXEMPTION UNDER SECTION 10(22) OF THE ACT W HICH HAS NOT BEEN CHALLENGED BY THE DEPARTMENT IN ITS CROSS APPEAL. T HE INVIDIDUAL RECEIPTS OF THE SCHOOLS RUN BY THE TRUST DO NOT EXCEED RS.1 CRORE AND THEREFORE THE INDIVIDUAL SCHOOL ARE NOT REQUIRED TO SEEK APPROVAL FROM THE PRESCRIBED AUTHORITY UNDER SECTION 10(23C)(VI). EVEN LD. CIT(A ) HAS ADMITTED THAT ASSESSEE TRUST IS RUNNING DIFFERENT SCHOOLS. EVEN T HE AO HAS TREATED THESE SCHOOLS SEPARATELY AS HE HAS INVOKED PROVISIONS OF SECTION 40A(3) IN RESPECT OF CASH TRANSACTIONS TAKEN PLACE IN EACH SC HOOL. 14. THE LD. AR FURTHER SUBMITTED THAT IT IS NOT THE INCOME OF THE TRUST AS SUCH BUT IT IS THE INCOME OF THE SCHOOL WHICH IS RE CEIVED BY THE TRUST. THE TRUST CAN HAVE OTHER SOURCES OF INCOME IN ADDITION TO INCOME RECEIVED ON BEHALF OF A SCHOOL. THEREFORE IT WILL NOT BE PROPE R TO CLUB THE INCOME OF 10 ALL THE SCHOOLS OR ALL THE RECEIPTS OF THE TRUST TO FIND OUT THE LIMIT FOR INVOKING THE PROVISIONS OF SECTION 10(23C)(VI). 15. THE LD. AR FINALLY SUBMITTED THAT MERELY BECAUS E ASSESSEE TRUST DID NOT SEEK EXEMPTION UNDER SECTION 10(23C)(VI) FROM T HE PRESCRIBED AUTHORITY IT CANNOT TURN ITS INCOME ASSESSABLE UNDE R BLOCK ASSESSMENT. IT IS NO BODYS CASE THAT INCOME OF THE SCHOOLS IS NOT RE CORDED IN THE REGULAR BOOKS OF ACCOUNTS OF DIFFERENT SCHOOLS AND IT IS AL SO NOT DISPUTED BY THE DEPARTMENT THAT ANY INCRIMINATING DOCUMENT WAS FOUN D SHOWING THAT SCHOOLS ARE RECEIVING INCOME OVER AND ABOVE WHAT IS DECLARED IN THE BOOKS OF ACCOUNT. THEREFORE MERELY BECAUSE ASSESSE E TRUST WAS REQUIRED TO SEEK APPROVAL FROM THE PRESCRIBED AUTHORITY AS P ER SECTION 10(23C)(VI) AND IT HAS NOT BEEN SO OBTAINED THEN ITS INCOME CAN NOT BE BROUGHT TO TAX UNDER BLOCK ASSESSMENT. IT WILL CONTINUE TO BE CONS IDERED ONLY IN REGULAR ASSESSMENT AND IN CASE IT IS CONSIDERED THAT SUCH A PPROVAL FROM THE PRESCRIBED AUTHORITY UNDER SECTION 10(23C)(VI) WAS REQUIRED THEN THIS INCOME COULD BE ASSESSED ONLY IN REGULAR ASSESSMENT . 16. REGARDING ADDITION OF RS.67 90 100/- ON ACCOUNT OF PURCHASE OF MILK LD. AR SUBMITTED THAT NO EVIDENCE HAS BEEN FO UND DURING THE COURSE OF SEARCH SHOWING THAT ASSESSEE HAS MADE BOGUS PURC HASES. THE STATEMENT RECORDED IN POST-SEARCH ENQUIRIES CANNOT BRING THE BOGUS ALLEGED PURCHASES INTO BLOCK ASSESSMENT. EVEN OTHERWISE STA TEMENT OF SHRI KISHORE GOSWAMI CANNOT BE RELIED UPON BECAUSE IN TH E ORIGINAL STATEMENT HE HAS CLEARLY STATED THAT HE HAS ACTUALLY SUPPLIED MILK TO THE SCHOOL WHICH STATEMENT IS SUPPORTED BY THE AFFIDAVIT OF MR . MAHENDRA R. SHAH THAT MILK IS BEING REGULARLY PROVIDED TO THE CHILDR EN RESIDING IN THE HOSTEL. SHRI JAGDISH PARMAR KITCHEN-IN-CHARGE HAD ALSO EX PLAINED THAT MILK WAS SUPPLIED INTO THE KITCHEN AND WAS DISTRIBUTED TO TH E CHILDREN. SHRI KISHORE 11 GOSWAMI HAD DECLARED RECEIPT FROM THE MILK IN HIS R ETURN OF INCOME WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. ON THIS BASIS LD. AR SUBMITTED THAT THERE IS NO CASE FOR TAXING THIS SUM IN THE BLOCK ASSESSMENT. 17. REGARDING CHARGING OF INTEREST UNDER SECTION 15 8BFA-1 LD. AR SUBMITTED THAT ASSESSEE HAS MADE REQUEST SEVERAL TI MES FOR GIVING EXTENSION FOR FILING OF RETURN OF INCOME BUT THE SA ME WAS NOT ALLOWED AND THEREFORE INTEREST COULD NOT BE CHARGED UNDER SECT ION 158BFA-1. HE RELIED ON THE FOLLOWING JUDGEMENTS :- -N.K. MALHAN VS. DCIT 91 TTJ 938 (DEL) -MALHAN BROTHERS VS. DCIT 91 TTJ 920 (DEL) -CIT VS. KISHANLAL HUF 258 ITR 359 (DEL) & -CIT VS. RANCHI CLUB LTD. 247 ITR 209 (SC) 18. REGARDING ADDITION UNDER SECTION 40A(3) LD. AR SUBMITTED THAT THESE TRANSACTIONS HAVE BEEN PICKED UP FROM REGULAR BOOKS THEREFORE THEY COULD NOT BE SUBJECTED TO ADDITION IN BLOCK AS SESSMENT. IN SUPPORT OF THIS CONTENTION HE RELIED ON THE FOLLOWING JUDGMENT S:- -KHOPDE KISANRAO MANIKRAO VS. ACIT 74 ITD 25 (PUNE) -DCIT VS. SAHU RAM WADHWANI 81 TTJ (NAG) 839 AND -ACIT VS. DR. MOHAN LAL SWARNKAR 95 TTJ (JP) 969 -CIT VS. ANAND SWARUP KHANDELWAL 177 TAXMAN 450 (DE L) -ACIT VS. DR. MOHANLAL SWARNKAR 95 TTJ (JP) 969 -DHANVARSHA BUILDERS & DEVELOPERS P. LTD. VS. DCIT 102 ITD 375 (PUNE ) 19. AGAINST ABOVE LD. DR FOR THE DEPARTMENT SUBMIT TED THAT FOR THE PURPOSE OF SECTION 10(23C)(IIIAD) THE RECEIPT OF TH E TRUST AS A WHOLE SHOULD BE CONSIDERED. IN THE AUDITED BALANCE SHEET OF THE TRUST THE RECEIPTS FROM ALL THE SCHOOLS ARE INCLUDED. THE COM BINED RETURN IS FILED FOR ALL THE RECEIPTS FROM ALL THE SCHOOLS. EVEN THE RE IS ONE RECOGNITION FROM CHARITY COMMISSIONER. IT IS ONLY THE PERMISSIO N TO RUN SEPARATE 12 SCHOOL IS GRANTED BUT THAT DOES NOT MEAN THAT THEY ARE SEPARATE EDUCATIONAL INSTITUTIONS. IN FACT THEY ARE THE RECE IPTS OF THE TRUST AND THEREFORE IT SHOULD BE CONSIDERED AS A WHOLE. HE THEREFORE SUBMITTED THAT ONCE APPROVAL UNDER SECTION 10(23C)(VI) IS NOT OBTAINED ASSESSEE WILL NOT GET ANY EXEMPTION AND THEREFORE IT HAS BEEN R IGHTLY ASSESSED BY THE AO IN THE BLOCK ASSESSMENT. 20. REGARDING ADDITION OF RS.67 90 100/- LD. DR SUB MITTED THAT STATEMENT OF SHRI KISHORE GOSWAMI RECORDED CLEARLY INDICATED THAT THERE WAS NO SUPPLY OF MILK AND IT WAS ONLY ADJUSTMENT EN TRIES. 21. IN RESPECT OF ADDITION UNDER SECTION 40A(3) LD. DR SUBMITTED THAT SUCH ADDITION COULD BE MADE IN BLOCK ASSESSMENT ALS O. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. EVEN THOUGH SEARCH AND SEARCH OPERATION WAS CARRIED OUT IN THE PREMISES OF ASSESSEE TRUST BUT IN FACT NO INCRIMINA TING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. A PERUSAL OF PANCHNAMA INDICATED THAT SEARCH AT M.S. HOSTEL OF AMBE VIDHYALAYA AND SHREEJI EDUCA TION TRUST CERTAIN PRINTED PASS BOOKS WERE FOUND AND CERTAIN BOOKS OF ACCOUNT CASH BOOKS ETC. WERE SEIZED. BUT THE BLOCK ASSESSMENT ORDER AS SUCH DID NOT INDICATE THAT THEY WERE ANY WAY CONNECTED WITH ANY UNDISCLOS ED INCOME. THE TOTAL RECEIPTS WORKED OUT BY THE AO AS MENTIONED ABOVE WE RE ON THE BASIS OF AUDITED BOOKS OF ACCOUNTS. FURTHER PURCHASES HELD T O BE BOGUS WERE ALSO IDENTIFIED FROM REGULAR BOOKS OF ACCOUNTS. ADDITION UNDER SECTION 40A(3) ARE ALSO MADE ON THE BASIS OF ENTRIES RECORDED IN THE REGULAR BOOKS. WE HAVE GONE THROUGH ENTIRE ASSESSMENT ORDER PASSED UN DER SECTION 158 BC READ WITH SECTION 158BG ON 30.9.2003. IT DID NOT IN DICATE THAT THERE WAS ANY RECEIPT OF THE SCHOOLS/EDUCATION INSTITUTION/TR UST WHICH WAS FOUND NOT 13 RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. IT IS T HEREFORE INFERRED THAT WHATEVER MATERIAL HAS BEEN SEIZED BY THE DEPARTMENT DURING THE COURSE OF SEARCH DID NOT INDICATE ANY TRANSACTION OUTSIDE THE BOOKS. THE AO HAS BASICALLY FOCUSED HIMSELF ON THE LEGAL ASPECTS OF T HE ADDITIONS. WE THEREFORE ARE OF THE CONSIDERED VIEW THAT UNLESS A N EVIDENCE IS FOUND DURING THE COURSE OF SEARCH WHICH INDICATES THAT AS SESSEE HAS UNDISCLOSED INCOME OR THE INCOME WHICH HAS NOT BEEN DECLARED BY HIM IN THE RETURN OF INCOME OR IN THE BOOKS OF ACCOUNT IT CANNOT BE BROU GHT TO TAX IN THE BLOCK ASSESSMENT. WE ARE FORTIFIED IN OUR VIEW FROM THE O BSERVATIONS OF SPECIAL BENCH OF THE TRIBUNAL IN MANGE RAM MITTAL VS. ACIT (2007) 289 ITR (A.T.)112)( ITAT)(DEL) WHEREIN IT HELD AS UNDER :- THE PROVISIONS OF CHAPTER XIV-B OF THE INCOME-TAX ACT 1961 RELATE TO ASSESSMENT OF UNDISCLOSED INCOME. FOR THAT PURPOSE THE PROVISI ONS OF SECTION 158BC LAY DOWN THE PROCEDURE. THE PROVISIONS OF SECTION 158B(B) DEFINE WHAT IS UNDISCLOSED INCOME AND THE PROVISIONS OF SECTION 158BB LAY DOWN HOW UNDISC LOSED INCOME HAS TO BE COMPUTED. THE PROVISIONS OF COMPUTATION HAVE TWO LI MBS VIZ. (1) EVIDENCE FOUND AS A RESULT OF SEARCH AND (2) SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER AND RELATABLE TO EVIDENCE FOUND A S A RESULT OF SEARCH. AFTER THE INSERTION OF THE EXPLANATION TO SECTION 1 58BA(2) BY THE FINANCE (NO. 2) ACT 1998 WITH RETROSPECTIVE EFFECT FROM JULY 1 1995 T HERE IS NO DISPUTE THAT THE BLOCK ASSESSMENT UNDER SECTION 158BC IS IN ADDITION TO TH E REGULAR ASSESSMENT AND NOT IN SUBSTITUTION OF THE REGULAR ASSESSMENT AND IN THE B LOCK ASSESSMENT UNDER SECTION 158BC ONLY THE UNDISCLOSED INCOME OF THE ASSESSEE H AS TO BE CHARGED TO TAX AT THE SPECIAL RATE OF TAX PROVIDED IN SECTION 113. THE COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD IN A BLOCK ASSESSMENT MUST BE RELATED TO EVIDENCE FOUND AS A RESULT OF SE ARCH PROCEEDINGS. THE FINANCE ACT 2002 BY THE AMENDMENT TO SECTION 158BB WITH RETROS PECTIVE EFFECT FROM JULY 1 1995 ADDED THE WORDS AND RELATABLE TO SUCH EVIDEN CE : THE UNDISCLOSED INCOME HAS TO BE COMPUTED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH AND/OR OTHER MATERIALS OR INFORMATION RELATABLE TO SUCH EVIDENCE . AT THE SAME TIME IT CANNOT BE CONCLUDED THAT UNDISCLOSED INCOME TO BE COMPUTED UNDER THE PROVISIONS OF SECTION 158BC SHOULD BE CONFINED TO THE EVIDENCE FOUND DURI NG THE COURSE OF THE SEARCH. EVEN AFTER THE AMENDMENT BY THE FINANCE ACT 2002 WITH RETROSPECTIVE EFFECT FROM JULY 1 1995 THERE IS SCOPE TO LET IN OTHER MATERI ALS OR INFORMATION GATHERED BY THE ASSESSING OFFICERS DURING THE COURSE OF POST-SEARCH ENQUIRY BUT SUCH OTHER MATERIALS OR INFORMATION AS NOW CLEARLY MANDATED BY THE LEGIS LATURE MUST BE RELATABLE TO EVIDENCE FOUND AS A RESULT OF SEARCH. 14 THE INSERTION OF THE WORDS RELATABLE TO SUCH EVIDE NCE BY THE FINANCE ACT 2002 WITH RETROSPECTIVE EFFECT FROM JULY 1 1995 IS INT ENDED TO RESTRICT THE SCOPE OF MATERIAL OR INFORMATION THAT MAY BE RELIED UPON BY THE ASSES SING OFFICER BECAUSE IT HAS TO BE RELATABLE TO EVIDENCE FOUND AS A RESULT OF SEARCH I N THE FIRST INSTANCE. AS LONG AS THERE IS AN EVIDENCE OF UNDISCLOSED INCOME OF THE ASSESSE E THAT WOULD BE SUFFICIENT TO CLOTHE THE ASSESSING OFFICER WITH THE POWERS TO ADD TO SUCH EVIDENCE ANY FURTHER MATERIAL OR INFORMATION THAT MAY BE PERTINENT OR NE CESSARY TO REACH A LOGICAL CONCLUSION BUT THERE HAS TO BE A CERTAIN AND SPECIF IC NEXUS BETWEEN THE EVIDENCE FOUND AS A RESULT OF SEARCH AND UNDISCLOSED INCOME PROPOSED TO BE ASSESSED IN THE BLOCK ASSESSMENT UNDER SECTION 158BC. AT THE SAME T IME IT CANNOT BE HELD THAT CONCLUSIVE EVIDENCE OF UNDISCLOSED INCOME SHOULD BE FOUND DURING THE COURSE OF SEARCH ACTION ITSELF AND NOTHING FURTHER CAN BE ADD ED OR SUPPLEMENTED BY WAY OF SUBSEQUENT ENQUIRY. THUS AN ASSESSMENT UNDER SECTION 158BC IS REQUIRED TO BE MADE BOTH ON THE BASIS OF RESULT OF SEARCH AS WELL AS SUCH POST-SEARCH ENQUIR Y AND OTHER PROCEEDINGS THAT ARE IN THE NATURE OF A LOGICAL CONSEQUENCE OF THE EVIDENCE FOUND AS A RESULT OF THE SEARCH. WHETHER A SEARCH IS CARRIED OUT AT BUSINESS OR RESI DENTIAL PREMISES THE ENTIRE MASS OF WHAT IS PHYSICALLY FOUND AT THE SEARCHED PREMISES C ANNOT BE SAID TO BE EVIDENCE FOUND AS A RESULT OF SEARCH. UNDER SECTION 158BB IT IS CO MPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD AND NOT THE ENTIRE INCOME OF THE B LOCK PERIOD. THE PROVISIONS OF SECTION 158B(B) CLEARLY DEFINE UNDISCLOSED INCOME AS INCLUDING ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLES OR TH ING OR ANY INCOME WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES O F THE ACT. THEREFORE NOT EVERY ARTICLE OR THING OR EVERY PIECE OF INFORMATION FOUN D DURING THE COURSE OF SEARCH CAN BE CALLED EVIDENCE FOUND AS A RESULT OF SEARCH. IF A NY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY INCOME IS REQUIRED TO BE DISCLOSED FOR THE PURPOSES OF THE INCOME-TAX ACT IN ANY RETURN OF INCOME BUT HAS NOT BEEN DISCLOSED THIS WOULD CONSTITUTE BASIS FOR UNDISCLOSED INCOME. WHERE TH E RETURNS OF INCOME HAVE NOT BEEN FILED BUT THE DUE DATE FOR FILING THE RETURN OF INC OME HAS NOT EXPIRED OR WHERE THE RETURN OF INCOME ITSELF HAS NOT FALLEN DUE THE QUE STION OF WHAT WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSES OF THE ACT WOULD DEPEND ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IT IS NOT EVERY MATERIAL OR INFORMATION AVAILABLE W ITH THE ASSESSING OFFICER THAT CAN FORM THE BASIS OF COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PERIOD BUT ONLY THE MATERIALS OR INFORMATION RELATABLE TO EVIDENCE FOUN D AS A RESULT OF SEARCH. IT IS EVIDENCE THAT HAS TO BE FOUND AS A RESULT OF SEAR CH IN THE FIRST INSTANCE. THEREAFTER IT IS ONLY MATERIALS OR INFORMATION AVAILABLE WITH THE ASSESSING OFFICER. THE EXPRESSION MATERIALS IS OF MUCH WIDER IMPORT THAN THE EXPRESSION EVIDENCE. THE PHRASEOLOGY EMPLOYED IN SECTION 143(3) INDICATES TH AT WHAT AN ASSESSEE IS REQUIRED TO PRODUCE ON HIS OWN OR ON REQUISITION BY THE ASSESSI NG OFFICER IS EVIDENCE ; WHEREAS WHAT THE ASSESSING OFFICER HAS TO GATHER IS MATERI ALS. THE SAME DISTINCTION HAS BEEN MAINTAINED IN THE PROVISIONS OF SECTION 158BB(1). W HAT CONSTITUTES ADMISSIBLE EVIDENCE MATERIAL OR INFORMATION FOR THE PURPOSE O F SECTION 143(3) EQUALLY CONSTITUTES ADMISSIBLE EVIDENCE MATERIAL OR INFORMATION FOR TH E PURPOSES OF COMPUTATION OF UNDISCLOSED INCOME IN BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158BC. 15 THERE SHOULD BE IN THE FIRST INSTANCE EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS THAT MAY CONSTITUTE THE BASIS OF COMPUTATION OF UNDISCLOSED INCOME. THAT EVIDENCE MAY NOT BE CONCLUSIVE TO ARRIVE AT THE FINDING OF UNDISCLOSED INCOME AND THE ASSESS ING OFFICER MAY SUPPLEMENT IT WITH MATERIALS OR INFORMATION THAT HE MAY GATHE R OR THAT MAY BE OTHERWISE AVAILABLE WITH HIM AT THE TIME OF COMPUTATION OF UN DISCLOSED INCOME OF THE BLOCK PERIOD. THE EXPRESSION RELATABLE APPEARING IN SEC TION 158BB(1) PERMITS THE ASSESSING OFFICER TO BRING MATERIAL ON RECORD AS MA Y BE REQUIRED FOR COMPUTATION OF UNDISCLOSED INCOME IN RELATION TO EVIDENCE FOUND AS A RESULT OF SEARCH. ALL MATERIALS OR INFORMATION GATHERED BY THE ASSESSING OFFICER OR RECEIVED BY THE ASSESSING OFFICER IN THE PROCESS OF COMPUTATION OF UNDISCLOSED INCOME ON THE BASIS OF EVIDENCE WOULD CONSTITUTE MATERIALS OR INFORMATION RELATABLE TO S UCH EVIDENCE. FOR EXAMPLE IF DURING THE COURSE OF THE SEARCH AN EVIDENCE IS FOUN D TO THE EFFECT THAT THE ASSESSEE HAD INCOME FROM A SOURCE NOT DISCLOSED BY THE ASSESSEE ALL FURTHER MATERIALS OR INFORMATION GATHERED BY THE ASSESSING OFFICER IN RE GARD TO THAT SOURCE OF INCOME AND FOR QUANTIFICATION OF THE ASSESSEES INCOME FROM TH AT SOURCE WOULD CONSTITUTE MATERIALS OR INFORMATION RELATABLE TO SUCH EVIDENCE . SIMILARLY IF FOR EXAMPLE DURING THE COURSE OF SEARCH AN EVIDENCE IS FOUND AS TO INF LATION OF A PARTICULAR ITEM OF EXPENDITURE THE MATERIALS OR INFORMATION SUBSEQUEN TLY GATHERED BY THE ASSESSING OFFICER IN ORDER TO FIND OUT THE OTHER INSTANCES OF INFLATION OF EXPENDITURE WOULD BE MATERIALS OR INFORMATION RELATABLE TO SUCH EVIDENCE . IN OTHER WORDS IF DURING THE COURSE OF SEARCH ONLY A PART OR PORTION OF THE PICT URE IS SEEN THE MATERIAL OR INFORMATION GATHERED BY THE ASSESSING OFFICER TO RE ASONABLY RECONSTRUCT THE WHOLE PICTURE WOULD BE MATERIALS OR INFORMATION RELATABLE TO SUCH EVIDENCE. IT THEREFORE FOLLOWS THAT WHILE IT IS NOT OPEN TO THE ASSESSING OFFICER TO INVESTIGATE NEW ITEMS OF UNDISCLOSED INCOME HE IS ENTITLED TO COLLECT FURTH ER MATERIALS OR INFORMATION SO AS TO BRING TO THE LOGICAL CONCLUSION EVIDENCE FOUND AS A RESULT OF SEARCH. THE BURDEN OF PROOF HOWEVER ON THE ASSESSING OFFICER MAY BE GRE ATER IN BLOCK ASSESSMENT PROCEEDINGS THAN IN REGULAR ASSESSMENT PROCEEDINGS IN VIEW OF THE FACT THAT WHILE REGULAR ASSESSMENT IS MADE OF INCOME BLOCK ASSESSM ENT IS MADE OF UNDISCLOSED INCOME. WHILE RELYING UPON ANY MATERIALS OR INFORMATION AS A SUPPLEMENT TO THE EVIDENCE FOUND AS A RESULT OF THE SEARCH THE ASSESSING OFFIC ER IS NOT BOUND BY TECHNICAL RULES OF EVIDENCE AND THEREFORE HE MAY TAKE INTO ACCOUNT F ACTS AND CIRCUMSTANCES THAT MAY NOT BE ADMISSIBLE UNDER THE INDIAN EVIDENCE ACT AND HE MAY ARRIVE AT HIS FINDING NOT ON THE BASIS OF ANY DIRECT EVIDENCE OF UNDISCLOSED INCOME BUT ON THE BASIS OF THE CUMULATIVE EFFECT OF ALL THE FACTS AND CIRCUMSTANCE S RELATING TO THE PROCEEDINGS BEFORE HIM. ANY UNDISCLOSED INCOME DISCOVERED BY THE ASSESSING OFFICER ENTIRELY ON THE BASIS OF MATERIAL OR INFORMATION GATHERED BY HIM ON HIS OWN WITHOUT THERE BEING ANY RELATIONSHIP WHATSOEVER WITH AN EVIDENCE FOUND AS A RESULT OF SEARCH CANNOT FORM PART OF UNDISCLOSED INCOME TO BE BROUGHT TO BLOCK ASSESS MENT UNDER THE PROVISIONS OF SECTION 158BC. 16 SIMILAR VIEW HAS BEEN EXPRESSED BY VARIOUS COURTS A S UNDER :- 1. CIT V ASHOK DUA (2009) 177 TAXMAN 494 (DELHI). THE ASSESSMENT IN THE BLOCK PERIOD CAN ONLY BE DONE ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEARCH. 2. BHAGBATI PRASAD KEDIA VS- CIT 248 ITR 562 (CAL). DURING THE BLOCK ASSESSMENT ASSESSEE WAS CALLED UP ON TO EXPLAIN THE ADVANCES TAKEN FROM THE COMPANY. THE ASSESSEE FILED CONFIRMATION O F LOANS AND LETTER FROM THE COMPANY INCLUDING INCOME TAX FILE NO. OF THE CREDIT OR. THE INCOME TAX AUTHORITY HELD THAT THE SAID LOAN WAS A FICTITIOUS ONE AND WAS TO BE CONSIDERED AS UNDISCLOSED INCOME OF THE ASSESSEE DURING THE BLOCK PERIOD UNDER CONSI DERATION. IT WAS HELD THAT THE ASSESSING OFFICER WAS NOT ENTITLED TO QUESTION IN BLOCK ASSESSMENT THE LOAN WHICH WAS A SUBJECT MATTER OF THE REGULAR ASSESSMENT. THE ASSESSING OFFICER WAS WRONG IN HOLDING THAT THE SAID SUM WOULD BE TAXED IN THE BLO CK ASSESSMENT WHEN IT HAS ALREADY FEATURED IN THE REGULAR BOOKS OF ACCOUNTS. THUS IT EM OF TRANSACTION WHICH IS DECLARED IN REGULAR BOOKS OF ACCOUNTS OR RETURN. EVEN THOUG H FOUND FICTITIOUS AND MAY GIVE RISE TO INCOME UNDER INCOME TAX ACT BUT THE SAME C AN NOT BE TAXED UNDER CHAPTER XIVB. FOR TAXING SUCH ITEMS OF REGULAR RETURN FOUND FICTITIOUS LATER DURING THE SEARCH PROVISIONS OF CHAPTER XIVB CANNOT BE INVOKED. 3. CONTROL TOUCH ELECTRONIC (P) LTD. VS- ACIT 77 ITD 522 (PUNE.) DURING THE COURSE OF THE SEARCH CERTAIN PURCHASE V OUCHERS INDICATING BOGUS PURCHASES WERE FOUND. NO PURCHASES THEREON WERE MADE. ENQUIRI ES HOWEVER REVEALED THAT NONE OF THE PURCHASE VOUCHERS WERE ENTERED IN THE REGULA R BOOKS OF ACCOUNTS. THUS TRIBUNAL FOUND THAT THERE WAS NO INFLATION OF EXPENDITURE AN D HENCE NO ADDITION CAN BE MADE IN THE BLOCK ASSESSMENT. WHETHER SUCH BOGUS PURCHAS E VOUCHERS CAN BE CONSIDERED IN THE REGULAR ASSESSMENT WAS NOT DECIDED BY THE TRIBU NAL. 4. AGRAWAL MOTORS VS.-ACIT 68 ITD 407 (JABALPUR). CERTAIN EXPENDITURE WAS DEBITED IN THE REGULAR BOOK S OF ACCOUNTS ON ACCOUNT OF FOREIGN TRAVEL OF MANAGING DIRECTOR. THE SEARCH REV EALED THAT SUCH TRAVEL WAS POSSIBLY NOT FOR THE BUSINESS PURPOSES. THE ASSESSI NG OFFICER CONSIDERED THE EXPENDITURE AS UNDISCLOSED INCOME U/S. 158BC. THE T RIBUNAL HELD THAT ANY ITEM OF ADDITION OR DISALLOWANCE CONSIDERED IN THE REGULAR ASSESSMENT COULD NOT BE SAID TO BE DISCOVERED BY SEARCH LIABLE TO BE ADDED UNDER CHAPT ER XIVB. SUCH EXPENDITURE WERE NOT UNDISCLOSED. WHETHER SUCH EXPENDITURE WAS FOR B USINESS PURPOSE OR FOR NON- BUSINESS PURPOSE WAS A MATTER TO BE CONSIDERED IN REGULAR ASSESSMENT ONLY. 5. MICROLAND VS- ACIT 67 ITD 446 ( BANGALORE.) WHERE ACQUISITION OF ASSETS ARE RECORDED IN THE RE GULAR BOOKS OF ACCOUNTS CLAIM OF DEPRECIATION WAS ALSO MADE AND CONSIDERED INTEREST PAYMENT ON INVESTMENT IN 17 PURCHASE OF THESE ASSETS IS ALSO CONSIDERED IN THE REGULAR ASSESSMENT IF SEARCH REVEALED THAT DEPRECIATION IS NOT CORRECTLY CLAIMED THE ADDITION THEREON CANNOT BE MADE UNDER CHAPTER XIVB. 6. SHRI KIRTI CHANDULAL OSWAL V. DCIT[2009] 3 17 ITR (A.T.) 0285- [ITAT-PUNE] IT IS THE MANDATE OF THE AMENDED PROVISIONS OF SECT ION 158BB(1) OF THE INCOME-TAX ACT 1961 THAT THE MATERIALS OR INFORMATION AVAILA BLE WITH THE ASSESSING OFFICER MUST 'RELATE' TO 'SUCH EVIDENCE'. THE WORDS 'SUCH EVIDEN CE' REFER ONLY TO THE EVIDENCE FOUND IN THE COURSE OF SEARCH AT THE ASSESSEE'S PRE MISES. THEREFORE SUCH OTHER MATERIALS MUST BE RELATABLE TO EVIDENCE FOUND IN TH E COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE ITSELF. THERE MUST BE A DIRECT NEXU S BETWEEN THE MATERIALS FOUND IN THE COURSE OF SEARCH AT THE ASSESSEE'S PREMISES AS WELL AS THE OTHER MATERIALS GATHERED BY THE ASSESSING OFFICER FROM AN EXTRANEOUS SOURCE. IF THERE IS NO SUCH NEXUS THEN THE ADDITION WOULD NOT BE JUSTIFIED. 7. CIT V. KISHAN KUMAR [2009] 315 ITR 0204 [RAJ] SECTION 158BC OF THE INCOME-TAX ACT 1961 PROVIDES THAT THE ASSESSING OFFICER SHALL PROCEED TO DETERMINE THE UNDISCLOSED INCOME OF THE BLOCK PERIOD IN THE MANNER LAID DOWN IN SECTION 158BB AND THE PROVISIONS OF SECTION 142 SUB-SECTIONS (2) AND (3) OF SECTION 143 SECTIONS 144 AND 145 SHALL SO FAR AS POSSIBLE BE APPLIED AND SECTION 158BB SHOWS THAT THEREUNDER UNDISCLOSED INCOME OF T HE BLOCK PERIOD IS TO BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT ON THE BASIS OF THE EVIDENCE FOUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABL E WITH THE ASSESSING OFFICER AND RELATABLE TO SUCH EVIDENCE AS REDUCED BY THE AGGRE GATE OF THE TOTAL INCOME OR AS THE CASE MAY BE AS INCREASED BY THE AGGREGATE OF THE L OSSES FOR SUCH PREVIOUS YEARS DETERMINED IN ACCORDANCE WITH THE FURTHER SUB-CLAUS ES. THUS THE COMPUTATION OF INCOME IS TO BE MADE ON THE BASIS OF THE EVIDENCE F OUND AS A RESULT OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMATION AS IS AVAILABLE WITH THE ASSESSING OFFI CER AND RELATABLE TO SUCH EVIDENCE. THIS PROVISION DOES NOT INCLUDE ANY FICTIONAL OR PR ESUMPTIVE INCOME TO BE LIABLE TO OR CAPABLE OF BEING INCLUDED IN THE AGGREGATE OF THE UNDISCLOSED INCOME. 8. CIT V. BIMAL AUTO AGENCY [2009] 314 ITR 01 91- [GAU] UNDISCLOSED INCOME HAS BEEN DEFINED BY SECTION 158B (B) OF THE INCOME-TAX ACT 1961 TO MEAN INCOME WHICH HAD NOT BEEN OR WOULD NO T HAVE BEEN DISCLOSED FOR THE PURPOSE OF THE ACT. PRIOR TO THE AMENDMENT BY THE F INANCE ACT 2002 SECTION 158BB AUTHORISED THE ASSESSING OFFICER TO MAKE AN ASSESSM ENT OF UNDISCLOSED INCOME ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF 'SEARCH . .. AND SUCH OTHER MATERIALS OR INFORMATION AS MAY BE AVAILABLE WITH THE ASSES-SING OFFICER'. THE USE OF THE WORD 'SUCH' POINTS OUT THAT SUCH MATERIALS OR INFORMATIO N MUST HAVE SOME CONNECTION WITH THE SEARCH AND NOT CONSTITUTE INDEPENDENT MATERIALS I.E. INDEPENDENT OF THE SEARCH. 18 9. CIT V. ANSAL BUILDWELL LTD. [2008] 304 ITR 0378- [DEL] HELD - DISMISSING THE APPEAL THAT THE TRIBUNAL HA D FOUND THAT THE AMOUNT OF COMMISSION PAID BY THE ASSESSEE TO T WAS SHOWN IN T HE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE OF ITS BUSINE SS PRIOR TO THE SEARCH. THIS AMOUNT HAD ALSO BEEN SHOWN IN THE REGULAR RETURNS. UNDER S ECTION 158BB UNDISCLOSED INCOME SHOULD BE THAT WHICH IS DISCOVERED AS A RESULT INT ER ALIA OF A DOCUMENT OR TRANSACTION WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSED FOR THE PURPOSE OF THE ACT. THE DOCUMENT RECOVERED DURING THE SEARCH REPRESENTED A DISCLOSED TRANSACTION OF SALE OF PROPERTY THAT HAD TAKEN PLACE FOR WHICH T HAD BEEN PAID A COMMISSION. THE FALSITY OF THE EXPENSE OR DEDUCTION OR ALLOWANCE MUST NECESSAR ILY BE RELATABLE TO THE DOCUMENT OR TRANSACTION. AS FAR AS THE ASSESSEES CASE WAS C ONCERNED THE VERY FIRST REQUIREMENT OF NON-DISCLOSURE OF THE MATERIAL WAS NOT SATISFIED BECAUSE IN FACT THE ASSESSEE HAD DISCLOSED THE TRANSACTION IN ITS BOOKS OF ACCOUNT A ND THIS WAS NOT DISPUTED BY THE REVENUE. THE TRIBUNAL HAD ALSO HELD THAT THE ASSESS ING OFFICER HAD COME TO THE CONCLUSION ON INADEQUATE REASONS. THIS WAS A FINDIN G OF FACT ARRIVED AT BY THE TRIBUNAL BASED ON THE MATERIAL ON RECORD. THE FACTS CONSIDERED BY THE ASSESSING OFFICER MIGHT RAISE A DOUBT WITH REGARD TO THE GENU INENESS OF THE TRANSACTION BUT THAT BY ITSELF WAS NOT ENOUGH. THE FACTS MUST BE RELATAB LE TO THE EVIDENCE AVAILABLE AND NOT INFERENTIAL. NO PERVERSITY HAD BEEN SHOWN IN THE CO NCLUSIONS ARRIVED AT BY THE TRIBUNAL. 10. CIT V. R. M. PATEL (HUF) [2008] 298 ITR 027 4- [MAD] WHAT IS CONTEMPLATED UNDER SECTION 158BB OF THE INC OME-TAX ACT 1961 IS THAT THE UNDISCLOSED INCOME SHALL BE COMPUTED ONLY IN ACCORD ANCE WITH THE PROVISIONS OF THE ACT ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF S EARCH AND SUCH OTHER MATERIAL OR INFORMATION RELATING TO SUCH MATERIAL. THE ASSESSEE WAS A HINDU UNDIVIDED FAMILY. A SEARCH UNDER SECTION 132 WAS CARRIED OUT AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE KARTA OF THE HINDU UNDIVIDED FAMILY AND HIS BROTHER BETWEEN NOVEMBER 5 1998 AND NOVEM BER 30 1998. DURING THE SEARCH IT WAS FOUND THAT THE ASSESSEE-HINDU UNDIVI DED FAMILY HAD A TIMBER TRADING BUSINESS DURING THE ASSESSMENT YEARS 1996-97 1997- 98 AND 1998-99. THE MATERIALS SEIZED INDICATED THAT THE ASSESSEE HAD ALSO UNDISCL OSED INCOME FROM THE BUSINESS AND THEREFORE NOTICE UNDER SECTION 158BD OF THE ACT WA S ISSUED TO THE ASSESSEE. THE ASSESSEE FILED A RETURN DECLARING UNDISCLOSED INCOM E AS NIL. AN EXPLANATION WAS OFFERED THAT THE MATERIAL SEIZED DURING THE SEARCH WAS IN NO WAY CONNECTED TO THE ASSESSEE. BUT THE ASSESSING OFFICER PASSED AN ASSES SMENT ORDER UNDER SECTION 158BD READ WITH SECTIONS 158BC AND 143(3). THE COMMISSION ER (APPEALS) HELD THAT THERE WAS NO INDICATION IN THE SEIZED MATERIALS ABOUT THE SUPPRESSION OF SALES BY THE BUSINESS CONCERN OF THE ASSESSEE AND THAT THE ASSES SING OFFICER WAS NOT CORRECT IN INVOKING SECTION 158BD. THE TRIBUNAL HELD THAT THE ADDITION OF GROSS PROFIT COULD BE MADE ONLY IN RESPECT OF ONE OF THE ASSESSMENT YEARS IN THE BLOCK PERIOD. ON APPEAL TO THE HIGH COURT : 19 HELD _ DISMISSING THE APPEAL THAT THE REVENUE COUL D NOT PROCEED ON THE BASIS OF THE MATERIAL WHICH WAS NOT RELATED TO THE ASSESSEE INVO KING SECTION 158BD READ WITH SECTIONS 158BC AND 143(3) OF THE ACT FOR ASSESSING THE UNDISCLOSED INCOME DURING THE BLOCK PERIOD OF 1988-89 TO 1997-98 AND APRIL 1 199 8 TO NOVEMBER 5 1998. IF THE REVENUE COULD SUBSTANTIATE THAT THE RETURN FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 1996-97 1997-98 AND 1998-99 DID NOT DISCLOSE THE CORRECT INCOME THEY WERE AT LIBERTY TO TAKE APPROPRIATE ACTION ONLY WITH RESPEC T TO THE RELEVANT ASSESSMENT YEARS AS RIGHTLY HELD BY THE TRIBUNAL. 23. SINCE IT IS UNDISPUTED FACT THAT NO EVIDENCE WA S FOUND IN THE SEARCH RELATING TO ANY OF THE ADDITIONS PROPOSED BY THE AO IN THE ASSESSMENT ORDER THESE ADDITIONS CANNOT BE UPHELD IN BLOCK AS SESSMENT. SINCE THERE IS NO REFERENCE OR DESCRIPTION OR RELIANCE FOR MAKI NG ADDITION ON THE BOOKS OF ACCOUNT FOUND IN THE SEARCH IT CANNOT BE INFERRED THAT THOSE BOOKS/DOCUMENTS OR EVIDENCE FOUND IN THE SEARCH WER E RELEVANT FOR MAKING BLOCK ASSESSMENT AND THEREFORE POST SEARCH ENQUIRY CARRIED OUT BY THE AO COULD NOT RELATE BACK TO THOSE EVIDENCE A ND THEREFORE ADDITION SO PROPOSED BY THE AO COULD NOT BE ACCORDINGLY JUST IFIED. IN FACT ANY ADDITION IN THE BLOCK ASSESSMENT PROPOSED BY THE AO MUST RELATE TO EVIDENCE FOUND AS A RESULT OF SEARCH AND THEN IT CA N BE FURTHER SUPPORTED OR STRENGTHENED BY MATERIAL COLLECTED DURING POST S EARCH ENQUIRY. WHATEVER MATERIAL FOUND IN THE SEARCH IS NOT CONSID ERED RELEVANT THEN POST SEARCH MATERIAL COLLECTED BY THE AO CANNOT BE SAID TO BE RELATED TO THAT EVIDENCE FOUND AS A RESULT OF SEARCH. THE POST SEARCH ENQUIRY AND MATERIAL COLLECTED AS A RESULT THEREOF HAS TO BE CO -RELATED WITH THE MATERIAL FOUND AS A RESULT OF SEARCH ON THE BASIS OF WHICH A DDITION IS PROPOSED AND ONLY THEN SUCH ADDITION CAN BE SUSTAINED IN BLOCK A SSESSMENT. MERELY BECAUSE SEARCH IS CARRIED OUT AT THE PREMISES OF AN ASSESSEE AND CERTAIN IRRELEVANT MATERIAL OR DECLARED MATERIAL OR MATERIA L CONTAINING TRANSACTION RECORDED IN THE BOOKS OF ACCOUNTS ARE SEIZED THAT I T DOES NOT GIVE JURISDICTION TO AO TO FRAME BLOCK ASSESSMENT AND TH EREAFTER MAKE ADDITION ON THE BASIS OF POST SEARCH ENQUIRY. IN TH IS REGARD EACH ADDITION 20 PROPOSED BY THE AO HAS TO BE SEPARATELY AND INDEPEN DENTLY EXAMINED AND IT HAS TO BE SEEN AS TO WHAT MATERIAL/EVIDENCE AO H AS FOUND DURING THE COURSE OF SEARCH RELEVANT TO THE ADDITION PROPOSED. THE ADEQUACY OR SUFFICIENCY OF MATERIAL FOR ASSUMING JURISDICTION I N BLOCK ASSESSMENT IS NOT RELEVANT. A SMALL NUCLEUS OF CONCEALED INCOME F OUND DURING THE COURSE OF SEARCH WOULD BE SUFFICIENT TO CONFER JURI SDICTION FOR MAKING ADDITION IN BLOCK ASSESSMENT AS SUCH NUCLEUS CAN B E SNOW BALLED BY THE AO BY COLLECTING RELEVANT POST SEARCH MATERIAL BY C ARRYING OUT NECESSARY ENQUIRIES ACCORDING TO LAW. IN THE PRESENT CASE WE NOTICE THAT NONE OF THE ADDITIONS REFERS TO ANY SEIZED MATERIAL FOUND DURIN G THE COURSE OF SEARCH. AO HAS PICKED UP TRANSACTIONS FROM REGULAR BOOKS OF ACCOUNT AND CONSIDERED THEM FOR ADDITIONS IN THE BLOCK ASSESSME NT. THIS IS NOT PERMISSIBLE. THE AO ACQUIRED JURISDICTION TO FRAME BLOCK ASSESSMENT OR FOR MAKING ADDITION IN THE BLOCK ASSESSMENT WITHOUT THERE BEING ANY REFERENCE TO SEIZED MATERIAL FOUND IN THE SEARCH. I F WE EXAMINE ALL THE THREE ADDITIONS MADE BY THE AO WE NOTICE THAT ONE ADDITION IS BY DENYING EXEMPTION UNDER SECTION 10(23C) AT RS.47 70 272 OUT OF WHICH ONLY RS.10 81 030 IS IN DISPUTE BEFORE US THE OTHE R PART BEING RS.38 36 242 IS DELETED BY LD. CIT(A) AND ACCEPTED BY THE REVENUE; OTHER IS OF RS.67 90 100/- BEING ADDITION ON ACCOUNT OF B OGUS MILK PURCHASES AND LAST IS OF RS.12 96 165/- BEING ADDITION UNDER SECTION 40A(3). ALL OF THEM ARE AS A RESULT OF EITHER EXAMINATION OF REGUL AR BOOKS OF ACCOUNTS OR ON THE BASIS OF MATERIAL COLLECTED IN THE COURSE OF POST SEARCH ENQUIRIES. NONE OF THEM REFERS TO ANY MATERIAL FOUND AS A RESU LT OF SEARCH THEREFORE NONE OF THE THREE ADDITIONS COULD BE SUSTAINED IN B LOCK ASSESSMENT. 24. NOTWITHSTANDING WE ARE OF THE CONSIDERED VIEW T HAT AO HAS TO FIRST DECIDE WHETHER ANY PART OF INCOME WOULD FALL IN THE REGULAR ASSESSMENT OR IN BLOCK ASSESSMENT AND THEREAFTER SUCH INCOME WOUL D BE CONSIDERED FOR 21 GRANTING EXEMPTION UNDER SECTION 10. IT IS NOW SETT LED LAW THAT CHAPTER XIVB IS A COMPLETE CODE IN ITSELF AND IF AN INCOME FALLS FOR CONSIDERATION IN THE DOMAIN OF BLOCK ASSESSMENT THEN PROVISIONS C ONTAINED IN CHAPTER XIVB WOULD BE INVOKED AND THEREAFTER BY VIRTUE OF S ECTION 115BH ALL OTHER PROVISIONS OF THE ACT WOULD BE APPLIED TO THE ASSESSMENT MADE UNDER CHAPTER XIVB. THUS BY VIRTUE OF SECTION 115BH SECTION 10 CAN BE INVOKED BY THE AO. IT IS NOT OTHER WAY ROUND THAT F IRST SECTION 10 IS INVOKED AND THEREAFTER IT IS DECIDED AS TO WHETHER INCOME NO EXEMPTED WOULD BE TAXED UNDER BLOCK ASSESSMENT. WHAT THE AO HAS DONE IN THE PRESENT CASE IS THAT HE HAS CONSIDERED THAT BENEFIT OF THE PROVISIONS OF SECTION 10(23C)(IIIAD) CANNOT BE AVAILED OF BY THE ASSESSEE AS IT HAS NOT OBTAINED THE APPROVAL UNDER SECTION 10(23C)(VI) AND THEREFORE SUCH INCOME WOULD BE TAXABLE UNDER BLOCK ASSESSMENT. THI S IS INCORRECT PROPOSITION OF LAW. IF AN INCOME DOES NOT FALL FOR CONSIDERATION IN THE BLOCK ASSESSMENT AS IN THE PRESENT CASE THEN WHETHE R IT GETS EXEMPTION UNDER SECTION 10(22) OR DOES NOT GET EXEMPTION UNDE R SECTION 10(23C)(IIIAD) IS NOT MATERIAL. EVEN IF INCOME OF T HE ASSESSEE IS TAXABLE ON ACCOUNT OF NON-APPLICABILITY OF PROVISIONS OF SE CTION 10(23C)(IIIAD) ON ACCOUNT OF ASSESSEE NOT HAVING AN APPROVAL UNDER SE CTION 10(23C)(VI) SUCH INCOME CANNOT BE BROUGHT TO TAX IN BLOCK ASSES SMENT AS NO MATERIAL IS FOUND DURING THE COURSE OF SEARCH FOR CONFERRING JURISDICTION TO THE AO TO TAX THIS PART OF INCOME IN BLOCK ASSESSMENT. 25. EVEN OTHERWISE WE NOTICE THAT AO HAS NOT MADE O UT A GOOD CASE IN LAW TO BRING THE RECEIPTS OF VARIOUS SCHOOLS TO TAX BY INVOKING SECTION 10(23C)(IIIAD) ON ACCOUNT OF NON-APPROVAL UNDER SEC TION 10(23C)(VI). IT IS BECAUSE SECTION 10(23C) STARTS WITH ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF. FOR THE SAKE OF CONVENIENCE W E REPRODUCE SECTION 10(23C) AS UNDER :- 22 10. INCOMES NOT INCLUDED IN TOTAL INCOME.--IN COMPU TING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON ANY INCOME FALLING WIT HIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED (23C) ANY INCOME RECEIVED BY ANY PERSON ON BEHALF O F-- (IIIAD) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITU TION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT IF THE AGGR EGATE ANNUAL RECEIPTS OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DO NOT EXCEED THE AMOUNT OF ANNUAL RECEIPTS AS MAY BE PRESCRIBED ; OR (VI) ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTIO N EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT OTHER THAN THOSE MENTIONED IN SUB-CLAUSE (IIIAB) OR SUB-CLAUSE (IIIAD) AND WHICH MAY BE APPR OVED BY THE PRESCRIBED AUTHORITY ; OR PROVIDED THAT THE FUND OR TRUST OR INSTITUTION OR A NY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION ++OR ANY HOSPITAL OR OTHER MEDICAL INST ITUTION REFERRED TO IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) ++OR SUB-CLAUSE (VI) OR SUB-CLAUS E (VIA) SHALL MAKE AN APPLICATION IN THE PRESCRIBED FORM AND MANNER TO THE PRESCRIBED AU THORITY FOR THE PURPOSE OF GRANT OF THE EXEMPTION OR CONTINUANCE THEREOF UNDER SUB-CL AUSE (IV) OR SUB-CLAUSE (V): FROM A READING OF THIS PROVISION IT IS NOTICED THAT INCOME FALLING IN THESE CLAUSES OF SECTION 10 SHALL NOT BE INCLUDED IN COMP UTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON. HERE ANY PERSON I S THE TRUST WHOSE ASSESSMENT HAS BEEN MADE BY THE AO IN THE STATUS OF AOP. THE TRUST IS RECEIVING INCOME FROM THE SCHOOLS OR EDUCATIONAL IN STITUTIONS. THE TRUST MAY BE RECEIVING INCOME FROM OTHER SOURCES AS WELL- SUCH AS INTEREST INCOME OR PROPERTY INCOME OR EVEN INCOME FROM CARRY ING OUT BUSINESS NOT SPECIFICALLY EXEMPTED UNDER ANY CLAUSE OF SECTI ON 10. THEREFORE IT IS NOT PROPER TO HOLD THAT ALL THE RECEIPTS OF THE TRU ST WOULD BE CLUBBED TOGETHER TO FIND OUT THE LIMIT OF RS. 1 CRORE AS PR ESCRIBED IN THE RELEVANT RULES. IF ALL THE RECEIPTS FROM DIFFERENT HEADS OR FROM DIFFERENT SOURCES CANNOT BE CLUBBED TOGETHER THEN THERE IS NO REASON TO HOLD THAT ALL THE RECEIPTS FROM DIFFERENT SCHOOLS OR INSTITUTIONS SHO ULD BE CLUBBED TOGETHER FOR DETERMINING THE RECEIPTS OF THE TRUST. IT IS N OT THE RECEIPT OF THE ACTIVITIES WHICH IS TO BE CONSIDERED FOR DETERMININ G THE LIMIT BUT IT IS THE 23 RECEIPT OF THE INSTITUTION ALONE HAS TO BE CONSIDER ED FOR DETERMINING THE LIMIT. IF ASSESSEE IS CARRYING OUT ACTIVITIES OF IM PARTING EDUCATION BY RUNNING DIFFERENT INSTITUTIONS THEN RECEIPTS OF THE ACTIVITIES AS SUCH SHOULD NOT BE CLUBBED TO DETERMINE THE LIMIT BUT IT IS A R ECEIPT OF THE INDIVIDUAL INSTITUTION OR SCHOOL RECEIVED BY THE TRUST WHICH ALONE SHOULD BE CONSIDERED FOR DETERMINING THE LIMIT. IF THE RECEIP T OF INDIVIDUAL SCHOOL OR INSTITUTION IS LESS THAN THE PRESCRIBED LIMIT THEN THE CASE WOULD BE COVERED UNDER SECTION 10(23C)(IIIAD). EVEN IF THE GROSS REC EIPT FROM ONE ACTIVITY CARRIED OUT IN DIFFERENT INSTITUTION EXCEEDS THE PR ESCRIBED LIMIT BUT RECEIPT OF INDIVIDUAL INSTITUTION DOES NOT EXCEED THE PRESC RIBED LIMIT THEN STILL THE CASE WOULD BE COVERED UNDER SECTION 10(23C)(IIIAD) AND ASSESSEE WOULD BE ENTITLED TO EXEMPTION. HOWEVER WE HAVE ALREADY HELD ABOVE THAT AS NO MATERIAL WAS FOUND IN THE SEARCH NO INCOME OF THE TRUST COULD BE TAXED IN THE BLOCK ASSESSMENT. ON THE ABOVE PRINCIPLE WE HOL D THAT THE INCOME COMPUTED BY HOLDING THAT SUPPLY OF MILK WAS BOGUS O R THE PURCHASES THEREOF ARE BOGUS AND ADDITION UNDER SECTION 40A(3) ALSO CANNOT BE TAXED IN BLOCK ASSESSMENT AS NO MATERIAL IN RESPECT OF TH ESE ADDITIONS WERE FOUND IN THE SEARCH. 26. HOWEVER THE ISSUE REGARDING CHARGING OF INTERE ST IS COVERED AGAINST THE ASSESSEE IN VIEW OF THE DECISION OF HON BLE BOMBAY HIGH COURT IN SK. MUNEER SK. MANNU CHOUDHARY VS. DCIT (2008) 300 ITR 216 (BOMB) WHEREIN IT IS HELD THAT UNDER SECTION 158BFA(1) T HERE IS NO PROVISION EMPOWERING THE ASSESSING OFFICER EI THER TO REDUCE THE INTEREST OR TO WAIVE IT OR TO COME TO A CONCLUSION THAT IT NEED NOT BE LEVIED. THE PROVISION IS COUCHED IN THE WORDS THE ASSESSEE SHALL BE LIABLE TO PAY SIMPLE INTEREST. THUS THERE IS NO O PTION OR ESCAPE FROM INTEREST LEVIABLE UNDER SECTION 158BFA(1) TO AN ASS ESSEE WHO IS BEING ASSESSED ONLY AFTER RAID AND SEARCH UNDER SECTION 1 32 24 27. THE ISSUE REGARDING LEVY OF SURCHARGE IS ALSO D ECIDED AGAINST THE ASSESSEE IN VIEW OF DECISION OF HONBLE S.C. IN CIT VS. SURAJCHAND GUPTA 297 ITR-322 (SC). 28. AS A RESULT WE DECIDE THE APPEALS OF THE TWO PA RTIES AS UNDER. ASSESSEES APPEAL . GROUND NO.1 IS REJECTED AS NOT PRESSED. GROUND NO.2 3 AND 4 ARE ALLOWED. GROUND NO.5 IS DECIDED AGAINST THE ASSESSEE. GROUND NO.6 IS GENERAL AND DOES NOT REQUIRE ANY SPE CIFIC ADJUDICATION. REVENUES APPEAL . GROUND NO.1 IS REJECTED. GROUND NO.2 IS ALLOWED. GROUND NO.3 & 4 ARE GENERAL IN NATURE AND AS SUCH R EJECTED. 29. AS A RESULT BOTH THE APPEALS ARE PARTLY ALLOWED . SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 09/04/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 09-04- 2010 25 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD