The main legal point established in the judgment is that the presumption under Section 132(4-A) of the Income Tax Act, 1961 is available only for the proceedings of search and seizure and for the purpose of retaining the assets under Section 132(5) and their application under Section 132-B. It is not available for framing the regular assessment.

Headnote:
Presumption - Income Tax - Section 132(4-A) of the Income Tax Act, 1961 - The judgment discusses the interpretation and application of Section 132(4-A) of the Income Tax Act, 1961, which provides for the presumption in relation to search and seizure and the retention of assets. The court held that the presumption under Section 132(4-A) is available only for the proceedings of search and seizure and for the purpose of retaining the assets under Section 132(5) and their application under Section 132-B. It is not available for framing the regular assessment. The judgment clarifies that while the material seized can be used as evidence in any other proceedings under the Act, the presumption under Section 132(4-A) is not available for authorities while framing the regular assessment.
Fact of the Case:

The case involved a search of residential and business premises, leading to the discovery of unaccounted money, gold, and important documents. The assessing authority made certain additions and retained the seized assets. The Commissioner (Appeals) confirmed the additions based on presumptions under Section 132(4-A) of the Income Tax Act, 1961. The Tribunal, however, held that the presumptions under Section 132(4-A) are confined to the framing of the order under Section 132(5) only and are not available for framing the regular assessment.
Finding of the Court:

The court found that the presumption under Section 132(4-A) is available only for the proceedings of search and seizure and for the purpose of retaining the assets under Section 132(5) and their application under Section 132-B. It is not available for framing the regular assessment. The court set aside the orders passed by the assessing authorities and the CIT (Appeals) as they had proceeded to frame the assessment raising the presumption under sub-section (4-A) of Section 132, and remitted the case back to the assessing authority for framing the assessment afresh in accordance with law.
Issues: The main issue was the interpretation and application of Section 132(4-A) of the Income Tax Act, 1961, and whether the presumption under Section 132(4-A) is available for framing the regular assessment.
Ratio Decidendi: The court held that the presumption under Section 132(4-A) is available only for the proceedings of search and seizure and for the purpose of retaining the assets under Section 132(5) and their application under Section 132-B. It is not available for framing the regular assessment. The court clarified that while the material seized can be used as evidence in any other proceedings under the Act, the presumption under Section 132(4-A) is not available for authorities while framing the regular assessment.
Final Decision: The court allowed the appeals, set aside the orders passed by the High Court, and remitted the case back to the assessing authority for framing the assessment afresh in accordance with law. The court did not record any opinion as to the merits of the case and directed the assessing authority to frame the assessment without being influenced by any of the observations made in the previous orders or the current order.

Judgment

ASHOK BHAN, J. - These appeals are directed against the judgment and order dated 9 - 7 - 2001 passed by the High Court of Karnataka at Bangalore in ITRCs Nos. 38, 39 and 40 of 1996 vide which the High Court has allowed

Reference Cases Nos. 39 and 40 of 1996 thereby answering the questions in favour of the Revenue and against the assessee. ITRC No. 38 of 1996 filed by the assessee has been dismissed by the High Court. Since these appeals arise from the common order passed by the High Court, we also propose to dispose of them by a common order.

Facts

2. The facts relevant for disposing of these references in short are:

P.R. Metrani and YR Metrani were two brothers and are the members of the joint Hindu family. PR. Metrani (HUF), the assessee was a partner in a firm called M/s RN. Metrani and Sons. Y.R. Metrani was also a partner in this firm. PR. Metrani as well as Y.R Metrani have died during the pendency of these cases.

3. A search of the residential premises Ranganatha Nilaya was conducted by the Income Tax, Central Excise and Customs Departments on 30 - 6 - 1982 and 1 - 7 - 1982 and as well as the business premises where the business of the firm was being conducted. The residential premises of J.J. Bakale, nephew of P.R. Metrani were also searched. The search brought to surface unaccounted money, gold biscuits, gold jewellery, silver, etc. besides some important documents. For the purpose of assessment for the assessment years 1981 - 82 and 1982 - 83 three documents were found to be relevant by the assessing officer and they were marked as PRM 1, PRM 7 and PRM 13 at the time of search and seizure, which were seized from the residential premises namely, "Ranganatha Nilaya". Statement of J.J. Bakale was recorded at the time of search. P.R Metrani was away to Rajasthan on a business tour. He was examined after his return to Hubli on 13 - 7 - 1982. He denied the possession of PRM 1, PRM 13 and PRM 7. He also denied that these papers contain any writing made by him. The assessing authority made a summary adjudication order under Section 132(5) of the Income Tax Act, 1961 (for short "the Act"). He made certain additions and retained the assets seized.

4. Notice under Section 139(2) dated 17 - 9 - 1982 for the assessment year 1982 - 83 was served on the assessee on 21 - 9 - 1982. The appellant declared a total income of Rs 46,200 and a net agricultural income of Rs 6000. Notices under Sections 143(2) and 142(1) were issued on several dates. The appellant appeared before the authorities on several dates and assessment came to be completed. The following additions were made in respect of the assessment year 1982 - 83:

(i) Income from undisclosed sources as Rs28,67,920

discussed in para 3.2 as per PRM 1 and

PRM7

(ii) Income from undisclosed sources as Rs6,66,690

discussed in para 3.3 i.e. PRM 13

(iii) Investment in Durgadabail building at Rs2,62,100

Rs Hubli as per para 5 being 50% of

Rs 5,24,200

(iv) Unexplained expenditure under Section Rs8,33,525

Rs 69 - C

5. The assessment for the years 1981 - 82 was completed after making an addition of Rs 19,93,117.

6. The assessing authority made an assessment for the construction of commercial complex in Durgadabailu, the investment for which was declared at Rs 5,55,000 for the entire building. Half of the building belonged to P.R. Metrani and other half to Y.R. Metrani. The Department had sent the Valuation Officer for enquiry regarding the cost of building and it was fixed by the Department Valuation Officer at Rs 5,83,000. The assessing authority however did not accept the valuation made by the Valuation Officer and held that the total investment in the building was Rs 6,45,809. A source to the extent of Rs 1,21,627 was accepted. The balance was rounded off to

Rs 5,24,200. Half of this was added to the assessment of P.R. Metrani (HUP) and other half was added in the assessment ofY.R. Metrani.

7. The appellant being aggrieved filed appeals before the Commissioner (Appeals). The Commissi

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2006 Supreme(SC) 1124

Cases Referred (2)