The undisclosed income of the block period can only be calculated based on evidence found as a result of search or requisition of books of accounts or other documents, as prescribed in Section 158BB of the Income Tax Act, and the provisions of Chapter XIV-B should be interpreted strictly.

JUDGMENT

(Prayer: Tax Case Appeal filed under Section 260 (A) of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal Madras 'D' Bench in IT(SS)A.No.100/Mds/2004 dated 28.12.2006.)

R. Mahadevan, J.

1. This Tax Case Appeal has been preferred by the appellant/revenue against the order dated 28.12.2006, passed by the Income Tax Appellate Tribunal Madras 'D' Bench (for brevity, 'ITAT') in IT(SS)A.No.100/Mds/2004, for the block assessment period from 01.04.1991 to 06.02.2001.

2. The respondent/assessee is a company engaged in the business of refining and trading of edible oils. On 06.02.2001, a search under Section 132 of the Income Tax Act, 1961 (in short, “the Act”) was conducted at the business premises as well as residential premises of the respondent/assessee, as a result of which, action under section 133A was initiated. Consequently, notice dated 23.03.2001 under Section 158BC of the Act was issued, to which, the respondent/assessee filed its return of income in Form 2B, on 10.08.2001, declaring the undisclosed income of Rs.47.21 Lakhs. On the basis of the materials collected during the course of search, the Assessing Officer completed the block assessment for the period in question, relating to the assessment years 1991-92 to 2001-02 under section 143(3) read with section 158BC of the Act and worked out the undisclosed income at Rs.2,21,48,784/- vide assessment order dated 18.02.2003.

3. Aggrieved by the order dated 18.02.2003 passed by the Assessing Officer, the respondent/assessee preferred an Appeal in I.T.A.No.382-C/02-03 before the Appellate Authority/Commissioner of Income Tax (Appeals) – II, Coimbatore (in short, “CIT(A)”), who after hearing both sides, reduced the block assessment arrived at by the Assessing Office from Rs.2,21,48,784/- to Rs.48,54,803/- and accordingly, partly allowed the appeal.

4. Challenging the order of the CIT(A), the respondent/assessee went on further appeal before the Income Tax Appellate Tribunal. By order dated 26.12.2006, the Tribunal allowed the appeal by concluding that the materials gathered in the course of inspection are to be treated as disclosed for the purpose of the Income Tax Act and it cannot be used for computation of undisclosed income of the block period under section 158BB. Aggrieved against the same, the appellant/ Revenue is before this court with this Tax Case Appeal.

5. On 22.02.2011, this Tax Case Appeal was admitted on the following substantial question of law:

“Whether on the facts and circumstances of the case, the Tribunal was right in holding that the material found in the course of survey which was converted to a search on the same day could not be used in the block assessment?”

6. According to the learned senior standing counsel appearing for the appellant/revenue, any material or evidence found / collected in a survey which has been simultaneously made at the premises of a connected person, can be utilized, while making block assessment in respect of an assessee under section 158 BB read with section 158 BH, in the light of the decision of the Hon'ble Supreme Court in CIT v. S.Ajit Kumar [(2018) 93 taxmann.com 294 (SC)]. However, the Tribunal erred in holding that the material gathered in the course of survey are to be treated as disclosed for the purpose of Income Tax Act and it cannot be used for computation of undisclosed income of block period under Section 158BB and allowed the appeal in favour of the respondent / assessee. Hence, the learned counsel prayed to set aside the impugned order of the Tribunal and remand the matter to the Tribunal for reconsideration.

7. Heard the learned counsel appearing for the respondent/ assessee, who fairly conceded the submission made on the side of the appellant / Revenue, in view of the ratio laid down in the decision of the Hon'ble Supreme court in S.Ajit Kumar case (supra).

8. Admittedly, in the present case, based on the materials collected during the course of inspection, the assessing of