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1) This appeal has been filed against the impugned judgment and order dated 22.11.2006 passed by the High Court of Judicature at Madras in Tax Case (Appeal) No. 2620 of 2006 whereby the Division Bench dismissed the appeal filed by the appellant herein while upholding the decision passed by the Income Tax Appellate Tribunal (for short “the Tribunal”) dated 28.04.2006. Along with this appeal, other appeals are also tagged. Since the moot question in all these appeals is same, all these appeals would stand disposed off through this common judgment.
Civil Appeal No. 10164 of 2010
2) In order to appreciate the facts of the present case in the appropriate manner, purpose would be served if we mention the facts in a summarized way which is as under:-
a) The appellant herein is the Revenue whereas the respondent is the assessee.
b) A search was conducted by the officers of the Income Tax Department in the premises of the assessee on 17.07.2002 which was concluded on 21.08.2002. On the same date, there was a survey in the premises of Elegant Constructions and Interiors Ltd. (hereinafter referred to as ‘M/s. ECIL’) - the builder and interior decorator who constructed and decorated the house of the assessee at Valmiki Nagar.
c) Pursuant to the same, the fact that the assessee having engaged the above contractor for construction of the house came out. At the same time, from the survey in the builder’s premises, the fact of the assessee having paid Rs 95,16,000/- to M/s ECIL in cash was revealed which was not accounted for.
d) The Assessing Officer, vide order dated 31.08.2004, after having regard to the facts and circumstances of the case, completed the block assessment and, inter alia, held that the said amount is liable to tax as undisclosed income of the block period.
e) Being aggrieved with the order dated 31.08.2004, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Learned CIT (Appeals), vide order dated 15.02.2005, held that it was due to the search action that the Department had found that the assessee had engaged the services of M/s. ECIL. Hence, the order of block assessment was upheld.
f) Being dissatisfied, the assessee brought the matter before the Tribunal by way of an appeal. The Tribunal, vide order dated 28.04.2006, set aside the decisions of the Assessing Officer and learned CIT (Appeals) and allowed the appeal.
g) Being aggrieved, the Revenue filed an appeal before the High Court. The High Court, vide order dated 22.11.2006, dismissed the appeal.
3) Consequently, the Revenue has filed this instant appeal before this Court.
4) Heard the arguments advanced by learned senior counsel for the parties and perused the relevant records of the case placed before us.
Point(s) for consideration:
5) The short point for consideration which arises in this appeal is as to whether in the light of present facts and circumstances of the instant case, the material found in the course of survey in the premises of the builder could be used in Block Assessment of the assessee?
6) At the outset, learned senior counsel for the Revenue contended that the High Court failed to consider that the information gathered as a result of search is not the details of appointment of interior decorator rather it is information regarding the cash payments made over and above the cheques payments and not accounted by the assessee. Further, it was also contended that it is the standard practice in the Department that when a search takes place in the case of an assessee, many related business premises are simultaneously covered under survey. Learned senior counsel further contended that though it is called a survey, it is very much part of the search process and the inquiry and investigation is one process. This is to be distinguished from the surveys which are stand-alone surveys, totally unconnected to any search. In order to substantiate his claim, learned senior counsel has referred to a decision of this Court in Assistant Commissioner of Income Tax and Another vs Hotel Blue Moon (2010) 3 SCC 259 and contended that the impugned decision of the High Court is liable to be set aside.
7) Per contra, it is submitted by learned senior counsel for the assessee that the High Court rightly dismissed the appeal of the appellant after placing reliance on the decision of the Madras High Court in Commissioner of Income Tax vs. G.K.