ORDER
K.C. Singhal, J.M.
1. The issue arising in this appeal relates to the estimation of household expenses as well as powers of enhancement by the CIT(A) on the basis of certain material found in the course of search.
2. Briefly stated, the facts are that in the course of regular assessment proceedings Under Section 143(3), it was seen that assessee had declared household expenses at Rs. 54.000. His family comprises of himself, his wife and three children-out of which two were school-going. It was also noticed that the other family members, i.e., brothers had also declared household expenses at Rs. 72,000 and Rs. 30,000. The total expenditure was thus taken at Rs. 1,56,000 which was considered to be on lower side considering the fact that the children of the assessee were going to school. Accordingly, an addition of Rs. 44,000 was made.
3. The said addition was challenged before the CIT(A). In the course of appellate proceedings, the CIT(A) took into consideration the various materials found in the course of search conducted at the premises of the assessee on 17th Dec., 1999. It was noticed by him that assessee along with his brother, Shri Pawan Bansal, had purchased a residential house at A-156, New Friends Colony, against consideration of Rs. 55 lacs though the documents seized showed that the said property was worth Rs. 2.47 crores. The balance amount of Rs. 1.92 crore was added as undisclosed income in the hands of the assessee in the block assessment proceedings. It was also noted by him that this new property was fitted with various air-conditioners, i.e., four air-conditioners of 1.5 tons, 1 split air-conditioner of 10 tons and one split air-conditioner of 2 tons at the ground floor and basement, which was owned by the assessee. Further, the wife of the assessee Mrs. Sunita was found in possession of cash of Rs. 61,150. It was also noted that the assessee had paid school fee of Rs. 23,000 excluding transport charges. In view of these facts, the assessee was asked to give the details of education expenses of the children. Regarding the conveyance, it was stated by the assessee that the children were commuting in a rickshaw for which the sum of Rs. 200 per month was being paid. The CIT(A) was not satisfied with this explanation. The assessee did not file any detail of electricity expenses. A notice Under Section 251(2) was issued for enhancement of income. After considering the reply of the assessee, the addition made by AO was confirmed and further enhancement was made of Rs. 1,77,600 on account of electricity expenses and conveyance expenses. Aggrieved by the same, the assessee is in appeal before the Tribunal.
4. The learned counsel for the assessee Mr. Jain has vehemently assailed the order of the CIT(A) regarding enhancement of income as well as confirmation of the household expenses by contending that regular assessment proceedings and block assessment proceedings are independent proceedings and what can be assessed under the block assessment proceedings cannot be assessed in regular assessment proceedings. Reliance was placed on the judgment of Calcutta High Court in the case of Shaw Wallace & Co. Ltd. v. Asstt. CIT (1999) 238 ITR 13 (Cal). In view of the same, it was pleaded that the adverse material found in the course of search could be utilized only in the block assessment proceedings and AO as well as CIT(A) were forbidden from using the same in the regular assessment proceedings.
5. I find merit in the contention raised by the learned counsel for the assessee in view of the Calcutta High Court judgment referred to. The learned Departmental Representative has not been able to point out any decision contrary to such judgment. In that case, it has been clearly held that AO shall not include the block amount of income in the regular assessment and vice versa. It has been further held that the material found in the course of search could not be used by the AO in the regular assessment proceedings. Therefore, following the said judgment, it is held that CIT(A) could not enhance the income on the basis of material found in the course of search. Considering the number of air-conditioners found installed at the premises of the assessee in the course of search, it is reasonable to hold that assessee had not declared correct household expenses. However, addition on the basis of such information could be made only in the block assessment in view of the above Calcutta High Court judgment and not in the course of regular assessment. If the AO could not make regular assessment on the basis of material found in the course of search then CIT(A) was also not empowered to enhance the said income on the basis of such material. Hence, the addition of Rs. 1,23,000 on account of electricity could not be made by the CIT(A). As far as addition on account of transport expenses is concerned, there is no material on record to justify the same. Hence, the entire enhancement made by the CIT(A) is hereby quashed. As far as the estimation made by AO is concerned, the same is on basis of suspicion and surmises and such addition cannot be. justified in view of the Third Member decision of the Tribunal reported as Raj Kumai Jain v. Asstt. CIT (1994) 49 TTJ (All)(TM) 558 : (1994) 50 ITD 1 (All)(TM). Accordingly, the addition made by the AO is also deleted.
6. In the result, appeal of the assessee is allowed.