ORDER
I.S. Verma, J.M.
In this appeal the revenue has objected to order of the Commissioner (Appeals), dated 25-2-2000, whereby the assessment framed under section 158BC of the Act has been challenged, by the way of following grounds :
“1. That the learned Commissioner (Appeals) has erred in law and on facts in cancelling the assessment made under section 158BC, ignoring the facts mentioned in the assessment order.
2. That the learned Commissioner (Appeals) has erred in law and on facts in holding that income below taxable limit of the years of block period will not form part of undisclosed income, ignoring the provisions of section 158BB(1)(c) of the Income Tax Act, 1961.
3. That the learned Commissioner (Appeals) has erred in law and on facts in holding that (i) undisclosed income should necessarily reflect towards the undisclosed assets, expenses and investment found during the search, (ii) no incriminating documents or material were found in search at the residence of the assessee and the undisclosed income of the assessee has been arbitrarily calculated on the basis of day books maintained by other person; and (iii) the undisclosed income of the assessee is not computed on the basis of seized martial, but estimated, ignoring the provision of section 158BB(1) of the Income Tax Act, 1961, and facts mentioned in assessment order.
4. That the appellant craves leave to add or alter any or more ground or grounds of appeal as may be deemed fit at the time of hearing of appeal.
5. That the order of the learned Commissioner (Appeals) being erroneous in law and on facts be set aside and that of the assessing officer be restored.”
2. At the time of hearing, none was present on behalf of the respondent/assessee. No application for adjournment has been received. Since the notice of hearing to the respondent was sent under regd. A.D. post, the same is presumed to have been served by virtue of the provision of section 27 of the General Clauses Act and section 114 of the Indian Evidence Act. Consequently the revenue’s appeal is decided after hearing the learned Departmental Representative who has submitted that there being a veiled search in case of respondent the Commissioner (Appeals) was not justified in cancelling the assessment of block period. According to the learned Departmental Representative the assessment of block period can be cancelled only on the basis of jurisdiction, which was not lacking in the present case. On merits the learned Departmental Representative supported the assessment order.
3.1 The facts relating to the issue involved in this appeal and as have been revealed from the records are that the assessee was earning salary for working in the nursing home of Dr. A.K. Varshney for rendering nursing home services (as an employee). The assessee was also providing physiotherapy services to the patients at the nursing home of Dr. A.K. Varshney for which was getting separate fees. On 7-10-1997, the assessee’s residence and physiotherapy centre were searched under section 132 of the Act, when nothing incriminating was detected.
3.2 Notice under section 158BC of the Act was issued on 24-7-1998, which was served on 7-8-1998. The assessee filed return of block period disclosing undisclosed income at Rs. nil on 18-9-1998.
3.3 The assessing officer proceeded with assessment proceeding by observing as under :
“During the search proceedings, no documents were seized or found on the basis of which the income of the assessee may be computed. Therefore, the papers seized in the case of other persons and statements recorded at the time of search have to be made the basis.”
In this way the assessing officer computed the assessee’s yearwise total income as under :
Asst. Yr.
Total income
(Including undisclosed income)
Retumed/assessed income
1988-89
19,622
Nil
1989-90
20,763
Nil
1990-91
21,266
Nil
1991-92
24,040
Nil
1992-93
23,256
Nil
1993-94
28,374
Nil
1994-195
52,038
Nil
1995-96
40,884
Nil
1996-97
57,314
Nil
1997-98
95,215
Nil
1998-99
41,743
10,000
3.4 The final assessed income for block period was determined at Rs. 4,14,514.
3.5 On appeal by the assessee, learned Commissioner (Appeals), after considering the facts and circumstances of the case as well as various decisions relied upon by the assessee and referred to in para Nos. 3.3 to para 4 and also the provision section 139(1) and of Chapter XIV-B of the Act, came to the conclusion that the assessee’s case was unfit for action under section 158BA/BC and, therefore, cancelled the assessment itself by observing as under :
“The facts on record have been considered. It is found that the assessing officer erred in making assessment under section 158BC as the undisclosed income under this chapter is to restricted to undisclosed assets, expenses and investments discovered during the search as the income of block period will be reflected in these, if the total assets found in search are taken into consideration. This view finds support from the decision in the case of Mushtaq Ahmed & Ors. v. Assistant Commissioner (2000) 66 TTJ (Jp) 305 : (1999) 9 ITC 344 (Jp). It will be seen that assessing officer has accepted the explanation of the appellant regarding source of acquisition of all the assets. No incriminating documents or material were found in search at the residence. She has fully explained the source of expenses incurred on acquiring assets and for incurring expenses on household. Her husband was also earning and supporting the family. Her salary was duly accounted for in the books of accounts of Dr. Varshney at whose premises main search was conducted. She had duly filed evidence regarding earning of income from patients to whom she rendered service, in the shape of patient register maintained by the doctor.
Thus, considering the case from all angles, the case is found to be unfit for action under section 158BA/BC. The assessment completed is cancelled and appeal is allowed with relief of Rs. 4,14,514.
4. After careful consideration of the facts and circumstances of the case and the specific finding of the assessing officer before proceeding with the block assessment that during the search proceedings, no documents were seized or found on the basis of which the income of the assessee could be computed and therefore, the papers seized in the case of other persons and statement recorded at the time of search have to be made the basis, we are of the opinion that the assessing officer had no jurisdiction even to issue a notice under section 158BC of the Act as per the provisions of law. The assessing officer has jurisdiction to initiate block assessment proceedings in a case where a search under section 132 is carried on or a requisition under section 132A is made only if the seized documents or material or valuables or assets found and seized are found to have undisclosed income meaning thereby that if as a result of search or requisition no undisclosed income is found, the assessing officer has no jurisdiction even to issue a notice under section 158BC of the Act. Such a notice is to be issued to assess the undisclosed income found as a result of search or requisition and not to assess an income which may be found as a result of subsequent inquiries.
Similarly, the papers seized in case of other person and the statement recorded during the search cannot be made basis for making an assessment of block period except as provided under section 158BD of the Act.
5.1 So far as present case is concerned, the assessee being an employee of Dr. A.K. Varshney and there being no other material except. payment of salary to the assessee in the documents seized as a result of search in case Dr. A.K. Varshney as well as the assessee, the assessing officer had no jurisdiction either to make an assessment under section 158BC of the Act or under section 158BD read with 158BC of the Act. Fact of payment of salary found recorded in the books of employer cannot be interpreted so as to mean that the same was undisclosed income of the employee for proceeding under section 158BD read with section 158BC of the Act.
5.2 In the present case even the salary found recorded in the books of Dr. A.K. Varshney was below taxable limit and, therefore, there was no question of there being undisclosed income.
5.3 In view of the totality of the facts and circumstances of the case as well as in law, we are of the opinion that Commissioner (Appeals) was quite justified in cancelling the assessment.
6. In the result revenue’s appeal is dismissed.