Matter sent back to ITAT for re-adjudication as decided on inadequate finding.

1.  On receiving intimation from the Central Excise Department regarding seizure of a sum of Rs. 10,25,000 from the premises of the assessee, the proceedings under section 132A (of Income Tax Act, 1961) were initiated against the assessee and a notice under section 158BC (of Income Tax Act, 1961) was served upon him. Return of income for block assessment was filed by the assessee declaring total undisclosed income as nil. 

2.  In response to show-cause notice as to why said sum should not be added to his income for the block period, the assessee explained before the Assessing Officer that said sum was on account of sales realizations collected by ‘R’ against sale bill Nos. 46 to 56. 

3.  However, the Assessing Officer held that said cash represented his income from undisclosed sources and, made addition. On appeal, the Commissioner (Appeals) deleted the said addition on the ground that the assessee had given detailed of sales bills which justified its stand and 'R' had also confirmed the same and, thus, the addition was not based on any cogent reason. 

4.  But, the Tribunal reversed the order of the Commissioner (Appeals) on two counts that the assessee was not entitled to challenge validity of search and seizure before appellate authority and that no valid explanation was furnished by the assessee regarding said sum.

On appeal HC held as under:

5.  The Division Bench of this High Court in CIT v. Paras Rice Mills [2010] 323 ITR 182 has held the Tribunal when hearing an appeal against the order of assessment could not go into the question of validity or otherwise of any administrative decision for conducting the search and seizure. 

6.  The same may be the subject-matter of challenge in independent proceedings where the question of validity or otherwise of administrative order could be gone into. Thus, the Tribunal had rightly held that the validity of search and seizure operation could not be gone into by the Tribunal in the appeal proceedings. 

7.  The Tribunal while arriving at the conclusion that Rs. 10,25,000 seized was on account of concealed income of the assessee, has merely relied upon the order of the Assessing Officer and has not given any basis or reasons for reversing the finding recorded by the Commissioner (Appeals) . 

8.  Further, the plausibility of the explanation submitted by the assessee on the basis of sales bill Nos. 46 to 56 produced by him also requires to be considered by the Tribunal. Accordingly, the matter was to be remanded to the Tribunal for re-adjudications.