Income tax - Whether undisclosed income revealed post-search inquiry can be assessed within scope of block assessment, although time for filing return for such assessment year has not expired as on date of search - YES: HC
By TIOL News Service
MUMBAI, NOV 17, 2014: THE issue before the Bench is - Whether undisclosed income revealed post search inquiry can be assessed within the scope of the block assessment, although the time for filing return for such assessment year has not expired as on the date of the search. And the answer is YES.
Facts of the case
The assessee publishes a daily newspaper “Herald”. Consequent to a search warrant issued under Section 132 of the Income Tax Act, executed on 01.11.1999 and 02.11.1999, the Deputy Commissioner of Income Tax, made block assessment for the period 01.04.1989 to 01.11.1999. Income generated by the said Unit was claimed as exempted in return for the AY 1999-2000, and in block assessment return as income of new industrial undertaking exempt u/s 80 IA. It was submitted that the search was completed on 02.11.1999 and last date of filing of the said return was 30.11.1999. Hence, following mandate of Section 158BB(1)(d) of the Income Tax Act, the said income could not have been taken into account for the purpose of block assessment. The AO made additions which was maintained by the CIT (A) as also by the Tribunal. Hence, this appeal.
The Counsel for the assessee argued that Stipulation in Section 158 BB (1)(d) of the Income Tax Act has been overlooked. That section excludes from the scope of the block assessment, such income assessable for assessment year for which the time of filing return has not expired as on the date of the search. He submitted that raid was conducted on 02.11.1999, while the normal date for filing the return was 30.11.1999. Accordingly the return was filed within time. He also submitted that the said last date was later on extended upto 30.12.1999. He contended that necessary details were also given in that return and entries were made in books of account before the date of filing of the return
Having heard the parties, the High Court held that,
++ the fact that time to file return was not over on the date of raid and return came to be filed on 30.11.1999, needs to be accepted. Section 158-BA dealing with the subject of assessment of undisclosed income as a result of search mandates that such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years. If this requirement is met with, the said income cannot be included in the block period. Appellant assessee has failed to demonstrate this fact. Section 158-BB is about the computation of undisclosed income of the block period. Its subsection(1)(d) lays down that where the previous year has not ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years; the undisclosed income can be computed. Provisions of both these Sections are very clear. Thus, the bar prescribed is not absolute. But then the appellant – assessee ought to have pointed out how the said income was disclosed in books before the date of raid & in its regular return. The I.T.A.T. has observed in paragraph no.11 of its order that no clarification was given as to whether the deductions under Section 80 IA was claimed in that return or not. The accounts officer has noted that the computerized books of account were produced before the DDIT only. The I.T.A.T. has found that said addition was made on the basis of the documents obtained during search and during post search enquiry. During arguments in this appeal, the Counsel appearing for the appellant was asked whether the assessment in terms of the return filed on 30.11.1999 is completed or not. The Counsel replied on 08.10.2014 that he was not having any instructions on this issue. The arguments of this Counsel were again on 13.10.2014 & even on said date, query remained un answered. In this situation, we are not in a position to accept the contentions of the appellant based on Section 158(BB)(1)(d);
++ in this situation, we find that question (d) also cannot be answered in favour of the appellant.
(See 2014-TIOL-1969-HC-MUM-IT)
