2006 (5) TMI 306 - AT - Income Tax

Summary

Issues:
Deletion of salary and rental income for the block period.

Analysis:
The appeal was against the deletion of salary and rental income for the block period by the CIT (Appeals). The Assessing Officer had initially made an assessment under section 158BC of the Income-tax Act, 1961, resulting in an income of Rs. 6,77,323. The CIT (Appeals) directed relief to the assessee based on previous tribunal judgments and allowed relief on account of salary and rental income amounting to Rs. 3,55,999. However, a notice under section 154 was later issued to rectify the relief calculation, resulting in a revised undisclosed income of Rs. 3,43,969. The CIT (Appeals) held that the salary income, being below the maximum limit not chargeable to tax, did not qualify as undisclosed income. The Assessing Officer's rectification was deemed inappropriate as the issue was debatable and did not fall under the purview of rectifiable mistakes.

The Departmental Representative argued that relief should not have been granted to the assessee as they had not filed an income tax return, rendering the relief amount as 'nil'. The counsel for the assessee contended that the Assessing Officer's order under section 154 was unjustified since it merged with the orders of the CIT (Appeals) and the Tribunal. The eligibility of the assessee for salary deduction, not discovered during the search, was a debatable issue and did not constitute a rectifiable mistake under section 154.

Upon careful consideration, it was noted that Chapter XXIV-B outlines the procedure for assessment in search cases, requiring block assessments for undisclosed income. Section 158BB specifies the computation of undisclosed income for the block period. In this case, the assessee had not filed a return, but the salary income was documented and did not exceed the non-taxable limit. The assessee was entitled to deduction for such income, which was not a clear-cut mistake under section 154. Therefore, the CIT (Appeals) was justified in deleting the addition made by the Assessing Officer. Consequently, the appeal of the revenue was dismissed.

In conclusion, the judgment upheld the CIT (Appeals)' decision to delete the salary and rental income additions for the block period, emphasizing that the salary income falling below the non-taxable limit did not constitute undisclosed income. The Assessing Officer's rectification under section 154 was deemed inappropriate for a debatable issue, leading to the dismissal of the revenue's appeal.