2007 (7) TMI 213 - HC - Income Tax

Whether on the facts and in the circumstances of the case the Tribunal was right in confirming the addition of Rs. 34.25 lakhs not received by the appellant as the income of the appellant for the block period April 1 1987 to March 17 1997? Whether on the facts and in the circumstances of the case the Tribunal having accepted the fact that the sum of Rs. 34.25 lakhs was not received by the appellant is justified in holding that the said sum represents the appellant s income? Held that - In the present case part of the amounts derived from the agreements were shown for regular assessment and in respect of the balance amounts not received as per the agreements it was not shown and offered for assessment. Later the block assessment was made in consequence of the search and while making the block assessment the Assessing Officer noticed that the balance amount of Rs. 34.25 lakhs was not offered for tax and hence he was of the view that it was an undisclosed income for the block period. No details were available on the record in respect of the same. The Tribunal which is the highest fact finding authority ought to have considered the same as to how the impugned amount could be considered as undisclosed income under Chapter XIV-B of the Act or not. Unfortunately we lack the precious finding on the crucial factor related to answering the above questions of law. Without the precious finding it is very difficult for this court to determine the issue. Set aside the order of the Tribunal with a direction to rehear the matter and consider the scope of Chapter XIV-B.

Summary

Issues:
1. Addition of Rs. 34.25 lakhs as undisclosed income for the block period.
2. Consideration of balance amounts not received for regular assessment in block assessment.

Analysis:

Issue 1: Addition of Rs. 34.25 lakhs as undisclosed income for the block period:
The case involved an appeal under section 260A of the Income-tax Act, 1961, regarding the addition of Rs. 34.25 lakhs as undisclosed income for the block period. The appellant, a partnership firm engaged in film production, had not received the full distribution amounts due to the failure of the film. The Assessing Officer treated the unreceived amounts as undisclosed income. The Tribunal upheld this decision, leading to the appeal. The appellant argued that the waiver of the unreceived amounts precluded their classification as undisclosed income. The court noted the distinction between block assessment and regular assessment, emphasizing that undisclosed income under Chapter XIV-B is distinct from disclosed income in regular assessments. The court directed the Tribunal to reconsider the matter, considering the impact of the regular assessment for the assessment year 1996-97, to determine if the unreceived amounts constituted undisclosed income under Chapter XIV-B.

Issue 2: Consideration of balance amounts not received for regular assessment in block assessment:
The appellant contended that the balance amounts not received should be considered in regular assessment rather than block assessment due to mutual agreements to waive the amounts. The Revenue argued that the accrued income not disclosed prior to the search justified its addition as undisclosed income. The court highlighted the importance of distinguishing between undisclosed income for block assessment and disclosed income for regular assessment. It emphasized the need for the Tribunal to provide findings on whether the unreceived balance amounts qualified as undisclosed income under Chapter XIV-B. The lack of such findings hindered the court's ability to determine the issue conclusively. Consequently, the court set aside the Tribunal's order, directing a rehearing to consider the applicability of Chapter XIV-B to the unreceived balance amounts in light of the regular assessment for the assessment year 1996-97.

In conclusion, the court's judgment focused on the distinction between undisclosed income in block assessments and disclosed income in regular assessments. It emphasized the need for a thorough analysis by the Tribunal to determine if the unreceived balance amounts constituted undisclosed income under Chapter XIV-B, considering the impact of the regular assessment for the assessment year 1996-97.