1998 (4) TMI 500 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the assessment order for the block period.
2. Consideration of belated returns filed by the assessee.
3. Inclusion of deductions under Chapter VI-A.
4. The existence of "undisclosed income" as per Section 158B(b).

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order for the Block Period:
The initial assessment order dated February 28, 1997, by the Assistant Commissioner of Income-tax was challenged by the assessee. The block period was incorrectly stated as April 1, 1995, to February 6, 1996. The Vice-President noted that the assessment years 1988-89, 1989-90, 1990-91, 1992-93, and 1993-94 were outside this block period. The Judicial Member, however, considered this a typographical error and corrected the block period to April 1, 1985, to February 6, 1996. The Third Member confirmed the error and agreed with the Vice-President that the assessment order was not a speaking order and lacked application of mind, thus setting aside the assessment order.

2. Consideration of Belated Returns Filed by the Assessee:
The assessee argued that returns for the assessment years 1988-89, 1989-90, and 1990-91 were filed on January 29, 1993, and for 1992-93 and 1993-94 on May 19, 1995, before the search on February 6, 1996. The Vice-President noted that Section 158BB(1)(c) does not mention Section 139, and thus these returns should have been considered. The Judicial Member disagreed, stating that since the returns were not filed within the due dates under Section 139, they could not be considered valid. The Third Member sided with the Vice-President, emphasizing that the returns, although belated, were filed before the search and should be considered.

3. Inclusion of Deductions under Chapter VI-A:
The Vice-President highlighted that the assessee claimed deductions under Sections 80CCA and 80G, which were not considered by the Assessing Officer. The Judicial Member agreed that these deductions should be reconsidered and remitted the matter back to the Assessing Officer for a fresh decision. The Third Member, however, found this issue to be infructuous due to the annulment of the assessment order.

4. The Existence of "Undisclosed Income" as per Section 158B(b):
The Third Member focused on the definition of "undisclosed income" under Section 158B(b), arguing that the income declared in the belated returns did not fit this definition. The income was not discovered during the search but was already disclosed by the assessee in the returns filed. Hence, there was no "undisclosed income" to be assessed under Chapter XIV-B. The Third Member concluded that the impugned assessment lacked any undisclosed income and thus annulled the assessment.

Conclusion:
The appeal was allowed, and the assessment order was annulled due to the absence of undisclosed income, rendering other issues, such as the consideration of deductions under Chapter VI-A, moot.