2010 (8) TMI 325 - HC - Income Tax

Search and Seizure - Block assessment - set off of declared undisclosed income - In the present case undisclosed income of the assessee was found to be more than what had been voluntarily declared in the return filed by the assessee for the block period - If the undisclosed income determined by the Assessing Officer exceeds the declared undisclosed income of the assessee there can be no set-off of the declared undisclosed income - Appeal of the Revenue is allowed

Summary

Issues:
1. Appeal against findings of the Income-tax Appellate Tribunal regarding set-off of excess income in a block assessment year.
2. Claim of set-off by the assessee for undisclosed income in subsequent years within the same block period.
3. Interpretation of provisions related to set-off in block assessments.

Analysis:
1. The appeal before the High Court was against the findings of the Income-tax Appellate Tribunal regarding the set-off of excess income disclosed in a particular assessment year falling within a block assessment year. The Tribunal had directed the Assessing Officer to allow set-off in favor of the assessee based on certain findings. The High Court analyzed the facts and the legal provisions involved in the case.

2. The assessee had filed a return of income for the block period, disclosing undisclosed income for different assessment years. The Commissioner of Income-tax (Appeals) allowed the appeal filed by the assessee and set aside certain additions made by the Assessing Officer. However, the appellate authority held that there cannot be set-off of one year's undisclosed income with any other year. The Revenue filed an appeal before the Tribunal against the deletions made by the Commissioner, and the Tribunal dismissed the appeal by upholding the deletions and allowing the cross-objection of the assessee regarding set-off.

3. The High Court examined the claim of set-off raised by the assessee, where certain amounts declared as undisclosed income were not linked to any undisclosed investment or unexplained expenditure. The Court noted that if the undisclosed income determined by the Assessing Officer exceeds the declared undisclosed income, there can be no set-off as the declared undisclosed income becomes part of the total undisclosed income determined. The Court held that set-off requires a surplus, which was not present in this case, as the undisclosed income determined cannot be less than what was voluntarily declared. Therefore, the findings of the Tribunal regarding set-off were deemed erroneous, and the appeal of the Revenue was allowed.

In conclusion, the High Court set aside the directions given by the Tribunal regarding the set-off of excess income in a block assessment year and held that the undisclosed income determined by the Assessing Officer cannot be less than what was voluntarily declared, precluding the possibility of set-off in such circumstances.