2011 (7) TMI 22 - HC - Income Tax

Search and seizure - Block assessment - Undisclosed income - Held that on the basis of best judgment assessment made by the Assessing Officer there is no scope of interference in this appeal under Section 260A of the Act and those two grounds raising new questions which are essentially questions of fact cannot be permitted to be raised for the first time in this appeal and the Revenue in terms of sub-section 4 of Section 260A of the Act is entitled to raise the question that the ground formulated by the Division Bench are not involved within the scope of this appeal - in the facts of the present case the best judgement assessment of the Assessing Officer cannot be said to be vitiated by any error of law - Appeal is dismissed

Summary

Issues:
- Appeal against order passed by Income-tax Appellate Tribunal for Block Period 1987-88 to 1996-97
- Discrepancy in income declared by firm for Assessment Year 1990-91
- Best judgment assessment made by Assessing Officer
- Failure to comply with notices and show cause notice
- Formulation of substantial questions of law by Division Bench
- Scope of interference in appeal under Section 260A of the Income-tax Act

Analysis:

The judgment by the Calcutta High Court pertains to an appeal under Section 260A of the Income-tax Act, 1961 against an order passed by the Income-tax Appellate Tribunal for the Block Period 1987-88 to 1996-97. The appeal was filed by two partners of an erstwhile partnership firm, challenging the assessment made by the Assessing Officer. The firm, M/s. Shree Krishna Arvind Hatcheries, had undisclosed income for the Assessment Year 1990-91, as revealed during a search operation in July 1996 at the premises of one of the partners. Despite notices and proceedings initiated under Section 158BB and 158C, the firm failed to file returns, claiming that it had been taken over by a new company. The Assessing Officer proceeded with the assessment under Section 158BC, considering the firm's undisclosed income based on seized papers and partner depositions.

The partners did not comply with notices under Section 158BC, 158BD, and 142(1), leading to the Assessing Officer completing a best judgment assessment, reassessing the tax amount. The partners, dissatisfied with the assessment, appealed before the Tribunal, which upheld the Assessing Officer's order. The Division Bench of the High Court formulated substantial questions of law, questioning the Assessing Officer's obligation to provide necessary documents and the validity of treating certain entries as undisclosed income. However, the Court found that these new points were not raised before the Tribunal and were beyond the appeal's scope under Section 260A.

The Court emphasized that the partners' failure to submit returns or show cause during the assessment process weakened their position to challenge the best judgment assessment. The judgment concluded that without any material to dispute the Assessing Officer's findings and in the absence of legal errors, the appeal lacked substance. Consequently, the appeal was dismissed, and no costs were awarded. Both judges, Justice Bhaskar Bhattacharya and Justice Sambuddha Chakrabarti, concurred with the decision to dismiss the appeal, citing the absence of substantial legal questions and failure to challenge the assessment effectively.