2011 (1) TMI 1112 - HC - Income Tax

Search and seizure - Block assessment - Assessing Officer assessed only the interest from these deposits as assessee s income and the deposit amounts in the names of the relatives were not assessed as undisclosed income of the assessee for the year 1992-93 which fell within the block period - Held that - As decided in High Court in VISHWANATH PRASAD ASHOK KUMAR SARBAF Versus CIT AND OTHERS 2010 (4) TMI 445 - ALLAHABAD HIGH COURT that income assessed in a block assessment under Section 158BC cannot be again brought to tax under Section 147 after the appellate authority cancels or modifies the block assessment - Assessing Officer has no jurisdiction to assess the very same amount which was considered and given up while making block assessment. The income assessed under Section 147 i.e. the amount covered by deposit receipts maintained in Banks were considered in the block assessment and at that time the AO treated only interest income as income of the assessee and not the deposit amounts as such as undisclosed income of the assessee. However when the CIT (Appeals) cancelled the block assessment holding that Bank deposits were that of family members of the assessee and therefore interest income therefrom could not be assessed in his hands the AO tried to bring to tax the deposit amounts itself by invoking the powers under Section 147. Even though block assessment under Section 158BC and income escaping assessment under Section 147 can probably be made for the same period on different basis assessments could not be successively made one after another for the same period under these provisions based on the same materials - Decided in favor of the assessee

Summary

Issues:
Challenge to order of Tribunal declaring income escaping assessment as invalid under Section 147 of the Income Tax Act for the assessment year 1992-93.

Analysis:
The High Court heard arguments from both the Revenue and the respondent assessee regarding the income escaping assessment made under Section 147 of the Income Tax Act for the assessment year 1992-93. Initially, the return filed by the assessee was processed under Section 143(1)(a) and later a scrutiny assessment was conducted under Section 143(3) of the Act. Subsequently, a search was carried out in the residential and business premises of the assessee, leading to a block assessment under Section 158BC for the period from 01/04/1988 to 25/11/1998. Specific additions were made for the assessment year 1992-93, including an arbitration award amount and interest on Bank deposits in the names of the assessee's relatives. The Assessing Officer only assessed the interest from these deposits as the assessee's income, not the deposit amounts in the names of relatives. The CIT (Appeals) partially allowed the block assessment, canceling most additions except for 1/3rd of the interest income from a deposit in the name of the assessee's deceased mother. The Tribunal upheld the CIT (Appeals)'s order against the Department's appeal.

Regarding the income escaping assessment under Section 147, the CIT (Appeals) canceled it, noting that the same amounts were already considered in the block assessment. The Tribunal agreed, stating that the reassessment under Section 147 was merely a change of opinion by the Assessing Officer. The Revenue contended that the Assessing Officer could proceed with income escaping assessment despite a completed block assessment. However, the assessee relied on precedents and argued that income assessed in a block assessment cannot be taxed again under Section 147 after modifications to the block assessment. The High Court agreed with the assessee, emphasizing that assessments cannot be successively made for the same period under these provisions based on the same materials. The Assessing Officer cannot ignore findings from the first appellate authority against a block assessment and proceed with income escaping assessment using the same materials. The Court upheld the Tribunal's decision, dismissing the departmental appeal.

In conclusion, the High Court ruled in favor of the respondent assessee, holding that the Assessing Officer cannot reassess the same amount as escaped income under Section 147 after it was considered and given up during a block assessment. The Court emphasized that once materials are gathered during a search, the Assessing Officer must choose between a block assessment or income escaping assessment based on those materials, and cannot reassess the same items successively using different provisions of the Act.