2012 (8) TMI 159 - HC - Income Tax

Disallowance of deductions u/s.80IB (10) from the income computed as undisclosed income u/s. 69A - no such claim of deduction u/s 80IB is made by the assessee in the return of income for the block period - Held that - A fresh claim could be urged before the Appellate authorities even if the claim was not made in the return of income filed before the AO. As in this case, the search took place in 2002 therefore, the present case is governed by Chapter XIVB of the said Act - as Section 158BB of Chapter XIVB deals with computation of undisclosed income of the block period as amended by the Finance Act, 2002 with retrospective effect from 1/7/1995 the total income or loss has to be computed in accordance with the provisions of the said Act and the same would include Chapter VI-A of the said Act. Section 80IB of the said Act is a part of Chapter VIA of the Act. In view of the above, while computing the undisclosed income for the block period the respondent-assessee is entitled to claim deduction from its income under Section 80IB. Undisclosed income found in the form of cash was explained as having been acquired while carrying on business as a builder and this explanation was accepted by the AO, no question of application of section 68,69 and 69A, 69B and 69C - in favour of assessee.

Summary

Issues:
1. Interpretation of deductions under Section 80IB(10) of the Income Tax Act, 1961 for undisclosed income during a block period.
2. Validity of allowing deduction under Section 80IB(10) when not claimed in the original return of income for the block period.

Issue 1: Interpretation of deductions under Section 80IB(10)
The case involved a dispute regarding the entitlement to deductions under Section 80IB of the Income Tax Act for undisclosed income during a block period. The respondent-assessee, a builder in Mumbai and Thane, declared undisclosed income during a search operation by the Income Tax Department. The Assessing officer computed the undisclosed income for the block period, and the Commissioner of Income Tax (Appeals) found the respondent entitled to benefit under Section 80IB. The Tribunal upheld this decision, stating that the deduction under Section 80IB would be available for undisclosed income offered for taxation under Chapter XIVB of the Act. This was supported by a retrospective amendment to the explanation of Section 158BB(1) of the Act. The Tribunal's decision was further backed by a Madras High Court case.

Issue 2: Validity of allowing deduction under Section 80IB(10)
The appellant-revenue argued that the deduction under Chapter VIA of the Act should not be extended to an assessee who did not originally disclose income but later sought its benefit while filing a block return under Chapter XIVB. They cited a Gujarat High Court case to support their contention. However, the respondent argued that the facts of the Gujarat High Court case were distinguishable, as in the present case, the undisclosed income was received during business activities and returned as income from business. The Assessing officer accepted this explanation, and no provisions under Section 68, 69, 69A, 69B, or 69C were invoked. The Tribunal found in favor of the respondent, stating that the retrospective amendment to the explanation of Section 158BB(1) allowed for the deduction under Section 80IB to be claimed for computing undisclosed income during the block period.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision to allow the deductions under Section 80IB for the undisclosed income during the block period. The judgment clarified the applicability of the deductions under Section 80IB in cases of undisclosed income offered for taxation under Chapter XIVB of the Income Tax Act.