2013 (1) TMI 543 - HC - Income Tax

Entitlement to benefit of section 158BB (1) (b) - assessee having filed the return under Section 139 sufficiently after action u/s 132A was invoked - Held that - As evident from the perusal of sub clause (b) of Sub-section (1) of Section 158BB, that the AO is required to reduce the income disclosed in the return filed by the assessee under Section 139 or Section 147 but the assessments had not been finalised till the date of search or the requisition while computing the income for the block period. In the present case, the cash was seized by the police on 15.9.1998 and action u/s 132A was initiated on 5.10.1998. The warrant of requisition was executed on 9.8.2001 when the money was paid by the police to the Income Tax department and notice u/s 158BC was issued to the assessee on 7.4.2003 in respect of block assessment for the period 1.4.1988 to 5.10.1998. The assessee filed return in Form 2B on 5.8.2003 and the block assessment was framed on 29.8.2003. It may, however, be noticed that prior thereto for the assessment year 1999- 2000, the assessee had filed return on 10.3.2000 in which the cash of Rs. 7 lacs was not disclosed but the same was disclosed by the assessee while filing the revised return on 5.6.2000. This return was processed u/s 143(1) on 31.3.2001. In the present facts and circumstances, the CIT(A) and the Tribunal held that the benefit of the amount of Rs. 7 lacs which was disclosed in the return filed by the assessee under Section 139 was admissible to the assessee while computing his undisclosed income & the revenue was unable to demonstrate that the aforesaid view was not in accordance with law - in favour of the assessee.

Summary

Issues:
1. Interpretation of Section 158BB of the Income Tax Act, 1961 regarding computation of undisclosed income.
2. Whether the assessee was entitled to the benefit of reducing Rs. 7 lacs from undisclosed income.
3. Application of relevant legal provisions in determining undisclosed income for the block period.

Analysis:
1. The primary issue in this case involves the interpretation of Section 158BB of the Income Tax Act, 1961, which outlines the computation of undisclosed income for a block period. The section specifies the methodology for determining undisclosed income based on evidence found during search or requisition, along with provisions for excluding certain incomes and including losses. Sub-section (1) of Section 158BB mandates the Assessing Officer to reduce income disclosed in returns filed by the assessee under specific sections, pending finalization of assessments.

2. The second issue pertains to whether the assessee was entitled to the benefit of reducing Rs. 7 lacs from the undisclosed income. The case involved the seizure of Rs. 7 lacs from the assessee, which was later disclosed in a revised return. The Assessing Officer had assessed this amount as undisclosed income, leading to an appeal by the assessee. The CIT(A) and the Tribunal allowed the appeal, stating that the disclosed amount could be reduced from the undisclosed income, as per Section 158BB(1)(b) of the Act.

3. The application of relevant legal provisions in determining undisclosed income for the block period was extensively discussed in the judgment. The timeline of events, including the seizure of cash, initiation of action under Section 132A, and subsequent assessment proceedings, was crucial in deciding the case. The Tribunal's decision to grant the benefit of reducing the disclosed amount from undisclosed income was upheld, emphasizing the adherence to statutory provisions and the lack of grounds to interfere with the order favoring the assessee.

In conclusion, the High Court dismissed the revenue's appeal, affirming the Tribunal's decision that the assessee was entitled to the benefit of reducing the disclosed amount from undisclosed income, in accordance with Section 158BB of the Income Tax Act, 1961. The judgment highlighted the importance of statutory interpretation and application of legal provisions in determining undisclosed income for the block period, ultimately upholding the assessee's position in the case.