2006 (7) TMI 194 - HC - Income Tax

Whether Tribunal was right in holding that the subsidy received would not form part of the undisclosed income, when the receipt of the subsidy was known only during the search held that the income by way of subsidy is taxable in the regular assessment and not in the assessment for the block period - assessee had already disclosed its transaction - AO is wrong in treating the impugned amount as undisclosed income for the block period order of tribunal is correct - additions deleted

Summary

Issues:
Interpretation of undisclosed income in relation to a subsidy received during a search operation.

Analysis:
The case involves an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal. The issue at hand is whether the subsidy received should be considered as undisclosed income for the block period. The assessee, a non-banking finance company, had received a subsidy during a raid on their premises. The Assessing Officer added the subsidy amount to the undisclosed income for the block period. However, the Commissioner of Income-tax (Appeals) held that it should be assessed only under regular assessment and not as part of the block period assessment, subsequently deleting the addition. The Tribunal upheld the decision of the C.I.T.(A), leading to the present appeal by the Revenue.

During the raid, incriminating documents, including lease agreements, were seized. The subsidy of Rs.1,12,50,000/- was received from IREDA for the supply of pumps. Initially, the subsidy was offered as income for the assessment year 1996-97 but later reversed and claimed as a deduction over a 10-year period of lease. The assessee had already disclosed Rs.45,00,000/- as income for previous years, and the remaining Rs.67,50,000/- was considered as undisclosed income for the block period. The authorities found that the subsidy income should be taxed in regular assessment, not as part of the block period, as the assessee had disclosed the transaction and there was no seized material to justify the addition. The concurrent findings by the authorities below were based on valid evidence and materials.

The High Court, citing precedent, emphasized that when there is a concurrent finding by the lower authorities, interference by the High Court is not warranted. Therefore, the Court found no error or legal infirmity in the Tribunal's order to justify interference. Consequently, the Court dismissed the tax case, stating that no substantial question of law arose for consideration.