2008 (8) TMI 204 - HC - Income Tax

Search block assessment - additions on basis of search proceedings, record and reply submitted by assessee to questionnaire - Assessee contend that addition to undisclosed income was in contravention of S. 158BB & 158BC but assessee has filed to point out as to how the additions on account of income from hotel to the income from other sources, were contrary hotel was functional throughout the relevant year - moreover addition were not made on higher side additions are sustainable

Summary

Issues:
1. Assessment of undisclosed income based on search of premises.
2. Appeal against tax liability determination.
3. Legality of addition to undisclosed income from hotel.
4. Interpretation of provisions of sections 158BB and 158BC of the Income-tax Act.

Assessment of Undisclosed Income Based on Search of Premises:
The appellant's residential premises were searched by income-tax authorities, leading to the discovery of undisclosed income amounting to Rs.8,98,550. Despite multiple notices and reminders, the appellant failed to respond adequately. The Assessing Officer determined the undisclosed income based on various items, including the purchase and renovation of a hotel building, a bank deposit, purchase of a vehicle, and income from the hotel. The Tribunal upheld the assessment, except for the income from the hotel, which was further contested in the present appeal.

Appeal Against Tax Liability Determination:
The appellant appealed to the Income-tax Appellate Tribunal, challenging the assessment of undisclosed income. The Tribunal upheld the assessment except for the income from the hotel, reducing it from Rs.1,00,000 to Rs.75,000 for the year 1995-96. The appellant contested this reduction, claiming it was not legally sustainable and violated the provisions of sections 158BB and 158BC of the Income-tax Act.

Legality of Addition to Undisclosed Income from Hotel:
The appellant argued that the addition of Rs.75,000 to the undisclosed income from the hotel was not legally sustainable. The Tribunal and Assessing Officer determined the income based on the assumption that the hotel was functional throughout the year with normal occupancy. The appellant failed to provide evidence of negligible occupancy or maintain records of hotel income. The Tribunal's calculation of income based on room tariff and occupancy was deemed reasonable, leading to the dismissal of the appellant's appeal.

Interpretation of Provisions of Sections 158BB and 158BC:
The substantial question of law revolved around the legality of the addition to the undisclosed income from the hotel concerning the provisions of sections 158BB and 158BC of the Income-tax Act. The Court found that the addition made by the Assessing Officer and upheld by the Tribunal was not contrary to these provisions or illegal. The appellant's failure to demonstrate any legal infirmity in the addition led to the dismissal of the appeal.

This detailed analysis of the judgment addresses the issues involved, the legal arguments presented, and the court's decision regarding the assessment of undisclosed income, appeal against tax liability determination, legality of addition to undisclosed income from the hotel, and the interpretation of relevant provisions of the Income-tax Act.