2007 (8) TMI 332 - HC - Income Tax

Search and seizure - returns filed after the due dates prescribed u/s 139(1) and 139(4) - belated returns filed by him were treated as invalid and consequently the amounts therein were treated as undisclosed income It is not the case of the Revenue that , any undisclosed income had come to light as a result of search belated returns, even though invalid, contained information showing the earning of the corresponding income and such information having been imparted to AO long before the search - held that there was no undisclosed income for the years in which advance tax had been paid for purpose of section 158BB

Summary

Issues:
1. Treatment of belatedly filed returns as undisclosed income.
2. Applicability of section 158BB(ca) to cases of late-filed returns.
3. Determination of undisclosed income for years with advance tax payment but late returns.

Issue 1: Treatment of belatedly filed returns as undisclosed income:
The case involved a taxpayer engaged in jewelry and money-lending businesses, subject to a search under section 132 of the Income-tax Act. The Assessing Officer treated belatedly filed returns as invalid and considered the amounts therein as undisclosed income. The Tribunal, however, ruled that the returns, although filed late, did not constitute undisclosed income as per section 158B(b) of the Act. The court referenced a previous judgment to support this decision, emphasizing that the returns provided income information prior to the search, negating the need for assessment under Chapter XIV-B. Consequently, the Tribunal's decision was upheld, finding no error in the treatment of returns for the assessment years 1992-93 to 1995-96.

Issue 2: Applicability of section 158BB(ca) to cases of late-filed returns:
The Revenue argued that even though the taxpayer had taxable income for certain years, the late filing of returns rendered them invalid, leading to the amounts being treated as undisclosed income. The Revenue contended that the mere payment of advance tax did not preclude the Assessing Officer from considering the late-filed amounts as undisclosed income for block assessment under section 158BC of the Act. However, the court upheld the Tribunal's decision, emphasizing that the information in the belated returns, filed before the search, did not constitute undisclosed income as defined by the Act.

Issue 3: Determination of undisclosed income for years with advance tax payment but late returns:
Regarding the addition towards undisclosed income for a specific assessment year, the Revenue highlighted that the return was filed post the search date, warranting consideration of the amount as undisclosed income. However, the court found that the principles applied in a previous judgment, coupled with the absence of material from the search to determine undisclosed income, supported the Tribunal's decision. The court noted that a relevant judgment favored the taxpayer in a similar context, leading to the dismissal of any substantial questions of law for consideration in this regard.

In conclusion, the court dismissed the tax case, concluding that no substantial questions of law arose for consideration, thereby affirming the Tribunal's decision in favor of the taxpayer.