2009 (7) TMI 53 - HC - Income Tax

Search and Seizure reopening of completed assessments u/s 143(3) /144 / 147 ITAT held that Tribunal clearly are that the material found in search was taken into account during regular assessment and there was no undisclosed income which may be subjected to block assessment under section 158BA decision the tribunal sustained.

Summary

Issues involved:
1. Whether assessment completed under Section 143(3)/144/147 can be reopened in proceedings under Chapter XIV-B despite incriminating documents?
2. Whether evidence from incriminating documents can be ignored in block assessment?
3. Whether undisclosed income can be determined for block assessment when regular assessment reflects the same?
4. Whether disclosed income on account of advance tax/TDS can be considered undisclosed income for block assessment?

Analysis:

Issue 1:
The appeal was filed against the order of the Income Tax Appellate Tribunal (ITAT) regarding the permissibility of reopening assessments completed under Section 143(3)/144/147 in proceedings under Chapter XIV-B. The Tribunal held that if the material found during search had already been disclosed in regular assessment proceedings, block assessment was not permissible. The Tribunal emphasized that elements of income disclosed in regular assessments within the block period cannot be included in computing undisclosed income for block assessment under Chapter XIV-B.

Issue 2:
The Tribunal's decision was based on the principle that the Assessing Officer cannot question deductions or exemptions claimed in regular block assessments as they fall under the purview of regular assessments. It was noted that if turnover had been disclosed in regular assessments, it cannot be considered undisclosed income for block assessment. The Tribunal highlighted that block assessment is additional to regular assessment proceedings and should be based on evidence found during the search.

Issue 3:
The Tribunal also addressed the issue of disclosed income on account of advance tax/TDS and its treatment in block assessment. It was determined that such disclosed income should not be treated as undisclosed income for block assessment purposes. The Assessing Officer was directed to verify the income for specific assessment years and exclude advance tax/TDS amounts from the determination of undisclosed income.

Issue 4:
The Tribunal's findings indicated that the material found during search was considered in regular assessments, leading to the conclusion that there was no undisclosed income for block assessment under section 158BA. The Court dismissed the appeal, emphasizing that the absence of disclosed income was a factual matter and not a substantial question of law unless the Tribunal's findings were deemed perverse.

In conclusion, the judgment clarified the principles governing block assessments under Chapter XIV-B and emphasized the importance of considering disclosed income, evidence from incriminating documents, and the distinction between regular and block assessments in determining undisclosed income for tax purposes.