2018 (9) TMI 470 - AT - Income Tax

Disclosure of additional income made with a rider - undisclosed income/transaction/entry found during the course of the block assessment proceedings shall be set off against this disclosure - Held that - It is important to note that while arriving total disclosure of ₹ 40 Crores in the hands of the appellant as well as in the hands of the various group concerns of the Madhav Group, the appellant and the Madhav Group concern could worked out the total disclosure to the extent of ₹ 32.45 Crores only on the basis of incriminating material. The balance of ₹ 7.55 crores was offered as Adhoc in equal sharing of 3 brothers i.e. the appellant, his brothers Shri Motibhai Prajapati and Bhagwanbhai Prajapati. The Adhoc disclosure shown in the return of income for A.Y. 2012-13 with a rider that any undisclosed entry/income/transaction worked during the course of the block assessment proceedings will be set off against this Adhoc disclosure of Rs 2.52 Crores. The appellant has claimed this entry of ₹ 1.99 croresas set-off against the Adhoc disclosure of ₹ 2.52 Crores but the Ld. A.O. has not given the same because he has opined that the adhoc disclosure of ₹ 2.52 . crores was made in the A.Y. 2012-13 and ₹ 1.99 crores is pertaining to A.Y. 2006-07. It is pertinent to mention here that the said seized paper does not contain any date. Respectfully following the case of Rajasthan High Court 1972 (11) TMI 20 - RAJASTHAN HIGH COURT since the Adhoc disclosure of ₹ 2.52 crores was made with a rider that any undisclosed income/transaction/entry found during the course of the block assessment proceedings shall be set off against this disclosure, the appellant is entitled for the legitimate claim. - Decided in favour of assessee

Summary

Issues:
1. Set off of adhoc disclosure for A.Y. 2012-13 against undisclosed income for A.Y. 2006-07.
2. Charging of interest under sections 234A, 234B, 234C & 234D of the Income Tax Act.

Analysis:
1. Set off of Adhoc Disclosure:
The appellant sought to set off an adhoc disclosure made for A.Y. 2012-13 against undisclosed income for A.Y. 2006-07. The Assessing Officer denied the set off, stating that the two amounts were for different assessment years and thus cannot be adjusted. The appellant argued that the disclosure of Rs. 40 crores was made without foreseeing specific assessment year-wise details, leading to a situation where a portion of the disclosure was treated as adhoc. The appellant claimed the right to set off this adhoc disclosure against the undisclosed income for A.Y. 2006-07. The lower authorities did not agree with this contention, resulting in the dismissal of the appeal.

2. Legal Precedent and Decision:
The Tribunal referred to a judgment of the Rajasthan High Court regarding cash credits and unexplained income in books of account. Relying on this precedent, the Tribunal held that for the purpose of unexplained income contained in books of account, the relevant previous year of the assessee should be considered when including such unexplained credits. Considering this, and given that the adhoc disclosure was made with a rider allowing set off against any undisclosed income found during the block assessment proceedings, the Tribunal concluded that the appellant was entitled to the legitimate claim for set off. Consequently, the appeal filed by the Assessee was allowed, overturning the decision of the lower authorities.

3. Charging of Interest:
Regarding the charging of interest under sections 234A, 234B, 234C & 234D of the Income Tax Act, the appellant contended that the interest should be withdrawn. However, the judgment did not specifically address this issue, focusing primarily on the set off of adhoc disclosure against undisclosed income. Therefore, the decision on the charging of interest was not explicitly mentioned in the detailed analysis of the judgment.

In conclusion, the Tribunal's decision in this case primarily revolved around the set off of adhoc disclosure against undisclosed income for different assessment years, citing legal precedent to support the appellant's claim. The judgment highlights the importance of considering the relevant previous year for such adjustments and upholding the appellant's right to the legitimate claim for set off.