2018 (11) TMI 1257 - HC - Income Tax

Validity of Block assessment u/s 158BC - suppression found on search - assessee had not disclosed the sales turnover as found in search in the books of accounts - Held that - Admittedly the assessee started the Bar Hotel in September, 1998. The search was conducted on 29.07.1999. Hence, the block period under Section 158BC were between September, 1998 to 31.03.1999 and 01.04.1999 to 29.07.1999, the assessment years being 1999-2000 and 2000-2001. The notice under Section 158BC read with Section 158BD was issued on 19.11.199. At that point, the time for filing of return even in the first block period had not expired, being 31.12.1999. As rightly noticed by the Tribunal, though an intelligent assumption has been made that the returns would not have disclosed an excess sale consideration but for the search; it remains in the realm of an assumption. There were no books of accounts recovered from the assessee s business premises which showed a lesser sale consideration. Statements of sales were recovered on search both from the assessee s business premises as also the residence of the Managing Director. The statements recovered from the residence of the Managing Director showed a larger consideration. It cannot be assumed that the returns filed would have shown only the figures in the statements recovered from the business premises. As recorded by the Tribunal that the returns for both the assessment years, being 1999-2000 and 2000-2001, was filed by the assessee showing the higher sale consideration as has been found from the documents recovered from the residence of the Managing Director. Hence, if at all, the search materials could have led to a consideration for a re-assessment if there was no correct disclosure and in no circumstance a block assessment. We are, hence, not inclined to interfere with the order of the Tribunal and we answer the question of law in favour of the assessee

Summary

Issues:
1. Whether the Tribunal was right in deleting the entire block assessment based on the time left for filing returns and non-disclosure of sales turnover?

Analysis:

The judgment pertains to a search conducted under Section 132 of the Income Tax Act, 1961. The Revenue challenged the Tribunal's decision regarding the block assessment. The key contention was whether the Tribunal was justified in nullifying the block assessment solely because the assessee had time remaining to file returns and had not disclosed the sales turnover found during the search. The Managing Director's residence and business premises were searched, revealing conflicting statements on sales consideration. The Revenue argued that the suppression discovered during the search constituted undisclosed income. The Assessing Officer also noted revised returns filed with the Sales Tax Department for the relevant assessment years. The Revenue relied on previous court decisions to support its position.

The court examined the precedents cited by the Revenue and found them inapplicable to the current case. The court distinguished a case involving sales suppression without corresponding purchase suppression, emphasizing the unique circumstances of each case. Another case cited by the Revenue was analyzed to determine its relevance, considering the timeline of events and the disclosure of sales turnover. The court noted that the search materials did not conclusively indicate a lack of correct disclosure, leading to the conclusion that a block assessment was unwarranted.

Regarding the applicability of the previous court decisions, the court highlighted the timeline of events, including the commencement of business, search dates, and filing deadlines. It was observed that the returns filed by the assessee reflected the higher sales consideration discovered during the search. The court emphasized that the absence of incriminating evidence in the form of recovered books of accounts supported the assessee's position. Ultimately, the court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue. The appeal was dismissed, with no costs awarded.

In conclusion, the court's analysis focused on the specific circumstances of the case, including the search findings, timeline of events, and adequacy of disclosure in the filed returns. The judgment underscored the importance of concrete evidence in supporting claims of undisclosed income and highlighted the need for a thorough assessment of facts before imposing block assessments.