2019 (4) TMI 1179 - HC - Income Tax

Year of taxability of the undisclosed receipts - income from such undisclosed receipts as per the regular methodology - In the returns the assessee also disclosed the same amount of income, but shifted the year of earning such income as per its method of accounting and also claimed expenditure in relation to such additional receipts - assessee company is engaged in the business of development of real estate properties and is declaring income from such business on the basis of a particular methodology, which has been accepted in the course of regular assessments. - HELD THAT - It can be seen that the view of Assessing Officer would lead to contradictions, since the assessee s income would be based on two different methodologies. First would be income arising out of computation on the basis of regular methodology and the second would be in relation to the income on receipt basis. The tribunal therefore accepted that the declaration of the assessee in the returns filed post search, to avoid such contradictions the income had to be recognized as per the assessee s regular methodology. No question of law therefore arises. Deletion of the protective assessment - Since substantive assessment was confirmed and the benefit of telescoping granted by the CIT Appeals which was confirmed by the tribunal. Both issues are based entirely on facts. No question of law arises.

Summary

Issues:
1. Whether the undisclosed receipts should be taxed in the year of receipt or as per the returns filed under section 153A of the IT Act, 1961?
2. Deletion of protective assessment and benefit of telescoping granted by CIT Appeals.

Analysis:
1. The case involved the assessment of undisclosed income by an Assessee engaged in real estate development following a search and seizure action. The Assessee admitted undisclosed income during the search and filed returns shifting the year of earning such income as per their accounting method. The Assessing Officer and CIT (Appeals) objected to this method, leading the issue to the tribunal. The tribunal ruled in favor of the Assessee, stating that the income from undisclosed receipts should be assessed as per the Assessee's regular methodology to avoid contradictions. The tribunal found that the method adopted by the Assessing Officer would result in a mix of two methodologies, causing inherent contradictions in the final assessment. Therefore, the tribunal upheld the Assessee's plea to assess the income from undisclosed receipts as per the regular methodology accepted in past assessments.

2. The tribunal also addressed additional questions regarding the deletion of protective assessment and the benefit of telescoping granted by the CIT Appeals, which were confirmed by the tribunal. These issues were found to be entirely based on facts, with no question of law arising. Consequently, the Income Tax Appeals were dismissed, affirming the tribunal's decision in favor of the Assessee regarding the assessment of undisclosed receipts based on their regular methodology to maintain consistency and avoid contradictions in the income computation process.