2020 (1) TMI 1039 - HC - Income Tax

Undisclosed income - assessment u/s158BC r.w.s.143(3) for the block period - adoption 4% gross profit on undisclosed turnover - assessee returned an undisclosed income in the block return of income - HELD THAT - Assessing Officer was directed to re-calculate the addition at the rate of 2% on the gross profit. The Tribunal nowhere has said that the undisclosed income which was filed by the appellant himself should not be taken into account. It is also pertinent to mention here that the assessee himself before the Assessing Officer had made a request that the income of ₹ 62,27,305/- declared by him be accepted and the assessment be completed. From perusal of the order passed by the Commissioner of Income Tax (Appeals) also, it is evident that the dispute was only with regard to rate of gross profit on the income which was not disclosed by the assessee. Therefore, it cannot be said that the Assessing Officer has disobeyed the direction contained in the order passed by the Tribunal.

Summary

Issues:
1. Justification of Assessing Officer in not following Tribunal's direction on calculating undisclosed income.
2. Tribunal's justification in holding Assessing Officer's action as correct.

Analysis:

Issue 1:
The appeal under Section 260-A of the Income Tax Act, 1961 raised the issue of whether the Assessing Officer was justified in not following the Tribunal's direction regarding the calculation of undisclosed income. The appellant, engaged in a copra business, had filed a return declaring an undisclosed income of ?62,27,305. The Assessing Officer, however, computed the undisclosed income at ?2,67,58,592 for the block period. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to adopt 4% gross profit, but the Tribunal later directed to adopt 2% gross profit based on comparable cases. The Assessing Officer, in compliance with the Tribunal's order, adopted a gross profit rate of 2%. The appellant contended that the income should have been computed as per the Tribunal's direction. However, the Court found that the Assessing Officer acted within the scope of the Tribunal's directions, and the undisclosed income declared by the appellant was taken into account. The Court held that the Assessing Officer did not disobey the Tribunal's direction, as the dispute was mainly regarding the rate of gross profit on the undisclosed income.

Issue 2:
The second issue raised was whether the Tribunal was justified in holding that the Assessing Officer correctly followed its direction. The Tribunal had directed the Assessing Officer to re-calculate the addition at a 2% gross profit rate. The Court noted that the Tribunal did not exclude the undisclosed income declared by the appellant from consideration. The Tribunal's order focused on estimating the gross profit based on subsequent years' averages. The Court concluded that the Assessing Officer did not act against the Tribunal's direction and upheld the order passed by the Assessing Officer. Consequently, both substantial questions of law were answered against the appellant and in favor of the revenue, leading to the dismissal of the appeal for lack of merit.