1997 (5) TMI 78 - AT - Income Tax

Summary

Issues involved:
1. Inclusion of undisclosed income for a specific assessment year.
2. Allowance of deductions under Chapter VI-A in block assessment.
3. Claim of rebate under section 88 of the Income-tax Act.

Issue 1 - Inclusion of undisclosed income for a specific assessment year:
The appeal challenged the inclusion of Rs. 64,636 as undisclosed income for the assessment year 1992-93. The contention was that the return of income for that year was belatedly filed, but the department argued that since the return was filed late, the income was correctly treated as undisclosed. The Tribunal noted that the basis for treating the income as undisclosed was not clear in the assessment order. It directed the Assessing Officer to reconsider the issue, taking into account that the return was filed before the search, and to provide reasons for the treatment.

Issue 2 - Allowance of deductions under Chapter VI-A in block assessment:
The dispute revolved around whether deductions under Chapter VI-A could be allowed in block assessment. The Tribunal analyzed the provisions of Chapter XIV-B, which governs block assessments, and noted that the undisclosed income for the block period should be computed in accordance with Chapter IV. It highlighted that the legislative intent, as clarified in the Explanation to section 158BB, was to disallow set off of brought forward losses in block assessments. The Tribunal concluded that deductions under Chapter VI-A cannot be allowed in block assessments, as the specific exclusion of other chapters indicated a restrictive approach towards deductions.

Issue 3 - Claim of rebate under section 88 of the Income-tax Act:
The contention was whether the assessee was entitled to claim rebate under section 88 in the block assessment. The Tribunal emphasized that the block assessment aimed to tax undisclosed income at a flat rate without allowing deductions or rebates. It pointed out that section 158BA(2) specified the tax rate for undisclosed income in block assessments. The Tribunal concluded that assessments under Chapter XIV-B did not permit the allowance of rebates like section 88, as the focus was on taxing undisclosed income without granting relief through deductions or rebates. Therefore, the claim for rebate under section 88 was not upheld.

Conclusion:
The Tribunal partly allowed the appeal, directing a reassessment of the undisclosed income issue for a specific assessment year and clarifying that deductions under Chapter VI-A and rebate under section 88 were not permissible in block assessments under Chapter XIV-B of the Income-tax Act.