1998 (2) TMI 165 - AT - Income Tax

Summary

Issues Involved:
1. Inclusion of non-taxable income for A.Ys. 1987-88 to 1991-92 as undisclosed income.
2. Assessment of income for A.Y. 1995-96 as undisclosed income.
3. Validity of assessment u/s 158BC without a search on the assessee.
4. Treatment of regular income for A.Y. 1995-96 as undisclosed income.

Summary:

1. Inclusion of Non-Taxable Income for A.Ys. 1987-88 to 1991-92 as Undisclosed Income:
The assessee challenged the inclusion of Rs. 47,723 as undisclosed income for A.Ys. 1987-88 to 1991-92. The Tribunal noted that the income for these years was below the taxable limit and, as per section 139 of the Act, the assessee was not required to file a return. The Tribunal referenced section 158B, which defines 'undisclosed income' and concluded that income below the taxable limit does not qualify as undisclosed income. The Tribunal directed the Assessing Officer to exclude Rs. 47,723 from the undisclosed income.

2. Assessment of Income for A.Y. 1995-96 as Undisclosed Income:
The assessee argued that the income of Rs. 68,256 for A.Y. 1995-96, declared in a return filed u/s 139(4), should not be treated as undisclosed income. The Tribunal examined section 158B(b) and concluded that income declared in regularly maintained books of account, which were seized during the search, does not fall under the category of undisclosed income. The Tribunal emphasized that the books were maintained for the purpose of the Income-tax Act and directed that the income of Rs. 68,256 should not be treated as undisclosed income.

3. Validity of Assessment u/s 158BC Without a Search on the Assessee:
The assessee contended that the assessment u/s 158BC was invalid as no search was conducted, and no panchanama was prepared. However, no arguments were raised on this point during the proceedings. The Tribunal found no merit in this ground and rejected it.

4. Treatment of Regular Income for A.Y. 1995-96 as Undisclosed Income:
The assessee challenged the inclusion of Rs. 83,665 as undisclosed income for A.Y. 1995-96. The Tribunal reiterated its stance that income declared in a return filed u/s 139(4) based on regularly maintained books of account does not constitute undisclosed income. The Tribunal directed the deletion of Rs. 83,665 from the undisclosed income.

Conclusion:
The appeal in IT (SS) A. No. 65/Ind./96 was allowed, and IT (SS) A. No. 68/Ind./96 was partly allowed. The Tribunal directed the exclusion of non-taxable income and regular income declared in returns filed u/s 139(4) from the undisclosed income.