2001 (10) TMI 285 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 11,75,000 as undisclosed income.
2. Rejection of appellant's explanation regarding the addition.
3. Inclusion of income returned for AY 1997-98 as undisclosed income u/s 158BB(1)(c).
4. Assessment being barred by limitation.

Summary:

Issue 1: Addition of Rs. 11,75,000 as Undisclosed Income
The assessee contested the addition of Rs. 11,75,000 made by the AO and confirmed by the CIT(A) as undisclosed income. The AO rejected the assessee's retraction of the statement made during the search, citing a declaration made u/s 132(4). The CIT(A) upheld this addition, stating that the appellant, an educated person, had clearly stated that the sum was his income and attempted to suppress it by manipulation.

Issue 2: Rejection of Appellant's Explanation
The assessee argued that the amount was accounted for in the books of M/s Satyabala Financial Services, a proprietary concern of his wife, and thus, adding it to his individual assessment amounted to double taxation. The Tribunal found that the retracted statement carried no value and could not be enforced against the assessee. Consequently, the inclusion of Rs. 11,75,000 as undisclosed income was deemed unsustainable under law.

Issue 3: Inclusion of Income Returned for AY 1997-98 as Undisclosed Income u/s 158BB(1)(c)
The AO included Rs. 47,032, returned by the appellant for AY 1997-98, as undisclosed income in the block assessment, citing late filing of the return. The CIT(A) upheld this inclusion. However, the Tribunal noted that merely filing a return late does not render the income undisclosed u/s 158BB(1)(c). The section prescribes the method of computing undisclosed income but does not classify income shown in a late return as undisclosed. Thus, the addition was found unsustainable under law.

Issue 4: Assessment Being Barred by Limitation
The assessee argued that the assessment was barred by limitation, as the search concluded on 30th Sept., 1997, and the assessment should have been completed by 30th Sept., 1999. The CIT(A) dismissed this ground, stating that follow-up actions continued until 1st Oct., 1997. The Tribunal, however, observed that the search concluded on 30th Sept., 1997, and the assessment order passed on 28th Oct., 1999, was beyond the prescribed two-year period. The Department's contention that the search concluded on 1st Oct., 1997, was not supported by a notice u/s 158BD. Therefore, the assessment order was quashed as it was barred by limitation.

Conclusion:
The Tribunal quashed the assessment order, finding it barred by limitation and unsustainable under law. The appeal of the assessee was allowed.