1998 (4) TMI 175 - AT - Income Tax

Summary

Issues:
Taxation of undisclosed income, computation of income, application of exemptions, interpretation of provisions under section 158BB, due date for filing return of income, levy of tax under section 113, basic exemption applicability, total undisclosed income for Block Period.

Analysis:

1. Taxation of Undisclosed Income:
The appeals were against orders of the Assistant Commissioner of Income-tax for the Block Assessment Period. The issue raised was regarding the taxing of aggregate profits, interest, and partnership salary at 60% from a firm. The definition of undisclosed income under section 158B(b) was crucial in determining the undisclosed income, which includes various assets or income not disclosed by the assessee.

2. Computation of Income and Exemptions:
The appellants argued that the computation of income should consider basic exemptions and exemptions under section 88 of the IT Act. They contended that the undisclosed income should exclude the basic exemption amount, especially if the return of income had not been filed within the due date. However, the Departmental Representative emphasized that the provisions of Chapter XIV-B are self-contained, and if the return is not filed within the due date, the entire income is considered undisclosed.

3. Interpretation of Section 158BB:
The interpretation of section 158BB(c) was crucial in determining the admissibility of deductions from undisclosed income. It was highlighted that if the due date for filing the return of income had expired without filing, no deduction would be admissible. The due date for filing the return of income was specified under section 139(1), and failure to file within this due date would result in the income being treated as undisclosed.

4. Levy of Tax under Section 113:
Section 113 specifies the tax rate for total undisclosed income of the Block Period at 60%. The Tribunal clarified that the tax rate of 60% is applicable to the undisclosed income of the Block Period and not specific to any assessment year. Therefore, the basic exemption allowed for a particular assessment year does not apply when charging tax at 60% on undisclosed income.

5. Total Undisclosed Income for Block Period:
The Tribunal concluded that the tax is charged on the total income for the Block Period, and it cannot be reduced by excluding parts not chargeable to tax under normal provisions for individual assessment years. The argument for applying section 88 exemptions was dismissed due to lack of supporting facts or evidence.

In conclusion, the appeals filed by different assessees were dismissed based on the analysis of the undisclosed income, due dates for filing returns, levy of tax under section 113, and the inapplicability of specific exemptions in charging tax on undisclosed income for the Block Period.