2001 (10) TMI 294 - AT - Income Tax

Summary

Issues Involved:
1. Whether the salary income of the assessee constitutes undisclosed income.
2. The correctness of the Assessing Officer's computation of undisclosed income.
3. The validity of the Commissioner (Appeals)'s order excluding salary income from undisclosed income.

Issue-wise Detailed Analysis:

1. Whether the salary income of the assessee constitutes undisclosed income:
The assessee, a professor at Patna University, claimed that her salary income should not be considered as undisclosed income. During the search and seizure operations conducted on 17-12-1997, cash and valuable securities were seized, and a notice under section 158BC of the Income-tax Act, 1961 was served. The assessee filed belated returns declaring an undisclosed income of Rs. 1,79,980/-. The Assessing Officer, however, included the salary income in the undisclosed income assessment, which the assessee contested.

2. The correctness of the Assessing Officer's computation of undisclosed income:
The Assessing Officer assessed the undisclosed income for various assessment years, aggregating it to Rs. 7,63,170, with tax payable at Rs. 4,57,902 and interest under section 158BFA amounting to Rs. 1,83,160, making the total payable Rs. 6,41,062. The computation included salary income, dividend income, interest income, and other sources of income for the block period. The assessee argued that the salary income was disclosed to her employer and therefore should not be considered undisclosed.

3. The validity of the Commissioner (Appeals)'s order excluding salary income from undisclosed income:
The Commissioner (Appeals) concluded that the salary income of the assessee cannot be considered as undisclosed income and ordered its exclusion from the undisclosed income for the block period. The revenue appealed against this decision, claiming that the appellate order was not based on the correct proposition of law.

Tribunal's Findings:

Disclosure of Salary Income:
The Tribunal noted that the assessee had furnished details of her salary income to her employer in Form No. 16, and the employer had deducted income tax from her salary. The University, being a state-controlled institution, filed annual returns under section 206 of the Act with the concerned Income-tax officer. The Tribunal emphasized that the term 'disclosed for the purpose of this Act' signifies that the income disclosed to the authority concerned should be such that it can charge or deduct income-tax from it. The assessee's disclosure of salary income to her employer satisfied this requirement.

Definition and Computation of Undisclosed Income:
The Tribunal referred to the inclusive definition of 'undisclosed income' under clause (b) of section 158B of the Act and the mechanics for computation detailed in section 158BB. It highlighted that undisclosed income is assessed separately for the block period and not as the total income or loss of the previous year. The Tribunal found that the assessee's salary income, disclosed to her employer and subjected to tax deduction at source, did not constitute undisclosed income.

Conclusion:
The Tribunal upheld the Commissioner (Appeals)'s order, finding no fault with the exclusion of the salary income from the undisclosed income assessment. The appeal of the revenue was declined, and the cross-objection of the assessee was granted. The Tribunal concluded that the assessee's salary income, disclosed to her employer in Form No. 16, was not undisclosed income within the meaning of clause (b) of section 158B of the Act.