2007 (12) TMI 270 - HC - Income Tax

Block Assessment under section 158BC 158BD Rectification of mistake The assessee had income for the assessment year 1994-95 and 1995-96 but had not filed returns for the two assessment years. The assessee filed returns in response to the notice under section 158BD including the amount for the assessment years but claiming that an application under the Voluntary Discloser of Income Scheme 1997 had been filed. The Assessing officer treated the undisclosed income under the provisions of section 158BC and computed the income. The Tribunal dismissed the appeal as it was infructuous in view of the acceptance of the voluntary disclosers made by the assessee. Held that the certificate u/s 68(2) of scheme placed before the tribunal for consideration and adjudication but it had not been taken into consideration by the Tribunal while passing the first order. That mistake had been rectified by the Tribunal. The appeal is dismissed.

Summary

Issues:
1. Validity of the voluntary disclosure scheme application filed after the date of search.
2. Consideration of the certificate under section 68(2) of the VDIS, 1997 by the Tribunal.

Issue 1: Validity of the voluntary disclosure scheme application filed after the date of search

The case involved an appeal against an order passed in M. P. No. 174/Mds/2005 in IT(SS) No. 24/ Mds/98, where the appellant, engaged in finance business, underwent a search and seizure operation under section 132 of the Income-tax Act, 1961. The search revealed undisclosed income for the assessment years 1994-95 and 1995-96. The appellant filed returns in response to a notice under section 158BD, including the amounts for the said assessment years, claiming that a voluntary disclosure under the Voluntary Disclosure of Income Scheme, 1997 (VDIS), was made. The Assessing Officer computed the undisclosed income under section 158BC. The Income-tax Appellate Tribunal dismissed the appeal filed by the assessee, but later allowed a miscellaneous petition based on a certificate issued under section 68(2) of the VDIS, 1997. The Commissioner of Income-tax challenged this decision, questioning the validity of the VDIS application filed after the search.

Issue 2: Consideration of the certificate under section 68(2) of the VDIS, 1997 by the Tribunal

The Tribunal rectified its earlier order by considering the certificate dated December 15, 1997, issued under section 68(2) of the VDIS, 1997, by the Commissioner of Income-tax, Tamil Nadu-IV, Chennai. This certificate was issued before the original order by the Tribunal but was not taken into account during the initial proceedings. The Tribunal acknowledged this oversight and directed the deletion of the amount covered by the VDIS scheme from the block assessment. The High Court observed that the Tribunal's correction of the mistake did not constitute an irregularity warranting the admission of the appeal. Consequently, the court dismissed the tax case appeal, upholding the Tribunal's decision to consider the certificate and rectify the earlier order.

This detailed analysis highlights the key legal issues addressed in the judgment, focusing on the validity of the VDIS application filed post-search and the Tribunal's consideration of the certificate under section 68(2) of the VDIS, 1997. The court's decision to dismiss the appeal underscores the importance of procedural compliance and the Tribunal's authority to rectify errors to ensure a just outcome.