2005 (12) TMI 61 - HC - Income Tax

Search - Whether Tribunal was justified in holding that the professional income of the assessment year 1996-97 amounting to Rs. 44, 800 was undisclosed income at the hands of the assessee? - even if we accept the contention of Mr. Chaphekar learned senior counsel that sub-section (3) of section 158BA of the Act is not exhaustive of the cases in which income should not be treated as undisclosed income in the present case we find no material to establish that the appellant had in any manner disclosed his income for the purpose of the Act before the date of search - we answer the substantial question of law in affirmative and hold that the Tribunal was justified in coming to the finding that the professional income of the appellant for the assessment year 1996-97 amounting to Rs. 44, 800 was undisclosed income and was liable to be assessed as such under Chapter XIV-B

Summary

Issues:
- Interpretation of "undisclosed income" under Chapter XIV-B of the Income-tax Act, 1961.
- Assessment of professional income for the assessment year 1996-97 as undisclosed income.
- Application of section 139(1) regarding filing of income tax return.
- Examination of disclosure requirements before and after a search operation.

Analysis:
The judgment involved an appeal under section 260A of the Income-tax Act, 1961, concerning the assessment of undisclosed income for the assessment year 1996-97. The appellant's professional income of Rs. 44,800 was the subject of dispute. The Tribunal held that this income was liable to be assessed as undisclosed income under Chapter XIV-B of the Act. The substantial question of law was whether the Tribunal's decision was justified in considering the professional income as undisclosed. The appellant argued that since the income was disclosed in the return filed after the search, Chapter XIV-B should not apply. The Department contended that the income was disclosed post-search to evade consequences, citing a Madras High Court judgment. The appellant referred to another Madras High Court case where advance tax payment was considered as income disclosure.

The court analyzed the relevant sections of the Act, particularly sections 158B and 158BA, defining "undisclosed income" and the assessment process post a search operation. It was noted that if a person fails to file a return by the due date under section 139(1), it implies non-disclosure of income. The court highlighted section 158BA(3), stating that income must be recorded before the search date to avoid being included in the block period. The appellant argued for a broader interpretation beyond section 158BA(3), citing a case where advance tax payment was deemed as disclosure.

The court agreed that pre-search income disclosure could prevent classification as undisclosed income. However, in this case, as there was no evidence of pre-search disclosure, the professional income was rightfully treated as undisclosed income. The judgment affirmed the Tribunal's decision, concluding that the professional income of Rs. 44,800 for the assessment year 1996-97 was undisclosed income under Chapter XIV-B of the Act.