2013 (1) TMI 154 - HC - Income Tax

Deductions under Chapter IV and VI-A of the Income tax Act, 1961 claimed in regular assessment allowed while computing the undisclosed income under section 158BB(1) - Held that - As earlier total income or loss was computed in accordance with Chapter IV, however the word Chapter IV was substituted by the word the Act by Finance Act, 2002 with effect from 1st July, 1995 and, therefore, while computing the undisclosed income or loss deduction under Chapter VI-A is admissible. The Tribunal had rightly held that the deduction under Chapter VI-A has to be given while computing total income or loss. Goodwill received on retirement added as undisclosed income - Tribunal deleted the addition - whether Tribunal justified in holding that the income which was duly disclosed in original assessment could not form part of undisclosed income as defined in Section 158 B (b) - Held that - Sum of Rs. 1,50,500/- received on assessee s retirement was disclosed in the regular return filed for the assessment year 1993-94 which has been taken into consideration while passing regular assessment order under section 143(3) therefore, the said amount cannot be included under sub-clause (b) of section 158B - The order of the Tribunal does not suffer from any legal infirmity.

Summary

Issues:
1. Allowability of deductions claimed under Chapter IV and VI-A of the Income Tax Act, 1961 for computing undisclosed income.
2. Determination of undisclosed income in relation to income disclosed and considered in original assessment proceedings.
3. Deletion of addition made under section 145 read with section 55(2) of the Act regarding goodwill received.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal regarding the allowance of deductions claimed under Chapter IV and VI-A of the Income Tax Act, 1961 for computing undisclosed income for the block period 1.4.1985 to 14.11.1995. The Tribunal relied on a letter clarifying that deductions due to the assessee in any previous years included in the block period would not form part of undisclosed income. The High Court upheld the Tribunal's decision, emphasizing that deductions under Chapter VI-A should be considered while computing total income or loss, as per the statutory provisions.

2. The issue of whether the income disclosed and considered in the original assessment proceedings could form part of undisclosed income was also raised. The High Court noted that the amount received by the assessee on his retirement from a firm had been disclosed in the regular return for the assessment year 1993-94 and considered in the assessment order. As a result, the Court held that this amount could not be treated as undisclosed income under the relevant provisions of the Income Tax Act.

3. Regarding the deletion of an addition made under section 145 read with section 55(2) of the Act concerning goodwill received by the assessee, the High Court found that the amount had been disclosed in the regular return for the assessment year 1993-94 and considered in the assessment order. As the Department did not dispute this fact, the Court ruled that the amount could not be categorized as undisclosed income. Therefore, the Tribunal's decision to delete this addition was upheld by the High Court.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decisions on the issues raised, including the allowance of deductions under Chapter VI-A for computing undisclosed income and the treatment of disclosed income in the original assessment proceedings. The Court found no legal infirmity in the Tribunal's order and upheld the deletion of the addition related to the goodwill received by the assessee.