2013 (11) TMI 18 - HC - Income Tax

Addition of undisclosed income of the block period u/s 158BB of the Income Tax Act Search was conducted on the premises of the Assessee - Added Rs. 30,000 as opening cash in hand on April 1, 1985, as undisclosed income for the assessment year 1986-87 on the ground that the assessee was not maintaining personal books of account Held that - Balance-sheet is a statement of affairs showing the assets and liabilities of the assessee as on a particular date ; it also incorporates opening balance of various assets and liabilities brought forward from earlier years along with net increase/decrease in each of the assets and liabilities during the year ; if the closing balance or cash in hand is disclosed income, the opening balance cannot be regarded to be undisclosed income Reliance has been placed on the judgment in the case of CIT v. Shamlal Balram Gurbani 2000 (2) TMI 37 - BOMBAY High Court Decided against the Revenue. Non-filing of the return on the ground that the total income of the assessee remains below the taxable limit after allowing the deduction available under the law be the ground to hold the income to be undisclosed one Held that - Respondent-assessee was filing his return and return of the partnership firm, of which he is a partner, regularly and the learned Assessing Officer has assessed the income of the partnership firm as well as of the assessee and has not doubted any entry therein, therefore, non-filing of the return for the assessment year 1995-96 on the ground that after allowing the deduction under the Act income remains below the taxable limit cannot be treated as undisclosed income for the block period Reliance has been placed on the judgments in the cases of CIT v. Vimla Khatri 2006 (1) TMI 117 - MADHYA PRADESH High Court Decided against the Revenue.

Summary

Issues involved:
1. Whether the Income-tax Appellate Tribunal was correct in deleting the addition of Rs. 39,356 for non-filing of return for the assessment year 1995-96?
2. Whether the Income-tax Appellate Tribunal was correct in deleting the addition of Rs. 4 lakhs made on account of receipt of alleged NRI gifts?

Issue 1 - Non-filing of Return for Assessment Year 1995-96:
The case involved a search at the assessee's premises leading to the addition of Rs. 30,000 as undisclosed income for the assessment year 1986-87 due to lack of personal books of account. However, the Tribunal considered the balance-sheet submitted by the assessee, where the closing balance was disclosed, and held that the opening balance cannot be undisclosed income. The court referred to a Bombay High Court case to support this view. As the entries in the balance-sheet were undisputed and the Tribunal's conclusion was fact-based, no substantial question of law arose. The court ruled in favor of the assessee, noting the absence of undisclosed income.

Issue 2 - Addition of NRI Gifts as Undisclosed Income:
The Assessing Officer treated Rs. 4,00,000 received as NRI gifts by the assessee as undisclosed income under section 69 of the Act. The Tribunal, however, found that the gifts were received through proper banking channels, transferred to the partnership firm's account, and duly reflected in the balance-sheet. The Tribunal highlighted the regular filing of returns by the assessee and the partnership firm, with no doubts raised by the Assessing Officer. The court emphasized that non-filing of the return for an assessment year where income remains below the taxable limit does not constitute undisclosed income for block assessment. Citing various judgments, including those from the Madhya Pradesh High Court and the Bombay High Court, the court held that the gifts received through proper channels and duly recorded cannot be deemed undisclosed income. Consequently, the court ruled in favor of the assessee, dismissing the appeal based on the answers to the substantial questions of law.

This comprehensive analysis of the judgment addresses the issues involved, providing detailed insights into the legal reasoning and conclusions reached by the court.