2014 (8) TMI 35 - HC - Income Tax

Advance tax paid but return not filed Undisclosed income or not Held that - The payment of advance tax by itself does not absolve the obligation of an assessee to file returns - It is only when a return is filed, that an assessing officer would be in a position to examine the details of income, expenditure and deductible incomes etc. - Following the decision in Commissioner of Income Tax v. B.R.Shah and others 2013 (1) TMI 345 - SUPREME COURT - payment of advance tax does not absolve an assessee from an obligation to file return disclosing total income for the relevant AY - income for that year would be treated as an undisclosed one - the contention of the revenue is upheld as regards the manner in which the income for a year for which no declaration was filed even after paying the advance tax the matter is remitted back ot the Tribunal for fresh consideration Decided in favour of Revenue.

Summary

Issues:
1. Whether failure to file a return by an assessee who paid advance tax leads to treating the income as undisclosed.
2. Whether payment of advance tax absolves the obligation of an assessee to file returns.
3. Clarity in law regarding treatment of income for a year for which returns were not filed despite paying advance tax.
4. Need for remand to Tribunal for working out details in block assessment cases under Chapter XIVB of the Income Tax Act.

Analysis:
Issue 1: The primary contention raised was whether the failure to file a return by an assessee who paid advance tax could result in treating the income as undisclosed. The Tribunal had accepted the respondents' argument that non-filing of returns by advance tax payers does not automatically lead to treating the income as undisclosed. However, the appellants argued that the failure to file a return could imply non-disclosure of income, citing a recent judgment of the Supreme Court. The High Court referred to the Supreme Court's decision in Commissioner of Income Tax v. B.R.Shah and others, emphasizing that advance tax payment does not absolve the obligation to file returns, and undisclosed income consequences apply.

Issue 2: Another aspect discussed was whether the payment of advance tax absolves the obligation of an assessee to file returns. The High Court clarified that the mere payment of advance tax does not relieve the assessee from the duty to file returns. It was highlighted that filing a return is crucial for the assessing officer to assess the details of income, expenditure, and deductible incomes accurately.

Issue 3: The judgment addressed the lack of clarity in the law regarding the treatment of income for a year when returns were not filed despite paying advance tax. The High Court resolved this ambiguity by referencing the Supreme Court's decision, which established that income for such years would be treated as undisclosed if returns were not filed, irrespective of advance tax payments. This clarification was crucial in determining the correct treatment of such income.

Issue 4: In cases of block assessments under Chapter XIVB of the Income Tax Act, the High Court emphasized the need for remand to the Tribunal for working out the details. It was noted that even in block assessments, the assessment must be conducted as if it were an ordinary one, as mandated by Section 158BH of the Act. Therefore, the High Court ordered a remand to the Tribunal for fresh consideration and disposal of all aspects raised, ensuring a comprehensive examination of all issues involved.

In conclusion, the High Court allowed the appeals, set aside the previous orders, and remanded the matters to the Tribunal for a thorough reconsideration of all issues, providing both parties with the opportunity to present their arguments.