2014 (11) TMI 803 - HC - Income Tax

Undisclosed income deleted - Return filed and available on record - Whether the Tribunal is right in deleting the addition as undisclosed income of the assessee received from M/s. Patira Packaging on the ground that the assessee had filed return for three AYs and the returns were on the record of the Income Tax Department and the income cannot be treated as undisclosed income of the assessee in view of the provisions of Section 158BB Held that - The Tribunal has not committed any error while coming to the conclusion that the income representing their shares from the partnership firm cannot be treated as undisclosed incomes of the assessees - the intention of the assessees is clearly reflected in so much as she had already filed the return before the date of search - assessee filed their returns, though beyond the due date specified u/s 139(1) of the Act, but before the date of search on 08.09.1995 - The returns of the income of the assessees were already on the records of the department before the date of search and it cannot be said that the assessees tried not to disclose their incomes from the partnership firm - when section 158BB(3) is read with section 158B(b), which defines undisclosed income, for income to be considered as disclosed income, it should have been disclosed in the return filed by the assessees before the search or requisition the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
- Appeal filed under section 260A of the Income Tax Act, 1961 by revenue against Tribunal's order
- Addition of undisclosed income by Assessing Officer
- Tribunal partly allowing the appeal filed by assessee
- Substantial question of law regarding deletion of addition as undisclosed income
- Interpretation of Section 158BB(1)(c) of the Income Tax Act, 1961

Analysis:
1. The appeals were filed by the revenue under section 260A of the Income Tax Act against the Tribunal's order dated 13.09.2001. The Assessing Officer had added undisclosed income to the assessee's assessment for the block year from 01.04.1985 to 08.09.1995. The Tribunal partly allowed the appeal filed by the assessee, leading to the current appeals by the revenue.

2. The main issue revolved around the interpretation of Section 158BB(1)(c) of the Income Tax Act, 1961. The substantial question of law was whether the Tribunal was correct in deleting the addition of undisclosed income received from a partnership firm, considering the assessee had filed returns for previous assessment years. The revenue contended that the Tribunal's decision was contrary to the provisions of Section 158BB(1)(c).

3. The revenue argued that the returns filed by the assessee for the assessment years 1989-90, 1991-92, and 1992-93 were beyond the prescribed time limit, and no request was made to condone the delay. Citing a Supreme Court decision, the revenue claimed that the income should be treated as undisclosed since the returns were not filed on time.

4. On the other hand, the respondent's advocate argued that the returns were filed before the search, indicating no intention to conceal income. The Tribunal's decision was supported, emphasizing that the assessee's returns were on record before the search date, indicating no attempt to hide income from the partnership firm.

5. The Court analyzed Section 158BB, which outlines the computation of undisclosed income for the block period. It was observed that the intention of the assessee, as reflected by filing returns before the search, was crucial. The Court noted that the case differed from the precedent cited by the revenue, as the returns were filed before the search in this instance.

6. Ultimately, the Court found no merit in the revenue's appeals. It was concluded that since the returns were filed before the search date, the income from the partnership firm could not be considered undisclosed. The Court dismissed the appeals based on the interpretation of relevant provisions of the Income Tax Act.