2018 (5) TMI 635 - HC - Income Tax

Addition made for the broken period as undisclosed income - Estimate of proportionate income on the basis of the income disclosed for the AY 1999-2000? - double taxation for same block assessment year - Held that - It may not be necessary for us to decide the questions of law involved in these Appeals, when the apprehension of the assessees being, they should not be taxed twice for the same block assessment period. Thus, it would be sufficient for us to clarify this aspect of the matter. Question left open with a direction to the Assessing Officer to ensure that the assessees should not be taxed twice for the same block assessment period from 01.04.1988 to 20.09.1998. Addition of membership fee paid to Andhra Club as undisclosed income - whether the payment effected by them for acquiring the membership in a Social Club should be allowed? - Held that - After considering the factual matrix and re-appreciating, what was placed before the Commissioner of Income Tax Appeals, in our opinion, rightly held that the personal expenses cannot be allowed as business expenditure, more so, when there was no evidence so as to prove that the membership of the Social Club was acquired for entertaining the customers. Thus, the second question of law, involved answered against the appellant therein.

Summary

Issues:
1. Whether addition made for the broken period as undisclosed income is justified?
2. Whether membership fee paid to a club can be considered as undisclosed income?

Analysis:
1. The appeals were against the ITAT's order for the Block Assessment Period from 01.04.1988 to 20.09.1998. The assessees feared being taxed twice for the same period. The Assessing Officer estimated income based on the return for AY 1999-2000 as no materials were available post 31.03.1997. The assessees argued against this estimation. The Revenue cited a Supreme Court ruling supporting their stance. The court clarified that the assessees should not be taxed twice for the same period, directing the Assessing Officer accordingly. The questions of law were not decided based on this clarification.

2. In one of the appeals, the ITAT disallowed the membership fee paid to a Social Club as business expenditure. The court upheld this decision, stating personal expenses cannot be claimed as business expenditure without evidence of being for customer entertainment. Therefore, the second question of law was answered against the appellant. Both tax cases were disposed of with no costs awarded.