The spreadover of income. - Income Tax - 229/CBDT

INSTRUCTION NO. 229/CBDT Dated: October 12, 1970 Section(s) Referred: 68 ,69 Statute: Income - Tax Act, 1961 In spite of the fact that clear instructions are issued on the above subject by board's D.O.NO.1/72/68-IT(INV) dated 4th July 1969 it appears that some doubts still exist on this subject. It is clearly stated in the above mentioned circular that a spreadover of income is justified if there are reasons to believe that the said income was in fact earned during the years for which the spreadover was that the income should not ordinarily be spreadover for more than 8 years and in case the CIT was of the view that spreadover should be granted for more than 8 years, the board's approval should be obtained. 2. For a spreadover for a period of 8 years the position is clarified again. Section 68 to 69 B provide for assessment of undisclosed income in the year in which the assessee was found in possession of the assets. These sections are enabling and not restrictive in scope do not prevent a spreadover being granted if there is evidence to indicate that the assets represent income of other years. The spreadover of income should be avoided. The spreadover of the disclosed income to years prior to the commencement of the business or to years after the peak credit is reached, or confined to those years in which the result of assessment is a loss or the allocation of a major portion of the income to those years in which there is a loss does not have any reasonable basis and has to be avoided. Subject to this remark if there is circumstantial evidence such as large sales licences quotas etc. in the earlier years which would indicate that income could have been earned in more than one year, a spread over would be justified and may be granted by the CsIT within their discretion upto 8 years.