Income Tax Appellate Tribunal - Indore
Smt. Sitadevi Daga vs Assistant Commissioner Of Income Tax. ... on 27 February, 1998
Equivalent citations: [1998]67ITD151(INDORE)
ORDER
S.K. Yadav, J.M.
1. These first appeals are preferred by the assessees against the assessment orders dt. 20th November, 1996, framed under s. 158BC r/w s. 143(3) of the IT Act in their respective hands. Since the assessment orders are challenged on common grounds, these appeals were heard together and are being disposed of by this consolidated order.
ITA No. 65/Ind/962. The assessment order is assailed on the following grounds by the assessee in this appeal:
(i) The learned AO has erred in treating the income below taxable limit pertaining to asst. yr. 1986-87 to 1991-92 at Rs. 47,723 as discussed in paras 7 and 4 as undisclosed income under s. 158 BB(1)(C) ignoring the instructions of col. No. 5 of p. 2 of the return Form 2B prescribed by the CBDT, Ministry of Finance, which is equivalent to Board's Circular as the return form is approved in rules by Board and is of binding nature on all officers under the IT Act, 1961 and also ignoring the provisions of s. 139(1) of the Act and, therefore, the addition of Rs. 47,723 which is assessed as undisclosed income is liable to be deleted.
(ii) The learned AO has erred in assessing the income of Rs. 47,723 as undisclosed income ignoring the Circular No. 717 at Sl. No. 39.3 (iv) and other provisions of the Act and also the fact that the particulars of entire income of asst. yr. 1987-88 to 1991-92 was already disclosed while filing the return of income of 1992-93 and as such the addition of Rs. 47,723 as undisclosed income is liable to be deleted.
(iii) The learned AO has erred in treating the regular income of Rs. 68,256 pertaining to the asst. yr. 1995-96 arrived at by regularly maintained books of accounts.
(iv) The learned AO has erred in making assessment on assessee under s. 158 BC of the Act when there was no search on assessee and no Panchnama of any sort was prepared by the Revenue in respect of the assessee.
3. Ground Nos. (i) and (ii) relate to the inclusion of non-taxable income for the asst. yrs. 1987-88 to 1991-92 amounting to Rs. 47,723 in the undisclosed income computed by the AO. The learned counsel for the assessee has urged that from the asst. yrs. 1987-88 to 1991-92 the income of the assessee was below taxable limit and the assessee was not supposed to file the return in respective assessment year. He has invited our attention to the provisions of s. 139 of the Act which directs the assessee to file his return of income if his total income from all sources during the previous year exceeded the maximum amount which is not chargeable to income-tax. In the relevant assessment year the income of the assessee computed by the AO in the block assessment is as under :
Asst. yr. Rs.
1987-88 13,101
1988-89 16,450
1989-90 4,235
1990-91 6,973
1991-92 6,964
________
47,727
________
Since the assessee was not supposed to file the return as per the provisions of the IT Act during the relevant assessment year, his income assessed in the relevant assessment year cannot be included in the undisclosed income, assessed by the AO in this block assessment. He further invited our attention to s. 158B in which the word 'undisclosed income' has been defined. From the plain reading of this sub-s. (b) of s. 158 it is quite obvious that the undisclosed income includes only that money which has not been or would not have been disclosed for the purpose of this Act. The income below the taxable limit is not supposed to be disclosed by the assessee for the purpose of this Act. He further invited our attention to the order of the Nagpur Bench of the Tribunal in the case of Kasturchand Baid vs. Asstt. CIT (1997) 58 TTJ (Nag) 253 in which the Tribunal has held that the AO could not treat the assessee's income as undisclosed income under s. 158BB(c) simply because the assessee had not filed the return for that year when the income was below taxable limit. The learned Departmental Representative on the other hand, relied on the assessment order.
4. We have heard the rival submissions of the parties and carefully perused the order of assessment and the relevant provisions of the IT Act and the documents placed on record. An identical issue has been raised in the assessee's group case in IT(SS) A. Nos. 66 to 69/Ind/96 in the case of Master Deepesh Daga vs. Asstt. CIT in which we have examined this issue in detail and after relying upon the Nagpur Bench decision, we were of the view that the income below the taxable limit in the relevant assessment year do not form part of the undisclosed income and the addition on this account towards undisclosed income is unwarranted and uncalled for. Since we have taken a particular view in similar set of facts in the group case of the assessee, we do not find any cogent reason to take a different view in this case. We, therefore, direct the AO to exclude the income for the asst. yrs. 1987-88 to 1991-92 amounting to Rs. 47,723 from the undisclosed income.
5. So far as ground No. 2 is concerned, the learned counsel for the assessee has strenuously argued that for the asst. yr. 1995-96 the return of income declaring income therein at Rs. 68,256 was filed on 30th January, 1996, within the period prescribed under s. 139(4) of the Act though beyond the period envisaged in s. 139(1) of the Act. This income was calculated on the basis of books regularly maintained during the previous year for the purpose of IT Act. The assessee has no other source of income except the interest income and capital gains. This fact can be ascertained from the computation of income and the return filed by the assessee.
Since the assessee does not have any other source of income except interest income, the books regularly maintained during the course of previous year cannot be called to have been maintained for any purpose other than the IT Act. During the course of search which was carried on on 20th November, 1995, the books of accounts regularly maintained by the assessee were seized by the Department. The return filed for the asst. yr. 1995-96 was prepared on the basis of books seized by the Department and returned income was accepted by the AO during the course of assessment. The learned counsel for the assessee has invited our attention to the provisions of s. 158B(c) in which the undisclosed income is defined. From the plain reading of this sub-section it is evident that only that income can be called undisclosed income which has not been or would not have been disclosed for the purpose of this Act. In the instant case, when the assessee has been maintaining the books of accounts regularly during the course of previous year, which were seized by the Revenue at the time of search and on the basis of these books of accounts the return was prepared and filed under s. 139(4) of the Act, on 3rd January, 1996, within the time allowed under the IT Act, the income declared by the assessee does not fall within the category of that income which would not have been disclosed for the purpose of this Act. The maintenance of books of accounts regularly during the course of previous year cannot be called to have been maintained for other purpose than the IT Act.
6. The learned counsel for the assessee further invited our attention to the provisions of s. 158BB and Circular No. 717 issued by the CBDT and submitted that as per cl. (b) of sub-s. (1) of s. 158BB if the return was filed under any clause of s. 139, the income declared therein would be deducted while computing the undisclosed income under this section.
7. In oppugnation, the learned Departmental Representative squarely relied on the assessment order. Besides, he submitted that the return was filed after the search was conducted by the Revenue authorities. The assessee's case does not fall within the purview of cl. (b) of sub-s. (1) of s. 158AB as only those income can be given a credit of while computing the undisclosed income, whose return has been filed under s. 139 or s. 147 but the assessment has not been made till the date of search or acquisition on the basis of the income disclosed in such return.
8. We have heard the rival submissions of the parties and carefully perused the orders of the authorities below and the relevant provisions of the Act. Primarily the assessee has raised two legal questions before us, one the income returned under s. 139(4) does not fall within the definition of the undisclosed income and the another the returned income should be adjusted while computing the undisclosed income under s. 158BB of the Act. For deciding the question whether the returned income for the asst. yr. 1995-96 falls within the definition of undisclosed income, we feel it proper to reproduce cl. (b) of s. 158B of the Act:
"(b) "undisclosed income" includes any money bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act."
From a plain reading of this section it is obvious that any money, bullion, jewellery or other article or thing or any income based on any entry in the books of accounts or other document or transaction where the above such items represent wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act, forms part of undisclosed income. It is very easy to determine that any income which has not been disclosed for the purpose of this Act is an undisclosed income but for that income which would not have been disclosed for the purpose of this Act, it is not easy to manifest it as undisclosed income. For determining such type of income the AO has to examine the surrounding circumstances under which that income has been detected or wherefrom that income has been noticed by the AO during the course of assessment. If it is noticed from the books of accounts of the assessee, the intention of the assessee must be examined in proper perspective as to what purpose the books were maintained by him. If the books are maintained for business purposes or any other purposes other than the IT Act, it could be gauged that the income would not have been disclosed for the purpose of this Act but if it is established from the surrounding circumstances that the assessee has maintained the books of accounts only for the purpose of IT Act and none else, only an inference can be drawn that the books were maintained for the purpose of IT Act and the income declared therein cannot be called to have been fallen within the category of income which would not have been disclosed for the purpose of this Act. A similar view was observed in the book of D.M. Harish at p. 7408, that the assessee's claim would be accepted if he shows that the income or transaction relating to such income are recorded in the books of accounts maintained in the normal course of business.
9. In the instant case the search was conducted on 20th November, 1985, and during the course of search the books of accounts were seized by the Revenue authorities and this fact is evident from the assessment order. The assessee has filed the return on 31st January, 1996, within the period prescribed under s. 139(4) of the Act on the basis of books regularly maintained by her during the course of previous year and seized by the Department at the time of search. The returned income was accepted by the Revenue authorities while framing the block assessment. It is also evident from the acknowledgment of the return and computation of income that the assessee had only interest income which is mentioned against column 'source' and no business income or otherwise. If the assessee had no intention of filing the return or declaring the income for the purpose of IT Act, there would not be any necessity for maintaining the books of accounts during the course of previous year. The maintenance of books of accounts and the computation of income on the basis of books seized by the Department is not denied by the Revenue. In these circumstances, the contention of the assessee is well founded that he had declared the income in the books of accounts which were maintained for the purpose of IT Act and for these reasons his income does not fall within the purview of that income which would not have been disclosed for the purpose of this Act. The stand of the Revenue that the return was filed after the search was conducted only with the intent to escape from the mischief of s. 158BB has been demolished by the assessee by placing the computation of income, balance sheet and P&L a/c. Once it is established from the documents available on record that only one inference can be drawn that the books were maintained for the purpose of IT Act, the returned income cannot be called an income which would not have been disclosed for the purpose of this Act. The onus is upon the Revenue to bring some material on record to prove that the books were maintained for other purposes than the IT Act and the returned income was an income which would not have been disclosed for the purposes of this Act, but no effort was made by the Revenue to disprove the contention of the assessee. In these circumstances, we are of the view that the returned income declared by the assessee does not form part of the undisclosed income.
10. The second argument of the assessee is that since the return has been filed under s. 139 of the Act, the returned income should be adjusted while computing the total undisclosed income under s. 158BB of the Act. For deciding this issue we also feel it proper to reproduce the relevant provisions of cl. (b) of s. 158BB of the Act:
"158BB(1). - The undisclosed income of the block period, shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with AO, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined, -
(a) xxxxx xxxxx xxxxx
(b) where returns of income have been filed under s. 139 or s. 147 but assessments have not been made till the date of search or requisition on the basis of the income disclosed in such returns;"
11. From a plain reading of this clause we find that this clause is applicable to those cases in which the return has been filed under s. 139 or s. 147 of the Act but the assessment has not been made till the date of search or requisition on the basis of the income disclosed in such return. The assessee's case does not fall within the category of this clause as the assessee has filed the return under s. 139(4) after the search was conducted at the premises of the assessee. From a careful reading of the provisions of s. 158BB we find that the legislature has provided different contingencies for computation of undisclosed income of the block period. Clause (a) deals with the cases in which the assessments are made under s. 143 or s. 144 or s. 147 of the Act. Clause (a) deals with those cases in which the returns were filed under s. 139 or s. 147 of the Act but the assessment has not been made till the date of search or requisition on the basis of income disclosed in such returns. Clause (c) deals with the cases in which due date of filing of the return has been expired but no return has been filed. Clause (d) deals with those cases in which the previous year has not ended on the date of filing of the return of income under sub-s. (1) of s. 139 has not expired. Clause (e) deals with the cases in which an order of settlement has been made. Clause (f) deals with those cases in which the assessment of undisclosed income has been earlier made under cl. (c) of s. 158BC. Since the assessee's case does not fall within any category of the case, we do not find any force in the argument of the assessee. We, therefore, reject the contention of the assessee that the assessee's case falls within the cl. (b) of sub-s. (1) of s. 158BB of the Act.
12. From a careful perusal of the assessment order we find that the undisclosed income i.e. Rs. 1,15,979 for the block period consists of Rs. 47,723 and Rs. 68,256. With regard to Rs. 47,723 we have already held that this income cannot be called as undisclosed income as it relates to the income below taxable limit assessed in the relevant assessment year and with regard to the other part of the undisclosed income i.e., Rs. 68,256 we find that it is the returned income declared by the assessee for the asst. yr. 1995-96 for which we have already expressed our views that this income does not partake the character of undisclosed income. We, therefore, set aside the assessment order and delete the addition made therein.
IT(SS) A. No. 68/Ind/96
13. In this appeal in ground Nos. 1 and 2 the assessee has assailed the order of assessment on the ground that the AO has erred in including the income for the asst. yrs. 1987-88, 1988-89 and 1989-90 at Rs. 16,552, Rs. 12,984 and Rs. 15,069, totalling to Rs. 44,605 which are below the taxable limit in the relevant assessment year in the undisclosed income. With regard to this issue we have already taken a view in IT(SS) A. No. 65/Ind/96 (supra) that the income below the taxable limit cannot form part of undisclosed income. For the reasons discussed therein, we delete the amount of Rs. 44,605 from the undisclosed income computed by the AO.
14. In ground No. 3 though the assessee has assailed the assessment order on the ground that the AO has erred in making assessment under s. 158BC of the Act when there was no search on the assessee and no Panchnama of any sort was prepared by the Revenue in respect of the assessee, but during the course of arguments no argument was raised on this point on behalf of the assessee. Since nothing was raised in support of this ground, we do not find any force therein. We, therefore, reject this ground.
15. In ground No. 4 the assessee has assailed the assessment order on the ground that the AO has erred in treating the regular income of Rs. 83,665 pertaining to the asst. yr. 1995-96 arrived at by regularly maintained books of accounts ignoring Circular No. 717 and other provisions of the Act which relate to the undisclosed income. An identical issue has been adjudicated by us in the other appeal of the assessee in which we have taken a view that if the return is filed under s. 139(4) of the Act declaring the income therein on the basis of the books regularly maintained during the course of previous year, the returned income cannot partake the character of undisclosed income. For the reasons discussed therein, we hold that the returned income of Rs. 83,665 does not form part of the undisclosed income. Accordingly, we delete this addition.
16. In the result, the appeal of the assessee in IT(SS) A. No. 65/Ind/1996 is allowed and IT(SS) A. No. 68/Ind/1996 is partly allowed.