Madhya Pradesh High Court
Dr. Brijesh Lahoti vs Cit & Ors. on 13 December, 2005
Equivalent citations: (2006)200CTR(MP)499
JUDGMENT
By The Court:
This is an appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'Act').
2. The facts briefly are that a search was conducted under section 132 of the Act in the residential premises in which the appellant as well as his elder brother Dr. Rajendra Lahoti reside. During the search, books of account of the appellant were 'found, but not seized. On the basis of the said books of account, the appellant filed a return disclosing income from his profession at Rs. 44,800 under section 139(4) of the Act on 31-3-1997. Thereafter, the Assistant Commissioner, Circle 1, Indore, made an assessment of undisclosed income of the appellant for the block period comprising of assessment years 1988-89 to 1996-97. Aggrieved by the order of assessment dated 29-12-1997, the appellant filed appeal before the Tribunal, Indore Bench, lpdore, and the Tribunal held that for some of the assessment years, the appellant had no taxable income and for some other assessment years, the tax had been deducted at source. For the assessment year 1996-97, the appellant contended before the Tribunal that since he had maintained the books of account and in his return of income filed under section 139(4) of the Act after search, income of Rs. 44,800 was disclosed by him, his aforesaid income was not liable to be taxed as undisclosed income (under) Chapter XIV-B of the Act. The Tribunal vide order dated 12-4-2002, rejected the aforesaid contention of the appellant and held that the income of Rs. 44,800 for the assessment year 1996-97 was liable to be assessed as 'undisclosed income'. Aggrieved by the order dated 12-4-2002 of the Tribunal, the appellant filed this appeal.
3. On 17-7-2002, this court while admitting the appeal, formulated the following substantial question of law which arises for decision in this case :
"Whether, in the facts and the circumstances of the case, the Tribunal was justified in holding that the professional income of the assessment year 1996-97 amounting to Rs. 44,800 was undisclosed income at the hands of the assessee ?"
4. Mr. G.M. Chaphekar, learned senior counsel appearing for the appellant, submitted that in the books of account of the appellant, the professional income of Rs. 44,800 was disclosed and when the search was conducted on 20-12-1996, the department also came to know about the professional income of the appellant. He vehemently argued that since the income of Rs. 44,800 for the assessment year 1996-97 was disclosed to the department at the time of search, it is not a case where the provisions of Chapter XIV-B of the Act relating to the assessment of undisclosed income could be applied. In support of his contention, he referred to the definition of 'undisclosed income' in section 158B(b) of the Act and submitted that if the income could have been disclosed by the assessee under the Act, such income would not be undisclosed income, to which Chapter XIV-B would be applicable. He submitted that under section 139(4) of the Act, the assessee had a right to file his return of income for any previous year at any time before expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever was earlier, and, therefore, in this case, for the assessment year 1996-97, the appellant had a right to file return under section 139(4) of the Act and disclose his income in such return on or before 31-3-1997. He submitted that since the appellant had filed his return of income for the assessment year 1996-97 on 31-3-1997 disclosing his income of Rs. 44,800, in exercise of his said right under section 139(4) of the Act, this is not a case where the provisions of Chapter XIV-B of the Act relating to assessment of 'undisclosed income' could be applied.
5. Mr. R.L. Jain, learned senior counsel appearing for the department, on the other hand, submitted that for assessment year 1996-97, the appellant was required to file return of income under section 139(1) of the Act on or before 31-7-1996, but the appellant had not filed return on or before 31-7-1996. He submitted that search was conducted on 20-12-1996 and only thereafter the appellant filed his return of come for assessment year 1996-97 on 31-3-1997 to save himself from the consequences of assessment of 'undisclosed income' under Chapter XIV-B of the Act. He relied on the decision of the learned Single Judge of the Madras High Court in B. Noorsingh v. Union of India (2001) 249 ITR 378 (Mad), wherein it has been held that in search cases where the time for filing the return under section 139(1) of the Act has not expired, income disclosed in the books of account is not treated as undisclosed income, but once search takes place, the assessee is denied an opportunity to file a return after the period specified in section 139(1) of the Act and if he files such a return after expiry of period specified under section 139(1), income has to be regarded as undisclosed income'. He relied on the observations of the learned Single Judge in the case B. Noorsingh (supra) to the effect that after having suffered a search, the assessee is not to be enabled to escape the consequences of his failure to disclose all his income by filing a return after the search and after expiry of the time prescribed under section 139(1) and by disclosing therein income which had remained undisclosed upto the date of the search.
6. Mr. Chaphekar, learned senior counsel appearing for the appellant, cited the judgment of the Division Bench of the Madras High Court in Assistant Commissioner v. A.R. Enterprises (2005) 274 ITR 110 (Mad), in which the aforesaid judgment of the learned Single Judge in B. Noorsingh (supra) has been explained and it has been held therein that the payment of advance tax amounts to disclosure of income by the assessee and where the advance tax has been paid, but no return has been filed on the due date as specified under section 139(1) of the Act, it would not be a case of undisclosed income.
7. Sections 158B and 158BA of the Act which are relevant for the purpose of deciding the aforesaid substantial question of law in this case, are quoted hereinbelow :
"Section 158B. In this Chapter, unless the context otherwise requires,
(a) 'block period' means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A and also includes the period upto the date of the commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made :
Provided that where the search is initiated or the requisition is made before the 1-6-2001, the provisions of this clause shall have effect as if for the words 'six assessment years', the words 'ten assessment years' had been substituted;
(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, or any expense, deduction or allowance claimed under this Act which is found to be false.
Section 58BA. Assessment of undisclosed income as a result of search-(1) Notwithstanding anything contained in any other provisions of this Act, where after the 30-6-1995, a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of any person, then, the assessing officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter.
(2) The total undisclosed income relating to the block period shall be charged to tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not.
Explanation : For the removal of doubts, it is hereby declared that-
(a) the assessment made under this Chapter shall be in addition to the regular assessment in respect of each previous year included in the block period;
(b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period.
(c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.
(3) Where the assessee proves to the satisfaction of the assessing officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period."
8. A reading of clause (b) of section 158B of the Act shows that '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 mentioned therein which represents wholly or partly income or property which has not been disclosed or which would not have been disclosed for the purposes of the Act. Thus, a case where the income has not been disclosed for the purpose of the Act will also be a case of undisclosed income. Section 139(1) of the Act requires that a person, if his total income or the total income of any person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner setting forth such other particulars, as may be prescribed. If a person whose income during the previous year exceeds the maximum income which was not chargeable to income-tax, does not file a return of his income on or before the due date as specified in section 139(1) of the Act, it has to be normally held that his income has not been disclosed for the purpose of this Act. This interpretation given by us finds support in the language used in sub-section (3) of section 158BA of the Act which provides inter alia, that where the assessee proves to the satisfaction of the assessing officer that any part of income referred to in sub-section (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under section 139(1) of the Act for the previous year has not expired and such income or the transactions relating to such income are recorded on or before the date of the search or requisition of the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period. Thus, if the assessee does not disclose any income in return filed before the due date of filing such return under section 139(1) of the Act, notwithstanding the fact that his income is reflected in books of account at the time of search, his income is to be assessed as undisclosed income.
9. Mr. Chaphekar, learned senior counsel appearing for appellant, submitted that there may be cases outside sub-section (3) of section 158BA of the Act where it can be held that income of the assessee has been disclosed. In fact, he relied on the Division Bench judgment of the Madras High Court in the case of A.R. Enterprises (supra) in support of his submission in which payment of advance tax before the date of search, even in a case where no return had been filed under section 139(1) of the Act, has been held to be a case where income has been disclosed.
10. We agree with Mr. Chaphekar, learned senior counsel for appellant, that where the assessee discloses his income to the department before the date of search in some manner or the other, it may be difficult to hold that such income is to be treated as undisclosed income for the purpose of assessment in accordance with Chapter XIV-B of the Act. In A.R. Enterprises (supra), the Division Bench of the Madras High Court has found that search had taken place on 23-2-1996, but for the assessment year 1995-96 even though the assessee had not filed the return, it had paid advance tax of Rs. 4,80,000 in three instalments on 15-9-1994, 12-12-1994 and 15-3-1995 much before search and the Division Bench accordingly held that the income of the assessee in that case cannot be treated to be as 'undisclosed income' for the purpose of assessment under Chapter XIV-B of the Act. But, in the present case, the search took place on 20-12-1996 and there was no material to show that before 20-12-1996 the appellant had in any manner disclosed his income to the authorities under the Act. Thus, even if we accept the contention of Mr. Chaphekar learned senior counsel, that sub-section (3) of section 158BA of the Act is not exhaustive of the cases in which income should not be treated as undisclosed income, in the present case, we find no material to establish that the appellant had, in any manner, disclosed his income for the purpose of the Act before the date of search on 20-12-1996.
11. In the result, we answer the substantial question of law in positive and hold that the Tribunal was justified to come to the finding that the professional income of the appellant for the assessment year 1996-97 amounting to Rs. 44,800 was undisclosed income and was liable to be assessed as such under Chapter XIV-B of the Act.