Patna High Court
Joint Cit vs Dr. (Smt.) Reeta Singh on 1 October, 2001
Equivalent citations: (2004)89TTJ(NULL)956
ORDER
Dr. R.K. Yadav, J.M. Search and seizure operations were conducted on 17-12-1997, at the residential premises of the assessee, wherein cash and valuable securities were seized. Notice under section 158BC of the Income Tax Act, 1961 (in short the Act) was served on the assessee and returns were filed belatedly on 15-12-1999, declaring total undisclosed income of Rs. 1,79,980. The assessee is a professor of Economics at Patna University, Patna. Though she has income from salary and other sources, she filed her return upto 1990-91 and thereafter no returns were filed. She claimed that the salary income is not concealed income. Her claim was denounced by the assessing officer, who assessed her undisclosed income as follows :
Rs.
Rs.
Rs.
Asst. yr. 1988-89 to 1990-91 ...
Nil Asst. yr. 1991-92:, Income from salary Gross 63,619 12,000 51,619 51,619 Income from &O.P. Annual value under section 23(2) Nil Less: Iritt. payable to BSHW LTD.
5,000 (-)5,000 46,619 Dividend Income from Indian Co.
6,621 Dividend Income from UTI 1,620 Interest income :
N.S.C. Iritt. on 2,000 of 1984-85 448 Bank Intt.204
55,512 P.P.F. Interest 13,467 68,979 Less: Deductions under section 80CCB 10,000 Deduction under section 80L 8,893 under section P.P.F. Iritt.
13,467 32,360 32,360 Total Income 36,619 36,619 Asst. yr. 1992-93 Income from salary 57,480 Less : Under section 16(1) 12,000 45,480 Income from S.O.P. :
Annual value under section 23(2) Nil Less: Iritt. payable to BSHW 5,000 (-)5,000 40,480 Dividend Income:
From Indian Company 13.712 From UTI 1,620 Interest income from bank 246 Income from other sources 44,500 1,00,558 Less: Deduction under section 80CCB 10,000 Less.: Deduction under section 80L 10,000 20,000 20,000 Total income 80,558 80,558 Asst. yr. 1993-94 Income from salary 70,056 15,000 55,056 Income from S.O.P. Annual value under section 23(2) Nil Less: Intt. payable to BSHW ITD.
5,000 (-)5,000 50,056 Dividend income From Indian Co.
9,167 From UTI 6,205 Interest income from bank 1,288 P.P.F. Interest 40,044 1,06,760 Less: under section 10 P.P.F. interest u/s. 80L 40,044 7,000 47,044 47,044 Total income 59,716 59,716 Asst. yr. 1994-95:
Income from salary 74,115 Less: under section 16(1) 18,000 56,115 56,115 Income from SOP Annual value under section 23(2) Nil Less: Intt. payable to BSHW ITD.
5,000 (-)5,000 51,115 Dividend Income From Indian Co.
20,058 From UTI 9,325 Interest from bank 804 P.P.F. Interest 26,728 Income from other sources 60,000 1,68,030 Less : Deduction u/s. 10 P.P.F. Interest 26,728 Deduction under section 80L 10,000 36,728 36,728 Total Income 1,31,302 1,31,302 Asst. yr. 1995-96:
Income from salary 78,178 Less : unders,. 16(1) 15,000 63.178 63.178 Income from SOP Exempt.
Dividend Income From Indian Co.
13,091 From UTI 3,600 Interest from bank 796 P.P.F. Interest 33,536 1,14,201 Less: Deduction under section 10 P. P. F. 33,536 Less: Deduction under section 80L 10,000 43,536 43,536 70,665 70,665 Asst. yr. 1996-97:
Income from salary 91,640 Less : under section 16(1) 15,000 76,640 Dividend Income From Indian Co.
24,419 From U17I 12,885 From UTI, RIP 1966 624 Bank Interest income 2,930 1,17,498 P.P.F. Interest 43,087 1,61,305 Less: Deduction under section 1OPPF 43,807 Less: Deduction under section 90L 13,000 56,8F 56,807 Total income 1,04,498 1,04,498 Asst. yr. 1997-98 Income from salary 1,11,382 Less: under section 16(1) 15,000 96,382 96,382 Income from S.O.P. Nil Dividend Income From Indian Co.
32,198 From UTI 6,912 Interest from bank 608 P.P.F. Interest 54,913 1,91,013 Less: Deduction under section 1OPPF 54,913 Deduction under section 80L 15,000 69,913 Total income 1,21,100 1,21,100 Asst. yr. 1998-99:
(Upto 17th Dec., 1997) Income from salary 1,11,732 Less under section 16(1) 20,000 91,732 Income from S.O.P. Nil Dividend Income From Indian companies 14,681 (Exempted) From UTI 6,912 Interest income from bank 625 Debenture interest 1,374 Capital gains 65,604 1,66,247 Less : Deduction under section 80L 7,537 Total income 1,58,710 1,58,710 Thus total undisclosed income assessment year wise of the assessee are as under Rs.
Asst. yrs. 1988-89 to 1990-91 Nil Asst. yrs. 1988-89 to 1991-92 36,619 Asst. yrs. 1988-89 to 1992-93 80,558 Asst. yrs. 1988-89 to 1993-94 59,716 Asst. yrs. 1988-89 to 1994-95 1,31,302 Asst. yrs. 1988-89 to 1995-96 70,665 Asst. yrs. 1988-89 to 1996-97 1,04,498 Asst. yrs. 1988-89 to 1997-98 1,21,100 Asst. yr. 1998-99 (upto the date of search) 1,58,710 7,63,168 or Total undisclosed income 7,63,170 Tax payable on total undisclosed income at Rs. 7,63,170 @ 60 per cent works out to 4,57,902 Interest payable under section 158BFA 1,83,160 Payable 6,41,062
2. Her total undisclosed income was assessed at Rs. 7,63,170, vide assessment order dated 7-12-1999.
3. An appeal was preferred before the Commissioner (Appeals), who granted it, in part, concluding that salary income of the assessee cannot be considered as undisclosed income and its inclusion in undisclosed income for the block period was ordered to be deleted.
4. Aggrieved by the orders of Commissioner (Appeals) the revenue seeks indulgence of the Tribunal claiming that the appellate order is not based on correct proposition of law.
5. The assessee has filed cross objections, defending the orders of the first appellate authority.
6. When appeal and cross objections came up for hearing Shri P.C. Mishra, Sr. departmental Representative advanced arguments on behalf of the revenue. Shri K.N, Prasad Advocate, presented his point of view on behalf of the assessee. We have given our careful considerations to the arguments advanced at the bar and cautiously perused the record. Our findings are detailed in the succeeding sections.
7. Admittedly, the assessee is a professor of Economics at Patna University, Patna, which institution is controlled by the State Government. The claim of the assessee has been that she has been furnishing the details of the salary income in Form No. 16 to her employer. Her employer had deducted income-tax from the salary, to the tune of Rs. 2,501 for the assessment year 1997-98. The University was duly filing annual returns under the provisions of section 206 of the Act, with the concerned Income Tax Officer. It had been agitated on her behalf that income from her salary cannot constitute undisclosed income.
8. The provisions of clause (b) of section 158B of the Act defines "undisclosed income". For the sake of convenience, said definition is extracted thus:
"(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 purpose of this Act."
9. Inclusive not exhaustive definition of "undisclosed income" has been given so as to include 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 purpose of this Act.
10. Mechanics for computation of undisclosed income, detailed in the provisions of section 158BB of the Act provide us with a key to interpretation of the term. It would be profitable to detail those steps as under
(i) The undisclosed income of the block period shall be the aggregate of the total income of the previous year falling within the block period computed on the basis of evidence found as a result of search and such other enquiries as the assessing officer may make or such other materials or information as are available with him, as reduced by the aggregate of the total income, or as increased by the losses returned or determined in respect of such previous years.
(ii) Where assessment under sections 143, 144 or 147 have been concluded or determination of income has been made under section 143(1A) or 143(B), the same will be reduced for determining the undisclosed income.
(iii) Where returns of income have been filed under any sub-section of section 139 or in response to notice issued under section 142(1) or section 148 of the Act, but assessments have not been made till the date of search, income disclosed in such return of income shall be reduced for computing the undisclosed income.
(vi) In a case where due date for filing a return of income has expired but no return of income has been filed, there will be no reduction of any amount for determining the undisclosed income stated above.
(v) Where the previous year has not ended or the date of filing the return of income under section 139(1) of the Act for any previous year has not expired, the income determined on the basis of transactions recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year shall be reduced.
(vi) However, in a case where undisclosed income has been determined in any earlier block assessment, the same shall be reduced from the total income for determining the undisclosed income.
(vii) Where any order of assessment under section 245D of the Act has been passed by the Settlement Commission, the income determined in such order shall be reduced accord~ngly,
(viii) Brought forward losses or unabsorbed depreciation will be allowed to be carried forward for set off in regular assessment and will not be set off against undisclosed income determined in the block period assessment.
(ix) The total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under section 32 of the Act.
(x) In determination of undisclosed income of a firm, returned income and total income assessed for each of the previous year falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called. The undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement.
11. Under the provisions of section 158BB (1) read with section 158 BC what is assessed is the undisclosed income of the block period and not the total income or loss of the previous year required to be assessed in the normal regular assessment under section 143(3) of the Act, where the AC) makes an enquiry to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner and on the basis of the evidence produced by the assessee, the evidence obtained on the specific points and all relevant material which he has gathered, assesses the total income or loss and determines the sum payable thereon as per the assessment. The method of working out total income is devised for the purpose of assessment of undisclosed income and would be alien to regular assessment under the provisions of sub-section (3) of section 143 of the Act. Any undisclosed income detected as a result of any search or requisition made shall be assessed separately as the income of the block years.
12. With above graphics in mind, now we would turn to the provisions of clause (b) of section 158B of the Act in order to interpret the phrase "disclosed for the purpose of this Act", used at the end of the said clause. The income, which the assessee has already disclosed or would have disclosed, is not to be treated as undisclosed income. The phrase "disclosed for the purpose of this Act" occurring in the provisions of clause (b) of section 158B of the Act signifies only what is required to be disclosed under the Act. What is a disclosure of an income for the purpose of this Act, is a question which confronts us. Simply and logically the answer would be that disclosure of income for the purpose of the Act should be in a manner and to the authotty concerned so that it may charge or deduct income-tax out of the said income. The provisions of sub-section (1) of section 192 of the Act enjoins duty on an employer to deduct tax at the average rate of income-tax computed on the basis of the rates in force on the estimated income of the assessee. It means that an estimate of the income under the head "salaries" in the financial year in which the payment has been made, will have to be made and on the basis of the estimate, the amount of tax payable, will have to be arrived at. After making the estimate of the income of the employee, the employer would deduct the income-tax from the amount payable to an employee.'Failure to deduct income-tax on salaries invites sanctions as contemplated by the provision of sections 201 and 221 of the Act. The employer deducting tax at source from the income under the head salaries is constrained to file returns as contemplated by the provisions of section 206 of the Act. Thus, it is clear that a co-extensive liability, with that of the employee to pay tax, has been created against the employer.
13. It is an admitted case that the assessee furnished the details of her salary income in Form No. 16 to her employer. On the basis of the said details, furnished by her, the employer formed an estimate of her income for that financial year and proceeded to deduct tax from her salaries. It is an admitted fact that a sum of Rs. 2,501 was deducted as tax from the salary of the asses see for the assessment year 1997-98. Therefore, it is clear that furnishing the details in Form No. 16 proves to be the basis for deduction of tax at source. It is a mode of disclosure of salary income for the purpose of this Act, since on the basis of the said disclosure the employer deducts tax, deposits it with the Government and submits its return as contemplated by the provisions of section 206 of the Act. The assessee furnished the details of her salary income to her employer in Form No. 16 and sleep-walked, covered the distance and reached the destination. She made the disclosure of her salary income to her employer for the purpose of this Act, as contemplated by the provisions of clause (b) of section 158B of the Act. This disclosure by the assessee satisfies the criteria of "disclosure under the provisions of this AcC and the assessing officer was not right in concluding that the assessee had not disclosed her salary income, since no returns were filed by her. Consequently, we conclude that by furnishing the details in Form No. 16 to her employer, the assessee made the disclosure of her salary income, under the provisions of the Act.
14. Provisions of Chapter XIVB of the Act lays down special procedure for assessment of search cases and provides for assessment of undisclosed income as a result of search. What is assessed under section 158BC of the Act, is the undisclosed income of the block period and not the total income or loss,of the previous year. The exercise under the provisions of sub-section (3) of section 143 of the Act is in contrast to the exercise under the provisions of section 158BC of the Act. If any precedental support is needed then reference can be made to the judgment in N.R. Paper & Board ITD. v. Dy. CIT (1998) 146 CTR (Guj) 612: (1998) 234 ITR 733 (Guj).
15. The assessing officer no where disputes that the assessee had furnished the particulars of the salary income to her employer for the block period under consideration. From the documents filed, it is clear that except the assessment year 1997-98, her salary income remained below the taxable limit. By furnishing the particulars of the salary income in Form No. 16, she had disclosed that income for the purpose of this Act and it was undisclosed income within the meaning of definition of the term contained in clause (b) of section 158B of the Act. The assessing officer was not justified in adding the said galary income to the undisclosed income of the assessee.
16. Resultantly, we find no fault with the orders of the Commissioner (Appeals). Consequently, the appeal of the revenue is declined and cross-objection of the assessee are granted.