Income Tax Appellate Tribunal - Patna
Joint Commissioner Of Income-Tax vs Smt. Dr. Reeta Singh on 1 October, 2001
Equivalent citations: [2002]80ITD503(PAT)
ORDER
R.K. Yadav, Judicial Member
1. 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 :
Assessment year 88-89 to 90-91 Nil
Assessment year 1991-92 :
Income from salary Gross Rs. 63,619
12,000
___________
Rs. 51,619 Rs. 51,619
Income from S.O.P :
Annual value under Section 23(2) Rs. nil
Less : Intt. payable to Rs. 5,000 Rs. 5,000
______________ __________
BSGCF Ltd. (-) Rs. 5,000 Rs. 46,619
Dividend Income from Indian Co. Rs. 6,621
-do- from UTI Rs. 1,620
Interest income :
N.S.C. Intt. on 2,000 of 84-85 Rs. 448
Bank Intt. Rs. 204
__________
Rs. 55,512
P.P.F. Interest Rs. 13,467
___________
Rs. 68,979
Less : Deductions under Section 80CCB Rs. 10,000
Deduction under Section 80L Rs. 8,893
under Section P.P.F. Intt. Rs. 13,467
____________
Rs. 32,360 Rs. 32,360
Total Income Rs. 36,619 Rs. 36,619
Assessment year 1992-93
Income from salary Rs. 57,480
Less : Under Section 16(1) Rs. 12,000 Rs. 45,480
Income from S.O.P. :
Annual value under Section 23(2) Nil
Less : Intt. payable to
BSHCF Ltd. Rs. 5,000 Rs. 5,000
_____________ __________
(-) Rs. 5,000 Rs. 40,480
Dividend Income :
From Indian Company Rs. 13,712
From UTI Rs. 1,620
Interest income from bank Rs. 246
Income from other sources Rs. 44,500
____________
Rs. 1,00,558
Less: Deduction under Sections 80CCB Rs. 10,000
-do- under Section 80L Rs. 10,000
__________
Rs. 20,000 Rs. 20,000
___________
Total income Rs. 80,558 Rs. 80,558
Assessment year 93-94 :
Income from salary Rs. 70,056
Less: under Section 16(1) Rs. 15,000
__________
Rs. 55,056
Income from S.O.P.
Annual value under Section 23(2) Nil
Less : Intt. payable to
BSHCF Ltd. Rs. 5,000 Rs. 5,000
__________
(-) Rs. 5,000 Rs. 50,056 Rs. 50,056
Dividend income :
From Indian Co. Rs. 9,167
From UTI Rs. 6,205
Interest income from bank Rs. 1,288
P.P.F. Interest Rs. 40,044
____________
Rs. 1,06,760
Less : under Section 10 P.P.F. Rs. 40,044
under Section 80L Rs. 7,000
___________
Rs. 47,044 Rs. 47,044
__________
Total income Rs. 59,716 Rs. 59,716
Assessment year 1994-95
Income from salary Rs. 74,115
Less: under Section 16(1) Rs. 18,000
___________
Rs. 56,115 Rs. 56,115
Income from SOP
Annual value under Section 23(2) Nil
Less : Intt. payable to BSHCF Ltd. Rs. 5,000 (-) Rs. 5,000
__________ _____________
Rs. 5,000 Rs. 51,115
Dividend Income :
From Indian Co. Rs. 20,058
From UTI Rs. 9,325
Interest from bank Rs. 804
P.P.F. Interest Rs. 26,728
Income from other sources Rs. 60,000
____________
Rs. 1,68,030
Less : Deduction under Section
10 P.P.F Interest Rs. 26,728
Deduction under Section 80L Rs. 10,000
__________
Rs. 36,728 Rs. 36,728
____________
Total Income Rs. 1,31,302 Rs.131,302
Assessment year 1995-96 :
Income from salary Rs. 78,178
Less: under Section 16(1) Rs. 15,000
__________
Rs. 63,178 Rs. 63,178
Income from SOP Exempt.
Dividend Income
From Indian Co. Rs. 13,091
From UTI Rs. 3,600
Interest from bank Rs. 796
P.P.F. Interest Rs. 33,536
Rs. 1,14,201
Less : Deduction under Section 10 P.P.F. Rs. 33,536
-do- under Section 80L Rs. 10,000
___________
Rs. 43,536 Rs. 43,536
__________
Rs. 70,665 Rs. 70,665
Assessment year : 1996-97 :
Income from salary Rs. 91,640
Less: under Section 16(1) Rs. 15,000
__________
Rs. 76,640
Dividend Income :
From Indian Co. Rs. 24,419
From UTI Rs. 12,885
From UTI, RIP 1966 Rs. 624
Bank Interest income Rs. 2,930
____________
Rs. 1,17,498
P.P.F. Interest Rs. 43,807
____________
Rs. 1,61,305
Less : Deduction under Section
10 PPF Rs. 43,807
-do- under Section 80L Rs. 13,000
__________
Rs. 56,807 Rs. 56,807
____________
Total income Rs. 1,04,498 Rs.1,04,498
Assessment year : 1997-98 :
Income from salary Rs. 1,11,382
Less: under Section 16(1) Rs. 15,000
____________
Rs. 96,382 Rs. 96,382
Income from S.O.P. Rs. Nil
Dividend Income :
From Indian Co. Rs. 32,198
From UTI Rs. 6,912
Interest from bank Rs. 608
P.P.F. Interest Rs. 54,913
___________
Rs. 1,91,013
Less : Deduction under Section
10 PPF Rs. 54,913
Deduction under Section 80L Rs. 15,000 Rs. 69,913
Total income _____________
Rs. 1,21,100 Rs. 1,21,100
Assessment year : 1998-99
(Upto 17-12-1997)
Income from salary Rs. 1,11,732
Less : under Section 16(1) Rs. 20,000 Rs. 91,732
Income from S.O.P. Nil
Dividend Income
From Indian companies Rs. 14,681
(Exempted)
From UTI Rs. 6,912
Interest income from bank Rs. 625
Debenture interest Rs. 1,374
Capital gains Rs. 65,604
___________
Rs. 1,66,247
Less : Deduction under Section 80L Rs. 7,537
____________
Total income Rs. 1,58,710 Rs. 1,58,710
Thus total undisclosed income assessment year wise of the assessee are as under :-
Assessment years 1988-89 to 1990-91 Nil
-do- 1991-92 Rs. 36,619
-do- 1992-93 Rs. 80,558
-do- 1993-94 Rs. 59,716
-do- 1994-95 Rs. 1,31,302
-do- 1995-96 Rs. 70,665 1996-97 Rs. 1,04,498 1997-98 Rs. 1,21,100 Assessment year 1998-99 Rs. 1,58,710 ________________ (upto the date of search) Rs. 7,63, 168 or Total undisclosed income : Rs. 7,63,170 Tax payable on total undisclosed income at Rs. 7,63,170 @ 60% works out to... Rs. 4,57,902 Interest payable under Section 158BFA. Rs. 1,83,160 ________________ Payable Rs. 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. D.R. 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 Incometax 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 Section 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.
(iv) 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 accordingly.
(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 Assessing Officer 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 authority 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 assessee 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 Act" 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 Ltd. v. Dy. CIT [1998] 234 ITR 733 : 101 Taxman 525 (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 purposes of this Act and it was not 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 salary 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 crossobjection of the assessee are granted.