Income Tax Appellate Tribunal - Ahmedabad
Smt. Jyoti M. Bhandari vs Asstt Cit on 24 October, 2005
Equivalent citations: [2006]6SOT375(AHD)
ORDER
R.P. Garg, Vice President.
These two appeals by two assessees are against the orders of assessing officer passed under section 158BD read with section 158BC of the Income Tax Act, 1961 for the block period 1-4-1985 to 31-3-1995 and 1-4-1995 to 12-12-1995. For the sake of convenience, they are being disposed of by this common order. The only dispute canvassed at the time of hearing was that the income for the assessment year 1995-96 has already been disclosed by the assessees in the regular returns and therefore, could not be subjected to assessment under section 15813D, read with section 158BC of the Income Tax Act, 1961.
2. The facts are that search and seizure operation was carried out at the residential premises of the assessee, the business premises of Electrotherm (1) Ltd. and residence of various persons connected with Electrotherm (1) Ltd. group on 12-12-1995 which was concluded on 14-12-1995. From the papers seized from the residence of Shri Shailesh Bhandari, Shri Pukhraj Shah and the factory premises of Electrotherm (1) Ltd., it was found that the assessee Smt. Jyoti M. Bhandari had sold 1,900 shares out of the entire holding of 91,400 shares and the assessee Smt. Indubala B. Bhandari had sold 4,500 shares out of the entire holding of 1,66,000 shares up to 26-6-1995. Notices were, therefore, issued under section 158BD read with section 158BC on 19-12-1996 requesting the assessee to show cause as to why the same be not related as undisclosed income of the assessees. Section 142(1) notices were also issued thereafter and the assessees ultimately filed the returns of income on 2-12-1997 with barely 29 days left before the expiry date within which the return was to be filed. The regular returns of income were filed declaring income of Rs. 1,88,520 and Rs. 4,08,048 respectively by these two assessees which was treated by the assessing officer as income from undisclosed sources. The assessments were also made under section 143(3) on 29-12-1997. The assessees only grievance is that they having filed the returns under section 139 even before the issue of notice under section 158BD read with section 158BC, the said income cannot be treated as undisclosed income.
3. The learned Counsel of the assessee placed reliance on certain decisions of the Tribunal/High court as under:
(i) Nagin Das M. Gordadia v, Dy. CIT(2004) 83 TTJ (Mum.) 151
(ii) Nilesh R. Shah v. Assit. CIT(2002) 253 ITR (AT) 34 (Chennai)
(iii) Smt. Shanti Rani v. Assistant Commissioner (2003) 126 Taxman 62 (Ahd.) (Mag.)
(iv) Smt Sitadevi Daga v. Assistant Commissioner(1998) 67 ITD 151 (Ind.)
(v) Harishkumar J. Gupta v. Dy. CIT (2000) 69 TTJ (Ahd.) 440
(vi) B.K. Agarwal v. Assistant Commissioner(2002) 76 TTJ (Lucknow) 69
(vii) Bhagwati Prasad Kedia v. CIT (2001) 248 ITR 562 (Cal.)
(viii) CIT v. Ravi Kant Jain (2001) 250 ITR 141 (Delhi)
(ix) CIT v. Vikram A. Doshi (2002) 256 ITR 129 (Bom.) and also on the decisions in the case of Shailesh Bhandari (IT(SS) Appeal No. 35 (Ahd.) of 1997, dated 9-3-2001) and in the case of Smt. Reema Bhandari and Smt. Ritu Bhandari (IT(SS) Appeal Nos. 28 and30 (Ahd.) of 1998, dated 29-2-2000). Reference was also made to Explanation (b) below section 158BA(2) of the Act which states that the total undisclosed income relating to block period shall not include the income assessed in regular assessment as income of such block period.
4. The learned Departmental Representative, on the other hand, submitted that the cases relied upon by the assessees are prior to the amendment by the Finance (No. 2) Act, 1998 and Finance Act, 2002 with retrospective effect from 1-7-1995. The Explanation which the assessees relied upon was inserted by Finance (No. 2) Act, 1998 with retrospective effect from 1-7-1995 and the amendment in section 158BB providing for computation of undisclosed income of block period was inserted by Finance Act, 2002 again with retrospective effect from 1-7-1995 inserting the words "prior to date of commencement of the search or date of requisition" in clause (a) of sub-section (1) by section 158BB. The amended clause now provides for reduction of the total income determined where the assessments under section 143 or 144 or 147 have been concluded prior to the date of commencement of search or date of requisition on the basis of such assessment. The commencement of the search in these cases was 12-12-1995 which was concluded on 14-12-1995 and, therefore, the assessments completed on 29-12-1997 would not be of any help to the assessees for reducing the income from the undisclosed income of the block period.
5. We have heard the parties and considered their rival submissions. The cases relied upon by the assessee, in our opinion, have no bearing on the issue raised in these cases after the amendment with retrospective effect from 1-7-1995 by Finance Act, 2002 in section 158BB(1)(a). In the first decision cited by the assessee in the case of Nagin Das M. Goradia (supra), the issue was that in the absence of any incriminating material having been found against the assessee during search, the assessing officer cannot treat the regular income returned in belated return after the date of search and the income below taxable limit for which no return was filed as undisclosed income for the purposes of block assessment. In the present cases, capital gain was found to be income of the assessees on the basis of the material found during the course of search and, therefore, that case would not be of any help to the assessee. Clause (c) of section 158BB was subject-matter of consideration in that case which provides for the reduction of the total income of a previous year by providing as under :
"(c) where the due date for filing a return of income has expired, but no return of income has been filed,-
(A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period;
(ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil in cases not falling under clause (c);"
This provision was also substituted by Finance Act, 2002 with retrospective effect from 1-7-1995. On the date of search on 12/14-12-1995, the due date for filing the returns for assessment year 1995-96 has already expired and the returns were filed on 17-12-1995. Therefore, the reduction which can be allowed to the assessees could be only of the income on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or the income on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period. In other cases where the due date for filing the return of income has expired but no return of income has been filed, the reduction that is to be allowed would be Nil,
6. In the case of Nilesh R. Shah (supra), the income of assessment year 1995-96 for which the assessee had not filed the return was deleted on the ground that the assessee had paid advance tax in time and no duplicate books of account were found and, therefore, the onus was on the revenue to prove that if search has not been conducted the assessee would not have disclosed the income. It was also held that there were no facts or evidence on record to presume that the assessee would not have disclosed the income and, therefore, the income declared by the assessee in the belated return did not come within the definition of 'undisclosed income' under section 158B of the Act. This was a case decided on 1-12-1999 and was prior to the amendment by Finance Act, 2002 with retrospective effect from 1-7-1995 and, therefore, would not be of any help to the assessee, The definition of 'undisclosed income' in section 15813(b) 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. This clause (b) to section 158B deals with two situations where the assessee has not disclosed and the second where it would not have been disclosed for the purposes of this Act. Both are joined with the help of 'or'. Therefore, if either of the conditions is satisfied a case would fall within the definition of undisclosed income. It is an admitted fact that on the date of search, the returns of income were due and had not been filed by the assessees. Therefore, the income has not been disposed by the assessees. In view of the this, we need not go to the alternative clause that the income would not have been disclosed by the assessee. The first is a fact and the other is a hypothesis. When the fact shows a particular state of affairs, one need not go to the hypothesis.
7. In the case of Smt. Shanti Rani (supra), it was a matter of fact that FDRs found in the locker had been duly entered in the books and, therefore, it was held that this could not be regarded as undisclosed income under section 158BB. There was no discussion with regard to section 158BB(1) nor section 158BA(2) Explanation thereto. This case, therefore, is also of no help to the assessee.
8. In the case of Smt. Sitadevi Daga (supra), the first question was that income of the years which was included in the block assessment was below taxable limit and it was held that the below taxable limit in the relevant assessment year does not form part of undisclosed income. It is also now clear by the amendment by Finance Act, 2002 with retrospective effect from 1-7-1995 if on the basis of entries as recorded in books of account and other document maintained in the normal course on or before the search or requisition. The other question was with regard to the belated returns for assessment years 1986-87 to 1995-96 and the Tribunal held that it was not a case of undisclosed income which would not have been disclosed by the assessee. It observed that once it was established from the document available on record that only one inference could be drawn that the books were maintained for the purposes of the Act, the returned income could not be an income which would not have been disclosed for the purposes of the Act and, therefore, the case of the assessee did not fall in the category of clause (b) of section 158BB(1). This is a case prior to the amendment in section 158BB(1) by the Finance Act, 2002 with retrospective effect from 1-7-1995 wherein the due date for filing the return of income has expired but no return of income has been filed, the reduction to be allowed is Nil unless the case of the assessee falls in clause (c) of section 158BB and that position is to be seen with reference to the date of commencement of the search or the date of requisition. On the date of commencement of search and requisition, the assessees had not filed the returns nor the assessments were made and, therefore, this case also would be of no help to the assessees.
9. In the case of Harish Kumar J. Gupta (supra), again the decision is dated 27-12-1999, i.e., prior to the amendment by Finance Act, 2002 with retrospective effect from 1-7-1995.
10. The case of B.K. Agarival (supra) was decided on 31-5-2001 and the amendment provisions were not subject-matter of consideration before the Tribunal and, therefore, this case would also be of no help to the assessees.
11. In the case before the Calcutta High Court in the case of Bhagwati Prasad Kedia (supra), the question was whether the assessing officer was entitled to question in block assessment the loan which was a subject matter of the regular assessment and it was held that the assessing officer was wrong in holding that the said sum could be taxed in block assessment although the same featured in regular books of account. It was a decision rendered on 19-2-2001 and the amended provisions by the Finance Act, 2002 with retrospective effect from 1-7-1995 were not the subject-matter of consideration before Their Lordships of Calcutta High Court. Similarly, in the case of Ravi Kant Jain (supra) before the Delhi High Court, it was held that block assessment under Chapter XIV-B is not intended to be a substitute for regular assessment. Its scope and ambit is limited in that sense to materials unearthed during search. It is in addition to the regular assessment already done or to be done. The assessment for the block period can only be done 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 the assessing officer. Admittedly, in that case, the undisclosed income was not determined on the basis of any search material and the assessing officer proceeded within the scope of the assessment and not within the scope of exercising jurisdiction under Chapter XIV-B and, therefore, the court held that section 158BA of the Act had no application to the facts of the case. This judgment is dated 15-3-2001, i.e., before the amendment by Finance Act, 2002 with retrospective effect from 1-7-1995 and also where the undisclosed income was not determined on the basis of any search material. Here, in these cases, the assessment of capital gain was based on the material gathered during the course of search and consequently, this case would not be of any help to the assessee. Again in the case of Vikram A. Doshi (supra) before Bombay High Court, the transactions which were treated as undisclosed were disclosed by the assessee in the return which were subject-matter of regular assessment and, therefore, it was held that they ought to have been assessed in the regular assessment and not in the block assessment. This is a judgment dated 26-2-2002 and is again a case before the amendment by Finance Act, 2002 with retrospective effect from 1-7-1995. Similarly, the case of Shailesh Bhandari (supra) was decided on 9-3-2001 and the case of Smt. Reema Bhandari and Smt. Ritu Bhandari (supra) were also cases decided on 29-9-2000, ie., before the insertion of Explanation by Finance Act, 2002 with retrospective effect from 1-7-1995. In these circumstances, in our opinion, the income of the assessment year 1995-96 though assessed under section 143(3) but the returns having been filed after the commencement of the search and date of requisition and assessments also completed thereafter under section 143, no reduction could be given to the assessees while determining the undisclosed income as per provisions of section 158BB(1) of the Act. The contention of the learned Counsel of the assessees is that Exlanation (b) to section 158BA(2) does not prescribe any time-limit before or after which the regular assessment was to be made and it is, therefore, to be taken as if any income assessed by way of regular assessment is to be excluded. We do not find any substance in this contention of the assessees because what has to be excluded is income assessed by way of regular assessment under section 143 or 144 or 147 which has been concluded prior to the date of commencement of the search or date of requisition. It is this assessment which is mentioned in section 158BB(1)(a) that is contemplated by Explanation below section 158BA(2) and the total income assessed in any regular assessment is not to be included if the assessment was made prior to the date of commencement of search or date of requisition. In view of the above, the appeals of the assessees have no merit, They are, accordingly, to be dismissed.
12. In the result, the appeals of the assessees are dismissed.