Income Tax Appellate Tribunal - Kolkata
Bhag Chand Jain vs Assistant Commissioner Of Income-Tax on 27 May, 1997
Equivalent citations: [1998]65ITD11(KOL)
ORDER
D. Manmohan, JM This appeal arises against the block assessment made by the Assistant Commissioner of Income-tax, consequent to the search conducted on 8-8-1985.
1. Vide Ground No. 1, assessee contends that the Assessing Officer is not correct including Rs. 64,636 as undisclosed income of the assessment year 1992-93 Ld. counsel submitted before us that the Income-tax return for the assessment year 1992-93 was belatedly filed on 14-2-1995 which was not taken into consideration. On the other hand, the ld. departmental representative submitted that the return of income for that year was not filed in time and so the income declared in the return was correctly treated as undisclosed income.
2. We have carefully considered the rival submissions, Sub-section (6) of section 158B defines 'undisclosed income'. It essentially includes income 'which has not been or would not have been disclosed for the purposes of this Act'. In the instant case, assessee has filed acknowledgement of filing the return of income for the assessment year 1992-93. By the return so filed, assessee showed total income of Rs. 64,636 and claimed refund of tax of Rs. 1,455 and in the covering letter he mentioned the reason for not filing the return in time. Thus, it cannot be said that the assessee would not have shown the aforesaid income but for the search operations. In fact, the return was filed much earlier to the date of search. The basis, upon which the aforesaid income is treated as undisclosed income, is not spelt out in the assessment order. The ld. departmental representative, however, justified the action of the Assessing Officer in the light of section 158BB(1)(c) of the Act. Assessing Officer has not given any reason in his order and so we do not wish to give any opinion on this aspect. In the interest of justice, we deem it fair and reasonable to set aside this issue to the file of Assessing Officer. The Assessing Officer is hereby directed to bear in mind the fact that the assessee has filed a return of income for the assessment year 1992-93, and reconsider the issue in accordance with law.
3. Vide Ground Nos. 2 and 3, assessee contends that from the income computed under the special procedure (block-assessment), Assessing Officer ought to have allowed admissible deductions under Chapter VI-A. Ld. counsel urged before us that sub-section (1) of section 158BB of the Act provides for computation of undisclosed income in accordance with the provisions of Chapter IV, but as long as there is no specific embargo on allowing deductions under Chapter VI-A of the Act, the deductions permissible under that Chapter are allowable against the computed undisclosed income. Explaining further, he contended that legislative intention can be seen from the Explanation of section 158BB of the Act wherein it was specifically mentioned that while determining the income of the Block period in accordance with Chapter IV, set off of brought forward losses under Chapter VI should not be allowed. He contends that no such restriction is imposed either in the Explanation to section 158BB of the Act or other provisions of Chapter XIV-B vis-a-vis the deductions permissible under Chapter VI-A. On the other hand, ld. departmental representative submitted that the income of the block period has to be computed as per section 158BB(1) of the Act which specifically provides that the total income shall be computed in accordance with Chapter IV and, hence, no other deduction or allowance mentioned in any other Chapter of the Income-tax Act can be allowed.
4. We have carefully considered the rival submissions. Chapter XIV-B of the Income-tax Act, 1961 provides for special procedure for computation of total income. Section 158BB(1) states that undisclosed income of the 'block period' shall be computed in accordance with the provisions of Chapter IV. 'Block assessment' is something different from the assessment made in the regular course for each assessment year. Block assessment is made on the total income of the block period consisting of 10 or more years, and practical difficulty could be posed before the tax gatherers as to the question of set off of brought forward losses while aggregating the income of all the years, for the purpose of block assessment. Explanation to section 158BB seeks to clarify this position. By virtue of this Explanation, reference was made to Chapter VI of the Act in order to make it very clear that the unabsorbed brought forward loss cannot be taken into consideration in the block assessment made and this position is further clarified in the Board's Circular No. 717, dated 14th August, 1995. The relevant paragraph from the Board's Circular reads as under :
"(d) Treatment of unabsorbed losses, depreciation, etc. - Brought forward losses or unabsorbed depreciation will be allowed to be carried forward and set off in subsequent regular assessments and shall not be set off against the undisclosed income determined in the block assessment. Therefore, the total income or total losses of each previous year shall for the purpose of aggregation be taken as the total income or total losses without giving effect to set off of brought forward losses under Chapter VI or unabsorbed depreciation under section 32. In other words, where in the regular assessment proceedings set off of loss or unabsorbed depreciation has been allowed in the regular assessment proceedings, the same shall be ignored for determining the undisclosed income for the block period."
As could be seen from the CBDT's circular, the explanation clarifies that only in the regular assessment proceedings carry forward and set off of losses should be allowed and the same should be ignored while determining the undisclosed income of the block period. Section 158BB(1)(a) to (f) states that where the income is otherwise shown by the assessee, the total income shall be reduced to that extent while making the block assessment. If the assessee has shown any income in the normal course, the deductions under Chapter VI-A, rebates, etc., are allowable in the regular assessment and the assessee also gets deduction of the assessed figure while computing the undisclosed income for the block assessment period. When the assessee has neither recorded in the books of account nor disclosed to the department by filing the return or otherwise, the Legislature, to our mind, seems to be not indulgent to allow deduction under Chapter VI-A or rebate under section 88 against the undisclosed income of the block period. In view of the specific exclusion of the other Chapters of the Income-tax Act, 1961, for the purpose of computing the undisclosed income, in our opinion, deductions contemplated under Chapter VI-A cannot be allowed to the assessee. Ld. counsel further tried to make out a case by pointing out to the provisions of section 158BH of the Act. The aforesaid section states that save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter. The opening words 'save as otherwise provided in this Chapter' clearly indicates that the other provisions of the Act would come into play only when the provisions of this Chapter are not specific. To put it otherwise, in view of the plain language of section 158BB(1) the other provisions of this Act shall not apply for the purpose of computation of undisclosed income. In fact, provisions of section 158BH, to our mind, are meant to give the Assessing Officer sufficient powers to recover the tax levied under this special procedure after the assessment is made under this Chapter. At any rate, the deductions claimed under Chapter VI-A cannot be allowed to an assessee while computing the income of the block period.
5. Ground Nos. 4 and 5 relate to the claim of rebate under section 88 of the Income-tax Act. Ld. counsel for the assessee contended that the restriction. if any, is only with reference to the computation of undisclosed income but the tax rebate falls outside the purview of computation of income, as the question of tax rebate comes only after the computation of total income. He, thus, contended that in the absence of any specific embargo on allowing the tax rebate, section 158BH comes into play and the assessee is entitled to rebate under section 88 of the Act. On the other hand, ld. departmental representative relied upon the provisions of section 158BA(2)/113 of the Income-tax Act.
6. We have carefully considered the rival submissions. As we have already stated in the aforesaid paragraphs, the scheme of the block assessment is only to tax the undisclosed income of the assessee at a flat rate and the income and the tax rebate, which is otherwise allowable if shown by the assessee either in the books or otherwise, is allowable as deduction in the regular assessment. A reading of section 158BB(1) and (3) shows that any income, rebate or deduction, which is otherwise not undisclosed, is allowable in the regular assessment, whereas, if the assessee has not claimed rebate in the regular assessment, the same cannot be allowed while making the block assessment. Section 158BA(2) states that the undisclosed income relating to the block period shall be charged to tax at the rates specified in section 113. Section 113 reads "total undisclosed income of the block period determined under section 158BC, shall be chargeable to tax at the rate of 60%." As could be seen from Chapter XII, pertaining to the determination of the tax in certain special case, wherever the Legislature intended to give or take away a benefit, such as deduction under Chapter VI-A or section, 88, the same was provided for and in the absence of any specific clause, the plain provisions of section 113 do not leave any room of doubt as to the chargeability @ 60% without any rebate from the tax so payable. For example, under section 112(2) of the Act, it is provided that if the gross total income of an assessee includes the income from sale of long-term capital assets, deduction under Chapter VI-A, should be allowed on the total income after excluding the income from long-term capital assets. Sub-clause (3) thereof states that rebate under section 88 shall be allowed to the assessee on the total income arrived after reducing the long-term capital gains. Looking it from another angle, we are convinced that as assessment made under the special provisions of Chapter XIV-B is meant to tax only the undisclosed income without giving any relief towards deduction or rebate in the block assessment so made. For the sake of clarity, we may repeat that the assessee, who does not disclose the income, cannot expect the benefit of deduction or rebate, whereas, any deduction or rebate which is reflected in the books or otherwise which is offered to tax in the regular process by filing a return thereof, is considered favourably by applying the other provisions of the Act. We, therefore, do not see any merit in the contentions urged by the assessee insofar as its claim for allowance of rebate under section 88 is concerned.
7. In the result, the appeal filed by the assessee is partly allowed.