Commissioner of Income Tax vs Tirupati Enterprises

N.P. Gupta, J.—This appeal by the revenue has been filed against the judgment of the Tribunal dated 5-1-2005, confirming the order of the learned Commissioner (Appeals), who deleted the addition of Rs. 2,95,000 made by the assessing officer for the cash credits.

The appeal was admitted on 9-3-2006 by framing the following substantial question of law:

Whether on the facts and in the circumstances of the case, the learned Tribunal is justified in law in upholding the findings recorded by the learned Commissioner (Appeals) deleting addition made by the assessing officer on account of unexplained cash credits in assessment of block period which had been disclosed in the regular return of income for the relevant assessment year i.e. 1991-92 (in this case) but were not included in assessment for that assessment year?

The necessary facts are that a search operation was undertaken, and consequently notices were issued u/s 158BD. The assessee filed return on 15-4-1999 in response to the notice declaring nil as undisclosed income, and the very action of initiating proceeding u/s 158BD was challenged, inter alia, taking the plea that regular returns for the earlier years have already been filed.

The learned assessing officer found that the credit of Rs. 1,00,000 appears at p. 29 on 18-6-1990 of Annexure A-10, a small Bahi, and then proceeded to consider the fact, that no confirmation in that regard was produced, and thus, addition was made by taking resort to provisions of Section 68 of the Act. Then another entry of Rs. 3,87,000 was considered, and it was found that out of that, credit for Rs. 2,00,000 stands explained from the transfer entry, and remaining Rs. 1,87,000 was added. Then another amount of Rs. 8,000 was also added, and no explanation was furnished regarding source of this credit. This amount is also said to be dated 19-3-1991.

The learned Commissioner (Appeals) in appeal found that credit entries form part of the details filed by the assessee along with the regular returns for the relevant assessment years, and in view of the long line of decisions, it could not have been- subject matter of proceedings under Chapter XTV-B. Accordingly, this addition was deleted. The learned Tribunal in appeal affirmed this order of the learned Commissioner (Appeals), after considering two judgments of this court in Commissioner of Income Tax Vs. Elegant Homes Pvt. Ltd., and Commissioner of Income Tax Vs. Ajay Kumar Sharma, and held that entries found in the regular books of accounts can be considered under Chapter XIV-B in those cases, where assessee has not disclosed these entries to the department. It was also held that when the assessee has already declared certain amounts in the regular returns, that cannot be a matter of block assessment thereafter, because this cannot be said to be an undisclosed income of the assessee.

In our view, a look at the provisions of Sections 158BA and 158BB together, makes it clear that according to Explanation appended to Sub-section (2) of Section 158BA, which was added on 1-7-1995, and was held to be retrospective, the assessment made under Chapter XIV-B is in addition to the regular assessment, and that the total undisclosed Income, regarding block period, shall not include the income assessed In any regular assessment as income of such block period. Likewise, the income assessed under Chapter XIV-B shall not be included in the regular assessment of any previous year included in the block period. Then according to Section 158BB, which provided the mode of computation of undisclosed income of the block period, according to Sub-section (1)(a) and (b), from out of the aggregate of the total income of the previous years falling within the block period computed in accordance with the Act, on the basis of evidence found as a result of search, or requisition of books of account, or other documents, and such other materials, or information, as are available with the assessing officer, and relatable to such evidence, it is to be reduced by the aggregate of the total income, where the returns of the income have been filed u/s 139, or in response to notice u/s 142(1) or 148, but assessments have not been made till the date of search, or requisition, on the basis of the income disclosed in such returns. Obviously therefore, where regular return has been filed, or assessment has been made with respect to any. previous year(s) included in the block period, the undisclosed income so calculated in accordance with Section 158BB(1) is to be reduced by the income so assessed, or so disclosed in the return already filed.

That being the position, since in the present case, undisputedly, the returns for the relevant year had been filed by the assessee much before the search and seizure operations, and in those returns, this income, added by the assessing officer, had been shown, in that view of the matter, this amount could not be added over again, while making assessment in proceedings under Chapter XTV-B.

Consequently, the question as framed is answered against the revenue and in favour of the assessee. The appeal thus, has no force, and is dismissed.