IMPORTANT POINT
Payment of Advance Tax and deduction of tax at source do not involve the disclosure of "total income".

JUDGMENT

D.K. Jain, J.:- Leave granted in all the Special Leave Petitions.

2. This batch of six appeals, arises from separate judgments of the High Court of Madras in the appeals preferred by the revenue under Section 260A of the Income Tax Act, 1961 (for short “the Act”) rendered in Tax Case (Appeal) Nos.238 of 2000 on 8th September 2004; 1371, 1372, 1373 of 2005 on 2nd January 2006; 687 of 2007 on 18th June 2007; and 620 of 2009 on 21st July 2009. This judgment shall govern all these appeals since they entail a common substantial question of law, as is evident from the adjudication of the High Court. However, to appreciate the issue involved, Civil Appeal No.2688 of 2006 is treated as the lead case. At the outset we may note that despite service of notice, no appearance was entered for the respondent-assesses, except in C.A. No. 2688/2006 and C.A. No. 2580/2010.

Facts

3. The respondent-assessee is a firm which came into existence on 25th June, 1992. On 23rd February, 1996, a search operation under Section 132 of the Act was carried out at the premises of another concern, viz. M/s A.R. Mercantile Private Limited. During the course of search, certain books and documents pertaining to the assessee i. e. M/s A.R. Enterprises, were seized. On scrutiny, the Assessing Officer found that though the assessee had taxable income for the assessment year 1995-96, no return of income had been filed (due to be filed on or before 31st October, 1995) till the date of search. Based on the material seized by virtue of the aforesaid search, the Assessing Officer was satisfied that the assessee had not disclosed their income pertaining to the assessment year 1995-96. Accordingly (without recording any reasons for his satisfaction), he initiated action under Section 158BD of the Act requiring the assessee to file their return of income. The assessee, after filing return for the block period (ten years preceding the previous year), which covered assessment years 1993-94 to 1995-96, pointed out that they had already filed returns for the assessment years 1993-94 and 1994-95. They objected to action initiated under Chapter XIVB of the Act on the ground that in relation to the assessment year 1995-96, Advance Tax had already been paid in three installments and, therefore, income for that period could not be deemed to be undisclosed.

4. Rejecting the plea of the assessee, the Assessing Officer formed the opinion that the assessee had failed to file the return as on the date of search, and the seized documents did show income, which had not been or would not have been declared. Accordingly, he proceeded to compute total undisclosed income for the block period 1993-94 to 1995-96 (upto the date of search), treating the income returned by the assessee for the period 1995-96 as NIL, as stipulated in Section 158BB (1)(c) of the Act.

5. Against the said order, the assessee preferred an appeal before the Tribunal. Accepting the stand of the assessee, the Tribunal allowed the appeal, and held that having paid the Advance Tax, the assessee had disclosed his income for the relevant assessment year. The Tribunal observed thus:

“Now coming to the facts of the present case, as stated supra, the assessee has not filed his return in time, but even after that date the assessee has filed his return voluntarily. Moreover not only that the assessee has also estimated his income for the year and paid advance tax thereon as detailed below:

15.09.1994 Bank of Baroda, T.Nagard. Rs.1,60,000

12.12.1994 -do- Rs.1,60,000

16.03.1994 -do- Rs.1,60,000

Rs.4,80,000

This would indicate that the assessee has made known to the income tax department his income for the year and also paid the income tax thereon well before the due dates and of course well before the date of search also. Even this fact of income was voluntarily disclosed by the assessee to the ADI (inv.)…”

Consequently, the Tribunal declared the said assessment, made under Section 158BD of the Act, as null and vo