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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P.D. DINAKARAN & THE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA
The Commissioner of Income-Tax Salem
Versus
K. Ramasamy
Tax Case (Appeal) No.262 of 2007
Decided On : 26-03-2007
Tax Case Appeal - Block Assessment - Income-tax Act, 1961 (Section 132, 139, 158BD, 158BC(a), 158BB(1)(c), 158BFA(2), 158BFA(1), 113) - The court discussed the provisions of Section 158B(a) defining the block period, Section 158BA(2) declaring the total undisclosed income, and the validity of belated returns filed under Section 139(1) of the Act. The court's decision was influenced by the interpretation of valid information imparted by the assessee to the assessing officer and the relevance of search timing in treating incomes as undisclosed for block assessment.
Fact of the Case:
The case involved a tax appeal against the order of the Income-tax Appellate Tribunal for the block assessment period 4. 99 to 26. 99. The respondent/assessee, engaged in the business of manufacture and sale of cloth, filed regular returns for previous years before a search was conducted under Section 132 of the Income-tax Act, 1961.
Finding of the Court:
The court dismissed the tax case appeal, upholding that the incomes admitted in belated returns cannot be treated as undisclosed income for block assessment, considering the information available to the Department before the search.
Issues: The issues revolved around whether the income admitted in belated returns can be treated as undisclosed income for block assessment.
Ratio Decidendi: The court's decision was based on the interpretation of valid information imparted by the assessee to the assessing officer and the relevance of search timing in treating incomes as undisclosed for block assessment.
Final Decision: The tax case appeal was dismissed by the court.
P.D. Dinakaran, J.
The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal made in IT(SS)A No.84/Mds/2003, dated 22. 2006 for the block assessment period 4. 99 to 26. 99.
1. The brief facts of the case are stated as hereunder:-
The Revenue is the appellant and the relevant block assessment period involved is
4. 99 to 26. 99. The respondent/assessee is engaged in the business of manufacture and sale of cloth. Concededly, even though there was a search under Section 132 of the Income-tax Act, 1961 (hereinafter referred to as the Act), on 26. 99 in the business and residential premises of the respondent/ assessee, even prior to the date of search, the assessee filed his regular returns for the previous years falling within the block period as detailed hereunder:-
Previous year ended/ admitted Assessment year Date of filing of return Income
31-03-95/95-96 13-04-99 Rs.23,830/-
31-03-96/96-97 13-04-99 Rs.14,260/-
31-03-97/97-98 13-04-99 Rs.55,160/-
31-03-98/98-99 13-04-99 Rs.65,810/-
31-03-99/99-2000 11-06-2001 Rs.1,33,870/-
2. 2. However, at the time of search, it was found that the respondent/assessee, Sri.K.Ramasamy, along with five others, had purchased about 4.26 acres of land from Sri.V.S.Kathirvel on 11. 95 for a consideration of Rs.31.68 lakhs and in order to ascertain the sources for the purchase consideration, enquiries were made by the Deputy Director of Income-tax (Inv.) with the assessee. It was admitted by the assessee in his sworn statement given on 7. 99 before the Deputy Director of Income-tax (Inv.) that he had contributed Rs.5.28 lakhs, being 1/6th share of the purchase consideration for the said piece of land. According to this statement, Rs.4.00 lakhs out of Rs.5.28 lakhs were borrowed from third parties and the assessee offered at that time to admit Rs.1.28 lakhs as his undisclosed income and to pay the tax thereon.
2. 3. On the satisfaction that there were certain undisclosed incomes, action under Section 158BD of the Act was initiated and notice under Section 158 BC(a) of the Act was issued on 10. 2000 and the same was served on the assessee on 110. 2000. In response to the said notice, the assessee filed the return for the block assessment in Form No.2B on 10. 2002 admitting undisclosed income of Rs.1.28 lakhs for the previous year 1995-96 falling within the block period. The case was taken up for scrutiny and after examining the documents seized during search and on hearing the submissions of the assessee, the assessing officer proceeded to make the block assessment.
4. The assessing officer found that for the assessment years 1997-98 and 1998-99, the regular returns were filed beyond the due date specified under Section 139(1) of the Act and hence, the incomes that were admitted for these years were also treated as undisclosed income for the respective years in terms of provisions of Section 158BB(1) (c) of the Act.
5. Consequently, the assessing officer computed the undisclosed income of each year comprised in the block period as under:
Previous year ended 31-03-96/Asst. Year 96-97 Total income returned/assessed - Rs. 14,317 Add: Undisclosed income admitted by the assessee - Rs.1,28,000
Total income including undisclosed Rs.1,42,317 income ------------Previous year ended 31-03-97/Asst. Year 97-98 Total income returned - Rs. NIL Add: Undisclosed income admitted by the assessee - Rs. 55,160
Total income including undisclosed Rs. 55,160 income ----------Previous year ended 31-03-98/Asst. Year 98-99 Total income returned - Rs. NIL Add: Undisclosed income admitted by the assessee - Rs. 65,810
Total income including undisclosed Rs. 65,810 income --------------
The total undisclosed income for the block period was computed as under:
Previous year/ Asst. year Total income including undisclosed income Total income returned/assessed F.Y.94-95/95-96
Rs.23,830
Rs.23,830 F.Y.95-96/96-97 Rs.1,42,317
Rs.14,317 F.Y.96-97/97-98 Rs.55,160 Rs.NIL
F.Y.97-98/98-99 Rs.65,810 Rs
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