Detection of undisclosed income during survey mandates assessment under block assessment provisions, maintaining distinct procedures from regular income tax assessments.

JUDGMENT :

Narsing Rao Nandikonda, J.

This appeal is filed arising out of the order, dated 28.02.2008 in IT (SS) A No.65/Hyd/2005 passed by the learned Income Tax Appellate Tribunal, Bench “B” Hyderabad (for short, ‘the Tribunal’) for the Assessment Years 1997-1998 to 2003-2004.

2. The brief facts of the case are that the appellant has been engaged in the business of purchase and sale of gold and silver articles under the name and style of M/s.Choudhary Jewellery and Silver Palace. It is stated that as on today, the appellant is looking after the business as Karta of Hindu Undivided Family (HUF). While so, a survey was conducted under Section 133 A of the INCOME TAX ACT , 1961 (for short, ‘the Act, 1961’) on 21.03.2003 at the business premises of the appellant and found excess stock of gold and silver articles worth Rs.47,97,837/- and the same was admitted by the appellant in his sworn statement. Pursuant to the same, a warrant of search under Section 132 of the Act, 1961 was issued by the Director of Income Tax (Investigation), Hyderabad, which was executed on the appellant on 21.03.2003 and the same was finally concluded on 25.04.2003. His statement was also recorded under Section 132 (4) of the Act, 1961 on 21.03.2003 and again on 26.03.2003, wherein he admitted that there is excess stock of gold and silver articles worth Rs.47,97,837/-, which was not disclosed in the regular books of accounts.

3. In the affidavit filed in support of the petition, it is stated that in response to the notice, dated 11.07.2003, issued under Section 158 BC of the Act, 1961, the appellant filed income tax returns on 18.09.2003 for the block period of 01.04.1996 to 21.03.2003 showing ‘undisclosed income’ as ‘NIL’ He further stated that he also filed regular income tax returns for the Assessment Year 2003-2004 showing the total income at Rs.47,28,077/- which includes sum Rs.46,03,947/- being ‘undisclosed income’ of gold and silver articles detected during the course of survey proceedings. It is further case of the appellant that though the unaccounted gold and silver articles were detected and admitted by him as ‘undisclosed income’ during the course of survey proceedings, the same are not liable for tax in regular assessment proceedings. But, without considering the same, the Assessing Officer held that the unaccounted gold and silver articles worth Rs.47,33,192/- is liable to be taxed under Section 158 BC of the Act, 1961 and erroneously passed the impugned order.

4. It is further case of the appellant that aggrieved by the order, dated 28.06.2004, passed by the Assessing Officer under Section 158BC of the Act, 1961 for the block period 01.04.1996 to 21.03.2003 and the appeal No.0139/CIT (A)- VI/2004-05 filed against the order, dated 28.06.2004 passed under Section 143 (3) of the Act, 1961 for the Assessment Year 2003-2004, the appellant filed appeals before the Commissioner of Income Tax (Appeals)-VI, Hyderabad. The Commissioner of Income Tax placing reliance on the judgment of High Court of Delhi in L.R.Gupta v. Union of India , [194 ITR 32] held that ‘Undisclosed Income’ means it was hidden from the Department and if Department was aware of its existence then it was not undisclosed income and finally the Commissioner concluded that the income which was already detected in the course of survey under Section 133A of the Act, 1961 cannot be treated as ‘undisclosed income’ for the purposes of search under Section 132 of the Act, 1961 and accordingly, allowed the appeals. Aggrieved by the order passed by the Commissioner, the Department filed an appeal vide Appeal No.IT (SS) A No.65/Hyd/2005 before t