CIT, LDH. vs. JAGPREET SINGH

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 18.7.2006, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for brevity, “the Tribunal”) in IT (SS) A.No.68/Chandi/2004 for the block period 1.4.1988 to 5.10.1998. 2. On 3.5.2007, the appeal was admitted to consider the following substantial question of law:- “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee having filed the return under Section 139 was entitled to the benefit of section 158BB (1) (b) of the I.T.Act disregarding the fact that the return was filed sufficiently after action under Section 132A of the I.T.Act was invoked?”

Briefly, the facts as narrated in the appeal may be noticed. The assessee is an individual from whose possession a sum of ` 7 lacs was seized by the police at Doraha Naka on 15.9.1998. The amount was requisitioned under Section 132A of the Act by the Director of Income Tax (Investigation) Ludhiana vide warrant of authorization issued on 5.10.1998. In compliance with the order dated 29.9.2000 passed by the Additional Sessions Judge, Ludhiana, the amount was handed over to the Income Tax Department on 9.8.2001. In response to the notice dated 7.4.2003 issued under Section 158BC of the Act requiring the assessee to file return of income for the block period 1.4.1988 to 5.10.1998, the assessee took the plea that the amount of ` 7 lacs had been disclosed in the return for the assessment year 1999-2000 and hence could not be the subject matter of assessment under Section 158BC of the Act. The assessee as per record, had filed his original return declaring income of ` 52,950/- on 10.3.2000 and in the revised return filed on 5.6.2000, the aforesaid amount of `7 lacs was offered to tax. During the assessment proceedings, the assessee took the stand that the sum of ` 7 lacs represented his earnings from betting in matches between April 1998 to 15.9.1998. However, no details of the matches were furnished. The Assessing officer completed the assessment at the undisclosed income of `7,31,270/- vide order dated 29.8.2003, Annexure A.1 under Section 158BC of the Act. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)]. Vide order dated 9.7.2004, Annexure A.2, the CIT(A) allowed

Learned counsel for the revenue relying upon judgment of this Court in M.R.Singhal v. Assistant Commissioner of Income Tax, (2007) 290 ITR 162 submitted that where no advance tax or self assessment tax had been paid by the assessee and return was filed under Section 139(4) of the Act, the same could not be termed as a return filed before the due date specified under Section 139(1) for the purposes of Section 158BB(1) (c) of the Act. According to the learned counsel, the Tribunal was thus in error in reducing ` 7 lacs while calculating undisclosed income of the assessee.

We are not impressed with the submission of the counsel for the revenue.

The issue that arises in this case is whether the income of `7 lacs disclosed by the assessee in the revised return filed on 5.6.2000 could be added in the undisclosed income of the assessee. In other words, whether the assessee was entitled for benefit of the aforesaid ` 7 lacs in computing the undisclosed income.

It would be advantageous to reproduce relevant portion of Section 158BB of the Act, which reads thus:- “Computation of undisclosed income of the block period- (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with Assessing Officer, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined, - (a) xx xx xx xx xx (b) Where returns of income have been filed under section 139 or section 147 but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns; c) Where the due date for filing a return of income has expired but no return of income has been filed - (A) On the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or (B) On the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period; xx xx xx xx xx xx xx”

Section 158BB (1) of the Act prescribes the methodology of computation of undisclosed income as defined under Section 158B (b) of the Act. Under Sub-section (1), the total income of each of the previous years which falls within the block period is to be computed on the basis of the evidence found as a result of the search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer. It further provides for exclusion of certain incomes already assessed or admitted and inclusion of losses admitted or assessed from the aggregate total incomes. Thus, it is evident from the perusal of sub clause (b) of Sub-section (1) of Section 158BB, that the Assessing Officer is required to reduce the income disclosed in the return filed by the assessee under Section 139 or Section 147 of the Act but the assessments had not been finalised till the date of search or the requisition while computing the income for the block period.

In the present case, the cash was seized by the police on 15.9.1998 and action under Section 132A of the Act was initiated on 5.10.1998. The warrant of requisition was executed on 9.8.2001 when the money was paid by the police to the Income Tax department and notice under Section 158BC of the Act was issued to the assessee on 7.4.2003 in respect of block assessment for the period 1.4.1988 to 5.10.1998. The assessee filed return in Form 2B of the Act on 5.8.2003 and the block assessment was framed on 29.8.2003. It may, however, be noticed that prior thereto for the assessment year 1999- 2000, the assessee had filed return on 10.3.2000 in which the cash of ` 7 lacs was not disclosed but the same was disclosed by the assessee while filing the revised return on 5.6.2000. This return was processed under Section 143(1) on 31.3.2001. In the present facts and circumstances, the CIT(A) and the Tribunal held that the benefit of the amount of ` 7 lacs which was disclosed in the return filed by the assessee under Section 139 of the Act was admissible to the assessee while computing his undisclosed income. The learned counsel for the revenue was unable to demonstrate that the aforesaid view was not in accordance with law.

Adverting to judgment in M.R.Singhal's case (supra) on which reliance has been placed by learned counsel for the revenue, therein, the assessee had not paid the advance tax or the self assessment tax on the return filed under Section 139(4) of the Act. Under the circumstances, it was held that the same could not be treated to be return filed before the due date specified under Section 139(1) of the Act for the purposes of Section 158BB(1) (c) of the Act. It relates to sub clause (c) of Section 158BB of the Act which is not applicable here. Thus, no advantage can be derived by the appellant from the aforesaid judgment.

Accordingly, we do not find any ground to interfere in the impugned order adjudicating the issue in favour of the assessee. Consequently, the appeal is dismissed. (Ajay Kumar Mittal) Judge November 07, 2012 (Gurmeet Singh Sandhawalia) 'gs' Judge