RAJESH SAYAL vs. CIT, CHANDIGARH

This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Bench 'B', Chandigarh, in ITA No. 1132/Chandi/1996 for the block period from 1.4.1985 to 7.9.1995 dated 28.2.2008, proposing to raise the following substantial questions of law: i) “ That the ITAT is not justified in treating the income voluntarily declared for the period from 1.4.1995 to 7.9.1995 being the period for which the date of filing of the return u/s 139(1) has not expired as undisclosed income which is against the express provisions of Section 158BB(i)(d) of the Income Tax Act, 1961 [2] and thereby taxing it at the special rate of 60% instead of normal tax rates for the said year which is against the express provisions of law and thus unjustified” ii) “That the ITAT was not justified on facts and in law in treating various incomes

Search was conducted at the business and residential premises of the assessee on 7.9.1995 resulting in seizure of cash, FDRs and other documents. In response to notice under Section 158BC, the assessee filed return as per Section 44AD. Assessment was made in respect of undisclosed income. On appeal, the assessment was affirmed except for deletion of some of the amounts, as indicated in the impugned order. 3

Learned counsel for the assessee submits that the impugned [4] order is perverse inasmuch as income for the assessment year in which search took place, could not be treated as undisclosed income in view of provisions of Section 158BB(1)(d) of the Act. We are unable to accept the submission. The Tribunal observed: “It was contended that the contention on behalf of the assessee that the income of Rs.5,25,325/- was recorded in regular books of account is not well founded in so for the assessee had not maintained any books of account. Moreover, the income as per assessee's own statement for earlier years was nominal at least below the maximum limit not liable to tax. The assessee could not have earned substantial income in a period of five months. It was contended that as per the provisions of Section 158BB(i)(d), no credit was available to the assessee for the income claimed to be taxable at normal rates. The learned DR further contended that the documents found in the course of search have been admitted by the assessee to be his documents and, therefore, additions based on entries of such documents was justified. It was pointed out that huge cash of more than [5] Rs.12 lacs was found at the time of search. The assessee was also found to be owner of various assets with aggregate value of Rs.51 lacs in his own name. He was neither Income tax payee, nor a Wealth -tax assessee. The assessee had not furnished any evidence to support the claims during the course of assessment proceedings with reference to the ownership of IVPs, loans etc. It was further contended that in respect of the alleged loan, the assessee had been given sufficient opportunity to produce the creditors which he failed. The addition was thus made on sound basis, it was contended. In counter reply, the learned counsel for the assessee contended that the Assessing Officer was required to give credit for the income up to assessment year 1993-94 to the tax is paid by the assessee, the Assessing [6] Civil Construction @ 60% as against the normal rates. It was further contended that the assessee had pointed out that he was engaged in the business of sale and purchase of land, money lending etc. Therefore, the Assessing Officer ought to have given credit for the income pertaining to the assessment year 1993-94 in which the income did not exceed the maximum non-taxable limit. It was further contended that the Assessing Officer had never demanded to produce the parties before him and, therefore, no addition could be made for non-production of the parties. Relying upon the decision of the [7] Delhi High Court in the case of CIT v. Ravi Kant Jain (2001) 250 ITR 141, it was contended that the Assessing Officer cannot make any addition without any document found in the course of search to support the addition. It was accordingly pleaded that the appeal of the assessee may be allowed. We have given our careful consideration to the rival contentions and have also perused the record including the paper book filed by the assessee as well as by the department. At the very outset, we would like to make it very clear that the statement of the learned counsel for the assessee that the assessee was a regular tax payer before the date of search, is contrary to the facts on record and no material has been placed before us to support the claim. On the contrary, the learned DR after verification of records has made a statement that the assessee was neither income-tax assessee nor wealth-tax assessee before the date of search. The assessee had also not maintained any books of account in respect of his business or for his income. Therefore, [8] the contention advanced on behalf of the assessee that he was entitled to credit in respect of the business income recorded in the books of account or disclosed in the returns of income filed before the search is not well founded as the assessee had neither filed any return of income before the date of search nor maintained any books of account. Therefore, the declared income in the return by the assessee of Rs.3,50,777 /- and Rs.5,25,325/- was rightly assessed by the Assessing Officer as undisclosed income as per the return filed by the assessee and charged to tax @ 60%.”

From the above finding, it is clear that even though time for filing return had not expired, there was no disclosure by the assessee in any manner. Benefit of Section 158BB(1)(d) could be available only when there was disclosure in the books of account and other documents maintained in the normal course on or before the date of search. The relevant provision is reproduced below: “ 158BB.(1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling [9] within the lock period computed, [in accordance with the provisions of this 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”, 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............x.x..............xx.................. (b) .............xx............x.x...............xx......... © ...xx.......xxx.......x.xx...........xxx.............. (d) where the previous year has not been ended or the date of filing the return of income under sub-section (1) of Section 139 has not expired, on the basis of entries relating to such income or transactions 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 relating to such previous years:

The scheme of Section 158BB (1)(d) is that the assessee may get credit for the income which may have already been disclosed prior to search either in the form of return or in the form of entries in books of account or documents maintained in the normal course. Disclosure can be in the form of advance tax also.

Learned counsel for the assessee has placed reliance on CIT v. Jai Parkash , [2008] 7 DTR 177 (P&H), CIT v. Ravi Kumar [2007] 294 ITR 78 (P&H), CIT v. Vimla Khatri [2007] 288 ITR 168 (MP), CIT v. J.K.Narayanan [ 2007] 293 ITR 179 (Mad), Dr.Mrs.Alaka Goswami Vs. CIT 268 ITR 178 to submit that assessee should get credit even if income disclosed later, when time for return had not expired.

We are unable to accept the submission. The judgments relied upon are distinguishable. In Jai Parkash (supra), the assessee had paid the entire advance tax and to that extent the income was held to be disclosed.

No substantial question of law arises.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) September 01, 2009