CIT-AMRITSAR vs. M/S CHABAL KALAN COOP L&C SOCIEITY LTD. AMRITSAR

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ITA/168/2009HC Punjab & HaryanaPHHC01084246200922 July 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Court found that the Tribunal's findings clearly indicated that the material found during the search was taken into account during the regular assessment proceedings and that there was no undisclosed income that could be subjected to block assessment under Section 158BA. The Court held that the Revenue's challenge was primarily to the finding that there was no disclosed income, which was a question of fact. In the absence of a perversity in the Tribunal's finding, the High Court stated it could not re-examine this factual aspect. Consequently, the substantial questions of law proposed by the Revenue were not considered to be substantial questions of law. The operative direction was the dismissal of the appeal.

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) concerning the block assessment of M/s Chabal Kalan Co-op. L & C Society Ltd. for the block period April 1, 1987, to October 9, 1997. A search under Section 132 of the Income-tax Act, 1961, was conducted, leading to the issuance of a notice under Section 158BC. The Assessing Officer (AO) made a block assessment based on estimated net profit, which was upheld by the CIT(A). The ITAT, however, allowed the assessee's appeal, holding that block assessment was not permissible when regular assessments were pending and the searched material had already been reflected in those regular assessments. The ITAT noted that regular assessments had been completed after considering all points.

What were the issues?

1. Whether the ITAT was correct in holding that an assessment completed under Section 143(3), 144, or 147 cannot be reopened in proceedings under Chapter XIV-B, despite incriminating documents found during a search and admitted by the assessee. 2. Whether the ITAT was right in ignoring evidence in the form of incriminating documents/books of accounts mentioned in the AO's order under Section 143(3)/158 BC. Assessee's Contention (as inferred from Tribunal's findings): The Tribunal accepted the assessee's appeal, holding that block assessment under Chapter XIV-B was not permissible if regular assessments for the years covered by the block period were already completed and the material found in the search had been disclosed in those regular assessments. The Tribunal stated that income already disclosed in regular assessments could not be treated as undisclosed income for block assessment. Revenue's Contention: The Revenue argued that the ITAT was incorrect in holding that regular assessments could not be reopened in block assessment proceedings, especially when incriminating documents were found and admitted. The Revenue also contended that the ITAT failed to appreciate the evidence available in the form of incriminating documents and books of accounts.

Which sections of the Income-tax Act were involved?

Section 260A,Section 132,Section 158BC,Section 143(3),Section 144,Section 147,Section 158BA

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

Income Tax Appeal No. 168 of 2009 (O&M) Date of decision: 22.7.2009 CIT-1, Amritsar. ......Appellant Vs. M/s Chabal Kalan Co-op. L & C Society Ltd, Goal Bagh, Amritsar. ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Ms.Naveender P.K.Singh, Senior Standing Counsel, for appellant. **** ADARSH KUMAR GOEL, J. (Oral)

1.

The Revenue has preferred this appeal under Section 260A of the Income-tax Act, 1961 (for short, “the Act”), against the order of the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar dated 19.9.2008 passed in I.T.(SS)A No. 10 (ASR)/ 2000 for the block period 1.4.1987 to 9.10.1997 served on the appellant on 23.9.2008, proposing to raise the following substantial question of law: 1. “Whether or not the Hon'ble ITAT was correct in holding that the assessment completed under Section 143(3) /144/147 cannot be reopened in the proceedings under Chapter XIV-B in spite of the facts that large number of incriminating documents were brought on record as a result of search and also admitted by the appellant.” 2. “Whether or not the Hon'ble ITAT was right in ignoring and not appreciating the evidence which was available in the shape of incriminating documents/books of accounts such as mentioned at Income Tax Appeal No. 168 of 2009 [2] page No.3 of the assessment order passed by the A.O. under Section 143(3)/158 BC.”

2.

The assessee was in the business of crushing of boulder stones and also running Hot Mix Plants, apart from business of transport and running of petrol pumps. Search was conducted under Section 132 of the Act and loose papers were found at various premises of the assessee. Notice under Section 158BC was issued and block assessment was made by the Assessing Officer on the basis of estimated net profit, which was upheld by the CIT(A). The Tribunal accepted the appeal of the assessee and held that when regular assessment was pending and the material found in search had already been reflected/disclosed by the assessee in regular assessment proceedings block assessment was not permissible. Regular assessment was made after considering all the points. Relevant observations of the Tribunal are as under: “ In our opinion, the Assessing Officer is not entitled to question the deductions or exemptions claimed in the regular block assessment since it is a subject matter of regular assessment. As discussed earlier, the assessee has already filed return of income for the various years covered in the block period and assessment completed under Section 143(3) and the assessee having been imparted information relating to the regular income in a normal way, it would not be proper to the Department to consider the turnover disclosed in the regular return for the purpose of making block assessment under Chapter XIV -B of the Act. Hence, the assessment completed

Income Tax Appeal No. 168 of 2009 [3] under Section 143 or 144 or 147 cannot be reopened in the assessment proceedings under Chapter XIV-B. Consequently, those elements of income which already stand disclosed in the relevant assessment year falling within block period cannot be included while computing undisclosed income under this Act. Block assessment is in addition to regular assessment proceedings for the previous year included in the block period. Hence, the undisclosed income in the block assessment cannot be made unless there was evidence found during the course of search to make such addition. If the turnover had been duly reflected and disclosed in the course of regular assessment proceedings by the assessee, the same cannot be said to be undisclosed income of the assessee and the same cannot be assessed under Chapter XIV-B of the Act.” xx xx xx xx xx xx xx xx “In view of the matter, we are of the opinion that the income disclosed on account of payment of advance tax/TDS cannot be treated as undisclosed income for the purpose of Block assessment and the AO is required to verify whether the assessee's income for the A.Y.1997-98 & 1998-99 is subject to advance tax/TDS, the same is to be excluded for the purpose of determination of undisclosed income. On the other

Income Tax Appeal No. 168 of 2009 [4] hand, if only part of the income out of contract receipts is subject to advance tax/TDS, the proportionate exemption is to be given to this, if the contract receipts are not recorded in the regular books of accounts maintained by the assessee. For this limited purpose of verification, the issue relating to assessment4 years 1997-98 & 1998-99 is set aside to the file of AO to decide the same afresh .”

3.

We have heard learned counsel for the Revenue.

4.

Findings of the Tribunal clearly are that the material found in search was taken into account during regular assessment and there was no undisclosed income, which may be subjected to block assessment under section 158BA.

5.

What is challenged by learned counsel for the Revenue is the finding that there was no disclosed income. That being a question of fact, in absence of finding of the Tribunal being perverse, cannot be re-examined by this Court. The questions of law proposed cannot be held to be substantial question of law.

6.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) July 22, 2009

JUDGE raghav Note: Whether this case is to be referred to the Reporter ........Yes/No Income Tax Appeal No. 168 of 2009 [5]

Income Tax Appeal No. 168 of 2009 [6]

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