A.C.I.T. vs. RITABEN B. RUPANI

Facts

The appeals by the revenue challenge an order of the Income Tax Appellate Tribunal (ITAT) for the block period 01.04.1985 to 08.09.1995. The assessee filed a return showing nil income in response to a notice under Section 158-BC read with Section 158-BD of the Income Tax Act, 1961. The Assessing Officer assessed the income as undisclosed income amounting to Rs. 4,56,454/- and Rs. 3,48,316/-. The ITAT partly allowed the assessee's appeal, deleting additions of Rs. 4,03,954/- and Rs. 2,31,816/- representing undisclosed income received from M/s. Patira Packaging. The revenue's appeals arise from this deletion.

Held

The High Court held that the Tribunal had not committed any error in concluding that the income representing the assessee's share from the partnership firm could not be treated as undisclosed income. The court noted that Section 158BB(1)(c) deals with situations where no return has been filed by the due date. However, in this case, the assessees had filed their returns, though beyond the due date, but crucially, before the date of the search (08.09.1995). Since these returns were on the department's records prior to the search, it could not be said that the assessees attempted to conceal their income from the partnership firm. The court distinguished the reliance on ACIT vs. A.R. Enterprises, stating that in that case, returns were filed after the search, whereas here, returns for two years were filed before the search. The court emphasized that for income to be considered disclosed income under Section 158B(b), it must have been disclosed in a return filed before the search or requisition, as per Section 158BB(3). Therefore, the appeals filed by the revenue were dismissed.

Key Issues

1. Whether the ITAT was right in deleting the addition of Rs. 4,03,954/- as undisclosed income received by the assessee from M/s. Patira Packaging, on the grounds that the assessee had filed returns for three assessment years, which were on record, and therefore, the income could not be treated as undisclosed income under Section 158BB of the Act? Assessee's contention: The assessees had filed their returns of income, albeit belatedly, before the date of the search. Therefore, the income could not be treated as undisclosed income as their intention was not to conceal income. Revenue's contention: The ITAT's conclusion was contrary to Section 158-BB(1)(c) of the Act, which states that if the due date for filing a return has expired but no return is filed, the income will be considered Nil and no credit will be given while computing undisclosed income. The returns for assessment years 1989-90, 1991-92, and 1992-93 were filed beyond the prescribed time limit without any prayer for condonation under Section 119. The revenue relied on the Supreme Court decision in ACIT vs. A.R. Enterprises.