COMMISSIONER OF INCOME TAX vs. KHERANI PAPER MILLS (P) LTD.

Facts

A search and seizure operation was conducted at the business premises of Kherani Paper Mills (P) Ltd on December 1, 1995, concluding on January 5, 1996. The company, engaged in manufacturing Duplex Board, was part of the N.R. Agarwal Group. Following a notice under Section 158BC of the Income-tax Act, 1961, the assessee filed a block return in Form 2B on February 23, 1996, declaring an undisclosed income of Rs. 17,83,454.00. Assessments were completed after issuing notices under Section 143(2). The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'A', referred a question of law to the High Court of Gujarat at the instance of the applicant-Revenue.

Held

The High Court of Gujarat held that the issue involved in the present matter is covered by its own decision in the case of Commissioner of Income-Tax v. N.R. Paper And Board Ltd., reported in [2009] 313 ITR 359 (Guj.). The Court found that the facts in the present case were similar to the cited precedent. Therefore, the question referred to the Court was answered in favour of the assessee and against the Revenue. The operative direction was to answer the reference accordingly, implying affirmation of the ITAT's decision.

Key Issues

1. Whether, on the facts and in the circumstances of the case and proper interpretation of Section 158BB and Part-II, Part-III of Form No. 2B for Block Assessment, the ITAT was justified in law in holding that the assessee is eligible for deduction under Section 80I with reference to the "total undisclosed income" of the Block period? Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The High Court's decision was based on a previous ruling. Revenue's Contention: The Revenue, as the applicant, sought reference of this question to the High Court, implying disagreement with the ITAT's finding on the eligibility for deduction under Section 80I based on total undisclosed income.