CIT JALANDHAR vs. ASHWANI TREHAN,JALANDHAR

The Income Tax Appellate Tribunal, Amritsar, under Section 256(1) of the Income Tax Act, 1961 (for short, “the Act”), has referred following questions of law for opinion of this Court, arising out of its orders dated 3.12.1997 and 10.6.1998 in IT( ) A.No.4(ASR)/1997 in respect of block assessment period from 1.4.1985 to 13.12.1995:- (i) “Whether, on the facts and in the circumstances of the case, the Ld. ITAT is right in law in deleting the addition of Rs.5 lacs representing income introduced through the ‘WILL’ allegedly left by the assessee’s deceased father, Sh. Gopal Dass Trehan Pertaining to the relevant period falling in the block period 1.4.1985 to 13.12.1995?” (ii) “Whether, on the facts and in the circumstances of the case, the Ld. ITAT is right in law in holding that the term “Due Date” as referred to in Section 158B (1) (c) of the Income Tax Act, 1961 also includes the return of income furnished u/s 139(4) of the Act?”

The assessee is an individual and his sources of income are salary, interest and dividend. A search was conducted at his residence on 13.12.1995 and 14.12.1995 on which two Wills executed by his father and mother were found. As per the will of the father, he bequeathed a sum of Rs.5 lacs in cash in favour of mother of the assessee, the assessee himself, his wife and his two children. The source of money found as per the Will, as claimed by the assessee, was doubted on the ground that his father had met with an accident and was unable to run the business. The Assessing Officer held that the amount was unexplained income of the assessee. On appeal, plea of the assessee was upheld on the ground that execution of Will had not been challenged and in absence of further investigation, there was no justification to reject the explanation furnished by the assessee that inspite of accident, his father continued to do business.

The assessee also took the plea that he had filed return for the assessment year 1995-96 on 25.3.1996, which was before the due date and the amount disclosed in the said return could not be treated as concealed income. The Assessing Officer did not accept this plea on the ground that disclosure in return filed after search was not relevant. However, on appeal, the Tribunal upheld this plea of the assessee on the ground that return was before due date under Section 139(4) of the Act.

We have heard learned counsel for the parties and perused the record.

We proceed to deal with the questions referred. Re. Que.(i):

After considering all the facts, we are in agreement with the arguments of the learned counsel for the assessee. Execution of will is not challenged by the A.O. nor the explanation given by the assessee during statement recorded at the time of search was treated as unbelievable otherwise the Department would have made sincere efforts to falsify the facts stated by the assessee. No investigation after that explanation of the assessee. In view of all these facts, no justification to treat the amount left by his father as unexplained income of the assessee, which is to be deleted. The ground succeeds and the A.O. is directed to delete the amount so added.”

The finding of the Tribunal on this aspect is as under:- “4. After considering the rival submissions, we are of the definite view that plea advanced by the learned counsel for the assessee has to prevail. The word used by the legislature in section 158BB(1)(c) is due date for filing the return of income and in the case in hand the return under section 139(1) was to be filed by 30.6.1995 by applying the provisions of section 139 (4) the assessee has an option to file return within a year after expiry of the date prescribed under Section 139(1) of the Act and admittedly the assessee had filed the return within that extended one year period. The legislature has not used the provision of section 139(1) in section 158BB(1)(c) as it has been specifically used in section 158BB(1)(d) of the Act and thus the assessee who has filed return under Section 139(4) cannot be deprived of the benefit of filing the return in time and he cannot be hit by the provision of section 158BB(1)(c) of the Act. The ground stands allowed and we direct the A.O. to reduce the income shown by the assessee, in return for the assessment year 1995-96 filed on 25.3.1996 for the purpose of working out the undisclosed income.” Under Section 158BB, undisclosed income is aggregate of income for the previous year falling in the block period, on the basis of evidence found in search, reduced by the income determined on the basis of returns already filed or where date for filing of return had not expired, on the basis of entries made in the books of account. In other words, return filed after search was not at par with disclosed income. The stand of the assessee that he had filed return under Section 139(4) of the Act on 25.3.1996, which should be taken into account could not be accepted. The return filed could be taken into account only if the same was before the date of search, as provided under Clause (b) of Section 158BB and if the return had not been filed but the date was still available, only entries in books of account could be taken into account. In view of this clear scheme of Section 158BB of the Act, the interpretation placed by the Tribunal in taking into account the return filed after the search, is against the express statutory provision under Clause (b) of Section 158BB. It is well settled that the Section has to be read as a whole and if interpretation taken by the Tribunal is to be accepted, the same will be against the scheme of Clause (b) of Section 158BB. In M.R. Singhal v. Assistant Commissioner of Income Tax [2007] 290 ITR 162 (P&H), same view was taken and it was held that return filed after search even before ‘due date’ under Section 139(4) of the Act could not be taken into account. The relevant observations are as under:- “Though learned counsel for the assessee has relied upon section 139(4) of the Act which permits the return to be filed even after the expiry of due date, for purposes of Section 158BB(1)(c) of the Act, the consequence of the return having not been filed by the due date cannot be nullified by a return filed under section 139(4) of the Act. Even otherwise, section 158BB(1)(c) of the Act clearly provides that even where the date for filing the return has not expired, transactions recorded on the basis of entries relating to income in the books of account have to be taken into account. In the present case, no advance tax or self-assessment tax had been paid at the relevant time. In such a situation, the return filed under Section 139(4) of the Act could no be taken into account.” In view of above, the view taken by the Tribunal cannot be sustained Question (ii) has to be answered in favour of the revenue and against the assessee.