SMT. RENU AGARWAL v. ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -2006-LL-1229-5]

Citation 2006-LL-1229-5
Appellant Name SMT. RENU AGARWAL
Respondent Name ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 29/12/2006
Assessment Year BLOCK PERIOD 1ST APRIL, 1989 TO 16TH FEB., 2000
Judgment View Judgment
Keyword Tags computation of income • addition to income • undisclosed income • block assessment • concealed income • income returned • search warrant • payment of tax • money lending • block period • advance tax
Bot Summary: On the date of search return of income for the year was not due and income returned by assessee does not form part of undisclosed income for the block period. The assessee has admitted the amount of Rs. 1,00,000 in the return of income filed for assessment year 2000-01 in addition to income from interest. Under section 158BB(1)(d) where the previous year has not ended or the date of filing of return of income under section 139(1) has not expired, the income on the basis of entries relating t o such income or transactions as recorded in the books of account and other documents maintained in normal course of business on or before the due date of search or requisitioned relating to such previous year, shall be reduced from undisclosed income computed under section 158BB(1). The assessee claimed that the income related to the assessment year 1995-96 for which the date of filing of the return of income under sub-section of section 139 of the Income-tax Act, 1961, had not expired. CIT v. A.R. Enterprises 2005 274 ITR 110 by Hon'ble Madras High Court that where the assessee earned taxable income for the assessment year, but no return of income has been filed till the date of search, the income disclosed on account of payment of advance tax cannot be held to be undisclosed income for the purpose of block assessment. If the ratio of the decision of Hon'ble Madras High Court, Rajasthan High Court and Madhya Pradesh High Court are applied to the facts of the assessee's case, the income on which no tax is chargeable, the same cannot be included as undisclosed income under section 158BB. The provisions of section 158B(1)(d) clearly mandate that income relating to entries recorded in the books of account for the previous year which has not ended or the date of filing of return has not expired cannot be taken as undisclosed income for the block period. Accordingly, we restore this issue to the file of Assessing Officer who will determine the income for assessment year 2000-01 as per law and the total income over and above the exemption limit as also covered by tax paid, determined after considering the rebate/deduction applicable to the assessee, if any, will be treated as undisclosed income for the block period.


This appeal by assessee for block period 1-4-1989 to 16-2-2000 arises out of order of CIT (Appeals)-I, Agra. 2. first issue for consideration relates to determination of undisclosed income of Rs. 1,00,000 as against nil shown by assessee. facts of case as apparent from records are that search was carried out in case of Shri Pankaj Agarwal, husband of assessee on 16-2-2000. During course of search, pronote for Rs. 1,20,000 made issued by M/s. Kuntals was found from premises of Shri Pankaj Agarwal. Locker in name of Smt. Renu Agarwal, assessee was also searched. No incriminating material was found in said locker. assessee filed return of income on 20-6-2000. assessee as evident from assessment order is regular assessee from assessment year 1990-91 onwards and has been filing returns of income regularly. Notice under section 158BC was issued on 10-1-2001 and return of income was filed for block period at nil income. Assessing Officer after considering facts and reply of assessee brought amount of Rs. 1,20,000 to tax as undisclosed income for block period. He also added interest of Rs. 4,500 deemed to have accrued on this amount. 3. During course of appellate proceedings, assessee explained that Rs. 1,20,000 was paid to M/s. Quintals at interest of 1.25 per cent per month. amount was paid in cash on 14-12-1999. assessee showed amount of Rs. 1,20,000 in balance sheet as on 31-3-2000. In computation of income for return filed on 20-6-2000, assessee surrendered Rs. 1,00,000 in absence of any evidence. Ld. CIT (Appeals) after considering submissions held that as against Rs. 1,20,000, amount surrendered at Rs. 1,00,000 could be taken as undisclosed income for assessment year 2000-01 as assessee has not filed any proof regarding source of Rs. 1,00,000. 4. Aggrieved by order of ld. CIT (Appeals) assessee is in appeal before this Tribunal. 5. Before us, ld. A.R. of assessee submitted that Assessing Officer has passed order under section 158BC whereas no seizure was made in hands of assessee. At best, order could have been made under section 158BD. Therefore, order passed under section 158BC is bad in law. On other hand, ld. D.R. submitted that search warrant was issued in name of assessee to search locker and, therefore, order passed under section 158BC is correct and justified. 6. We have heard both parties. pronote was seized from premises of Shri Pankaj Agarwal, husband of assessee. Therefore, impugned amount of pronote could have been considered under section 158BD if there was no search in hands of assessee. However, we find that there was search of locker standing in name of assessee. Therefore, order passed under section 158BC is justified on ground that two orders for same block period - one under section 158BD and other under section 158BC cannot be passed. Single assessment order for block period under section 158BC can be passed in respect of material found in search in own case and found in premises of other persons. In our view, amount of pronote has been rightly considered under section 158BC in hands of assessee as undisclosed income in respect of latter is zero. Therefore, proceeding cannot be declared invalid on this ground. 7. next contention of ld. A.R. of assessee is that amount of pronote is not subject to block assessment since assessee was not subjected to payment of advance tax. On date of search return of income for year was not due and, therefore, income returned by assessee does not form part of undisclosed income for block period. Ld. A.R. of assessee placed reliance on decision of Hon'ble Madhya Pradesh High Court in case of CIT v. Nitin Munje [2003] 264 ITR 628. He further submitted that on total income returned on 20-6-2000, assessee was not liable to pay advance tax. On other hand, ld. D.R. relied on order of CIT (Appeals). 8. We have heard both parties. assessee is not engaged in money lending business on regular basis. Therefore, assessee was not required to maintain books of account. assessee has admitted amount of Rs. 1,00,000 in return of income filed for assessment year 2000-01 in addition to income from interest. 9. question arises whether amount of Rs. 1,00,000 surrendered in return of income filed on 20-6-2000 represents undisclosed income for block period. According to assessee, assessee purchased NSCs worth Rs. 50,000 and, therefore, was not subject to advance tax. Under section 158BB(1)(d) where previous year has not ended or date of filing of return of income under section 139(1) has not expired, income on basis of entries relating t o such income or transactions as recorded in books of account and other documents maintained in normal course of business on or before due date of search or requisitioned relating to such previous year, shall be reduced from undisclosed income computed under section 158BB(1). provisions of section 158BB(1)(d) are applicable in cases where assessee maintains regular books of account. In case of Nitin Munje (supra) Hon'ble Madhya Pradesh High Court held as under: "The assessee had been assessed for block assessment period from 1986-87 to 13-9-1995. On appeal Tribunal found that there was no dispute that date of filing of return for assessment year 1995-96 was extended till 31-10-1995 and search was conducted on 13-9-1995. assessee claimed that income related to assessment year 1995-96 for which date of filing of return of income under sub-section (1) of section 139 of Income-tax Act, 1961, had not expired. Before Assessing Officer, assessee made declaration that he would be showing income of Rs. 9,00,000 in return for assessment year 1995-96. After analyzing provision, appellate authority had allowed appeal holding that there was no undisclosed income for block assessment period. On appeal to High Court: Held, dismissing appeal that Tribunal was correct in holding that there was no undisclosed income for block period. No substantial question of law arose from its order." 10. However in case before us, assessee has not maintained any books of account/diary for money lending activities. Therefore, provisions of section 158BB(1)(d) are not applicable. At same time provisions of law cannot be applied differently or harshly in cases where books of account are not required to be maintained or not maintained. In such cases, undisclosed income is governed by payment of tax by way of TDS or advance tax as held i n case of Asstt. CIT v. A.R. Enterprises [2005] 274 ITR 110 by Hon'ble Madras High Court that where assessee earned taxable income for assessment year, but no return of income has been filed till date of search, income disclosed on account of payment of advance tax cannot be held to be undisclosed income for purpose of block assessment. Also in case of CIT v. Ashok Taksali [2002] 257 ITR 352 Hon'ble Rajasthan High Court held that once salary income of block year has been taxed and tax has been deducted at source, there is no question of holding that income of assessee as undisclosed income of block year for taxing it again after search. 11. If ratio of decision of Hon'ble Madras High Court, Rajasthan High Court and Madhya Pradesh High Court are applied to facts of assessee's case, income on which no tax is chargeable, same cannot be included as undisclosed income under section 158BB. provisions of section 158B(1)(d) clearly mandate that income relating to entries recorded in books of account for previous year which has not ended or date of filing of return has not expired cannot be taken as undisclosed income for block period. This logic will be equally applicable in cases where no books of account are maintained and assessee has paid tax, if any, by way of TDS or advance tax. Payment of advance tax in case individual assesees is determined after taking into account rebates/deductions available to such assessees. 12. Hon'ble Rajasthan High Court in case of Chain Sukh Rathi v CIT [2004] 270 ITR 368 has supported this view as under:-"When some material was seized connecting concealed income, Income-tax Officer can compute income on that basis but that should be computed and taxed in accordance with provisions of Act, 1961. Therefore, exemption limit has to be kept in mind and to that extent, income not chargeable to tax, tax should not be charged on that part of income." SLP filed by assessee was dismissed by Hon'ble Supreme Court, 266 ITR (St.) 104-105 (SC). 13. From above discussion, it is clear that income above chargeable limit in respect of which no tax has been paid by way of advance tax or TDS, will be liable to tax as undisclosed income for block period under section 158BB. Assessing Officer as well as ld. CIT (Appeals) have not carried out this exercise. Accordingly, we restore this issue to file of Assessing Officer who will determine income for assessment year 2000-01 as per law and total income over and above exemption limit as also covered by tax paid, determined after considering rebate/deduction applicable to assessee, if any, will be treated as undisclosed income for block period. We direct Assessing Officer accordingly. 14. In result, appeal by assessee is allowed for statistical purposes. *** SMT. RENU AGARWAL v. ASSISTANT COMMISSIONER OF INCOME TAX
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