The Commissioner of Income-tax-II, Nagpur v. Rajkumar Santoshkumar
[Citation -2017-LL-0619-7]

Citation 2017-LL-0619-7
Appellant Name The Commissioner of Income-tax-II, Nagpur
Respondent Name Rajkumar Santoshkumar
Court HIGH COURT OF BOMBAY AT NAGPUR
Relevant Act Income-tax
Date of Order 19/06/2017
Assessment Year 1986-87, 1987-88, 1988-89, 1989-90, 1990-91, 1991-92, 1992-93, 1993-94, 1994-95, 1995-96
Judgment View Judgment
Keyword Tags regular books of account • undisclosed income • regular assessment • valuable article • block assessment • question of law
Bot Summary: In the present facts ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 3 196ITL 63.02.odt also these books of accounts formed the basis of the return of income which were subject to scrutiny assessments under section 143(3) of the Act. In the above case, it is held that where the transaction are disclosed in return of income and subject of regular assessment, then such income cannot be considered to be undisclosed income. Section 158-B Definitions:- In this Chapter, unless the context otherwise requires-....... undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 5 196ITL 63.02.odt or would not have been disclosed for the purpose of this Act. 158BA....... Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub- section relates to an assessment year for which the previous year has not ended or the dare of filing the return of income under sub- section of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period. In support, reliance is placed upon the decision of the Delhi High Court, in case of Commissioner of Income Tax, Central-1, New Dehli vs Shailendra Mahto reported in 372 ITR 257/ where statement made under Section 131 of the Act prior to search cannot be considered to be disclosed income so as to escape from the clutches of Chapter XIVB of the Act. As not only entries were made in regular books of accounts maintained in normal course of business but the assessment of income for the years also ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 7 196ITL 63.02.odt completed under Section 143(3) of the Act. In the present facts, the aforesaid amount as reflected in the regular books of account cannot be considered to be undisclosed income for the purpose of Chapter XVB of the Act.


IN HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH : NAGPUR Income Tax Appeal No. 63/2002 (The Commissioner of Income Tax-II, Nagpur vs M/s Rajkumar Santoshkumar, Nagpur) Office Notes, Office Memoranda of Coram, appearances, Court's orders or directions Court's or Judge's orders. and Registrar's orders Shri A. J. Bhoot, Advocate for Appellant. Shri N.S. Bhattad, Advocate for Respondent. CORAM : M.S. SANKLECHA & MANISH PITALE, JJ. DATE : 19.6.2017. This appeal under Section 260A of Income Tax Act (the Act) takes exception to order dated 26th April, 2002 passed by Income Tax Appellate Tribunal (Tribunal). This appeal relates to block assessment year 1986-1987 to 1995-1996. 2. This appeal was admitted on 20th February, 2003 on following substantial questions of law:- Whether on facts and in circumstances of case , Tribunal was justified in law in deleting additions made by Assessing Officer as undisclosed income, on ground that additions could not be termed as undisclosed income within meaning of Section 158B of Income Tax Act, as these were based on entries in regular books of account? ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 2 196ITL 63.02.odt 3. respondent assessee is partnership firm. It derives incomes from business as dealer in various grains and also supplier and installation of Borewells. 4. It is agreed position between parties that basic issue which arises for our consideration in deciding above substantial question of law is that when income claimed to have been discovered during search, has been duly recorded in regular books of accounts for previous year relating to assessment years covered by block assessment and assessment for each of individual year s therein has been completed under Section 143(3) of Act would such as income be considered to be undisclosed income for purpose of Chapter XIVB of Act. 5. It is undisputed before us that that in law where amount of income has already been reflected in regular books of account prior to search formed on basis of of return which had been assessed under Section 143(3) of Act, then such income will not fall in class of undisclosed income. This has been so held by Andhra Pradesh High Court in CIT in B. Satyarayan 356 ITR 323, Gauhati High Court in CIT vs Armar Sheikh 293 ITR 179 and Delhi High Court in CIT vs. J.M.D International 179 Taxman 253. We are in agreement with above view. In present facts ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 3 196ITL 63.02.odt also these books of accounts formed basis of return of income which were subject to scrutiny assessments under section 143(3) of Act. 6. However, Mr. Bhoot, learned counsel appearing for appellant-revenue in support of appeal submits that the above decisions are inapplicable in present facts. This for reasons that entries in books of account being relied upon to establish that income has been noted for regular books of account are in different handwriting and in different ink. Therefore, it is submitted that this evidences fact that books of account have been interpolated leading to suspicion that same was done after closure of books. 7. As against above, Mr. Bhattad learned counsel for respondent points out that there has been no manipulation of books of accounts as alleged. This for simple reason that on search, officers of Revenue had seized appellant's books of accounts and returned it only after passing of assessment order. Consequently, appellant had no opportunity to manipulate its accounts as is being alleged by Revenue. Moreover, prior to date of search, by Assessing Officer, assessment has already been completed under Section 143(3) of Act. Thus ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 4 196ITL 63.02.odt appellant-assessee would have no reason, thereafter to manipulate its books of accounts . It is further pointed out that assessment for each of year included block assessment period have been completed under Section 143(3) of Act. This would necessarily imply that account books and all other supporting documents which are in support of return, would have been subject of examination of Assessing Officer before passing of Assessment Order. It was also contended that issue is concluded in its favour by decision of this Court in CIT vs. Vikram Doshi in 256 ITR 129 . In above case, it is held that where transaction are disclosed in return of income and subject of regular assessment, then such income cannot be considered to be undisclosed income. Thus, in above view, it is submitted that no interference is warranted. 8. Before considering rival submissions, it may be appropriate to reproduce Sections 158B and 158BA(3) of Chapter XIV-B of Act which have bearing to present facts. Section 158-B Definitions:- In this Chapter, unless context otherwise requires- (a)....... (b) undisclosed income includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in books of account or other document or transaction represents wholly or partly income or property which has not been ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 5 196ITL 63.02.odt or would not have been disclosed for purpose of this Act. 158BA (1).... (2)... (3) Where assessee proves to satisfaction of Assessing Officer that any part of income referred to in sub- section (1) relates to assessment year for which previous year has not ended or dare of filing return of income under sub- section (1) of section 139 for any previous year has not expired, and such income or transactions relating to such income are recorded on or before date of search or requisition in books of account or other documents maintained in normal course relating to such previous years, said income shall not be included in block period. 9. Mr. Bhoot learned counsel for Revenue submits that books of accounts are to be discarded as same has been manipulated and tinkered with by respondent assessee. This according to him is evident from some of entries in books are found in different ink and in different handwriting. Therefore, entries as recorded in regular books of accounts have to be ignored to extent Assessing Officer has found undisclosed income in hands of respondent assessee. aforesaid submission has been completely met by respondent - assessee pointing out that at time of search of books of account maintained in regular course of business and other documents found during course of search had been seized by Revenue. Thus, there could be no occasion for respondent - assessee to manipulate books of ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 6 196ITL 63.02.odt accounts as suggested by Revenue. More so, as rightly pointed out by him, that once assessment has been completed under Section 143(3) of Act, there is no reason for him to manipulate his accounts. In above view, submission of Revenue that books of accounts should be ignored cannot be accepted. 10. It was next contended by learned counsel for Revenue that decision of this Court in Vikram Doshi (supra) will not apply. In support, reliance is placed upon decision of Delhi High Court, in case of Commissioner of Income Tax, Central-1, New Dehli vs Shailendra Mahto reported in (2015) 372 ITR 257 (Delhi)/ where statement made under Section 131 of Act prior to search cannot be considered to be disclosed income so as to escape from clutches of Chapter XIVB of Act. entire basis of Delhi High Court decision was that respondent - assessee in that case had not filed any return for income, which is not case in present facts. Further, reliance is placed upon decision of Rajasthan High Court in CIT vs. Elegant Homes (P) Ltd 259 ITR 232. This also is inapplicable at it proceeds on basis that entries in books of accounts will not make it disclosed income, proceeded on basis that no return of income has been filed. Therefore, aforesaid decisions would have no bearing to present facts. As not only entries were made in regular books of accounts maintained in normal course of business but assessment of income for years also ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 7 196ITL 63.02.odt completed under Section 143(3) of Act. 11. In fact, decision of this Court in Vikram Doshi (supra) is applicable to present facts as income disclosed in regular accounts has been subject matter of regular assessments. Thus, such income cannot be considered to be undisclosed income for purpose of Chapter XIVB of Act. 12. One must not lose sight of fact that proceeding under Chapter XIVB of Act are special procedure to tax undisclosed income, which has been found as result of search. It is not intended to be replacement for regular assessment. Therefore, any assessment under Chapter XIVB of Act has only to be of undisclosed income. When assessment is done under Section 143(3) of Act, it can be safely presumed that regular books of account which formed basis of return of income were also subjected to examination by Assessing Officer. Therefore, in present facts, aforesaid amount as reflected in regular books of account cannot be considered to be undisclosed income for purpose of Chapter XVB of Act. 13. In view of above, substantial question of law is answered in affirmative i.e. in favour of respondent asssesse and against appellant- Revenue. ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: 8 196ITL 63.02.odt 14. Accordingly, appeal is dismissed. No order as to costs. (MANISH PITALE, J.) (M.S.SANKLECHA, J.) Gohane ::: Uploaded on - 27/06/2017 ::: Downloaded on - 29/06/2017 09:47:38 ::: Commissioner of Income-tax-II, Nagpur v. Rajkumar Santoshkumar
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