Smt. Subha Prasad vs The Deputy Commissioner of Income Tax (INV)

K.L. Manjunath, J.—The assessee has come up in this appeal being aggrieved by the concurrent findings of the order passed by the Assessing Officer which has been confirmed by the Commissioner of Income Tax (Appeals) and further confirmed by Income Tax Appellate Tribunal in IT (SS) A No. 13/B/02 dated 28.3.2005. At the time of admission the appeal is admitted to consider the questions of law. During the course of arguments, the learned Counsel for both the parties submit that the following questions would arise in this appeal. Therefore, on the submission we have considered the following substantial questions of law:

Whether the Tribunal is justified in law holding that the income admitted by the appellant in the regular return for the assessment year 1993-94 to 1996-97 is to be assessed as undisclosed income for the block period under the facts and circumstances of the case?

Whether on the facts and in the circumstances of the case, is the Tribunal correct, in holding that the income covered by the amount of advance tax paid for the assessment years 1993-94 to 1996-97 was not disclosed to the Department and thus assessable as undisclosed income for the block period?

The facts of the case are that the dispute is in regard to block assessment period 1990-91 to 1999-2000. The assessee as an individual is carrying on the business of transport for the assessment year 1993-94. The advance tax paid by the assessee as detailed in the appeal memo are as hereunder:

Assessment Date of advance Amount of Year tax payment tax paid 1993-94 15.09.1992 Rs. 5,820 15.12.1992 Rs. 5,820 15.03.1993 Rs. 7,760 1994-95 15.09.1993 Rs. 7,093 15.12.1993 Rs. 19,115 15.03.1994 Rs. 17,472 1995-96 14.09.1994 Rs. 5,100 20.12.1994 Rs. 5,100 15.03.1995 Rs. 6,800 1996-97 15.09.1995 Rs. 16,200 14.12.1995 Rs. 16,200 15.03.1996 Rs. 21,600 1997-98 14.09.1996 Rs. 11,000 13.12.1996 Rs. 11,000 15.03.1997 Rs. 11,000 1998-99 15.09.1997 Rs. 6,000 15.12.1997 Rs. 6,000 14.03.1998 Rs. 8,000

Though the assessee was regular in paying the taxes but was not in the habit of filing returns. The search was conducted on the premises of one Sri B.S. Amaranarayana Gupta & Others on 17.11.1998. Certain documents were seized from the premises of B.S. Amaranarayana Gupta. Thereafter on 27.11.1998 the assessee filed regular return of income for the assessment years. The Assessing Officer issued a notice to the assessee u/s 158BD on 23.4.1999 and treated the entire income for the block assessment year as undisclosed income. Accordingly, an order of assessment was completed, against which the assessee filed an appeal before the Commissioner of Income Tax (Appeals). That the income assessed by the Assessing Officer cannot be treated as undisclosed income on account of the fact that the assessee was very regular in paying the advance tax every year, accordingly, he requested the Commissioner to allow the appeal. The appeal came to be rejected, against which the assessee filed an appeal before the Tribunal. The Tribunal also concurred with the views of the Assessing Officer allowed the appeal in part and granted the relief for the assessment year 1997-98 and 1998-99 and rejected the claim of the assessee for the previous years. Being aggrieved by the same the present appeal is filed.

Mr. Shankar learned Counsel contends that all the, authorities have committed an error in treating the income of the assessee as an undisclosed income. According to him when the assessee has paid the advance taxes en time, it only reflects that the assessee had no intention to conceal the income and it was offered for the tax. Relying upon the Judgment of this Court in the case of Commissioner of Income Tax and Anr. v. Anil M. Potdar in ITA No. 459/2007 dated 22.1.2010, contends that, in view of the non-filing of return, the Department can initiate proceedings to recover interest, if they could levy by invoking the provisions of Section 234B of the Act. Therefore, he request the court to answer both the questions in favour of the assessee. To support his arguments he has also relied upon the decision of the Madras High Court in the case of The Assistant Commissioner of Income Tax Vs. A.R. Enterprises, . Relying upon the aforesaid Judgment, he request the court to allow the appeal.

Per contra, learned Counsel for the revenue contends that the contentions urged by the learned Counsel for the appellant cannot be appreciated. According to him due to non-filing of the return on time, the return has to be treated as invalid and the same has to be rejected. When there is no valid return filed, the authorities were justified in initiating proceedings by issuing notice u/s 158BD of the Act. Therefore, the questions of law are to be answered against the assessee.

Having heard the learned Counsel on both sides, we are of the opinion that both the questions have to be answered in favour of the assessee for the following reasons:

In order to appreciate the initiation of proceedings by the Assessing Officer u/s 158BD, the Assessing Officer should satisfy himself that there is an undisclosed income, if a search had not been conducted, the assessee would not have revealed the income and therefore, on the premises that there is undisclosed income, a notice u/s 158BD has been issued. In order to ascertain whether there is undisclosed income, we have to examine the definition of undisclosed income as defined u/s 158BD which reads as hereunder:

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 other transactions represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act.

From reading of the definition, we are of the opinion that considering the facts and circumstances of this case we cannot hold that the assessee had an intention not to disclose his income for tax. According to us the very fact that the assessee was paying the advance tax on time every year within the due date would show his intention to offer his income to the tax and not to hide or conceal the income. If really the intention of the assessee was to conceal his income, he would not have paid the advance tax on time.

It is no doubt true that the return has not been filed by the assessee within the stipulated time in every assessment year. Even in this case before issuing notice u/s 158BD the return had been filed by the assessee. A search has not been conducted on the premises of the assessee herein but the same had been conducted in the premises of Amarnarayan Gupta and others. It is the case of the assessee that even in the search conducted, no material concerning the assessee was seized from the house of the Amar Narayana Gupta. Therefore, Mr. Shankar contends that there cannot be any undisclosed income in the present case. In Anil Potdar''s case this Court has taken a view that when advance tax has been collected by the firm and bank respectively and even if there is belated return, ii cannot be considered as an undisclosed income and if there is delay in filing return, it is for the revenue to initiate proceedings in accordance with law.

As a matter of fact the facts involved in the present case is squarely covered by the Judgment of Madras High Court in A.R. Enterprises case the search was conducted on the premises of the assessee, but the assessee therein had paid the advance tax on time and the return was not filed in time. Therefore, their Lordships have taken a view such return filed belatedly cannot be considered as an undisclosed income. In the instant case the case of the assessee stands in a better footing than the facts involved in the A.R. Enterprises case. In the present case search had not been conducted in the premises of the assessee, advance tax was paid regularly by the assessee and even before issuing notice u/s 158BD the assessee has filed the return. The only mistake committed by the assessee herein is that though the advance tax was paid on time, the return was filed belatedly. Therefore, we are of the view we have to answer the questions of law in favour of the assessee and against the revenue.

Accordingly, the appeal is allowed.