Ita/91/2002 Of Commissioner Of Income Tax Jodhpur v. Late Shri Manohr Lal Soni

Mr. K.K.BISSA, for the appellant/ petitioner Mr. RAMIT MEHTA, for the respondent Date of Order : 23.11.2007 This appeal has been filed by the Revenue, againstthe judgement of Tribunal, dated 28.11.2001. This appealwas admitted vide order dated 09.12.2002, by framing thefollowing substantial question of law:- “(i) Whether, on the facts and in thecircumstances of the case the Tribunalwas justified while interpreting theprovisions of Section 158BB (1)(c) ofthe Act that credit of the income is tobe given while computing undisclosedincome even if no return is filed u/s139(1) in the cases of below taxableincome?” The facts of the case are, that the assessment wasmade for block-period 1988-89 to 1999-2000, and that matterwas carried up to the Tribunal, and the Tribunal,ultimately while deciding ground No. 8, relating todeletion of addition of Rs.1,57,467/-, held that theaddition was deleted by the CIT Appeals holding that the assessee was not having taxable income during the period,and was not under the obligation to file a return, and somerely on account of non-filing of the return of income,the assessee's income cannot be computed as undisclosedincome, and this was found to have been so consideredrightly. It may be observed, that this is not in disputethat this amount of Rs.1,57,467/- represents the amount ofincome of the assessee during the relevant previous years,in which his income was below taxable limits, and for thoseperiod, the assessee was not under the obligation to fileany type of income tax return. It is contended by the learned counsel on behalfof the Revenue, on the basis of language of Section 158BB,that in the case of search and seizure, when the BlockAssessment is to be made, income is to be computed inaccordance with various provisions of Chapter IV, and nodeduction can be allowed, with respect to the income,during the years, during which it was below taxable limits,and therefore, the order of the Tribunal, so also CITAppeals, is required to be interfered with. On the other hand, learned counsel for theassessee supported the impugned order, contending it to bein accordance with the provisions of Section 158BB. We may gainfully quote the relevant parts of theSection 158BB, being Sub-section (1) and Clause (c) and (ca) thereof, which read as under:- “158BB (1) The undisclosed income ofthe block period shall be the aggregatecomputed, [in accordance with theprovisions of this Act, on the basis ofevidence found as a result of search orrequisition of books of account orother documents and such othermaterials or information as areavailable with the Assessing Officerand relatable to such evidence], asreduced by the aggregate of the totalincome, or as the case may be, asincreased by the aggregate of thelosses of such previous years,determined.,- … … … … … … … … (c)Where the due date for filing areturn of income has expired, but noreturn of income has been filed,-(A) On the basis of entries asrecorded in the books of account andother document maintained in the normalcourse on or before the date of thesearch or requisition where suchentries result in computation of lossof any previous year falling in theblock period; or (B)On the basis of entries asrecorded in the books of account andother documents maintained in thenormal course on or before the date ofthe search or requisition where suchincome does not exceed the maximumamount not chargeable to tax for anyprevious year falling in the blockperiod; (ca) where the due date for filing areturn of income has expired, but noreturn of income has been filed, asnil, in cases not filing under clause(c);” A bare reading of this Section shows, thataccording to the Sub-section (1), the undisclosed income of (B)On the basis of entries asrecorded in the books of account andother documents maintained in thenormal course on or before the date ofthe search or requisition where suchincome does not exceed the maximumamount not chargeable to tax for anyprevious year falling in the blockperiod; (ca) where the due date for filing areturn of income has expired, but noreturn of income has been filed, asnil, in cases not filing under clause(c);” A bare reading of this Section shows, thataccording to the Sub-section (1), the undisclosed income of the block period is to be taken to be aggregate of thetotal income of the previous years, falling within theblock period, to be computed in accordance with provisionsof the Act, on the basis of the material mentioned in thissub-section, but then, such aggregate amount is furthersubject to reduction, and increase, as provided in thissub-section (1) itself, inasmuch as, it is to be reduced byaggregate of total income, so also is to be increased bythe aggregate of losses, of such previous years, determinedaccording to various Clauses of this sub-section (1). Thus,the circumstances mentioned in Clause (c) and (ca), as thecase may be, are required to be taken into account, for thepurpose of increasing or reducing the aggregate of thetotal income, as arrived at. In this sequence, a look atClause (c) shows, that it comprises of sub-clauses (A) and(B). Sub-clause (A) prescribes the procedure forcomputation of losses, for any previous years fallingwithin the block period, while Clause (B) provides forcomputation of the income, falling within block period.Since it is not a case of computation of any losses, therelevant and applicable clause would be only sub-clause(B), which provides, that the income is to be computed onthe basis of computation as recorded in the books ofaccount and other documents maintained in the normal courseon or before the date of the search or requisition, wheresuch income does not exceed maximum amount not chargeableto tax for any previous year, falling within the blockperiod. In our view, this, unmistakably shows that wheretotal income for any previous year falling within the blockperiod, as arrived at on the basis of the books of accountand other documents maintained in the normal course on orbefore the date of the search or requisition the documents,if it does not exceed the maximum amount not chargeable totax, has to be reduced from out of the aggregate income ofthe block period, as arrived at under sub-section (1) inaccordance with the provisions of the Act, on the basis ofthe documents. Our view is further fortified from barereading of the Clause (ca), which provides, that where duedate of filing of the return has expired, but no return ofincome has been filed, in cases not falling in Clause (c),income is to be taken as “nil”. Obviously, meaning thereby,that in cases, where the total income for any previousyears, falling within the block period, exceeds the maximumamount not chargeable to tax, and return has not been filedthen the entire income is to be taken into account asaggregate income of the assessee during the relevant BlockPeriod, and no deduction on that account is required to bemade. Obviously, therefore, where it does not exceed,maximum amount not chargeable to tax, for any previous yearfalling within the block period, that income is required tobe reduced from out of the aggregate income of the BlockPeriod, arrived at in accordance with the provisions ofSection 158BB, and it cannot be said, to be the undisclosedincome even if no return is filed, within the time prescribed under Section 139, as obviously, the assesseewas not under the obligation to file any return. Our view also finds support from the judgement of Madhya Pradesh High Court, in CIT Vs. Hasamdar Khatri,reported in 283 ITR page 346. prescribed under Section 139, as obviously, the assesseewas not under the obligation to file any return. Our view also finds support from the judgement of Madhya Pradesh High Court, in CIT Vs. Hasamdar Khatri,reported in 283 ITR page 346. Accordingly, the question framed is answered in favour of the assessee, and against the Revenue.Resultantly, we find no force in the appeal, and the sameis dismissed. ( MUNISHWAR NATH BHANDARI ),J. ( N P GUPTA ),J. preety