Itta/18/2000 Of Commissioner Of Incometax Visk v. Parthyusha Associates

THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B.LOKURANDTHE HON’BLE SHRI JUSTICE SANJAY KUMARI.T.T.A.NO.18 OF 2000 DATED 16thFEBRUARY, 2012 Between Commissioner of Income Tax,Visakhapatnam. …Appellant and M/s.Prathyusha Associates,D.No.48-10-24A, Srinagar,Visakhapatnam – 530 016. ...Respondent THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B.LOKURANDTHE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A.NO.18 OF 2000 JUDGMENT(Per Sri Justice Sanjay Kumar) The following substantial questions of law were framed forconsideration in this appeal by the Revenue under Section 260(A) ofthe Income Tax Act, 1961 (hereinafter, ‘the Act’): 1)Whether on the facts and in the circumstances of thecase, the ITAT is right in holding that the AssessingOfficer has exceeded his jurisdiction while completingthe assessment under Section 158BC? 2)Whether on the facts and in the circumstances of thecase, the interpretation given by the ITAT to Section158BB(1) in allowing the assessee’s claim in respect ofdepreciation holds good? 3)Whether on the facts and in the circumstances of thecase, the ITAT is right in holding that the assessee isentitled to claim depreciation @ 40% on the merits of thecase, having regard to the nature of business carried onby the respondent assessee? The assessee, a partnership firm, was subjected to search andseizure operations under Section 132 of the Act on 06.11.1995. Noticeunder Section 158BC of the Act was issued on 11.01.1996 calling forthe assessee’s return of undisclosed income for the block period01.04.1985 to 06.11.1995. The assessee filed its return on 28.05.1996and by order dated 27.11.1996, the Assessing Officer, the AssistantCommissioner of Income Tax, Circle 2, Visakhapatnam, computed the assessee’s undisclosed income for the block period and the taxleviable thereon. In the course of this assessment, the Assessing Officerdisallowed the assessee’s claim of depreciation @ 40% on its tippersand permitted depreciation @ 25% only. The disallowance was for twoassessment years, 1994-95 and 1995-96, and amounted toRs.46,18,266/-. Aggrieved by this disallowance, the assesseepreferred an appeal before the Income Tax Appellate Tribunal,Hyderabad Bench ‘A’, in I.T.(SS)A.No.57/Hyd/1996. By order dated25.06.1999, the Tribunal allowed the assessee’s appeal. Hence, thisappeal by the Revenue. It is not in dispute that no information/material pertaining to thisdepreciation allowance was found during the search and seizureoperations. It was only on the basis of the returns filed by the assesseethat the Assessing Officer disallowed the claim of depreciation at thehigher rate. The return for the assessment year 1994-95 wasadmittedly filed before the search operations wherein the assesseehad claimed depreciation at 40%. The return for the assessment year1995-96 was filed after the search operations, but again claiming thesame depreciation allowance. In view of these undisputed facts, theTribunal opined that the Assessing Officer had exceeded hisjurisdiction under Section 158BC of the Act in disallowing thedepreciation allowance at 40% by going beyond the materialunearthed in the search and seizure operations. The first substantial question of law framed in this appealpertains to the correctness of this conclusion of the Tribunal. Thisissue is no longer res integra. In THE COMMISSIONER OF INCOME- TAX, VISAKHAPATNAM V/s. B.SATYANARAYANA[[1]], we heldthat the special provisions of Chapter XIV-B of the Act, dealing withassessment of undisclosed income unearthed as a result of a search,would not be attracted in a case where the information sought to berelied upon by the Assessing Officer was already available in the The first substantial question of law framed in this appealpertains to the correctness of this conclusion of the Tribunal. Thisissue is no longer res integra. In THE COMMISSIONER OF INCOME- TAX, VISAKHAPATNAM V/s. B.SATYANARAYANA[[1]], we heldthat the special provisions of Chapter XIV-B of the Act, dealing withassessment of undisclosed income unearthed as a result of a search,would not be attracted in a case where the information sought to berelied upon by the Assessing Officer was already available in the balance sheet or the books of account of the assessee. We observedthat as undisclosed income would be the income which was unearthedduring the search, conversely, if the income was already disclosed inthe return of income or was available in the books of account, it wouldnot fall within the category of undisclosed income or income unearthedduring the search. Reliance in this regard was placed on the Judgmentof the Supreme Court in ASSISTANT COMMISSIONER OF INCOME- TAX V/s. HOTEL BLUE MOON[[2]]and judgments of various other High Courts. In that view of the matter, when it is an admitted fact that thedepreciation allowance claimed by the assessee @ 40% was thesubject matter of the returns filed by the assessee, finding reflection inits books of account, and no material pertaining thereto wasdiscovered during the search and seizure operations, the AssessingOfficer could not have made this allowance the subject matter ofassessment under Section 158BC of the Act. The Tribunal wastherefore fully justified in holding that the Assessing Officer hadexceeded his jurisdiction under Section 158BC of the Act in thisregard. The first substantial question of law framed in this appealtherefore requires to be answered in the affirmative, in favour of theassessee and against the Revenue. In the light of our finding on thisaspect, the other two questions of law become purely academic anddo not require adjudication. In the result, the appeal is dismissed but, in the circumstances,without any order as to costs. -------------------------------- MADAN B.LOKUR, CJ. ---------------------------- SANJAY KUMAR, J. 16[th] FEBRUARY, 2012. [1] ITTA No.29 of 1999 dated 09.12.2011 ITTA No.29 of 1999 dated 09.12.2011 [2] (2010) 321 ITR 362 (SC) (2010) 321 ITR 362 (SC)