Judgment:
1. This appeal filed by the assessee is against the order of the Assistant Commissioner of Income-tax, Special Investigation Circle, Erode, dated February 28, 1997, passed under section 143(3) read with section 158BC of the Income-tax Act, 1961, for the block period "April 1, 1995, to February 6, 1996".
2. According to the Assessing Officer, who passed the impugned assessment order dated February 28, 1997, the status of the assessee is a Hindu undivided family (specified). Consequent to the search at the residence of the assessee and his business premises on February 6, 1996, a notice under section 158BC dated July 25, 1996, was issued. A return in Form No. 2B showing "nil" undisclosed income was filed on January 8, 1997. All the investments have been considered in the hands of the assessee in his individual status. However, the assessee has failed to file his returns of income for the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1993-94 as envisaged under section 139.
Hence, the total income for the five years aggregating to Rs. 2,62,338 is treated as the undisclosed income of the block period under section 158BB(1)(c). The total undisclosed income of the block period was mentioned in the assessment order as under 3. Aggrieved by the same, the assessee preferred this appeal before the Tribunal.
4. The assessee's counsel filed a paper-book of five pages, containing the acknowledgments for having filed the returns for the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1993-94. He urged that the returns for the assessment years 1988-89, 1989-90 and 1990-91 were filed on January 29, 1993, and the returns for the assessment years 1992-93 and 1993-94 were filed on May 19, 1995. Accordingly, he urged that the Assistant Commissioner erred in taking the income of Rs. 2,62,338 as the undisclosed income for the block period April 1, 1995, to February 6, 1996, as mentioned in the impugned assessment order. He also urged that the impugned assessment order is not a speaking order and hence it should be annulled.
5. The Departmental Representative relied on the assessment order of the Assessing Officer.
6. We have considered the rival submissions and perused the papers filed before us. In the assessment order in the cause title portion against column No. 6 it is stated as under : "6. Assessment year : Block period : April 1, 1995, to February 6, 1996." However, the Assessing Officer includes certain amounts as mentioned in the assessment order as the alleged undisclosed income relating to the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1993-94. These assessment years are admittedly outside the block period as stated in the assessment order. Further section 158BB(1)(c) does not mention section 139. Section 158BB(1)(c) reads as under : "158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer, as reduced by the aggregate of the total income, or, as the case may be, as increased by the aggregate of the losses of such previous years, determined, - ....
(c) where the due date for filing a return of income has expired but no return of income has been filed, as nil." 7. Section 158BB(3) states that the burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee. In the present case, admittedly, the returns for the assessment years 1988-89, 1,989-90 and 1990-91 were filed on January 29, 1993, and for the assessment years 1992-93 and 1993-94 were filed on May 19, 1995, i.e., well before the commencement of the search on February 6, 1996. Further, in the following assessment years, the assessee has claimed deductions under Chapter VIA as under :-------------------|--------------|-------------- Assessment year | Section | Amount (Rs.)-------------------|--------------|-------------- 1989-90 | 80CCA | 10,000 8. These were not considered by the Assessing Officer in the impugned assessment order dated February 28, 1997. This is in total disregard of section 158BH, which reads as under : "158BH. Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter." The impugned assessment order is not a speaking order passed after the application of mind by the Assessing Officer to the relevant provisions of law. In these facts and circumstances of the case, we set aside the impugned assessment order. In the result the appeal is allowed.
1. I have carefully gone through the erudite order proposed by my learned brother, but with great respects and inspite of persuading myself to agree with it even after discussions with him over it, I am unable to concur with him after, however, giving considerable thought to the contents and conclusions of the order proposed by him, for the reasons following : 2. In the instant case, it is true that the assessment order in its cause title portion against Column No. 6 the block period is stated as April 1, 1995, to February 6, 1996; but this seems to be a mere typographical error, for the assessee himself has mentioned in its memorandum of appeal itself and in other references on record the block period as April 1, 1985, to February 6, 1996. My learned brother has extracted the provisions of section 158BB(1) and its clause (c) in his proposed order. According to him, as the returns of income for the assessment years 1988-89 to 1990-91 were filed on January 29, 1993, and for the assessment years 1992-93 and 1993-94 they were filed on May 19, 1995, i.e., well before the commencement of the search on February 6, 1996, these should have been considered by the Assessing Officer since section 158BB(1)(c) does not mention section 139. It is true that clause (c) of the said section does not mention section 139, but it refers to the due date for filing a return of income and different due dates are mentioned only in section 139.
3. Under these circumstances and in the above view of the matter, I am of the considered opinion that as no valid returns were filed by the assessee under section 139 of the Act, the income declared in the belated returns cannot be considered by the Assessing Officer. While I confirm the action of the Assessing Officer on this point, with reference to the deductions claimed under section 80CCA for the assessment years 1989-90 and 1990-91 and deduction claimed under section 80G for the assessment year 1990-91, the assessment has to be set aside to the Assessing Officer for redoing it de novo in the light of the discussions made above, after, however, giving opportunity of being heard to the assessee and also duly considering any material and stand that may be relied upon and taken by the assessee before passing a speaking order in accordance with law.
4. In the result, the appeal of the assessee is allowed for statistical purposes.
1. As we differ in opinion on the point in adjudication in this case after due deliberations between us, we refer to the President of the Income-tax Appellate Tribunal for hearing by one or more of the other Members of the Tribunal to be constituted by him as Third Member, the below mentioned point of difference : "Whether on the facts, and in the circumstances of the case the Tribunal will be correct to set aside the assessment order in question : (a) allowing the assessee's appeal praying that the Assessing Officer erred in estimating the income of Rs. 2,62,338 for the assessment years 1987-88 to 1992-93 for the purpose of computing the income for the block period of April 1, 1985, to February 6, 1996, without any valid basis since returns were filed, and observing that the impugned assessment order is not a speaking order passed after the application of mind by the Assessing Officer to the relevant provisions of law, resulting thus in annulment of the assessment order for the reasons particularly detailed in para. 5 at page 2 of the proposed order of the Vice-President or (b) opining that as no valid return was filed by the assessee under section 139 of the Act, the income declared in the belated returns cannot be considered by the Assessing Officer and while so confirming his action on this point, with reference to deductions claimed under section 80CCA for the assessment years 1989-90 and 1990-91 and deduction claimed under section 80G for the assessment year 1990-91, for a decision de novo by the Assessing Officer through a speaking order after giving opportunity of being heard to the assessee, for the reasons particularly detailed in paras. 2 and 3 at pages 5 and 6 of the dissenting order of the Judicial Member ?" 1. As a result of difference of opinion between two Members who heard this appeal originally, the following point of difference, as agreed to by both the Members, was-referred to me by the President of 'the Income-tax Appellate Tribunal for rehearing and decision : "Whether, on the facts and in the circumstances of the case, the Tribunal will be correct to set aside the assessment order in question : (a) allowing the assessee's appeal praying that the Assessing Officer erred in estimating the income of Rs. 2,62,338 for the assessment years 1987-88 to 1992-93 for the purpose of computing the income for the block period of April 1, 1985, to February 6, 1996, without any valid basis since returns were filed, and observing that the impugned assessment order is not a speaking order passed after the application of mind by the Assessing Officer to the relevant provisions of law, resulting thus in annulment of the assessment order for the reasons particularly detailed in para. 5 at page 2 of the proposed order of the Vice-President or (b) opining that as no valid return was filed by the assessee under section 139 of the Act, the income declared in the belated returns cannot be considered by the Assessing Officer and while so confirming his action on this point, with reference to deductions claimed under section 80CCA for the assessment years 1989-90 and 1990-91 and deduction claimed under section 80G for the assessment year 1990-91, for a decision de novo by the Assessing Officer through a speaking order after giving opportunity of being heard to the assessee, for the reasons particularly detailed in paras. 2 and 3 at pages 5 and 6 of the dissenting order of the judicial Member Accordingly the appeal was heard by me and my decision on the point of difference is being given as below : The assessee is a Hindu undivided family (specified). Consequent to the search under the Income-tax Act which took place in the residential place as well as business premises of the assessee on February 6, 1996, a notice under section 158BC of the Income-tax Act was issued asking for the return of income under Chapter XIV-B on July 25, 1996. 'After some initial hesitations, the assessee ultimately filed its return in Form No. 2B showing "nil" undisclosed income on January 8, 1997. In the impugned assessment order, the Assessing Officer discussed that all the investments had been considered in the hands of the assessee in his individual status. He furthermore discussed that however, the assessee had failed to file his return of income for the assessment years 1988-89, 1989-90, 1990-91, 1992-93 and 1993-94 as envisaged under section 139 of the Act. Therefore, the Assessing Officer stated that the total income of the assessee for the five years aggregating to Rs. 2,62,338 was being treated as undisclosed income of the block period under section 158BB(1)(c). The total undisclosed income of the block period was mentioned in the assessment order as under 2. Tax on the abovementioned undisclosed income was computed at Rs. 1,57,404 at the rate of 60 per cent.
3. The first appeal against the aforesaid assessment was heard by a Bench of the Tribunal consisting of the Vice-President-cum-Accountant Member and also the judicial Member. After stating the facts of the case, the Vice-President stated that for the assessment year, the block period was shown to be comprising the period from April 1, 1995, to February 5, 1996. He stated that, however, the Assessing Officer had included certain amounts as mentioned in the assessment order as the alleged undisclosed income relating to the previous years 1987-88, 1988-89, 1989-90, 1991-92 and 1992-93. The Vice-President furthermore stated that these assessment years are admittedly outside the block period as stated in the assessment order.
4. The Vice-President further referred to the method of computation of "undisclosed income" as provided under section 158BB(1)(c) of the Act.
The Vice-President further stated that in the present case the assessee had admittedly filed the returns for the assessment years 1988-89, 1989-90 and 1990-91 on January 29, 1993, and for the assessment years 1992-93 and 1993-94 returns were filed on May 19, 1995, i.e., well before the commencement of the search on February 6, 1996.
5. The Vice-President further stated that the impugned assessment order is not a speaking order passed after the application of mind by the Assessing Officer to the relevant provisions of law. He also noted that the assessee had claimed certain deductions under Chapter VI-A for the assessment years 1989-90 and 1990-91. These were, however, not considered by the Assessing Officer in the impugned assessment order.
He stated that he has totally disregarded the provisions of section 158BH.6. On the above facts and circumstances of the case, the Vice-President set aside the impugned assessment order and allowed the appeal filed by the assessee.
7. In the separate order passed by the learned judicial Member, in the first instance he held that the block period had been mentioned to be from April 1, 1995, to February 6, 1996, in the impugned assessment order out of a typographical mistake only and that actually it should be from April 1, 1985, to February 6, 1996. He, thereafter, discussed that all the returns filed by the assessee were beyond the time limit as prescribed under section 139 and, therefore, the income declared in the returns could not, have been considered by the Assessing Officer for the purpose of the impugned undisclosed income. Actually, he confirmed the action of the Assessing Officer on the main issue of assessment of the undisclosed income.
8. So far as the question of allowing deductions under Chapter VI-A is concerned, he set aside the assessment on the limited point and remitted the matter back to the Assessing Officer for redoing the assessment in the light of the discussion made by him.
9. It is required to be noted in this connection that the Vice-President simply set aside the impugned assessment order, without clearly specifying the purport of his order in that regard. In income-tax parlance, the word "setting aside" means cancelling the order and allowing the Assessing Officer to pass a fresh order in its place. In such a case, the appellate/revisionary authorities generally add an extra sentence directing the Assessing Officer to redo it afresh in accordance with the law. In this case, the Vice-President, however did not give any specific direction to the Assessing Officer to redo the assessment once more. Again, in the concluding paragraph of his order, he allowed the appeal. Generally, in the case of setting aside by the appellate authority for the purpose of allowing it to be redone, the appeal is considered to be partially allowed or allowed for statistical purposes. Lastly, again, from the point of reference made to me, to which both the deciding members are parties, it is quite evident that the order of the learned Vice-President tended to result in annulment of the assessment order. Hence, I am taking it that the Vice-President used the expression "set aside" in his order in the sense of "annulment" of the impugned assessment order.
10. During the course of hearing of the appeal before me, learned counsel appearing on behalf of the assessee has relied on the definition of undisclosed income as provided in section 158B(b). He has strongly argued that inasmuch as the assessee itself has shown the entire income considered in the impugned assessment in the returns of income filed by it, it cannot be said the said income has not been or would not have been disclosed by the assessee to the Department. He thus strongly argued that the income considered in the impugned assessment does not fall within the ambit of definition of "undisclosed income", as provided under section 158B(b).
11. Referring to the provisions of sub-section (3) of section 158BB, learned counsel for the assessee has argued that the assessee discharged its onus provided in the said sub-section inasmuch as the so-called undisclosed income had already been disclosed by the assessee by filing returns of income although in a belated and invalid manner, much before the date of search.
12. Lastly learned counsel for the assessee strongly relied on the order of the Tribunal, Pune Bench in the case of Parakh Foods Ltd. v.Dy. CIT [1998] 64 ITD 396. In that case also, it was held as below : "... if prior to the date of search the assessee has disclosed particulars of the income either in the return or in the course of assessment proceedings to the Assessing Officer or where the return has not become due, same are duly recorded in the regular books of account, then such income cannot be treated as undisclosed income." 13. Reliance was also placed in this connection on an order of the Income-tax Appellate Tribunal, Madras Bench-A, dated January 8, 1998 in Income-tax Appeal No. 64/Mad of 1997 in the case of J. K. Narayanan (Individual) in which case also in similar circumstances, it was held that inasmuch as the so-called undisclosed income considered in that assessment merely represented the income disclosed by the assessee himself in his return of income filed much earlier than the date of search, there was no question of treating the said income as undisclosed income.
14. From the definition of "undisclosed income" as provided in section 158B(b), it is clear that the said undisclosed income is stated to include any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other document or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transactions represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act. In the present case, the impugned assessment order clearly states that all the investments have been considered in the hands of the assessee in his individual status and hence such investments even if they be undisclosed in nature, cannot be considered in the impugned assessment in the case of the Hindu undivided family. The income returned by the assessee in the belated and invalid returns filed by it is merely of the nature of rent and interest earned. Such income does not exactly fit in with the definition of various items of income as-mentioned in section 158B(b). It has been held by the Income-tax Appellate Tribunal, Bombay Bench in the case of Sunder Agencies v. Dy.
CIT [1997] 63 ITD 245 that although the definition of "undisclosed income" is stated in section 158B(b) to be merely inclusive, the said definition has, however, got to be considered as exhaustive definition of the expression, "undisclosed income".
15. There cannot be any doubt about the fact that the impugned assessment order is not at all a speaking order, inasmuch as how and wherefrom the undisclosed income has been considered in the assessment, has not at all been stated clearly in the assessment order. Only after study of other materials, one can come to the finding that the figures of undisclosed income as considered in the impugned assessment merely represent the income as declared by the assessee itself in the returns of income filed by it in the ordinary course for the different years although in belated and invalid manner.
16. Learned counsel for the assessee appearing before me has admitted that so far as the assessee (Hindu undivided family) is concerned it does not maintain any books of account. Apart from the question as to whether the income as considered in the impugned assessment, is not of the nature as specified in the definition of "undisclosed income" as provided in section 158B(b) it is also clear that for any income to be undisclosed income, it will be required that the said income was not or would not have been disclosed by the assessee to the Department. In the instant case, there is no doubt about the fact that the assessee itself declared the aforesaid income for all the years in the returns filed by it. The returns might be invalid but the information contained therein showing earning of corresponding income by the assessee was certainly a valid information imparted by the assessee to the Assessing Officer a long time before the search. It is very evident that the search by itself, has not been able to discover or unearth any other income earned by the assessee during the block period. The entire assessment is based on the declaration of income by the assessee itself in the returns filed by it and actually the income declared has been totally accepted by the Assessing Officer. In the face of such facts, it would not be possible to say that what has been considered in the impugned assessment order as "undisclosed income" of the assessee, really represents the income not disclosed or not meant for the Department. I am, therefore, of the view that actually there is no existence of any "undisclosed income" for the purpose of an assessment to be made under Chapter XIV-B. Section 158BB only prescribes the method for computing the undisclosed income of the block period. However, prior to making such computation, the existence of undisclosed income as such, is required to be shown. In the instant case, there is no existence of undisclosed income at all. Hence, the question of application of different clauses of sub-section (1) of section 158BB for the purpose of computing undisclosed income for the block period cannot arise.
Finally, therefore, I hold that on account of non-existence of any undisclosed income, the impugned assessment under Chapter XIV-B for the block period is liable to be annulled.
17. I, therefore, agree with the setting aside of the assessment tantamounting to annulment of the same.
18. In view of the annulment of the impugned assessment, the question of allowing the claims of the assessee under Chapter VI-A does not arise and the second issue as referred to in the point of difference, therefore, becomes infructuous.
19. In the result, the appeal filed by the assessee is required to be allowed.