Cit Vs. Suman Paper and Boards Ltd. - Court Judgment

Excerpt:
- - section 158bh clearly provides that all other provisions of the act would be applicable to block assessment. as well as the cit that deduction under section 80ia is admissible to the assessee on disallowances and additions made on the ground that these are out of the expenses recorded in the books of account, but the same is not admissible in relation to the undisclosed income declared in form no.d.a. mehta, j.1. income-tax appellate tribunal, ahmedabad bench 'a' has referred only the following question at the instance of applicant-revenue, under section 256(1) of the income-tax act, 1961 (the act), though the applicant-revenue had suggested as many as eight questions:whether on the facts and in the circumstances of the case and proper interpretation of provisions of section 158bb and part-ii, part-iii of the form no. 28 for block assessment, the i.t.a.t. was justified in law in holding that the assessee is eligible to deduction under section 80i or 80ia with reference to 'total undisclosed income' of the block period?2. the controversy relates to block period commencing from assessment year 1986-87 and ending on 06.01.1996. the respondent-assessee, a limited company, claimed deduction under sections 80i or 80ia of the act in relation to the 'total undisclosed income' of the block period. the said claim was rejected by the assessing officer and the matter carried before tribunal. the tribunal vide its impugned order dated 18.05.1988 allowed the relief for the reasons recorded in paragraph no. 21 of the impugned order, material portion whereof reads as under:from the above, it is clear that as per the provisions of section 158bb(1), the undisclosed income of the block period shall be the aggregate of the total income computed in accordance with the provisions of chapter iv without giving effect to set off of brought forward losses under chapter vi or unabsorbed depreciation under section 32(2), as per the restrictions provided in section 158bb(4) referred above and it has to be inferred that the income under each of the head of income is to be computed upto the stage of gross total income and no set off of brought forward losses and unabsorbed depreciation are to be given. however, the act nowhere lays down any restriction for allowance of deduction under chapter via of the act. the above legislative intention is further supported from the specific column in part-iii on page 3 in form no. 2b, which is the prescribed form for filing the return of undisclosed income. it contains the headwise income upto gross total income and thereafter, there is a column for deduction under chapter vi. the distinction in form no. 2 and form no. 2b is only with regard to column for set off of brought forward losses and unabsorbed depreciation. section 158bh clearly provides that all other provisions of the act would be applicable to block assessment. thus, there is specific exclusion of 'not set off of brought forward losses and depreciation under section 32(2)' but no specific exclusion of eligible deduction under chapter via. according to rules of the interpretation relating to exclusion and inclusion, whatever is not specifically excluded shall be deemed to have been included in taxing statutes. thus, as far as the deductions under chapter via are concerned, the legal provisions are very clear : that the assessee can not be denied the deduction under section 80ia. the view of the a.o. as well as the cit that deduction under section 80ia is admissible to the assessee on disallowances and additions made on the ground that these are out of the expenses recorded in the books of account, but the same is not admissible in relation to the undisclosed income declared in form no. 2b as the same is not a part of the report of the c.a. and quantitative information in relation to that income is not annexed to the audit report, is not tenable, because by its very nature, the undisclosed income could not be certified by the auditor in the audit report; because if the undisclosed income is certified in the audit report, then it will cease to be undisclosed and will become disclosed income, and then there would be no question of any undisclosed income. it is also pertinent to note that the undisclosed income declared in form no. 2b is under the head 'business income' from industrial undertaking as the only activity of the assessee companies is the manufacture and sale of board paper and craft paper, which has been all along assessed as business income and in all the asstt. years falling within the block periods, there has been no other head of income except 'business income'. (ii) during the course of search from the records seized, there is no evidence that the assessee companies were having income assessable under any other head namely, house property, capital gains or income from other source except business income. (iii) the chairman of the companies shri n.r. agrawal in the various statements recorded under section 132(4) has specified the manner of earning undisclosed income out of the trading activities of the assessee companies relating to the manufactured goods namely, board paper and craft paper by under-invoicing of sales and over-invoicing of purchases and inflation of expenses etc. thus, on a correct interpretation of the provisions of sections 158bb(1), 158bb(4) and 158bh as applicable to the facts and circumstances of the cases before us, we are of the opinion that the assessee will be eligible for deduction under section 80i/80ia in respect of the undisclosed income assessed by the ao under the block period. this issue is, accordingly, adjudicated in favour of the assessee.3. heard learned senior standing counsel appearing for the applicant-revenue. though served, there is no appearance on behalf of the respondent-assessee.4. on behalf of the revenue it was submitted that the provisions of section 158bb of the act have been amended by finance act, 2002 with retrospective effect from 01.07.1995 whereby the reference to chapter iv of the act has been substituted with reference to the provisions of 'this act' and below explanation (a) to the said section a proviso has been inserted. it was therefore submitted that in principle the impugned order made by the tribunal cannot be disputed. however, according to the learned advocate for the applicant, the tribunal is required to consider the amended provisions and decide about availability of relief under section 80i or 80ia of the act after determining-(i) whether the entire undisclosed income is relatable to the industrial undertaking; and (ii) the requirements of filing requisite audit report, which may be even during course of the appellant proceedings.5. in so far as the first contention is concerned, the same was not raised before the tribunal and hence, it is not necessary to issue any directions at this stage to the tribunal, leaving it open to the applicant-revenue to raise the said issue at the time when the tribunal adjusts its decision in accordance with the judgment of this court. similarly, in relation to the filing of audit report, the tribunal has already dealt with the said aspect of the matter. however, it will be open to revenue to seek procedural compliance to provisions of section 80i(7) of the act by moving tribunal in this regard when the tribunal adjusts its decision in accordance with the judgment of this court.6. hence, in light of the amended provisions, which have been made retrospectively applicable, no fault can be found with the impugned order of the tribunal holding that the assessee is entitled to claim deduction under section 80i or 80-ia of the act. the question referred for the opinion of this court is, therefore, answered in the affirmative i.e. in favour of the assessee and against the revenue. the reference stands disposed of accordingly with no order as to costs.