Commissioner of Income-tax, Central Circle II,Chennai v. P.S.Mani

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 10.08.2007CORAM :THE HONOURABLE MR.JUSTICE D.MURUGESANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJATax Case (Appeal) No.549 of 2007Commissioner of Income-tax, Central Circle II,Chennai. .. Appellant/Respondent Vs.P.S.Mani .. Respondent/AppellantAppeal under Section 260A of the Income-tax Act, 1961 againstthe order of the Income Tax Appellate Tribunal, Bench 'C', Chennai inI.T.(SS)A.No.991/Mds/2004 dated 30.06.2006 for the assessment year1991-92 to 2001-02 against the order of the Commissioner of IncomeTax Appeals Central II, Chennai 34 for the Assessment year of 1991-92to 2001-2002 in ITA No.200/02-03 dated 20.5.2004 and against theAssessment Order of the Asst. Commissioner of Income Tax,CentralCircle I,Tiruchirappalli in PAN/GIR.No.AAKPM 2007M (GIR No.M-3009).For Appellant :Mr.J.Narayanaswamy, Standing Counsel forIncome-tax Department JUDGMENTP.P.S.JANARTHANA RAJA, J.This appeal is filed under Section 260A of the Income Tax Act,1961 by the Revenue, against the order of the Income Tax AppellateTribunal, Bench 'C', Chennai in I.T.(SS)A.No. 991/Mds/2004 dated30.06.2006, raising the following substantial questions of law:- "1. Whether on the facts and circumstances of thecase, the Tribunal was right in holding that eventhough returns were filed belatedly and hencetreated as invalid, the income shown in them couldnot be treated as undisclosed income? https://hcservices.ecourts.gov.in/hcservices/

2. Whether on the facts and circumstances of thecase, the provisions of sec.158BB(ca) would applyonly where returns are not at all filed, orwhether it would also apply to cases where thereturn is filed beyond the specified time limitsand is hence invalid?3. Whether on the facts and circumstances of thecase, the Tribunal was right in holding that therewas no undisclosed income for the years in whichadvance tax had been paid, even though the returnswere not filed within the time limit specified u/s139(1)?"2.The facts leading to the above substantial questions of laware as under:- The assessee is engaged in jewellery business and money lendingbusiness. The assessee is also a partner in M/s.ThangamayilJewellery and was also a partner in M/s.Winner Finance, Trichy,M/s.Winner Chit Funds, Trichy and M/s.Venus Corporation, Trichy.Besides business income, the assessee also derived income from houseproperty. A search under Section 132 of the Income-tax Act ("Act" inshort) was conducted on 14.12.2000 in the residential premises of theassessee. During the course of the search, incriminating materialsand documents were noticed and seized. Considering the above seizedmaterials, the Assessing Officer had issued notice under Section158BC of the Act on 30.07.2002. In response to the said notice, theassessee filed Return of income for the block period from 1991-92 to2001-02 in Form No.2B on 24.09.2002 admitting an income ofRs.20,000/-. During the course of assessment proceedings, theassessee had admitted the following:- Amount (Rs.)i)Towards undisclosed income of 2,50,000 jewellery business ii)Unaccounted investment in 1,22,000M/s.Thangaratnam Jewelleryiii)Towards unaccounted personal 1,40,000expenditureThe Assessing Officer determined the total undisclosed income atRs.8,66,869/-. While completing the assessment, the AssessingOfficer made the following additions:-i)Additions of Rs.36,770/-, Rs.51,270/-, Rs.55,010/- andRs.67,850/- towards undisclosed income for theassessment years1992-93, 1993-94, 1994-95 and 1995-96,respectively.ii)Addition of Rs.1,43,969/- towards undisclosed income for theassessment year 2000-01. https://hcservices.ecourts.gov.in/hcservices/ Aggrieved by the order, the assessee filed an appeal to theCommissioner of Income-tax (Appeals). The C.I.T.(A) dismissed theappeal and confirmed the order of the Assessing Officer. Aggrieved,the assessee filed an appeal to the Income-tax Appellate Tribunal("Tribunal" in short). The Tribunal allowed the appeal and set asidethe order of the lower authorities. Hence the present tax case bythe Revenue. 3.Learned Standing Counsel appearing for the Revenue submittedthat even though the assessee had taxable income for the assessmentyears 1992-93 to 1995-96, he had not filed the Returns within theperiod specified under Section 139(1) or even Section 139(4) of theAct. The belated Returns filed by him were treated as invalid andconsequently the amounts therein were treated as undisclosed income.In respect of addition towards undisclosed income for the assessmentyear 2000-2001, the counsel for the Revenue further submitted thatthe Return of income was filed only on 08.03.2001 which is subsequentto the date of the search. Hence the Tribunal is wrong indisregarding the fact of filing the Return belatedly. Mere paymentof advance tax cannot prevent the Assessing Officer to treat the saidamount as undisclosed income for the purpose of block assessmentunder Section 158BC of the Act. 4.Heard the counsel. In respect of Question Nos.1 and 2, thedue dates for filing the Return of income under Section 139(1) of theAct, the actual date of filing by the assessee and the incomedeclared for the assessment years 1992-93 to 1995-96 are as under:- Asst.year Due date Date of Income declared u/s.139(1) filing Rs. 1992-93 31.07.1992 26.03.1997 36,770 1993-94 31.07.1993 30.03.1997 51,270 1994-95 31.07.1994 30.03.1997 55,010 1995-96 31.07.1995 13.03.1998 67,850From a reading of the above, it is clear that for the aboveassessment years, Returns were filed by the assessee only after thedue dates prescribed under Sections 139(1) and 139(4) of the Act.Since the Returns of income filed were not valid ones, the AssessingOfficer treated the Returns as "nonest" and lodged the same. Theincome returned by the assessee in these assessment years could notbe taken as undisclosed income considering the definition ofundisclosed income under Section 158B(b) of the Act. From the abovetabular column, it is seen that the filing of the Returns were beforethe date of search. The Assessing Officer merely lifted the figuresfrom the Returns filed by the assessee and treated the amounts shownin the Returns as undisclosed income. The Revenue also did not point https://hcservices.ecourts.gov.in/hcservices/ out that there is any material available in consequence of the saidsearch for determining undisclosed income. A similar issue came upfor hearing before this Court and this Court considered the same inthe unreported judgment in T.C. No.268 of 2001 dated 01.04.2004 inthe case of C.I.T Vs. Shri J.K.Narayanan, wherein it was held asfollows:-"4. It is not the case of the Revenue thatin the present case, any undisclosed income hadcome to light as a result of search. On theother hand, the assessee had filed already abelated return disclosing such income.5. Keeping in view the provisions containedin Section 155BB of the Act, in the facts andcircumstances of the case, it cannot be said thatassessment was required to be made under ChapterXIV-B. The belated returns, which had beenfiled, even though invalid, contained informationshowing the earning of the corresponding incomeand such information having been imparted by theassessee to the Assessing Officer long before thesearch, it would not be proper to hold that therewas any undisclosed income requiring assessmentunder Chapter XIV-B."The facts involved in the above unreported judgment of this Court aswell as the facts involved in the present case are the same. TheTribunal rightly followed the principles enunciated in the aboveunreported judgment of this Court and correctly held that theAssessing Officer is wrong in determining undisclosed income inrespect of the assessment years 1992-93 to 1995-96. Hence we find noerror or illegality in the order of the Tribunal in respect ofQuestion Nos.1 and 2 and accordingly, no substantial questions of lawarise for consideration of this Court in respect of Question Nos.1and 2. 5.Learned Standing Counsel appearing for the Revenue fairlystated that Question No.3 stands covered by this Court's judgment inthe case of Assistant Commissioner of Income-tax Vs. A.R.Enterprises,[2005] 274 ITR 110 (Mad), in favour of the assessee. Hence nosubstantial question of law arises for consideration of this Court inrespect of Question No.3. https://hcservices.ecourts.gov.in/hcservices/

6.In the result, no substantial questions of law arise forconsideration of this Court and accordingly, the tax case isdismissed. No costs. Sd/Asst.Registrar/true copy/Sub Asst.Registrar kmTo1. The Assistant Registrar, Income-tax Appellate Tribunal, Bench 'C', Chennai.2. The Commissioner of Income-tax (Appeals) Central II, Chennai-600 034.3. The Assistant Commissioner of Income-tax, Central Circle I, Tiruchirapalli.4.The Commissioner of Income-Tax,Central Circle II, Chennai.AD (CO)km/22.8. T.C.(A) No.549 of 2007