2005 (1) TMI 709 - HC - Income Tax

Court Upholds Decision on Undisclosed Land Sale Income; Justifies Higher Tax Rates and Block Assessment.

Smt. Harbans Kaur Bhatia Versus Commissioner of Income Tax

The HC dismissed the assessee's appeal under Section 260A of the IT Act, upholding the AO and ITAT's decision. The Court determined that the income from ... Substantial question of law - search operation - discrepancies in the sale of land - Whether a notice u/s 158BD of the IT Act could have been issued despite the return for the relevant assessment year showing the receipt of a certain amount from the sale of a plot had already been filed and tax liability met - HELD THAT:- Conjoint reading of Section 139(1) and 158BA(3), would, thus, make it manifestly clear that, in order to take out any income or transaction out of the clutches of block period, it is for the assessee to prove to the satisfaction of AO that a particular income/transaction had already stood recorded in the books of account/documents in the normal course of business by the assessee prior to the date of search or their requisition. What is, therefore, material is its disclosure in the books of account and secondly, such disclosure should be prior to the date of search in point of time, In such circumstances, if an assessee has not filed his/her regular return u/s 139(1), even then it would not make much difference because the assessee has already taken care to disclose the income/transaction in his/her books of account the day it was required to be entered into in accordance with accountancy system In our opinion, thus, it was a clear case of income from undisclosed source in the hands of assessee as defined under Section 158B(b) ibid. It is clear from the fact that firstly, the sale deed recited a sale consideration of ₹ 9 lakhs. Secondly, only a sum of ₹ 9 lakhs was shown to be received by cheque. Thirdly, the balance amount of ₹ 20,60,000 received in cash was not entered in the books of account of any of trio, nor was anywhere disclosed in any document such as bank account or in wealth-tax returns or in the form of issuing a receipt in favour of purchaser against sale consideration by any of the trio including the assessee to the extent of her l/3rd share of ₹ 6,66,666. In this view, the intention of assessee was not to disclose receipt of ₹ 20,00,000 or her l/3rd share out of ₹ 20,00,000, i.e., ₹ 6,66,666 in her income for the year in question. It was thus a clear case which falls in the wordings of Section 158B(b) i.e. 'would not have been disclosed for the purpose of this Act.' Thus, the income in question had to be taxed in the hands of assessee as per provisions applicable to block assessment r/w Section 113 of the Act treating the income to be an income from undisclosed one as defined under Section 158B(b) ibid. Accordingly, we are of the view that no fault can be found in the conclusion arrived at by the AO and that of Tribunal. Appeal, thus fails and is accordingly, dismissed. Issues Involved:The appeal filed by the assessee u/s 260A of the IT Act against an order passed by the Income-tax Appellate Tribunal, Indore. The substantial question of law was whether a notice u/s 158BD of the IT Act could have been issued despite the return for the relevant assessment year showing the receipt of a certain amount from the sale of a plot had already been filed and tax liability met.Summary:The case involved a search operation revealing discrepancies in the sale of land by the assessee and two others. The assessee filed a return for the assessment year disclosing income from the sale. The Assessing Officer issued notices under relevant sections for block assessment, which the assessee contended against. The High Court analyzed the provisions of Section 158B(b) and Section 158BA(3) to determine undisclosed income and requirements for exclusion from the block period. The Court emphasized the importance of disclosure in books of account before the search date to avoid higher tax rates. In this case, the assessee failed to prove that the disclosed income was recorded prior to the search date, leading to the conclusion of undisclosed income. The Court upheld the AO and Tribunal's decision, emphasizing the legal provisions applicable to the case.In conclusion, the appeal was dismissed based on the interpretation of relevant sections, highlighting the necessity of proving income disclosure before the search date to avoid higher tax rates.