2012 (12) TMI 573 - HC - Income Tax

High Court upholds deletion of undisclosed income in block assessment for AY 1996-97

The High Court upheld the deletion of Rs. 53,98,229/- in a block assessment order for Assessment Year 1996-97, following the Commissioner's decision. The ... Block assessment - undisclosed stock - held that:- the respondent has offered in the aggregate an amount of Rs.41,51,082/- as taxable income for the Assessment Year 1996-97. The aforesaid amount includes an amount of Rs.28,59,171/- being the undisclosed income disclosed in the seized Balance Sheet from the residence of the respondent's partner. Once, the revenue has accepted the amount of profit shown in the seized Balance Sheet then there was no justification to make any further addition from that very seized Balance Sheet as sought to be done by the Assessing Officer. Further, it is very pertinent to note that neither during the course of the search, nor during the block assessment proceeding the Revenue found any evidence or material to support that the respondent was in possession of undisclosed stock valued at Rs.53,98,229/. Further, the finding of the authorities below is essentially a questions of fact. Therefore, the reframed question does not give rise to any substantial question of law. - Decided in favor of assessee. Issues:Challenge to Tribunal's deletion of additions in block assessment order for A.Y. 1996-97 and 1998-99.Analysis:The appeal by the Revenue under Section 260A of the Income Tax Act, 1961 contested the Tribunal's order regarding the block period from 01.04.1992 to 14.10.1997. The primary issue focused on the deletion of Rs.53,98,229/- in the block assessment order relevant to the Assessment Year 1996-97. The Revenue did not contest the deletion of Rs.2,26,507/- for the Assessment Year 1998-99, narrowing down the dispute to the specific amount for 1996-97.The case involved a partnership firm in the Jewellery business where a search operation on 14.10.1997 led to the seizure of a Balance Sheet dated 31.03.1996 showing a closing stock value of Rs.75,40,420/-. Discrepancies arose as the regular return of income for the Assessment Year 1996-97 declared a closing stock of Rs.21,42,191/-. Consequently, the unaccounted closing stock difference was added to the block assessment order dated 28.12.1999, after adjusting the disclosed profit amounts.The Commissioner of Income Tax (Appeals) noted that the seized Balance Sheet disclosed additional profit, which was already offered to tax, eliminating the need for further additions. The Commissioner's order dated 01.01.2001 emphasized the lack of supporting evidence for the Rs.53,98,229/- addition, leading to its deletion.Upon second appeal, the Tribunal upheld the deletion of Rs. 53,98,229/-, aligning with the Commissioner's decision. The Revenue, represented by Mr. Malhotra, argued for the addition of the unaccounted stock amount, emphasizing the respondent's failure to explain it during assessment proceedings.In response, Mr. Percy Pardiwala, Senior Counsel for the Respondent, highlighted the absence of substantial legal questions due to concurrent factual findings supporting the deletion. The disclosed profit from the seized Balance Sheet had already been taxed, rendering the additional Rs.53,98,229/- unwarranted.The High Court, after considering the arguments, concluded that the respondent had already offered the undisclosed income for taxation, including the profit from the seized Balance Sheet. The lack of evidence supporting the existence of undisclosed stock valued at Rs.53,98,229/- further solidified the decision to dismiss the appeal, emphasizing the factual nature of the findings and the absence of substantial legal questions.