2013 (11) TMI 1776 - HC - Income Tax

Income disclosure timing crucial for undisclosed income determination. Tribunal decision upheld.

CIT and Ors. Versus N. Leela Kumar

The High Court of Karnataka ruled on whether income entered in the books during a search and disclosed in a return filed after the search constitutes ... - Issues Involved:1. Whether the income entered in the books of accounts, which was detected in search, and disclosed in the return filed u/s 139(4) after search, would constitute undisclosed incomeRs.Summary:Issue 1: Whether the income entered in the books of accounts, which was detected in search, and disclosed in the return filed u/s 139(4) after search, would constitute undisclosed incomeRs.The High Court of Karnataka addressed the appeals filed by two assessees against a common order passed by the Tribunal. The primary issue was whether the income entered in the books of accounts, detected during a search, and disclosed in a return filed u/s 139(4) after the search, constitutes undisclosed income.The court noted that the first search was conducted on 13-3-2000, and the block assessment order for the period from 1-4-1990 to 31-3-2000 was passed on 27-3-2002. The assessing officer computed undisclosed income but did not include it in the block assessment as the due date for filing a return u/s 139(1) had not expired. A second search on 27-4-2001 led to the assessment of the same income as undisclosed since the return was not filed u/s 139(1).The assessees argued that the amounts were reflected in the books of accounts and disclosed in the return filed u/s 139(4), thus not constituting undisclosed income. The Tribunal agreed, stating that the income was already noted in the books during the first search and the second block assessment order contradicted the first.The court elaborated on the provisions of Section 158BB, which deals with the computation of undisclosed income, and Section 139, which outlines the due dates for filing returns. It emphasized that undisclosed income is defined as income not disclosed in the return filed u/s 139(1) or 139(4). The court concluded that if the income is reflected in the books of accounts before the first search and disclosed in a return filed u/s 139(4) before the second search, it cannot be considered undisclosed income.The court upheld the Tribunal's decision, stating that the assessing authority's stance was contrary to statutory provisions. The appeals were dismissed, and the substantial question of law was answered in favor of the assessee and against the Revenue.