2007 (5) TMI 176 - HC - Income Tax

Revenue appeal dismissed; Chapter XIV-B requires undisclosed income based on search material; Section 260-A no substantial question

COMMISSIONER OF INCOME TAX Versus GIRISH CHAUDHARY

The HC dismissed the Revenue's appeal, upholding the Tribunal's deletion of a Rs.48 lakh addition for undisclosed income. The court held that under ... Undisclosed income on the basis of seized material - discrepancies in the assessment order - HELD THAT:- Under the provisions of Chapter XIV-B only such of the aforesaid categories of income, which has been found as a result of search can alone be the subject matter of an assessment under this Chapter. The definition specifies that where an assessee has claimed any expenses or addition, which is found to be false, the same can only be regarded as an undisclosed income for the purpose of this Chapter. Under Chapter XIV B of the Act, before an addition of an 'undisclosed income' can be made, the Assessing Officer has to bring on record the material to show that on evidence found as a result of search there is an undisclosed income represented by credits appearing in the books of accounts. No material on record to show as to on what basis the Assessing Officer has reached at the conclusion that the figure '48' is to be read as Rs.48 lacs. Similarly, the document Annexure A-37 recovered during the course of search in the present case is a dumb document and lead us nowhere. Thus, the Tribunal rightly deleted the addition of Rs.48 lacs made by the Assessing Officer on account of undisclosed income on the basis of seized material. No fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of Section 260-A of the Act, which is confined to entertaining only such appeals against the order which involves a substantial question of law. Accordingly, the present appeal filed by the Revenue is, hereby, dismissed. Issues:Appeal against deletion of addition of Rs.48 lakhs as undisclosed income based on seized material during block assessment period 1990-91 to 2000.Analysis:The High Court judgment pertains to an appeal filed by the Revenue challenging the deletion of an addition of Rs.48 lakhs as undisclosed income by the Income Tax Appellate Tribunal. The Tribunal had dismissed the Revenue's appeal against the order of the Commissioner of Income Tax (Appeals) who had deleted the said addition. The crux of the matter revolved around a document marked as Annexure A-37 found during a search operation, containing certain cash entries. The Assessing Officer presumed these entries as undisclosed income, which the assessee failed to explain. However, the Tribunal, in its decision, emphasized the need for strict proof beyond reasonable doubt to establish undisclosed income. It highlighted discrepancies in the assessment order, questioning the basis for concluding the figure of '48' as Rs.48 lakhs. The Tribunal found the seized document to be inconclusive and rightly deleted the addition made by the Assessing Officer.In the legal analysis, the judgment delves into the provisions of Section 158B of the Income Tax Act, which defines 'undisclosed income' for block assessment purposes. It clarifies that only income found as a result of a search can be considered undisclosed income under Chapter XIV-B. The Assessing Officer must provide material to demonstrate the existence of undisclosed income represented by credits in the books of accounts before making any addition. In the absence of such material in the present case, the High Court found no basis for the Assessing Officer's conclusion regarding the undisclosed income of Rs.48 lakhs.Moreover, the judgment references a Supreme Court ruling stating that loose sheets of papers are not considered 'books,' rendering entries therein inadmissible under the Evidence Act. Similarly, the document Annexure A-37 in this case was deemed inconclusive, leading to the Tribunal's decision to delete the addition of Rs.48 lakhs. The High Court upheld the Tribunal's decision, stating that it did not raise any substantial question of law warranting further appeal under Section 260-A of the Act. Consequently, the Revenue's appeal was dismissed, affirming the Tribunal's deletion of the addition of Rs.48 lakhs as undisclosed income based on the seized material.