2018 (11) TMI 1332 - HC - Income Tax

High Court upholds block assessment & additions on undisclosed income from hospital against Doctor. Loss on house property claim allowed. Surcharge deleted pre-specific date. Doctor's challenges dismissed. Sworn statement key.

The High Court upheld the block assessment and additions on undisclosed income from a hospital against a Doctor, dismissing the Doctor's challenges. The ... Block assessment u/s 158BC - whether computation of the undisclosed income for the block period has to be done under Section 158BB - Held that:- The assessee made no attempt to prove that he had not received the said amounts, nor disputed individually the documents as received from the SUT hospital. Section 132(4) of the Act raises a statutory presumption, in so far as the statement made under oath being permitted to be used in evidence, which has to be deemed to be true. Unless there is contra evidence to dispel such presumption the statements have an evidentiary value as conferred by the statute. The sworn statement u/s 132(4) in the present case is the evidence relatable to the material or information as available with the Assessing Officer in the nature of the documents recovered from the SUT Hospital. It is also pertinent that the CIT appeals had confirmed only those additions made on account of the undisclosed income from the SUT Hospital and had deleted all the other additions. There was a departmental appeal from the order of the CIT appeals with respect to the additions deleted also, but the Revenue has not chosen to challenge the order of the Tribunal allowing the appeal of the Revenue. The appeal of the Revenue was allowed only with respect to the surcharge levied and the loss claimed on “income from house property”. We do not think that there is any scope for interference in the block assessment as modified by the first appellate authority, affirmed by the Tribunal. The questions of law raised as to whether the Tribunal was correct in having affirmed the additions sustained by the first appellate authority, in the context of there being no evidence recovered from the search in the assessee's premises relatable to the materials or information available with the Assessing Officer is answered against the assessee and in favour of the revenue. Liability to surcharge on tax which was made effective from 01.06.2002 alone - Held that:- On the question of surcharge, a larger Bench of the Hon'ble Supreme Court in 2015 (1) SCC 1 [Commissioner of Income Tax v. Vatika Township P.Ltd.] held that the proviso to section 132 introduced by the Finance Act of 2002 is prospective in operation. There could hence be no surcharge prior to the date on which the said proviso was made effective, i.e. prior to 01.04.2002. The first question is hence answered against the Revenue and in favour of the assessee. Claim for loss on house property can be set off against income computed for the block period - Held that:- AO indicates that the income including the undisclosed income declared in the returns filed for the block period is less than that of the regular income for six years. The assessee has a contention that he can substantiate the loss on income from house property. In any event, the assessee is entitled to make such claim even during the block period as has been held in Assistant Commissioner v. Hotel Bluemoon [2010 (2) TMI 1 - SUPREME COURT OF INDIA]. The question is answered in favour of the assessee and against the Revenue but however, the computation is left to the Assessing Officer. The assessee shall produce the details before the Assessing Officer who shall consider the same and allow it to the extent permissible under the Income Tax Act. Issues:1. Block assessment and surcharge levied2. Undisclosed income based on evidence not recovered during the search3. Computation of undisclosed income under Section 158BB4. Validity of additions made on undisclosed income from SUT Hospital5. Surcharge on tax effective from a specific date6. Claim for loss on house property against income computed for the block periodBlock Assessment and Surcharge Levied:The case involves two appeals filed by a Doctor against a block assessment conducted by the Income Tax Department. The block assessment covered the period from 01.04.1990 to 18.12.2000. The Department initiated a search in the Doctor's premises based on certain documents recovered from a hospital where the Doctor had worked. The Doctor challenged the block assessment and surcharge levied. The CIT appeals deleted most additions except those related to undisclosed income from the hospital. The Tribunal confirmed the additions and set aside the order regarding surcharge. The High Court analyzed the evidence and upheld the additions, rejecting the Doctor's arguments against the block assessment.Undisclosed Income Based on Evidence Not Recovered During the Search:The Doctor argued that for a block assessment under Section 158BC, undisclosed income must be based on evidence found during the search. The Department had documents from the hospital but lacked evidence from the Doctor's premises. The Court noted the Doctor's sworn statement under Section 132(4) of the Act, where he admitted to an arrangement with the hospital regarding remuneration. The Court held that the Doctor failed to disprove the statement or challenge the documents from the hospital, leading to a statutory presumption of truth. Therefore, the additions based on the evidence were upheld.Computation of Undisclosed Income Under Section 158BB:The Doctor contended that without evidence from his premises, undisclosed income could not be computed. The Court emphasized that the Doctor's sworn statement, corroborated by hospital documents, provided a basis for estimating income. The Doctor's failure to refute the statement strengthened the Department's case for undisclosed income computation.Validity of Additions Made on Undisclosed Income from SUT Hospital:The Court upheld the additions related to undisclosed income from the hospital, as supported by the Doctor's sworn statement and documents recovered. The Department's assessment was deemed valid, and the Tribunal's decision affirming the additions was upheld.Surcharge on Tax Effective From a Specific Date:Regarding the surcharge, the Court referred to a Supreme Court ruling stating that surcharge could not be levied before a specific date. As the Doctor's case fell before this date, the Court ruled in favor of the Doctor, deleting the surcharge.Claim for Loss on House Property Against Income Computed for the Block Period:The Doctor claimed a loss on house property against the computed income for the block period. The Court allowed the claim, citing a Supreme Court decision permitting such claims during block assessments. The Court directed the Doctor to provide details to the Assessing Officer for consideration within the provisions of the Income Tax Act.In conclusion, the High Court upheld the block assessment, additions on undisclosed income, and the claim for loss on house property, while deleting the surcharge levied before the specified date.