1999 (4) TMI 115 - AT - Income Tax

Tribunal denies basic exemption for undisclosed income, lowers tax rate on capital gains, and allows partial appeal

PA Chandran. Versus Assistant Commissioner Of Income-Tax.

The Tribunal upheld the assessment treating salary income as undisclosed for the block period, stating that basic exemption does not apply to undisclosed ... Block Assessment Issues:1. Treatment of salary income as undisclosed income for block period.2. Denial of basic exemption for the assessment year.3. Applicability of tax rate on capital gains.4. Request for credit of tax paid.Analysis:Issue 1: Treatment of salary income as undisclosed income for block periodThe appeal challenged the assessment treating salary income as undisclosed income for the block period. The representative argued that as a Government employee, the salary income was regularly received and should not be considered undisclosed. Additionally, it was contended that since the income was below the taxable limit, no return was filed, and thus, it should not be treated as undisclosed income. However, the Tribunal disagreed, stating that the basic exemption is not applicable for undisclosed income during block assessment. The Tribunal emphasized that the obligation to file a return is not dependent on the income amount, and failure to declare income, including capital gains, cannot be justified based on income levels. Therefore, this ground was decided against the assessee.Issue 2: Denial of basic exemption for the assessment yearThe representative argued that the AO was unjustified in denying the basic exemption for the assessment year. However, the Tribunal clarified that basic exemption is only applicable when levying tax as per the Finance Act for the respective assessment year. In the case of undisclosed income for the block period, tax is levied under section 112 of the IT Act, without provision for basic exemption. Hence, the contention to allow basic exemption was rejected, and the AO's decision was upheld.Issue 3: Applicability of tax rate on capital gainsThe appeal contested the tax rate applied to capital gains from the sale of immovable property, arguing that the tax should be levied at 20% as per section 112. The Tribunal referred to a previous decision and directed the AO to apply the lower tax rate of 20% on the capital gains, contrary to the initial 60% rate imposed by the AO.Issue 4: Request for credit of tax paidThe assessee requested credit for tax paid based on the income declared in the return. The Tribunal instructed the AO to verify the tax payment and provide credit for the actual amount paid by the assessee. Consequently, the appeal was partly allowed, and the AO was directed to revise the assessment accordingly.