TaxTMI 
TaxTMI 
2010 (11) TMI 93
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....s of facts appearing in ITA 811/2007. Record of factual matrix does not need a large canvas. Succinctly stated, the facts are that on 13th January, 2000, a search and seizure operation was carried out on Shyam Telecom Group of Companies (to which these assessee group of companies belonged). There was no specific search warrant in the name of the assessee company. However, according to the department, since the papers relating to the assessee company were also seized during the course of the search, notice under Section 158 BC read with Section 158 BD of the Income-Tax Act (hereinafter referred to as „the Act‟) was also issued to the assessee for the block assessment period 1st April, 1989 to 13th January, 2000. The assessee in response thereto filed its return declaring undisclosed income at „nil‟. The assessment was however framed determining undisclosed income at Rs. 8,67,010/- for the assessment year 1999-2000. While making this assessment, the Assessing Officer treated the long term capital gain on the sale of shares as undisclosed income. The CIT (A) confirmed the aforesaid order of the Assessing Officer. However, the ITAT has allowed the appeal of the ....
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....) of Section 142, such person may still furnish the return of previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. 5. Chapter-XIV B of the Act, which was inserted by the Finance Act, 1995 w.e.f. 1st July, 1995 deals with said procedure for assessment of search cases and it starts with Section 158B which provides certain definitions for the said Chapter. Clause (a) thereof defines „block period‟. Clause (b) gives the definition of „undisclosed income‟ and reads as under:- "‟undisclosed income‟ includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purpose of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false." 6. Section 158BA deals with assessment....
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....ntained in any other provisions of this Act.... the Assessing Officer shall proceed to assess the undisclosed income in accordance with the provisions of this Chapter". Section 158 BB gives the procedure for computation of undisclosed income of the block period and is also contained in Chapter XIV-B. As per Section 158 BA therefore, the provisions of section 158 BB have to be applied for computation of undisclosed income. I will like to quote the decision of the Hon‟ble Calcutta High Court in the case of Shaw Wallace & Co. Ltd. Vs. ACIT (1999, 238, ITR 13) which is as under:- " It will be found from section 158 BB that the Assessing Officer is to compute total income twice. One has to emphasise the combination of words „total income‟. The First computation of total income under section 158BB is on an aggregate of materials including returns. The second computation of total income is as per direction and definition given in section 158 BB irrespective of whatever might be contained in the other provisions of the Act. That such computation of the second total income is to be made irrespective of other provisions is seen from the words of section 158BA, which stat....
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.... page 39 of the paper book. In the circumstances, we are of the considered opinion that when the investment in shares in question on which capital gain was realized by the assessee had been shown I the balance sheet filed by the assessee, prior to the date of search, it cannot be assumed that capital gain derived on the sale of such shares would have been shown by the assessee. In the above circumstances, in view of the order of the Delhi High Court in the case of CIT Vs Mrs. Kumkum Kohli, 276 ITR 589 (Del) (supra), in our considered opinion, capital gains on such shares cannot be treated as undisclosed income of the assessee under Chapter XIV B of the Act. Hence, we set aside the orders of the Ld. CIT (A) and allow the ground of appeal of the assessee." 11. In the present case, the search has taken place after the last date of filing the return under Section 139 (1) of the Act. There is no overt act on the part of the assessee which would indicate that assessee had the intention to disclose the income. On the contrary, when the aforesaid documents relating to the sale of shares leading to income in the form of long term capital gain were seized during the search on 13th January....
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....if we accept the contention of Mr. Chaphekar learned senior counsel, that Sub-section (3) of Section 158BA of the Act is not exhaustive of the cases in which income should not be treated as undisclosed income, in the present case, we find no material to establish that the appellant had, in any manner, disclosed his income for the purpose of the Act before the date of search on 20th Dec., 1996. 12. Before Madras High Court, the issue cropped up, albeit in other context where the provisions and constitutionality of Section 158 BB of the Act was challenged. It was argued that once the return is not filed after the due date under Section 139 (1), before the expiry of period specified in Section 139 (4) and the search take place before filing of the return, the assessee would lose the benefit of filing the return under Section 139 (4) of the Act and therefore provisions of Section 158BB were ultra vires and unconstitutional. This contention was rejected and relevant observations of the Court dealing with this contention are as under: "Learned counsel for the petitioner contended that this provision is unconstitutional as it has the effect of depriving an honest assessee the severa....
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....-B consisting of sections 158B & 158BH was inserted in the Income-tax Act by the Finance Act, 1995, with effect from July 1, 1995. The assumption made in the scheme of the Act that a person who comes forward with the return or with further information after a search, does so only on account of the detection already effected under the search and the likelihood of further exposure is a reasonable assumption and it can in no way be regarded as arbitrary. The special procedure provided in Chapter XIV-B is meant to apply to all such cases notwithstanding anything contained in any other provisions of the Act, as provided in Section 158BA(1), and the other provisions of the Act, therefore cannot control the contents of this Chapter except to the extent provided for in Chapter XIV-B. There is no fundamental right in an assessee to commit breaches of the law. The right that can be asserted by one who has chosen to violate the law is the right to be treated in a manner similar to that in which other similar offenders are treated. Chapter XIV-B accords similar treatment to all persons belonging to the class for whom that Chapter is to apply. There is no discrimination therein among those w....