TaxTMI 
TaxTMI 
2006 (6) TMI 133
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..... CIT noted that the said return of income was not filed by the assessee during the time allowed under section 139 and was, therefore, non est. He was of the view that while completing a block assessment the income disclosed by the assessee in the said return for the assessment year 2002-03 should have been considered by the Assessing Officer as undisclosed income for the block period. The CIT took recourse to the provisions of section 158BB(1)(ca) (sic) substituted by the Finance Act, 2002 with retrospective effect from 1-7-1995 according to which no reduction on account of income disclosed in the return from assessment year 2002-03, which is filed after the expiry of due date of filing of the return of income, was permissible. Accordingly he thought that the block assessment order passed by the Assessing Officer on 30-9-2004 by not including the said income was erroneous and prejudicial to the interest of revenue and, therefore, he set aside the block assessment with the direction to include the same in the block assessment of the assessee treating the same as undisclosed income within the meaning of section 158BB(1)(ca). In response to this notice, the assessee took the followin....
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.... of undisclosed income provided by section 158BB(1)(ca) provided such inclusion (ii) Hon'ble Settlement Commission has not proceeded with the application of the assessee (iii) the assessee has not paid full advance tax on the income so disclosed in the non est return and (iv) regularization of return for assessment year 2002-03 by issuing a notice under section 148 would not in any way affect the recourse to be taken by virtue of section 158BB(1)(ca). Thus, ld. CIT considered that the order passed by the Assessing Officer on 30-9-2004 was erroneous insofar as it is prejudicial to the interest of the revenue and hence he set aside that assessment and directed the Assessing Officer to include the said income at Rs. 53,27,812 in the block assessment. 3. Before us, ld. A.R. of the assessee argued that the return for the assessment year 2002-03 was not due on the date of search and the same was filed after getting Photostat copies of seized material and books on 5-7-2004 and after obtaining audit report, the assessee filed a return on 1-9-2004 declaring regular income of Rs. 53,27,812. Secondly, assessee has paid advance tax for the assessment year 2002-03 amounting to Rs. 5,71,000. ....
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....ncome, or as the case may be, as increased by the aggregate of the losses of such previous years, determined- (ca) where the due date of filing a return of income has expired, but no return of income has been filed, as nil, in cases not falling under clause (c);" A bare reading of this section shows that it does not provide the definition of undisclosed income which is provided only by section 158B(b). That section only provides how to compute undisclosed income. For the purpose of computation of undisclosed income the Assessing Officer should aggregate the total income of the previous years falling within the block period on the basis of evidence found as a result of search or other documents and such other material or information relatable to such evidence and thereafter reduce therefrom income nil as due date for filing of the return of income has expired but no return of income has been filed. In his order passed under section 263, ld. CIT has not demonstrated that undisclosed income of the block period, which is aggregate of total income of the previous years falling in the block period, does not take into account income for the period 2001-02. Once an income under secti....
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....efore, the case will fall in clause (c) rather than clause (ca). It is shown by the ld. counsel that entire income filed in the belated return was entered into regular books of account, entries therein were made on that basis, audit was done and audit report was obtained, advance tax was paid, though not commensurate with the declared income but that alone will not make the case to fall in clause (ca) as against clause (c). For shortfall in payment, the Assessing Officer may charge interest under sections 234B and 234C but cannot bring his case to clause (ca) when it squarely fell in clause (c). The case laws cited by the ld. counsel for the assessee clearly support the proposition that where entries are made in the regular books of account in the normal course of business, then income computed on the basis of such entries cannot form part of undisclosed income. In Rewa Shanker A. Kothari's case it was held that the Tribunal is well within its jurisdiction to examine whether CIT has rightly exercised jurisdiction under section 263. In Mehrotra Bros.' case, it was held that where assessee has furnished all the information and Assessing Officer considered them in the order of assessm....