ORDER
B. L. Chhibber, AM:
The assessee, an individual, passed his diploma in civil engineering in 1966 and started his career with a private firm. Thereafter, he joined as junior engineer in 1969 with Reserve Bank of India (Reserve Bank of India), Bombay. In September, 1992 he took voluntary retirement from Reserve Bank of India and joined M/s S.N. Construction, Ratnagiri, as a partner. His family consists of himself, his wife and two daughters.
2. A search and seizure action under section 132 of the Income Tax Act, 1961, was carried out at the residence of the assessee. As a result of search assessment was completed by the assessing officer under section 158BC of the Income Tax Act, for the block period 1987-88 to 1997-98 (Part). The assessment was completed on an income of Rs. 4,16,974 as against the income declared at Rs. 54,330. Being aggrieved by the order, the assessee is in appeal before us. Four grounds have been raised and the same are discussed and disposed of as follows :
Ground No. 1 reads as follows :
The learned Assistant Commissioner erred in bringing to tax salary income undisclosed income for assessment year 1987-88 to 1992-93 as follows :
Asst. yr.
Salary
Rs.
1987-88
41,784
1988-89
47,466
1989-90
50,329
1990-91
56,401
1991-92
74,044
1992-93
88,620
Since there was nothing found in regard to the above income during the search and since even otherwise the salary received from Reserve Bank of India from which adequate and proper tax was deducted at source, such income could not be considered as ‘undisclosed income’ as defined.
As the salary income for above years was not ‘undisclosed income’, the learned Assistant Commissioner had no jurisdiction to assess the same under section 158BC. The additions made being untenable in law kindly be deleted in full. ”
As discussed supra, the assessee was employed with Reserve Bank of India during the assessment years 1987-88 to 1992-93 the period covered under the block assessment period. The assessing officer noted that the assessee had not filed his income tax returns for the assessment years 1987-88 to 1992-93 though his salary was assessable. The assessee produced original salary certificates for the assessment year 1992-93 and xerox copies of salary pass book maintained by him and submitted that though he had not filed returns of income-tax was deducted at source by the Reserve Bank of India. The Reserve Bank of India also communicated to the assessing officer that the information in respect of salary was not traceable and the salary certificate will be forwarded in due course. The assessing officer took the salary figures from the salary pass book and computed year wise income from salary as under :
Deduction
Net salary
Asst. yr.
Gross Salary
Standard deduction
Prof. Tax
Total
(2-5)
1
2
3
4
5
6
1987-88
54,024
12,000
240
12,240
41,784
1988-89
59,706
12,000
240
12,240
47,466
1989-90
62,568
12,000
240
12,240
50,328
1990-91
68,001
12,000
600
12,600
55,401
1991-92
86,644
12,000
600
12,600
74,044
1992-93
1,01,220
12,000
600
12,600
88,620
He treated the taxable salary in column 6 above as undisclosed income for the assessment years 1987-88 to 1992-93 and brought the same to tax. He did not give any credit of Tax Deduction Source on the ground that the assessee had not been able to furnish the original certificates of salary from Reserve Bank of India.
4. Shri K.A. Sathe, the learned counsel for the assessee, submitted that Chapter XIV-B is intended to bring to tax the undisclosed income of the assessee found by the department as a result of search and seizure action initiated under section 132. This assessment is a special assessment and it has been made amply clear now by both i.e. by the decisions of the court as also by Explanation added to section 158BC that block assessment is in addition to the regular assessment in each previous year included in the block period. In other words, if a particular income does not fall in the category of undisclosed income, but still if the assessing officer is of the opinion that it has escaped assessment, his remedy under section 148 is not ruled out. Section 158BB which prescribes procedure for computation of undisclosed income must yield to the basic theme of the block assessment that it is intended to assess undisclosed income found as a result of search. It therefore, becomes necessary to examine whether in a case like the present the income earned by the assessee from a public institution like Reserve Bank of India from which adequate tax would have been deducted at source, constitutes undisclosed income. He further submitted that the assessee was working with Reserve Bank of India and it cannot be said that in the normal course, the Reserve Bank of India would not have disclosed in its return under section 206 the salary received by the assessee from which undoubtedly they had deducted tax at source. Unfortunately for the assessee, he could produce tax deduction certificate only for assessment year 1992-93. His file containing salary certificates was lost in the dacoity that took place at his residence. But he had maintained a note book in which the details of salary received by him as also tax deducted at source found mention. In fact, the figures of salary have been taken by the assessing officer from such record of the assessee only. Accordingly, it. is wrong on the part of the assessing officer to hold that the salary received by the assessee from Reserve Bank of India was undisclosed income of the assessee for the block period 1987-88 to 1992-93.
5. The learned Departmental Representative strongly supported the order of the assessing officer. He submitted that the definition of ‘undisclosed income’ contained in the Act is illustrative and not exhaustive. According to the meaning of the word `undisclosed’, assessee’s income would also be undisclosed because he had nowhere disclosed it in his return of income in earlier years. He further submitted that if a proper interpretation leads to a harsh result the said interpretation has to be followed because there is no place for equity in tax laws. The learned Departmental Representative further submitted that on interpretation of section 158BB laying down the procedure for computation of undisclosed income, it is clear that the assessing officer had to compute the income of the assessee as per the provisions of the Act and in such a case he was perforce required to compute the same and since no returns had been filed for the respective years i.e., 1987-88 to 1992-93, no deduction was permissible. In other words, in view of the language of section 158BB, the salary income has been rightly treated as undisclosed income of the assessee. According to the learned Departmental Representative the assessee’s reference to alleged disclosure in the return under, section 206 filed by the Reserve Bank of India in Bombay Would have no meaning. Such a return would be firstly filed in Bombay, whereas the assessee is being assessed at Kolhapur. Return under section 206 itself would be running into several pages and merely because an entry appears in such a voluminous record at Bombay, the assessing officer is not supposed to take cognizance thereof in finding out the undisclosed income. The learned Departmental Representative further drew our attention to Expln. 3 to section 271 and submitted that as per this Explanation, if an assessee fails to file a return of income without reasonable cause within the period prescribed under section 153(1), such income is deemed to be concealed. On the same analogy, the assessee has failed to file his return disclosing salary income. Such salary income would be regarded as concealed or undisclosed income.
6. We have considered the rival submissions and perused the facts on record. In our opinion, the learned assessing officer has taken a very narrow view in interpreting undisclosed income. It appears, according to him, that if the assessee has not filed a return, it means that there is no disclosure for the purpose of the Act as envisaged under section 158B(b). Such a restrictive view is not at all warranted by the provisions of law. Section 158B(b) defines ‘undisclosed income’ to include income or property which has not been or would not have been disclosed for the purposes of this Act. In this connection, it is significant to note that a non-disclosure has been mentioned in a general way. It has nowhere been stated that the disclosure has to be seen with reference to the assessee’s return in whose case block assessment is being made. A disclosure for the purpose of the Act would be wide enough to include a case where employer submits his return of tax deduction from salaries under section 206 of the Act in which the income earned by the various employees have been disclosed. In the assessee’s case, it is an accepted position that Reserve Bank of India would have filed a return under section 206 which the assessee’s name and income disclosing his salary income would have been disclosed. Such a disclosure under section 206 also would constitute a disclosure for the purpose of the Act and treating salary of the assessee as if it has not been disclosed or would not have been disclosed for the purpose of the Act would be unjustified. In the context of the present case, the situation becomes more obvious only because salary is received from a public institution like Reserve Bank of India which is a semi-government body. It cannot be said that in normal course, it would not have disclosed in its return under section 206 the salary received by the assessee from which undoubtedly they had deducted tax at source. Though the assessee could produce the tax deduction certificate only for assessment year 1992-93 because such certificates were lost in the dacoity that took place at his residence, but it is also a fact that the assessee has maintained a note book in which the details of salary received by him as also tax deducted at source found mention. In fact, the figures of salary have been taken by the assessing officer from such record of the assessee only. Since the figures shown in the salary book of the assessee matched with the figures of salary shown in the certificate of tax deduction, the assessing officer also certified that the figures of salary in the earlier years would be reliable.
Accordingly, we hold that there is no justification for treating the salary income for the block period 1987-88 to 1992-93 as undisclosed income of the assessee.
7. Now we will discuss the issues raised by the learned Departmental Representative. As regards the contention of the department that the definition is illustrative and not exhaustive or that ordinary meaning of ‘undisclosed’ has to be seen, does not appear tenable in the context of the case. As stated earlier, there are no restrictive words requiring disclosure by the assessee and in his return. Disclosure for the purpose of the Act has to be given a very wide meaning and in that sense an income from salary disclosed by the employer in the return under section 206 can be regarded as disclosure for the purpose of the Act and such income particularly when tax is deducted at source cannot constitute undisclosed income for the purpose of Chapter XIV-B.
8. For the purpose of Chapter XIV-B reference to section 271(1)(c) is irrelevant as is clear from section 158BF. Similarly, Expln. 3 does not regard all cases of non-filing of return of cases of concealment. In the present case, tax was deducted at source adequately and being under a bona fide impression that no return is required to be filed, the assessee did not file the return. If this constituted reasonable cause, then even under Expln. 3 to section 271(1)(c) income would not have constituted concealed income. Even under section 147, if tax was deducted at source (in this case it was adequately deducted by the Reserve Bank of India) no action could be taken because there would be no escapement of tax. Thus, the Departmental Representative’s argument that by non-filing of the return there has resulted an undisclosed income for the purpose of Chapter XIV is without merit.
9. It is true that there is no place for equitable principles in tax legislation, but it is also well known that tax and equity need not be sworn enemies. In one of the recent cases i.e. S. Nagaraj & Ors. v. State of Karnataka & Anr. (1993) Suppl. (4) SCC 595, decided by the Hon’ble Supreme Court, Justice Sahai speaking for the court explained the law on the subject thus :
“Justice is a virtue which transends all barriers. Neither the rules of procedure nor technicalities of law can stand in its way. The order of the court should not be prejudicial to any one. Rule of stare decisis is adhered for consistency but it is not as inflexible in Administrative Law as in Public Law. Even the law bends before justice. Entire concept of writ jurisdiction exercised by the higher courts is founded on equity and fairness. If the court finds that the order was passed under a mistake and it would not have exercised the jurisdiction but for the erroneous assumption which in fact did not exist and its perpetration shall result in miscarriage of justice then it cannot on any principle be precluded from rectifying the error. Mistake is accepted as valid reason to recall an order. Difference lies in the nature of mistake and scope rectification, depending on if it is of fact or law, But the root from which the power flows is the anxiety to avoid injustices. It is either statutory of inherent. The latter is available where the mistake is of the court, In Administrative Law the scope is still wider, Technicalities apart if the court is satisfied of the injustice then it is its constitutional and legal obligation to set it right by recalling its order. ”
(Emphasis, here italicised in print, supplied)
From the above, it is evident that it is the basic principle of jurisprudence that the assessee must get justice. In a peculiar case like the present one, a clear and practical view has to be found out because it is nobody’s case that income by way of salary received by the assessee from Reserve Bank of India has not been taxed or that there is any escapement of income in regard to that income. If basically there is no charge of escapement of income or tax, question of bringing the same under Chapter XIV should not arise.
10. In view of the above discussion, we decide this ground in favour of the assessee.
11. Ground No. 2 reads as follows :
“Without prejudice to Ground No. 1, the learned Assistant Commissioner was not justified in not allowing deduction under section 80C and also in not allowing rebate under section 88 wherever applicable. The learned Commissioner erred in refusing to grant adjustment of tax deduction at source for assessment year 1992-93 in spite of the fact that the tax deducted certificate was produced before him the cognizance of which he had taken in determining income from salary. It may, therefore, be held that the appellant be granted deduction under section 80C rebate under section 88 in relevant years and he may also be granted adjustment of tax deducted at source for assessment year 1992-93”
In view of our finding in the preliminary ground, this ground has become infructuous. Accordingly, it is not necessary for us to go into the merits of the case. This ground is accordingly dismissed.
12. Ground No. 3 reads as follows :
“The appellant could not get salary certificate for assessment years 1987-88 to 1991-92 from Reserve Bank of India in spite of best efforts. It is requested that he may be permitted to produce them as soon as received from Reserve Bank of India and the credit for tax deducted may be directed to be allowed on that basis.
In view of our finding in the preliminary ground this ground has become infructuous. The same is accordingly dismissed.
13. Ground No. 4 reads as follows :
“The appellant craves leave to add, alter or substitute any of the above grounds at the time of hearing of the appeal.”
Obviously this ground is general in nature and calls for no comments.
14. In the result, the appeal is allowed, in part.