ORDER
K.D. Ranjan, Accountant Member
1. This appeal by the assessee for block period 01.04.89 to 16.02.2000 arises out of order of CIT(Appeals)-I, Agra.
2. The First issue for consideration relates to determination of undisclosed income of Rs. 1,00,000/- as against nil shown by the assessee. The facts of the case-as apparent from records are that search was carried out in the case of Shri Pankaj Agarwal, the husband of the assessee on 16.02.2000. During the course of search, a pronote for Rs. 1,20,000/- made issued by M/s Kuntals was found from the premises of Shri Pankaj Agarwal. Locker in the name of Smt. Renu Agarwal, the assessee was also searched. No incriminating material was found in the said locker. The assessee filed return of income on 20th June, 2000. The assessee as evident from assessment order is a regular assessee from the assessment year 1990-91 onwards and has been filing the returns of income regularly. Notice Under Section 158BC was issued on 10.01.2001 and the return of income was filed for the block period at nil income. The Assessing Officer after considering the facts and reply of the assessee brought the amount of Rs. 1,20,000/- to tax as undisclosed income for the block period. He also added interest of Rs. 4,500/- deemed to have accrued on this amount.
3. During the course of appellate proceedings, the assessee explained that Rs. 1,20,000/- was paid to M/s. Quintals at the interest of 1.25% per month. The amount was paid in cash on 14.12.1999. The assessee showed the amount of Rs. 1,20,000/- in the balance sheet as on 31st March, 2000. In computation of income for return filed on 20.06.2000, the assessee surrendered Rs. 1,00,000/- in the absence of any evidence. Ld. CIT(Appeals) after considering the submissions held that as against Rs. 1,20,000/-, the amount surrendered at Rs. 100000/- could be taken as undisclosed income for assessment year 2000-01 as assessee has not filed any proof regarding the source of Rs. 100000/-.
4. Aggrieved by the order of ld. CIT(Appeals) the assessee is in appeal before this Tribunal.
5. Before us, ld. A.R. of the assessee submitted that Assessing Officer has passed order Under Section 158BC whereas no seizure was made in the hands of the assessee. At the best, order could have been made Under Section 158BD. Therefore, the order passed Under Section 158BC is bad in law. On the other hand, ld. D.R. submitted the search warrant was issued in the name of assessee to search the locker and, therefore, the order passed Under Section 158BC is correct and justified.
6. We have heard both the parties. The pronote was seized from the premises of Shri Pankaj Agarwal, the husband of the assessee. Therefore, the impugned amount of the pronote could have been considered Under Section 158BD if there was no search in the hands of the assessee. However, we find that there was search of locker standing in the name of the assessee. Therefore, order passed Under Section 158BC is justified on the ground that two orders for the same block period – one Under Section 158BD and other Under Section 158BC cannot be passed. Single assessment order for the block period Under Section 158BC can be passed in respect of material found in search in own case and found in the premises of other persons. In our view, the amount of pronote has been rightly considered Under Section 158BC in the hands of the assessee as undisclosed income in respect of latter is zero. Therefore, the proceeding cannot be declared invalid on this ground.
7. The next contention of Id. A.R. of the assessee is that the amount of pronote is not subject to block assessment since assessee was not subjected to payment of advance tax. On the date of search return of income for the year was not due and therefore, income returned by assessee does not form part of undisclosed income for the block period. Ld. A.R. of the assessee placed reliance on the decision of Hon’ble M.P. High Court in the case of CIT v. Nitin Munje 264 ITR 628. He further submitted that on the total income returned on 20.06.2000, the assessee was not liable to pay advance tax. On the other hand, ld. D.R. relied on the order of CIT(Appeals).
8. We have heard both the parties. The assessee is not engaged in money lending business on regular basis. Therefore, the assessee was not required to maintain books of accounts. The assessee has admitted the amount of Rs. 1,00,000/- in the return of income filed for assessment year 2000-01 in addition to income from interest.
9. The question arises whether the amount of Rs. 1,00,000/- surrendered in return of income filed on 20.06.2000 represents undisclosed income for the block period. According to assessee, the assessee purchased NSCs worth Rs. 50,000/- and therefore was not subject to advance tax. Under Section 158BB(1)(d) where the previous year has not ended or the date of filing of return of income Under Section 139(1)has not expired, the income on the basis of entries relating to such income or transactions as recorded in the books of accounts and other documents maintained in normal course of business on or before the due date of search or requisitioned relating to such previous year, shall be reduced from undisclosed income computed Under Section 158BB(1). The provisions of Section 158BB(1)(d) are applicable in the cases where assessee maintains regular books of accounts. In the case.of CIT v. Nitin Munje (supra) Hon’ble M.P. High Court held as under:
The assessee had been assessed for the block assessment period from 1986-87 to September 13, 1995. On appeal the Tribunal found that there was no dispute that the date of filing of the return for the assessment year 1995-96 was extended till October 31, 1995 and the search was conducted on September 13, 1995. The assessee claimed that the income related to the assessment year 1995-96 for which the date of filing of the return of income under Sub-section (1) of Section 139 of the Income-tax Act, 1961, had not expired. Before the Assessing Officer, the assessee made a declaration that he would be showing the income of Rs. 9,00,000/- in the return for the assessment year 1995-96. After analyzing the provision, the appellate authority had allowed the appeal holding that there was no undisclosed income for the block assessment period. On appeal to the High Court:
Held, dismissing the appeal that the Tribunal was correct in holding that there was no undisclosed income for the block period. No substantial question of law arose from its order.
10. However in the case before us, the assessee has not maintained any books of accounts/diary for money lending activities. Therefore, provisions of Section 158BB(1)(d) are not applicable. At the same time provisions of law cannot be applied differently or harshly in the cases where books of accounts are not required to be maintained or not maintained. In such cases, the undisclosed income is governed by the payment of tax by way of TDS or advance tax as held in the case of ACIT v. A.R. Enterprises 274 ITR 110 by Hon’ble Madras High Court that where the assessee earned taxable income for the assessment year, but no return of income has been filed till the date of search, the income disclosed on account of payment of advance tax cannot be held to be undisclosed income for the purpose of block assessment. Also in the case of CIT v. Ashok Taksali 257 ITR 352 Hon’ble Rajasthan High Court held that once the salary income of the block year has been taxed and tax has been deducted at source, there is no question of holding that income of the assessee as undisclosed income of the block year for taxing it again after search.
11: If the ratios the decision of Hon’ble Madras High Court, Rajasthan High Court and M.P. High Court are Applied to the facts of the assessee’s case, the income on which no tax is chargeable, the same cannot be included as undisclosed income under Section 158BB. The provisions of Section 158BB(1)(d) clearly mandate that income relating to entries recorded in the I books of accounts for the previous year which has not ended or the date of filing of return has not expired cannot be taken as undisclosed income for the block period. This logic will be equally applicable in the cases where no books of accounts are maintained and the assessee has paid tax, if any, by way of TDS or advance tax. Payment advance tax in the case individual assessees is determined after taking into account the rebates/deductions available to such assessees.
12. Hon’ble Rajasthan High Court in the case of Chainsukh Rathi v. CIT 270 ITR 368 has supported this view as under:
When some material was seized connecting the concealed income, the income tax officer can compute the income on that basis but that should be computed and taxed in accordance with the provisions of the Act, 1961. Therefore, the exemption limit has to be kept in mind and to that extent, income not chargeable to tax, tax should not be charged on that part of income.
The S.L.P. filed by the assessee was dismissed by Hon’ble Supreme Court 266 ITR (St) 104-105 (SC).
13. From above discussion, it is clear that income above chargeable limit in respect of which no tax has been paid by way of advance tax or TDS, will be liable to tax as undisclosed income for the block period Under Section 158BB. The Assessing Officer as well as Id. CIT(Appeals) have not carried out this exercise. Accordingly, we restore this issue to the file of Assessing Officer who will determine the income for assessment year 2000-01 as per law and the total income over and above the exemption limit as also covered by tax paid, determined after considering the rebate/deduction applicable to the assessee, if any, will be treated as undisclosed income for the block period. We direct the assessing officer accordingly.
14. In the result, appeal by assessee is allowed for statistical purposes.
The order pronounced in the court 29th Dec., 2006