THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY and THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM
I.T.T.A. No. 97 of 2004
% 10.12.2014
Between:
# Late Sri G.Nageswara Rao Rep.by Sri G.Mohan Rao.
Versus $ The Commissioner of Income Tax.
...
APPELLANT ...RESPONDENT < Gist:
> Head Note:
! COUNSEL FOR THE APPELLANT :- Smt.K.Neeraja ^COUNSEL FOR RESPONDENT :- Sri J.V.Prasad ? Cases Referred:
THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A. No. 97 of 2004
JUDGMENT: (per the Hon’ble Sri Justice L.Narasimha Reddy)
This appeal is referable to an assessee by name, late Sri G.Nageswara Rao. During the pendency of the proceedings, he died and his son is brought on record.
The appeal arises out of an order, dated 19.02.2004, passed by the Visakhapatnam Bench of the Income Tax Appellate Tribunal in IT (SS) A.No.7/V/99.
The brief facts pertaining to the case are as under:
The appellant was having income from house property, agriculture as well as transport business. Whenever his income exceeded the taxable limits, he filed return. On account of his old age, he is said to have entrusted the transport business to his son, who is an independent assessee. The appellant was deriving income only from two sources, namely house property and agriculture. Though he filed returns for quite some period, he discontinued to file the same on the ground that the income, after transfer of transport business to the son was below the limits.
A search was conducted on 10.10.1996 in the house of the son of the appellant. By that time, the appellant was aged 78 years. A notice under Section 158BC of the Income Tax Act (for short ‘the Act’) was issued to him and in response to the same, the appellant filed a ‘Nil’ return. The Assessing Officer, however, passed an order, dated 29.10.1997, holding that there exists a sum of Rs.5,87,086/- as undisclosed income. It was mentioned that the figure represents the income from investment in construction, long term capital gains and the one from house property.
The appellant approached the Tribunal by filing the appeal. During the pendency of the appeal, he died and his legal representative was brought on record. The Tribunal took the view that the appellant is entitled for the benefit of Section 158BB(c)(B) of the Act. However, the Tribunal, ultimately, dismissed the appeal. Hence, this further appeal under Section 260A of the Act.
Heard Smt.K.Neeraja, learned counsel for the appellant and the learned Standing Counsel for the respondent.
The appeal arises out of block assessment proceedings. The undisputed facts are that the appellant did not file returns for a period exceeding ten years before the search was conducted, but he was the assessee earlier thereto. Though he was not maintaining the books of account, he explained his financial state of affairs through cash flow statement, prepared in the context of search and seizure. The same was part of record and it is also placed before us. According to this, the income from two sources, namely agriculture and house property for the years 1986-87 to 1997-98 did not exceed the taxable limits and the nature of investments from the savings made over the years were shown.
Things would have been different altogether, had the Assessing Officer or the Tribunal disbelieved the statement referred to above. Not a word was said about it. Section 158BB of the Act prescribes the procedure to be followed in the context of computation of undisclosed income of the block period. Broadly stated, the undisclosed income to be so arrived at, is the one which is found as a result of search or requisition of books, added by the loss, which the assessee may have incurred in the block period or deducted by the income which is already disclosed.
Clauses (a) to (f) of sub-section (1) of Section 158BB of the Act stipulate the components that are added or deducted, as the case may be, for the process of computation of undisclosed income. Clause (c) thereof reads as under:
“(c) where the due date for filing a return of income has expired, but no return of income has been filed
(A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period; or
(B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period;”
From a perusal of this, it becomes clear that even where an assessee did not file returns for the block period, the facts and figures mentioned in the books of account must be taken into account. The Tribunal did not disbelieve the statement submitted by the appellant. On the other hand, an observation was made to the effect that the allowance to that extent is to be made. It reads as under:
“The assessee has shown the house property income for assessment year 1987-88 till date of survey on 10.10.1996 which are below taxable limit. While relying on the decisions 265 ITR 327 (Kerala), we direct to exclude the income in a block assessment years which is below taxable limit, the rental income is on records of the Revenue. Since the effect of the decision 254 ITR 245 (Kerala) is nullified by amendment in introducing Section 158BB(1)(c)(B) to the Act”
This observation should have led to a conclusion that the refusal on the part of the Assessing Officer to take into account the facts and figures mentioned with reference to the block period cannot be sustained in law and the order of assessment ought to have been set aside or at least modified. However, the appeal was dismissed as a whole.
We are of the view that this is a rare case in which the result of the appeal does not accord with the reasons furnished in the course of discussion. On merits also, we are satisfied that the appellant explained the source of income and the order of block assessment passed by the respondent is contrary to law.
The appeal is accordingly allowed and the order of assessment, dated 29.10.1997, is set aside. There shall be no order as to costs.
The miscellaneous petitions, if any, filed in this appeal shall also stand disposed of.
L.NARASIMHA REDDY,J Dt:10.12.2014 Note: L.R. copy to be marked. kdl RAM,J CHALLA KODANDA