COMMISSIONER OF INCOME TAX Vs. M M GEORGE

JUDGEMENT

(1.) THIS reference is at the instance of the Commissioner of Income-tax, Calicut. Question of law referred is whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that the income below the taxable limit of any previous year is not to be included as the undisclosed income of the block period for the purpose of Section 158 BC, even though such income has not been declared by the assessee by filing the return of income?

(2.) THE assessee is an individual deriving income from various business activities including a grocery shop, plying of lorries on hire and also income from agricultural properties. THE Department conducted a search under Section 132 of the Income Tax Act in the residential premises of the assessee on 22.11.1995. In response to a notice issued under Section 158 BC, the assessee filed return showing undisclosed income of Rs. 88,500/- for the block period from 1.4.1985 to 22.11.1995. THE Assessing Officer completed the assessment determining the total undisclosed income of the block period at Rs. 7,22,232/-. As the assessee had not previously paid tax, no deduction was allowed from the income of the assessee. Aggrieved by the assessment under undisclosed income of Rs. 7,22,232/-, the assessee preferred appeal before the Tribunal.

(3.) CONTENTION of the learned counsel for the Revenue is that Section 158B contained in Chapter XIV of the Income Tax Act deals with special procedure for block assessment. Learned counsel submitted that in the block assessment, a particular period is fixed and the assessment is made of the total income for this block period, which was 10 years at the relevant time. Tax is charged as per Section 113, which says that the total disclosed income of the block period, determined under Section 158BC, shall be chargeable to tax at the rate of sixty per cent. Hence, learned counsel submitted that there is no room for finding out whether the income for each of the years was below the taxable limit or not. The only deduction which the assessee is entitled is as provided under Section 158BB Clauses (a) to (f). On the other hand, learned counsel for the assessee submitted that it is true that the assessment was for a block period. But there may be cases where in a particular year the income of the assessee would be less than the assessable income, that income should not be taken into consideration for the purpose of total income, as that would be against him. Learned counsel also brought to our notice Form 2B, which is the relevant form for block assessment. In Note 5 to Form 2B, it is stated thus "Give the details in respect of the previous year on the basis of assessment order if the assessment/prima facie adjustment has been completed. Else, give the details on the basis of return of income filed. For the previous year which has not ended or for which the date of filing of the return under Section 139(1) has not expired and that you are in a position to prove to the satisfaction of the Assessing Officer that such income or the transactions relating to such income have been recorded in the books of account and documents maintained in the normal course, such income is to be indicated against that previous year. For any year, if the return has not been furnished for the reason that the taxable income was not above the maximum amount not chargeable to tax, the total income is to be mentioned against that previous year".