Umang Agrawal, Allahabad V. ACIT, Allahabad

ITA 464/ALLD/2005

• Counselvise Citation: 46420714 RSA 2005
• Duration Of Justice: 8 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-08-2014
• Assessment Year: misc
• Appeal Filed On: 09-09-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K LACHHIRAMKA
• Assessee Lawyers: R R AGARWAL
• Keywords: Depreciation; Search and seizure; Document seized; Opportunity of being heard; Question of law; Block assessment; Documents seized; Unabsorbed depreciation
• Section: 32; 147; 148; 263; 132; 144; 69C; 15; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 464/ALLD./2005 BLOCK PERIOD : 01.04.1996 TO 04.09.2002 UMANG AGARWAL, VS. COMMISSIONER OF INCOME-TAX, 1 /4, BANK ROAD, ALLAHABAD. CENTRAL CIRCLE, ALLAH ABAD. (PAN: ABTPA 3232 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.R. AGARWAL, SR. ADVOCATE RESPONDENT BY : SHRI R.K. LACHHIRAMKA, CIT/DR DATE OF HEARING : 12.08.2014 DATE OF PRONOUNCEMENT : 25.08.2014 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.CIT (CENTRAL), KANPUR DATED 16.08.2005 U/S. 263 OF THE IT ACT, DIRECTING THEREIN TO THE ASSESSING OFFICER TO INCLUDE A SUM OF RS.53,27, 812/- IN THE BLOCK ASSESSMENT BEING THE INCOME DECLARED BY THE ASSESSEE IN THE RE GULAR RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 ON THE GROUND THAT THE SAID RETURN WAS FILED LATE AND HENCE, IT WAS NON-EST. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH A ND SEIZURE OPERATION WAS CONDUCTED AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON ITA NO. 464/ALLD./2005 2 04.09.2002. BLOCK ASSESSMENT ORDER U/S. 158BC WAS P ASSED ON 30.09.2004 FOR THE ABOVE BLOCK PERIOD ON UNDISCLOSED INCOME OF RS. 1,48,94,580/-. THE LD. CIT ISSUED SHOW CAUSE NOTICE U/S. 263 OF THE IT ACT ON 19.04.2005 WHEREIN HE HAS MENTIONED THAT THE ASSESSEE HAD FILED A REGULAR RET URN FOR THE ASSESSMENT YEAR 2002-03 ON 01.09.2004 DISCLOSING AN INCOME OF RS.53 ,27,812/-. THE LD.CIT NOTED THAT SAID RETURN OF INCOME WAS FILED BY THE A SSESSEE BEYOND THE TIME ALLOWED U/S. 139 OF THE IT ACT AND WAS, THEREFORE, NON-EST. THE LD. CIT WAS OF THE VIEW THAT WHILE COMPLETING THE BLOCK ASSESSMENT ORDER, INCOME DISCLOSED BY THE ASSESSEE IN THE SAID RETURN FOR THE ASSESSMENT YEAR 2002-03 SHOULD HAVE BEEN CONSIDERED BY THE AO AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE LD.CIT RELIED UPON THE PROVISIONS OF SECTION 158BB(1)(CA) OF THE IT ACT, ACCORDING TO WHICH NO REDUCTION ON ACCOUNT OF INCOME DISCLOSED I N THE RETURN FOR ASSESSMENT YEAR 2002-03, WHICH IS FILED AFTER EXPIRY OF THE DU E DATE OF FILING OF THE RETURN OF INCOME, WAS PERMISSIBLE. HE HAS ALSO NOTED THAT TH E AO ALSO DID NOT PROPERLY EXAMINED THE COMPUTER GENERATED ACCOUNTS FOR THE AS SESSMENT YEAR 2002-03, WHICH WERE GENERATED FROM THE CPU SEIZED DURING THE COURSE OF SEARCH AND SEIZURE AND DID NOT INCLUDE THE UNDISCLOSED INCOME REFLECTED FROM THE SAID ACCOUNTS WHILE COMPLETING THE AFORESAID BLOCK ASSES SMENT ORDER. THE LD.CIT, THEREFORE, THOUGHT THAT THE BLOCK ASSESSMENT ORDER PASSED BY THE AO ON 30.09.2004 BY NOT INCLUDING THE SAID INCOME WAS ERR ONEOUS AND PREJUDICIAL TO ITA NO. 464/ALLD./2005 3 THE INTERESTS OF REVENUE AND THEREFORE, HE SET ASID E THE BLOCK ASSESSMENT ORDER WITH THE DIRECTION TO INCLUDE THE SAME INCOME IN TH E BLOCK ASSESSMENT OF THE ASSESSEE TREATING THE SAME AS UNDISCLOSED INCOME WI THIN THE MEANING OF SECTION 158BB(1)(CA) OF THE IT ACT. THE ASSESSEE IN RESPONS E TO THE NOTICE ISSUED U/S. 263 OF THE IT ACT RAISED THE FOLLOWING SUBMISSIONS BEFORE THE LD. CIT, WHICH ARE REPRODUCED AT PAGE 3 OF THE IMPUGNED ORDER AND READ S AS UNDER : (I) THE NOTICE U/S 263 DATED 19.4.2005 IS ILLEGAL AND INVALID SINCE THERE WAS NO VALID BASIS OR REASON FOR ISSUE OF SUCH NOTICE. (II) THE NOTICE U/S 263 WAS ISSUED ON THE GROUND TH AT THE ASSESSING OFFICER HAD FAILED TO CONSIDER IN THE BLO CK ASSESSMENT THE INCOME DISCLOSED BY THE ASSESSEE IN THE RETURN FILE D ON 1.9.2004 FOR THE ASSTT. YEAR 2002-03, THOUGH AS PER THE ASSESSEE , THIS ISSUE WAS THOROUGHLY DISCUSSED BY THE A.O. IN THE COURSE OF T HE BLOCK ASSESSMENT PROCEEDINGS AND THE A.O. HAD RIGHTLY NOT CONSIDERED THE INCOME SHOWN IN THE RETURN FOR THE ASSTT. YEAR 2002 -03 AS THE UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT ORDER AF TER TAKING COGNIZANCE OF THE SETTLED LAW. (III) BEFORE COMPLETION OF THE BLOCK ASSESSMENT ORD ER DATED 30.09.2004 PASSED BY THE A.O., A REGULAR RETURN FOR THE ASSTT. YEAR 2002-03 WAS FILED ON 1.9.2004, WHICH WAS WITHIN THE KNOWLEDGE OF THE A.O. (IV) SINCE THE ASSESSEE'S APPLICATION IS PENDING BE FORE THE HON'BLE SETTLEMENT COMMISSION, IT WILL NOT BE PROPE R FOR ANY OTHER AUTHORITY TO INTERFERE IN THE MATTER. (V) THE ASSESSEE HAD PAID ADVANCE TAX FOR THE ASSTT . YEAR 2002- 03 AMOUNTING TO RS.5,71,000/- ON 14.3.2002 I.E. BEFORE THE DATE OF THE SEARCH AND IT WAS CLAIMED ON BEHALF OF THE ASSESSEE THAT THERE AR E NUMBER OF DECISIONS IN FAVOUR OF THE ASSESSEE WHERE THE COURT S HAVE HELD THAT BY MAKING PAYMENTS OF ADVANCE TAX BEFORE THE DATE O F THE SEARCH, ITA NO. 464/ALLD./2005 4 THE ASSESSEE ADMITTED HIS INCOME FOR THE PURPOSE OF REGULAR ASSESSMENT. (VI) THE A.O. ISSUED A NOTICE U/S 148 ON 15.10.200 4 AND BY ISSUE OF SUCH NOTICE, THE A.O. WAS VERY MUCH INTERESTED T O REGULARISE THE REGULAR PROCEEDINGS BY CONSIDERING THE RETURN DATED 1.9.2004 FOR THE ASSTT. YEAR 2002-03 . (VII) THE RETURN FOR THE ASSTT. YEAR 2002-03 WAS NO T DUE ON THE DATE OF THE SEARCH AND THERE ARE VARIOUS DECISIONS OF THE HIGH COURTS AND ITAT ENCLOSED WITH THE PAPER BOOK WHERE THE COURTS HAVE HELD THAT SINCE THE RETURN WAS NOT DUE ON THE DATE OF SEARCH, IT IS NOT CORRECT TO SAY THAT THE INCOME DISCLOSED IN THE RETURN FILED SUBSEQUENTLY WAS UNDISCLOSED INCOME WHEN, IN REALIT Y, IT WAS THE DISCLOSED INCOME OF THE ASSESSEE. 3. THE LD. CIT REJECTED THE AFORESAID SUBMISSIONS O F THE ASSESSEE ON THE FOLLOWING REASONS : (I). THAT THE DEFINITION OF UNDISCLOSED INCOME PROV IDED BY SECTION 1588BB(1)(CA) PROVIDED SUCH INCLUSION OF INCOME AND THE AO FAILED TO APPLY THE CORRECT POSITION OF LAW. (II). THE SETTLEMENT COMMISSION HAS NOT PROCEEDED W ITH THE APPLICATION OF THE ASSESSEE AND IS PENDING. (III). THE ASSESSEE HAS NOT PAID FULL ADVANCE TAX O N THE INCOME AS DISCLOSED IN THE NON-EST RETURN AND THE BALANCE PAY ABLE OF RS.10,12,827/- AS PER THE SAID RETURN WAS NOT PAID BY THE ASSESSEE WHILE FILING THE SAID RETURN ON 01.09.2004. ITA NO. 464/ALLD./2005 5 (IV). THE REGULARIZATION OF RETURN FOR THE ASSESSME NT YEAR 2002-03 BY ISSUE OF NOTICE U/S. 148 WOULD NOT, IN ANY WAY, AFF ECT THE PROVISIONS OF SECTION 158BB(1)(CA) OF THE IT ACT. 3.1 THE LD.CIT, THEREFORE, CONSIDERED THE BLOCK ASS ESSMENT ORDER PASSED BY THE AO ON 30.09.2004 ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTERESTS OF REVENUE AND HENCE, SAME WAS SET ASIDE. THE AO WAS D IRECTED TO INCLUDE THE SAID INCOME OF RS.53,27,812/- IN THE BLOCK ASSESSMENT OR DER. 4. THE ASSESSEE PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL REITERATING THE SAME GROUNDS WHICH WERE RAISED BEFORE THE LD.CI T. THE APPEAL OF THE ASSESSEE WAS ALLOWED BY THE TRIBUNAL VIDE ORDER DAT ED 26.06.2006 AND THE IMPUGNED ORDER WAS CANCELLED. 5. THE REVENUE PREFERRED APPEAL BEFORE THE HONBLE ALLAHABAD HIGH COURT AGAINST THE AFORESAID DECISION OF THE TRIBUNAL DATE D 26.06.2006 IN INCOME-TAX APPEAL NO. 422 OF 2006 IN THE MATTER OF CIT (CENTRA L) VS. UMANG AGAWAL. HONBLE ALLAHABAD HIGH COURT VIDE ITS JUDGMENT DATE D 16.05.2014 ALLOWED THE DEPARTMENTAL APPEAL FOR STATISTICAL PURPOSES AND TH E MATTER WAS REMANDED TO THE TRIBUNAL TO PASS A FRESH ORDER IN THE LIGHT OF THE DISCUSSION. THEREFORE, SUBSTANTIAL QUESTION OF LAW FORMULATED BY THE HONB LE HIGH COURT WAS NOT ITA NO. 464/ALLD./2005 6 ANSWERED. COPY OF THE AFORESAID JUDGMENT IS PLACED ON RECORD. THE HONBLE HIGH COURT IN ITS JUDGMENT HELD THAT THE ASSESSEE H AS FILED THE RETURN FOR THE ASSESSMENT YEAR 2002-03 BEYOND THE TIME ALLOWED U/S . 139 OF THE IT ACT AND WAS, THEREFORE, NON-EST. IT WAS ALSO NOTED THAT THE LD. CIT IN HIS ORDER U/S. 263 HAS CLEARLY MENTIONED THAT THE AO DID NOT PROPERLY EXAMIN THE COMPUTER GENERATED ACCOUNT FOR THE ASSESSMENT YEAR UNDER APP EAL WHICH WERE GENERATED FROM CPU SEIZED DURING THE COURSE OF SEARCH. FURTHE R BOTH THE PARTIES ARE UNABLE TO TELL THE STATUS OF ASSESSEES APPLICATION PENDIN G BEFORE THE SETTLEMENT COMMISSION. IT WAS ALSO NOTED THAT REGULAR RETURN F OR THE ASSESSMENT YEAR 2002- 03 WAS WITHIN THE KNOWLEDGE OF THE AO AT THE TIME O F COMPLETING THE BLOCK ASSESSMENT ORDER, BUT THE AO WHILE PASSING THE BLOC K ASSESSMENT ORDER HAS FAILED TO TAKE INTO ACCOUNT THE CORRECT POSITION OF LAW. HONBLE HIGH COURT WAS, THEREFORE, OF THE VIEW THAT THESE VITAL ISSUES WERE NOT EXAMINED BY THE TRIBUNAL AND ACCORDINGLY, IMPUGNED ORDER WAS SET ASIDE AND T HE MATTER WAS REMANDED TO THE TRIBUNAL FOR PASSING THE ORDER AFRESH IN THE LI GHT OF THE DISCUSSION IN THE JUDGMENT. THE APPEAL WAS, THEREFORE, RE-FIXED FOR H EARING AS PER DIRECTIONS OF THE HONBLE HIGH COURT. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE RETURN FOR THE ASSESSMENT YEAR 2002- ITA NO. 464/ALLD./2005 7 03 WAS NOT DUE ON THE DATE OF SEARCH. THE SEARCH WA S CONDUCTED ON 04.09.2002 AND DUE DATE OF FILING OF THE RETURN FOR THE ASSESS MENT YEAR 2002-03 U/S. 139(1) WAS 31.10.2002 AND THE SAME WAS FILED AFTER GETTING PHOTOCOPIES OF THE SEIZED MATERIAL AND BOOKS OF ACCOUNT ON 05.07.2004 AND THE REAFTER OBTAINED AUDIT REPORT ON 25.08.2004 AND THE ASSESSEE FILED RETURN OF INCO ME ON 01.09.2004 (PB-51) DECLARING INCOME OF RS.53,27,812/-. COPIES OF THE L ETTERS SEEKING COPIES OF THE SEIZED MATERIAL ARE FILED AT PAGE 30 AND 75 OF THE PAPER BOOK (NEW). HE HAS REFERRED TO PB-64 TO 68 (NEW)(PANCHNAMAS) TO SHOW T HAT THE SEIZED MATERIALS INCLUDING CPU WERE OPERATED ONLY IN JUNE, 2004 AND THEREAFTER COPIES WERE SUPPLIED TO THE ASSESSEE. THE ASSESSEE PAID ADVANCE TAX FOR THE ASSESSMENT YEAR 2002-03 AMOUNTING TO RS.5,71,000/- ON 14.03.2002 AN D THE BALANCE AMOUNT WAS PAYABLE OF RS.10,12,827/- AND SINCE THE ASSESSEE WA S NOT IN A POSITION TO PAY THE DEMAND, THEREFORE, HE HAD REQUESTED TO ADJUST THE S AME FROM THE SEIZED CASH LYING WITH THE INCOME-TAX DEPARTMENT. HE HAS SUBMIT TED THAT THE NOTICE U/S. 148 WAS ISSUED FOR THE ASSESSMENT YEAR 2002-03 ON 15.10 .2004. COPY OF THE ASSESSMENT ORDER DATED 29.03.2006 U/S. 143(3)/148 I S FILED AT PAGE 44 OF THE NEW PAPER BOOK ACCEPTING THE DECLARED INCOME OF RS.53,2 7,812/-. HE HAS, THEREFORE, SUBMITTED THAT SINCE TIME WAS TAKEN BY THE INCOME-T AX DEPARTMENT FOR SUPPLY OF THE SEIZED DOCUMENTS, THEREFORE, DELAY IN FILING TH E RETURN U/S. 139(1) WAS NOT ATTRIBUTABLE TO THE ASSESSEE AND WHATEVER INCOME HA S BEEN TAXED IN REGULAR ITA NO. 464/ALLD./2005 8 ASSESSMENT COULD NOT BE ADDED AGAIN IN THE BLOCK AS SESSMENT ORDER AS IS DIRECTED BY THE LD. CIT U/S. 263 OF THE IT ACT. HE HAS SUBM ITTED THAT THE ASSESSEE IS ENTITLED FOR ADJUSTMENT OF TAX IN RESPECT OF CASH L YING WITH THE DEPARTMENT. PB-72 (NEW) IS NOTICE U/S. 263 AND PB-23(NEW) IS THE ORDE R OF SETTLEMENT COMMISSION DATED 23.01.2006 REJECTING THE SETTLEMENT APPLICATI ON IN THE CASE OF ASSESSEE. HE HAS SUBMITTED THAT THE DEPARTMENT HAS HEAVILY RELIE D UPON THE PROVISIONS OF SECTION 158BB(1)(CA) OF THE IT ACT, BUT THE CASE OF THE ASSESSEE FALLS IN SECTION 158BB(1)(C) OF THE IT ACT BECAUSE THE ASSESSEE MAIN TAINED REGULAR BOOKS OF ACCOUNT EVEN AT THE TIME OF SEARCH. HE HAS RELIED U PON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. MRS. KUMKUM KOHLI , 276 ITR 589, IN WHICH IT WAS HELD : A SEARCH AND SEIZURE OPERATION IN TERMS OF SECTION 132 OF THE INCOME-TAX ACT, 1961, WAS CONDUCTED AT THE RESI DENTIAL PREMISES OF THE ASSESSEE ON SEPTEMBER 15, 1995. NOTICE WAS I SSUED TO THE ASSESSEE TO FILE RETURN AS CERTAIN DOCUMENTS WERE S EIZED DURING THE SEARCH. BESIDES OTHER ITEMS, THE ASSESSING OFFICER TREATED RS.26,92,532 AS THE UNDISCLOSED INCOME. ON APPEAL A GAINST THE ORDER OF THE ASSESSING OFFICER, THE TRIBUNAL REDUCE D THE ADDITION FOR THE BLOCK PERIOD TO RS.2,75,277 IN REGARD TO TH E ASSESSMENT YEAR 1995-96.THE TRIBUNAL HELD THAT ADDITION OF RS.23,05 ,357 WAS WITHOUT ANY BASIS AND THERE WAS NO DISCUSSION IN TH E ORDER OF ASSESSMENT EXCEPT TO THE EXTENT THAT THE RETURN WAS NOT FILED WITHIN TIME. THE ASSESSEE HAD PAID THE ADVANCE TAX OF RS.5 ,50,000 ON MARCH 31, 1995, FOR THE ASSESSMENT YEAR 1995-96, TH AT IS, MUCH BEFORE THE DATE OF SEARCH. THE ASSESSING OFFICER HA D ACCEPTED THE RETURN FILED BY THE ASSESSEE FOR THAT VERY SAME ASS ESSMENT YEAR DECLARING AN INCOME OF RS.23,05,360 WHICH WAS FILED ON MAY 4, 1996.THE FIGURE OF RS.23,05,360 WAS DULY REFLECTED IN THE ACCOUNTS. ON APPEAL : ITA NO. 464/ALLD./2005 9 HELD, THAT THE PROVISIONS OF SECTION 158B WOULD NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE INASMUCH AS NOTHING HAD BEEN RECORDED IN THE ORDER OF ASSESSMENT OR IN ANY PROCE EDING THEREAFTER THAT THE AMOUNT HAD NOT BEEN INDICATED IN THE BOOKS OF ACCOUNT OR THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS O F ACCOUNT AS DIRECTED BY THE ASSESSING OFFICER. THE PRESUMPTION AGAINST THE ASSESSEE COULD BE DRAWN ONLY IF THE SUMS WHOLLY OR PARTLY HAD NOT BEEN REFLECTED IN THE BOOKS OR THE ASSESSEE HAD FAI LED TO RENDER EXPLANATION IN TERMS OF THE SAID PROVISIONS. THUS, NO QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW AROSE F ROM THE ORDER OF THE TRIBUNAL. 6.1 HE HAS ALSO RELIED UPON THE DECISION OF THE SUP REME COURT IN THE CASE OF ACIT VS. A.R. ENTERPRISES, 350 ITR 489, IN WHICH IT WAS HELD SECTION 158 BD AND 158BC OF THE INCOME-TAX ACT, 196 1, ALONG WITH THE REST OF CHAPTER XIV-B, FIND APPLICAT ION ONLY IN THE EVENT OF DISCOVERY OF UNDISCLOSED INCOME OF AN AS SESSEE. UNDISCLOSED INCOME IS DEFINED BY SECTION 158B AS TH AT INCOME WHICH HAS NOT BEEN OR WOULD NOT HAVE BEEN DISCLOSE D FOR THE PURPOSES OF THIS ACT. THE ONLY WAY OF DISCLOSING I NCOME ON THE PART OF AN ASSESSEE, IS THROUGH FILING OF A RETURN, AS STIPULATED IN THE ACT, AND, THEREFORE, UNDISCLOSED INCOME SIGNIFIES INCOME NOT STATED IN THE RETURN FILED. THERE ARE TWO SCENARIOS WHERE INCOME WOULD BE DEEMED UNDISCLOSED : (I) WHERE THE INCOME HAS CLEARLY NOT BEEN DISCLOSED, AND (II) WHERE THE INCOME WOULD NOT HAVE BEEN DISCLOSED. IN CONCLUDING THAT AN ASSESSEE WOULD OR WOULD NOT HAVE DISCLOSED INCOME, RELIANCE MUST BE PLACED ON THE SU RROUNDING FACTS AND CIRCUMSTANCES OF THE CASE. IF THE SEARCH IS CONDUCTED AFTER THE EXPIRY OF THE DUE DATE FOR FILING RETURN, PAYMENT OF ADVANCE TAX IS IRRELEVANT IN CONSTRUING THE INTENTION OF THE ASSESSEE TO DISCLOSE INCOME. IF, O N THE OTHER HAND, THE SEARCH IS CONDUCTED PRIOR TO THE DUE DATE FOR F ILING RETURN, THE OPPORTUNITY TO DISCLOSE INCOME OR, IN OTHER WORDS, TO FILE A RETURN AND DISCLOSE INCOME, STILL PERSISTS, IN WHICH CASE, PAYMENT OF ADVANCE TAX MAY BE A MATERIAL FACT FOR CONSTRUING W HETHER AN ASSESSEE INTENDED TO DISCLOSE. PAYMENT OF ADVANCE T AX MAY BE A ITA NO. 464/ALLD./2005 10 RELEVANT FACTOR IN CONSTRUING INTENTION TO DISCLOSE INCOME OR FILING A RETURN AS LONG AS THE ASSESSEE CONTINUES TO HAVE TH E OPPORTUNITY TO FILE A RETURN AND DISCLOSE HIS INCOME AND NOT PAST THE DUE DATE FOR FILING THE RETURN. THEREFORE, THE SIGNIFICANCE OF P AYMENT OF ADVANCE TAX IN CONSTRUING INTENTION OF DISCLOSURE OF INCOME DEPENDS ON THE FACTS OF THE CASE AND HINGES ON THE POSITIONING OF THE SEARCH OPERATIONS QUA THE DUE DATE OF FILING RETURNS. PAYMENT OF ADVANCE TAX BY AN ASSESSEE PER SE IS NO T TANTAMOUNT TO DISCLOSURE OF TOTAL INCOME, FOR THE R ELEVANT ASSESSMENT YEAR. PAYMENT OF ADVANCE TAX DOES NOT ABSOLVE AN ASSESSE E OF THE OBLIGATION TO FILE A RETURN DISCLOSING HIS TOTAL IN COME FOR THE RELEVANT ASSESSMENT YEAR. IN SHORT THE DISCLOSURE O F TOTAL INCOME BY THE FILING OF A RETURN UNDER SECTION 139 OF THE ACT IS MANDATORY EVEN AFTER THE PAYMENT OF ADVANCE TAX BY AN ASSESSEE, SI NCE THE CURRENT INCOME WHICH FORMS THE BASIS OF THE ADVANCE TAX IS A MERE ESTIMATION AND NOT THE FINAL TOTAL INCOME FOR THE R ELEVANT ASSESSMENT YEAR LIABLE TO BE ASSESSED. THE PAYMENT OF ADVANCE TAX IS BASED ON AN ESTIMATION OF THE TOTAL INCOME THAT IS CHARGEABLE TO TAX AND NOT ON THE TOTAL INCOME ITSELF WHEREAS THE COMPUTATION OF 'UNDISCLOSED INCOME' FOR THE PURPOSES OF CHAPTER XI V-B HAS TO BE CONSTRUED IN TERMS OF THE 'TOTAL INCOME' RECEIVED, ACCRUED, ARISEN; OR WHICH IS DEEMED TO HAVE BEEN RECEIVED, ACCRUED O R ARISEN IN THE PREVIOUS YEAR, AND IS COMPUTED ACCORDING TO THE PRO VISIONS OF THE ACT. THE DISCLOSURE OF THE INCOME IS THE DISCLOSURE OF THE TOTAL INCOME IN A VALID RETURN UNDER SECTION 139, SUBJECT TO ASSESSMENT AND CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE A CT. THE TOTAL INCOME IS DISTINCT FROM THE ESTIMATED INCOME, UPON THE BASIS OF WHICH ADVANCE TAX IS PAID BY AN ASSESSEE. THE FACT THAT THE 'CURRENT INCOME' IS AN ESTIMATION IMPLIES THAT IT IS NOT FINAL AND IS SUBJECT TO FURTHER ADJU STMENTS IN THE FORM OF ADDITIONS OR REDUCTIONS, AS THE CASE MAY BE, AND WOULD HAVE TO BE SUCCEEDED BY THE DISCLOSURE OF FINAL AND TOTAL I NCOME IN A VALID RETURN. IT WILL BE A MISCONSTRUCTION OF THE LAW TO CONSTRUE THE UNDISCLOSED INCOME FOR PURPOSES OF CHAPTER XIV-B AS AN ESTIMATE OF THE TOTAL INCOME, WHICH IS ASSESSABLE AND CHARGE ABLE TO TAX. THEREFORE, PAYMENT OF ADVANCE TAX BASED ON 'CURRENT INCOME' DOES ITA NO. 464/ALLD./2005 11 NOT INVOLVE THE DISCLOSURE OF 'TOTAL INCOME', AS DE FINED IN SECTION 2(45) OF THE ACT, WHICH HAS TO BE STATED IN THE RET URN OF INCOME. AN ESTIMATE ALWAYS HAS AN ELEMENT OF GUESSWORK. THE RE COULD BE VARIOUS REASONS DUE TO WHICH AN ESTIMATE MAY BE FAU LTY AND INACCURATE WHICH IS WHY, THERE IS A PROVISION FOR P AYMENT OF INTEREST ON DEFICIENT OR EXCESS PAYMENT OF ADVANCE TAX WHEN THERE IS VARIATION BETWEEN ADVANCE TAX PAID AND ACTUAL LIABI LITY TO TAX. WHEN SECTION 158BB(3) IS READ WITH SECTION 158B(B), WHICH DEFINES UNDISCLOSED INCOME, FOR INCOME TO BE CONSID ERED AS DISCLOSED INCOME, IT SHOULD HAVE BEEN DISCLOSED IN THE RETURN FILED BY THE ASSESSEE BEFORE THE SEARCH OR REQUISITION. ON FAILURE TO FILE RETURN OF INCOME BY THE DUE DATE UNDER SECTION 139 OF THE ACT, PAYMENT OF ADVANCE TAX PER SE CANNOT INDICATE THE I NTENTION OF AN ASSESSEE TO DISCLOSE HIS INCOME. SINCE THE TAX TO BE DEDUCTED AT SOURCE IS ALSO COMPUTED ON THE ESTIMATED INCOME OF AN ASSESSEE FOR THE RELEVANT FINANCIAL YEAR, SUCH DEDUCTION CANNOT RESULT IN THE DISCLOSURE OF THE TOTAL INCOME FOR THE RELEVANT ASS ESSMENT YEAR. SUBJECT TO THE MONETARY LIMIT OF THE TOTAL INCOME, EVERY PERSON IS OBLIGATED TO FILE HIS RETURN OF INCOME EVEN AFTER T AX IS DEDUCT3ED AT SOURCE. HENCE, MERE DEDUCTION OF TAX AT SOURCE, AL SO, DOES NOT AMOUNT TO DISCLOSURE OF INCOME NOR DOES IT INDICATE THE INTENTION TO DISCLOSE INCOME MOST DEFINITELY WHEN THE SAME IS NO T DISCLOSED IN THE RETURNS FILED FOR THE CONCERNED ASSESSMENT YEAR . HELD ACCORDINGLY, THAT AFTER THE SEARCH WAS CONDUCTED ON FEBRUARY 23, 1996, IT WAS FOUND THAT FOR THE ASSESS MENT YEAR 1995- 96, THE ASSESSEE HAD NOT FILED ITS RETURN OF INCOME BY THE DUE DATE. IT WAS ONLY WHEN BLOCK ASSESSMENT PROCEEDINGS WERE INI TIATED BY THE ASSESSING OFFICER, THAT THE ASSESSEE FILED ITS RETU RN FOR THAT ASSESSMENT YEAR ON JULY 11, 1996, UNDER SECTION 158 BC OF THE ACT, SHOWING ITS TOTAL INCOME. SINCE THE ASSESSEE HAD NO T FILED ITS RETURN OF INCOME BY THE DUE DATE, THE ASSESSING OFFICER WA S CORRECT IN ASSUMING THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED ITS TOTAL INCOME. 6.2 THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SU BMITTED THAT THE ASSESSEE HAS INTENTION TO DISCLOSE INCOME FOR THE ASSESSMENT YEA R 2002-03 ON THE BASIS OF ITA NO. 464/ALLD./2005 12 REGULAR BOOKS OF ACCOUNT SO MAINTAINED AND THERE IS ONLY VAGUE ALLEGATION MADE FOR NON-EXAMINATION OF CPU IN THE PROPOSED ORDER IN WHICH ALL THE SEIZED MATERIAL WERE EXAMINED INCLUDING THE ASSESSMENT YEA R UNDER APPEAL. HE HAS, THEREFORE, SUBMITTED THAT THE IMPUGNED ORDER MAY BE SET ASIDE. 7. ON THE OTHER HAND, THE LD. DR RELIED UPON THE IM PUGNED ORDER OF THE LD. CIT AND SUBMITTED THAT THE CASE OF THE ASSESSEE FAL LS IN PROVISIONS OF SECTION 158BB(1)(CA), WHICH IS ACCORDING TO THE AMENDMENT B Y FINANCE ACT, 2002 WHEREIN SUCH INCOME IS TO BE INCLUDED IN THE BLOCK ASSESSMENT ORDER. HE HAS SUBMITTED THAT HONBLE HIGH COURT HAS GIVEN FINDING THAT THE RETURN U/S. 139(1) IS NON-EST, THEREFORE, NO FURTHER ADJUDICATION IS R EQUIRED IN THE MATTER. HE HAS SUBMITTED THAT THE SETTLEMENT COMMISSION APPLICATIO N HAS ALSO BEEN REJECTED AS FILED BY THE ASSESSEE. THE ADVANCE TAX COULD BE DEP OSITED FOR ASSESSMENT YEAR 2002-03 LATEST BY 15.03.2002.THEREFORE, AT THE MOST THE ASSESSEE COULD GET BENEFIT OF PAYMENT OF ADVANCE TAX OF RS.5,71,000/- PAID ON 14.03.2002. HE HAS SUBMITTED THAT LETTERS WRITTEN BY THE ASSESSEE FOR ADJUSTMENT OF THE TAX COULD NOT BE CONSTRUED PAYMENT OF ADVANCE TAX AT LATER STAGE BECAUSE ADVANCE TAX COULD BE PAID UP TO 15.03.2002 ONLY. THEREFORE, THE ADJUSTME NT OF TAX IN THE CASE OF ASSESSEE IS NOT PERMISSIBLE OUT OF THE SEIZED CASH ETC. HE HAS SUBMITTED THAT WHEN THE ASSESSEE MOVED ON 01.10.2002 SEEKING COPIE S OF THE SEIZED MATERIAL, ITA NO. 464/ALLD./2005 13 THE AUTHORIZED OFFICER WAS HAVING TIME TO EXAMINE T HE SEIZED DOCUMENTS. HE HAS SUBMITTED THAT EVEN IF THE PROVISIONS OF SECTION 15 8BA(3) MAY BE APPLIED IN THE CASE OF ASSESSEE, BUT SATISFACTION OF THE AO WAS NO T RECORDED ANYWHERE. HE HAS, THEREFORE, SUBMITTED THAT THE LD.CIT WAS JUSTIFIED IN CANCELLING THE ORDER U/S. 263 OF THE IT ACT. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. SECTION 158BB OF THE IT ACT PROVIDES AS UND ER : COMPUTATION OF UNDISCLOSED INCOME OF THE BLOCK PER IOD. 158BB. (1) THE UNDISCLOSED INCOME OF THE BLOCK PERIOD SHAL L BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD COMPUTED, [IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESUL T OF SEARCH OR REQUISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER 81 AND RELATABLE TO SUCH EVIDENCE], AS REDUCED BY THE AGGREGATE OF THE TOTAL INCOME, OR AS THE CASE MAY B E, AS INCREASED BY THE AGGREGATE OF THE LOSSES OF SUCH PREVIOUS YEA RS, DETERMINED, (A) WHERE ASSESSMENTS UNDER SECTION 143 OR SECTION 144 OR SECTION 147 HAVE BEEN CONCLUDED 82 [PRIOR TO THE DATE OF COMMENCEMENT OF THE SEARCH OR THE DATE OF REQUISITION], ON THE BASI S OF SUCH ASSESSMENTS; (B) WHERE RETURNS OF INCOME HAVE BEEN FILED UNDER SECTION 139 83 [OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148] BUT ASSESSMENTS HAVE NOT BEEN M ADE TILL THE DATE OF SEARCH OR REQUISITION, ON THE BASIS OF THE INCOME DISCLOSED IN SUCH RETURNS; ITA NO. 464/ALLD./2005 14 (C) WHERE THE DUE DATE FOR FILING A RETURN OF INC OME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, (A) ON THE BASIS OF ENTRIES AS RECORDED IN THE BOO KS 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 81 OF LOSS FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK PERIOD; OR (B) ON THE BASIS OF ENTRIES AS RECORDED IN THE BOO KS 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 CHARG EABLE TO TAX FOR ANY PREVIOUS YEAR FALLING IN THE BLOCK P ERIOD; (CA) WHERE THE DUE DATE FOR FILING A RETURN OF INC OME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED, AS NIL, IN CASE S NOT FALLING UNDER CLAUSE (C); (D) WHERE THE PREVIOUS YEAR HAS NOT ENDED OR THE D ATE OF FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 HAS NOT EXPIRED, ON THE BASIS OF ENTRIES RELATING TO SUCH I NCOME OR TRANSACTIONS AS RECORDED IN THE BOOKS OF ACCOUNT AN D OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE ON OR BEF ORE THE DATE OF THE SEARCH OR REQUISITION RELATING TO SUCH PREVI OUS YEARS; (E) WHERE ANY ORDER OF SETTLEMENT HAS BEEN MADE UN DER SUB-SECTION (4) OF SECTION 245D, ON THE BASIS OF SUCH ORDER; (F) WHERE AN ASSESSMENT OF UNDISCLOSED INCOME HAD BEEN MADE EARLIER UNDER CLAUSE (C) OF SECTION 158BC, ON THE BASIS OF SUCH ASSESSMENT. EXPLANATION.FOR THE PURPOSES OF DETERMINATION OF U NDISCLOSED INCOME, (A) THE TOTAL INCOME OR LOSS OF EACH PREVIOUS YEAR SHALL, FOR THE PURPOSE OF AGGREGATION, BE TAKEN AS THE TOTAL INCOM E OR LOSS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF 85 [THIS ACT] WITHOUT GIVING EFFECT TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORBED DEPRECIATION UNDER SUB-SECTION (2) OF SECTION 32: ITA NO. 464/ALLD./2005 15 PROVIDED THAT IN COMPUTING DEDUCTIONS UNDER CHAPTER VI-A FOR THE PURPOSES OF THE SAID AGGREGATION, EFFECT SHALL BE G IVEN TO SET OFF OF BROUGHT FORWARD LOSSES UNDER CHAPTER VI OR UNABSORB ED DEPRECIATION UNDER SUB-SECTION (2) OF SECTION 32; (B) OF A FIRM, RETURNED INCOME AND TOTAL INCOME A SSESSED FOR EACH OF THE PREVIOUS YEARS FALLING WITHIN THE BLOCK PERIOD SHAL L BE THE INCOME DETERMINED BEFORE ALLOWING DEDUCTION OF SALARY, INT EREST, COMMISSION, BONUS OR REMUNERATION BY WHATEVER NAME CALLED 88 [TO ANY PARTNER NOT BEING A WORKING PARTNER : PROVIDED THAT UNDISCLOSED INCOME OF THE FIRM SO DETERMINED S HALL NOT BE CHARGEABLE TO TAX IN THE HANDS OF THE PARTNE RS, WHETHER ON ALLOCATION OR ON ACCOUNT OF ENHANCEMENT;] (C) ASSESSMENT UNDER SECTION 143 INCLUDES DETERMIN ATION OF INCOME UNDER SUB-SECTION (1) OR SUB-SECTION (1B) OF SECTIO N 143. (2) IN COMPUTING THE UNDISCLOSED INCOME OF THE BLOC K PERIOD, THE PROVISIONS OF SECTIONS 68, 69, 69A, 69B AND 69C SHA LL, SO FAR AS MAY BE, APPLY AND REFERENCES TO 'FINANCIAL YEAR' IN THOSE SECTIONS SHALL BE CONSTRUED AS REFERENCES TO THE RELEVANT PR EVIOUS YEAR FALLING IN THE BLOCK PERIOD INCLUDING THE PREVIOUS YEAR ENDING WITH THE DATE OF SEARCH OR OF THE REQUISITION. (3) THE BURDEN OF PROVING TO THE SATISFACTION OF TH E ASSESSING OFFICER THAT ANY UNDISCLOSED INCOME HAD ALREADY BEE N DISCLOSED IN ANY RETURN OF INCOME FILED BY THE ASSESSEE BEFORE T HE COMMENCEMENT OF SEARCH OR OF THE REQUISITION, AS TH E CASE MAY BE, SHALL BE ON THE ASSESSEE. (4) FOR THE PURPOSE OF ASSESSMENT UNDER THIS CHAPTE R, LOSSES BROUGHT FORWARD FROM THE PREVIOUS YEAR UNDER CHAPTE R VI OR UNABSORBED DEPRECIATION UNDER SUB-SECTION (2) OF SE CTION 32 SHALL NOT BE SET OFF AGAINST THE UNDISCLOSED INCOME DETER MINED IN THE BLOCK ASSESSMENT UNDER THIS CHAPTER, BUT MAY BE CAR RIED FORWARD FOR BEING SET OFF IN THE REGULAR ASSESSMENTS. 8.1 SECTION 158BA(3) OF THE IT ACT PROVIDES AS UNDE R : ITA NO. 464/ALLD./2005 16 WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF T HE ASSESSING OFFICER THAT ANY PART OF INCOME REFERRED TO IN SUB- SECTION (1) RELATES TO AN ASSESSMENT YEAR FOR WHICH THE PREVIOUS YEAR H AS NOT ENDED OR THE DATE OF FILING THE RETURN OF INCOME UNDER SUB-S ECTION (1) OF SECTION 139 FOR ANY PREVIOUS YEAR HAS NOT EXPIRE D, AND SUCH INCOME OR THE TRANSACTIONS RELATING TO SUCH INCOME ARE RECORDED ON OR BEFORE THE DATE OF THE SEARCH OR REQUISITION IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEARS, THE SAID INCOME SH ALL NOT BE INCLUDED IN THE BLOCK PERIOD. 8.2 THE PROVISIONS OF SECTION 158BB PROVIDES FOR COMPUT ATION OF UNDISCLOSED INCOME OF BLOCK PERIOD. THE DEFINITION OF UNDISCLOS ED INCOME IS PROVIDED IN SECTION 158B(B) OF THE ACT. FOR THE PURPOSE OF COMP UTATION OF UNDISCLOSED INCOME, THE AO SHOULD AGGREGATE THE TOTAL INCOME OF THE PREVIOUS YEAR FALLING WITHIN THE BLOCK PERIOD ON THE BASIS OF EVIDENCE FO UND AS A RESULT OF SEARCH OR OTHER DOCUMENTS AND SUCH OTHER MATERIAL OR INFORMAT ION RELATABLE TO SUCH EVIDENCE AND THEREAFTER REDUCE THERE FROM INCOME N IL AS DUE DATE FOR FILING THE RETURN OF INCOME HAS EXPIRED, BUT NO RETURN OF INCOME HAS BEEN FILED. THE LD. CIT HAS NOT MENTIONED THAT THE BLOCK INCOME COMPUTE D BY THE AO DOES NOT INCLUDE THE INCOME FOR THE PREVIOUS YEAR 2001-02. T HE DIFFERENCE BETWEEN CLAUSE (C) AND CLAUSE (CA) OF SECTION 158BB (1) IS THAT WH ERE THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT IN NORMAL COURSE OF BUSINE SS, THEN INCOME COMPUTED IN ACCORDANCE WITH ENTRIES IN THE BOOKS OF ACCOUNT SHA LL NOT FORM PART OF UNDISCLOSED INCOME WHEREAS SUB-CLAUSE (CA) REFERS T O A SITUATION WHERE THE CASE ITA NO. 464/ALLD./2005 17 DOES NOT FALL IN CLAUSE (C). THEREFORE, UNDER CLAUS E (CA), ONLY THOSE CASES MAY COME WHERE THE ASSESSEE DOES NOT MAINTAIN REGULAR B OOKS OF ACCOUNT FOR A RELEVANT PREVIOUS YEAR. THE ASSESSEE CONTENDED BEFO RE THE AUTHORITIES BELOW THAT HE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AND SINC E THE DOCUMENTS AND BOOKS WERE SEIZED DURING THE COURSE OF SEARCH AND ASKED F OR THE COPIES FOR FILING OF THE RETURN OF INCOME WOULD PROVE THAT THE ASSESSEE MAIN TAINED REGULAR BOOKS OF ACCOUNT AT THE TIME OF SEARCH. 8.3 IT IS ADMITTED FACT THAT WHEN THE SEARCH WAS CO NDUCTED ON 04.09.2002, THE RETURN FOR THE ASSESSMENT YEAR 2002-03 WAS NOT DUE ON THE DATE OF THE SEARCH AND DUE DATE OF FILING OF THE RETURN U/S. 139(1) FOR TH E ASSESSMENT YEAR 2002-03 WAS 31.10.2002 AND THE SAID PERIOD HAD NOT EXPIRED ON T HE DATE OF SEARCH. IT IS ALSO UNDISPUTED FACT THAT THE ASSESSEE APPLIED FOR COPIE S OF SEIZED BOOKS OF ACCOUNT AND OTHER DOCUMENTS TO THE REVENUE AUTHORITIES AFTE R SEARCH AND AFTER PREPARATION OF PANCHNAMAS ETC., THE COPIES OF THE S EIZED DOCUMENTS WERE SUPPLIED TO THE ASSESSEE ON 05.07.2004. THOUGH THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2002-03 ON 01.09.2004 WAS NON-EST U /S. 139(1) AS WAS ALSO HELD BY HONBLE HIGH COURT BUT THE FACT REMAINS THAT THE DELAY IN FILING SUCH NON-EST RETURN WAS NOT SOLELY ATTRIBUTABLE TO THE ASSESSEE. ANY HOW SUCH REASON MAY NOT BE RELEVANT U/S. 139(1). SINCE IT WAS ALREADY HELD BY HONBLE HIGH COURT THAT THE RETURN FOR THE ASSESSMENT YEAR 2002-03 WAS NON-EST, THEREFORE, NO FURTHER FINDING ITA NO. 464/ALLD./2005 18 WOULD BE REQUIRED. IT IS ALSO ADMITTED FACT THAT TH E ASSESSEES APPLICATION BEFORE SETTLEMENT COMMISSION HAS ALREADY BEEN REJECTED. TH EREFORE, NO SUCH APPLICATION WAS PENDING AND FILING OF APPLICATION B EFORE SETTLEMENT COMMISSION WOULD HAVE NO BEARING ON THE ISSUE. THE CPU FOR F.Y . 2001-02 AS SEIZED WAS LATER ON EXAMINED AS PER PANCHNAMAS AND THE ASSESSE E ALSO FILED RETURN FOR THE ASSESSMENT YEAR 2002-03 LATER ON AND AMOUNT OF DISP UTE IS CERTAIN AT RS.53,27,810/-. THEREFORE, IT WOULD HAVE NO BEARING ON THE ISSUE U/S. 263 OF THE IT ACT. IT IS A FACT THAT WHEN THE AO FRAMED BLOCK ASSESSMENT ORDER ON 30.09.2004, THE RETURN FOR THE ASSESSMENT YEAR 2002 -03 WAS WITHIN THE KNOWLEDGE OF THE AO AS WAS FILED ON 01.09.2004. 8.4 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DISCUSSION, IT IS CLEAR THAT THE RETURN FOR THE ASSESSMENT YEAR 2002- 03 FILED ON 01.09.2004 DECLARING INCOME OF RS.53,27,812/- WAS NON-EST, BUT IT WAS REGULARIZED BY THE AO BY ISSUING NOTICE U/S. 148 OF THE IT ACT AND THE INCOME DECLARED THEREIN WAS ACCEPTED VIDE ASSESSMENT ORDER DATED 29.03.2006 U/S . 143(3)/148 AND INCOME DECLARED FOR ASSESSMENT YEAR 2002-03 WAS ACCEPTED A T RS.53,27,810/-. EQUALLY IT IS ALSO A FACT THAT THE ASSESSEE WHILE FILING THE N ON-EST RETURN ON 01.09.2004 DECLARING INCOME OF RS.53,27,810/- HAD DEPOSITED ON LY RS.5,71,000/- AS ADVANCE TAX ON 14.03.2002. ADMITTEDLY, NO OTHER ADVANCE TAX HAS BEEN PAID BY THE ASSESSEE. ACCORDING TO THE INCOME-TAX ACT, ADVANCE TAX COULD BE PAID LATEST BY ITA NO. 464/ALLD./2005 19 15.03.2002 FOR THE ASSESSMENT YEAR 2002-03. THEREFO RE, THE LETTERS WRITTEN BY THE ASSESSEE LATER ON FOR ADJUSTMENT OF TAX FROM THE SE IZED CASH ETC. COULD NOT BE CONSTRUED AS PAYMENT OF ADVANCE TAX FOR THE REMAINI NG AMOUNT OF RS.10,12,827/- .THE ASSESSEE IN THE COMPUTATION OF INCOME FILED WI TH THE RETURN OF INCOME (PB- 54) ALSO MADE THE SAME REQUEST THAT SINCE THE ASSES SEE IS NOT IN A POSITION TO LIQUIDATE THE PRESENT DEMAND OF TAX, THEREFORE, REQ UESTED THE DEPARTMENT FOR ADJUSTMENT OF THE CASH SEIZED BY THE DEPARTMENT FOR PAYMENT OF TAX. SUCH REQUEST WOULD ALSO NOT ABSOLVE THE ASSESSEE FROM MA KING PAYMENT OF ADVANCE TAX IN ACCORDANCE WITH THE IT ACT BEFORE EXPIRY ON 15.03.2002. HONBLE SUPREME COURT IN THE CASE OF ACIT VS. A.R. ENTERPRI SES (SUPRA) LAID DOWN TWO PROPOSITIONS AND FOR THE SAKE OF CLARITY, THE SAME IS REPRODUCED AS UNDER : IF THE SEARCH IS CONDUCTED AFTER THE EXPIRY OF THE DUE DATE FOR FILING RETURN, PAYMENT OF ADVANCE TAX IS IRRELEVANT IN CONSTRUING THE INTENTION OF THE ASSESSEE TO DISCLOSE INCOME. IF, O N THE OTHER HAND, THE SEARCH IS CONDUCTED PRIOR TO THE DUE DATE FOR F ILING RETURN, THE OPPORTUNITY TO DISCLOSE INCOME OR, IN OTHER WORDS, TO FILE A RETURN AND DISCLOSE INCOME, STILL PERSISTS, IN WHICH CASE, PAYMENT OF ADVANCE TAX MAY BE A MATERIAL FACT FOR CONSTRUING W HETHER AN ASSESSEE INTENDED TO DISCLOSE. PAYMENT OF ADVANCE T AX MAY BE A RELEVANT FACTOR IN CONSTRUING INTENTION TO DISCLOSE INCOME OR FILING A RETURN AS LONG AS THE ASSESSEE CONTINUES TO HAVE TH E OPPORTUNITY TO FILE A RETURN AND DISCLOSE HIS INCOME AND NOT PAST THE DUE DATE FOR FILING THE RETURN. THEREFORE, THE SIGNIFICANCE OF P AYMENT OF ADVANCE TAX IN CONSTRUING INTENTION OF DISCLOSURE OF INCOME DEPENDS ON THE FACTS OF THE CASE AND HINGES ON THE POSITIONING OF THE SEARCH OPERATIONS QUA THE DUE DATE OF FILING RETURNS. IT WAS ALSO HELD ITA NO. 464/ALLD./2005 20 THAT THE DISCLOSURE OF INCOME IS THE DISCLOSURE OF TOTAL INCOME IN VALID RETURN U/S. 139 SUBJECT TO ASSESSMENT AND CHA RGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT. 8.5. IN THE CASE OF ASSESSEE, THE SEARCH IS CONDUCT ED ON 04.09.2002, I.E., PRIOR TO THE DUE DATE FOR FILING RETURN U/S. 139(1) FOR T HE ASSESSMENT YEAR 2002-03, I.E., 31.10.2002. THEREFORE, THE ASSESSEE HAD OPPORTUNITY TO DISCLOSE INCOME OR TO FILE A RETURN OF INCOME AND IN SUCH CASE PAYMENT OF ADVA NCE TAX MAY BE A RELEVANT FACT FOR CONSTRUING WHETHER THE ASSESSEE INTENDS TO DISCLOSE SUCH INCOME. IN SUCH SITUATION, THE PAYMENT OF ADVANCE TAX MAY BE RELEVA NT FACTOR IN CONSTRUING THE INTENTION TO DISCLOSE INCOME OR FILING THE RETURN A S LONG AS THE ASSESSEE CONTINUES TO HAVE AN OPPORTUNITY TO FILE THE RETURN AND DISCL OSE HIS INCOME. HONBLE SUPREME COURT IN THE AFORESAID JUDGMENT ALSO EMPHAS IZED THAT WHETHER THE ASSESSEE WOULD OR WOULD NOT HAVE DISCLOSED INCOME, RELIANCE MUST BE PLACED ON THE SURROUNDING FACTS AND CIRCUMSTANCES OF THE CASE . CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE DECISION OF SUPREME COURT IN THE CASE OF AR ENTERPRISES (SUPRA), IT IS CLEAR THAT THE DUE DATE OF FILING OF THE RETURN U/S. 139(1) ON THE DATE OF SEARCH HAD NOT EXPIRED. THE SEARCH IS, THEREFORE , CONDUCTED PRIOR TO THE DUE DATE FOR FILING OF RETURN FOR THE ASSESSMENT YEAR 2 002-03. THE ASSESSEE PAID ADVANCE TAX OF RS.5,71,000/- ON 14.03.2002 AND AFTE R SEARCH, THE ASSESSEE WAS MAKING REQUEST FOR SUPPLY OF THE SEIZED DOCUMENTS I NCLUDING THE COPIES OF BOOKS OF ACCOUNT FOR THE PURPOSE OF FILING RETURN OF INCO ME FOR THE ASSESSMENT YEAR ITA NO. 464/ALLD./2005 21 2002-03.THEREFORE, THE SURROUNDING FACTS AND CIRCUM STANCES OF THE CASE CLEARLY PROVE THAT THE ASSESSEE HAD INTENTION TO DISCLOSE I NCOME TO THE EXTENT TO WHICH THE ASSESSEE PAID ADVANCE TAX OF RS.5,71,000/- ON 1 4.03.2002. FOR THE REST OF INCOME, NOTHING IS AVAILABLE ON RECORD TO PROVE THA T THE ASSESSEE HAD ANY INTENTION TO DISCLOSE THE INCOME FOR THE ASSESSMENT YEAR 2002-03 BECAUSE NO ADVANCE TAX FOR THE BALANCE AMOUNT HAD BEEN PAID BY THE ASSESSEE AND NO VALID RETURN U/S. 139(1) HAS BEEN FILED. THE BALANCE AMOU NT OF TAX OF RS.10,12,827/- REMAINED UNPAID EVEN AT THE TIME OF FILING OF NON-E ST RETURN ON 01.09.2004.THEREFORE, CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF A. R. ENTERPRISES (SUPRA), WE ARE OF THE VIEW THAT THE ASSESSEE COULD BE GIVEN BE NEFIT OF SUCH INCOME, TO BE CONSIDERED AS DISCLOSED INCOME, ON WHICH HE HAS PA ID THE ADVANCE TAX OF RS.5,71,000/- AND THE SAME COULD NOT BE CONSIDERED AS UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 158BB OF THE IT ACT. THE LD.CIT WAS, THEREFORE, NOT JUSTIFIED IN DIRECTING THE AO TO INCLUDE ENTIRE INCOME OF RS.53,27,810/- IN THE BLOCK ASSESSMENT ORDER. WE ACCORDINGLY SET ASID E THE ORDER OF THE LD. CIT U/S. 263 TO THE EXTENT THAT THE AO SHALL NOT CONSIDER SU CH INCOME AS UNDISCLOSED INCOME IN BLOCK PERIOD, ON WHICH THE ASSESSEE HAD P AID ADVANCE TAX OF RS.5,71,000/-.THE AO SHALL MAKE NECESSARY COMPUTATI ON/DETERMINATION OF SUCH DISCLOSED INCOME ON WHICH THE ADVANCE TAX IS PAID A FTER GIVING REASONABLE AND ITA NO. 464/ALLD./2005 22 SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE DISCLOSED INCOME IN PROPORTION TO WHICH ADVANCE TAX OF RS.5,71,000/- HA S BEEN PAID SHALL BE EXCLUDED FROM THE ADDITION TO BE MADE IN THE BLOCK ASSESSMENT ORDER AND WHATEVER UNDISCLOSED INCOME IS LEFT OR DETERMINED T HEREAFTER WILL BE ADDED IN THE BLOCK ASSESSMENT. THE AO, THEREAFTER SHALL MAKE NEC ESSARY AMENDMENT IN THE ORDER U/S. 143(3)/148 DATED 29.03.2006 AND SHALL RE DUCE THE UNDISCLOSED INCOME FROM THE COMPUTATION OF INCOME WHICH HAS BEEN ADDED IN THE BLOCK ASSESSMENT ORDER. THE IMPUGNED ORDER U/S. 263 TO THAT EXTENT I S MODIFIED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (B.C. MEENA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH AUGUST, 2014 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT BY ORDER 2. RESPONDENT 3. CIT(A), CONCERNED ASSTT. REGISTRAR 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE TRUE COPY