THE COMMISSIONER OF INCOME TAX V. SHRI G P GOYAL

ITA/649/2008

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against Shri G. P. Goyal concerning the assessment of undisclosed income for the assessment years 1987-88 to 1997-98. The appeal challenged the Tribunal's decision which had partly allowed the assessee's appeal and granted him relief regarding certain investments and undisclosed income identified during a search. The primary legal contention revolved around whether the additions made to the assessee's income constituted undisclosed income as defined under the Income Tax Act, particularly focusing on the interpretation and application of Sections 158B and 158BB of the Act.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728979 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-08-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: B N JAYADEVA
• Assessee Lawyers: K V ARAVIND
• Keywords: Block assessment; Income Tax; Investment; Search and seizure; Undisclosed income
• Section: 158BB; 260-A; 158B; 158BA

Judgement Text

" IN THE HIGH COURT OF KARNATAKA AT BANGALORE Dated this the 19th day of August, 2014 PRESENT THE HON’BLE MR. JUSTICE N KUMAR AND THE HON’BLE MRS. JUSTICE RATHNAKALA ITA No.649 of 2008 BETWEEN: 1. The Commissioner of Income Tax Central Circle C.R. Building Queens Road Bangalore 2. The Assistant Commissioner of Income Tax Central Circle-II C.R. Building Queens Road Bangalore …Appellants (By Sri K. V. Aravind, Advocate) AND: Shri G. P. Goyal 6A & 6B, Sah Jeevan Apartment RMV Extension Bangalore …Respondent 2 (Sri B.N. Jayadeva, ADvocate) This ITA filed under Section 260-A of IT Act, 1961 arising out of order dated 13-12-2007 passed in IT(SS)A No.131/BNG/1997, for the Assessment year 1987-88 to 1997-98, praying to (i) formulate the substantial questions of law stated therein; (ii) allow the appeal and set aside the order passed by the ITAT Bangalore in IT(SS)A No.131/BNG/1997, dated 13-12-2007 confirm the order of the Appellate Commissioner confirming the order passed by the Assistant Commissioner of Income Tax, Central Circle-II, Bangalore. This ITA coming on for hearing this day, N. KUMAR J delivered the following: J U D G M E N T The revenue has preferred this appeal challenging the order passed by the Tribunal partly allowing the appeal of the assessee and granting relief to him. 2. The subject matter of this appeal is as under:- (i) Investments made by certain share holders in M/s Bellaire Apartments Limited; (ii) Investments made in M/s Syndicate Road Carriers; 3 (iii) Investments made in M/s Bullion Investments and Financial Services; and (iv) Cost of construction which was discovered during the course of search. 3. The Tribunal has held that, in all these cases the undisclosed income is not detected as a result of search. The block assessment proceedings require the income to be computed based on the evidence gathered as a result of search. It is not permissible to make an addition without reference to any material gathered at the time of search and, therefore, the Tribunal interfered with the order passed by the lower authorities and granted relief to the assessee. 4. Therefore, the two substantial questions which arise for our consideration in this appeal are as under:- 1. Whether the Tribunal was correct in holding that the additions on account of unexplained investment in shares, bullion etc., do not constitute undisclosed income 4 when these transactions were not recorded in the books of accounts of the assessee and the same was not liable to be brought to tax in accordance with Section 158BB of the Act? 2. Whether the Tribunal was correct in holding that the department had already knowledge of the denial of investment made by certain share holder in the case of M/s. Bellaire Apartment Ltd., and therefore the detention cannot be undisclosed income and consequently addition of Rs.11,05,000/- was deleted? 5. The ‘undisclosed income’ is defined under Section 158B (b) of the Income Tax Act, 1961 (hereinafter for short referred to as ‘the Act’) as under:- “158B. Definitions. (a) xxx xxxx (b) “undisclosed income” includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of 5 account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, deduction or allowance claimed under this Act which is found to be false.” 6. However, the computation of undisclosed income of the block period is to be done under Section 158BB. Sub- section (1) reads as under:- “Computation of undisclosed income of the block period. 158BB. (1) The undisclosed income of the block period shall 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 result of search or requisition of books of account or other documents and such other materials or information as are available with the 6 Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,—” xxx xxx xxx 7. A reading of the aforesaid Section makes it clear that the undisclosed income of the block period shall be the undisclosed income as defined under Section 158BA, BB and other documents and such other materials or information as are available with the assessing officer and relatable to such evidence. Taking into consideration both these, the computation of undisclosed income of the block period is to be determined. The Tribunal has not looked into Section 158 BB (1) of the Act in coming to its conclusion. Therefore, the impugned order in so far as the aforesaid four items are concerned, are set aside and the matter is remitted to the Tribunal for consideration in respect of the investments made in those four items taking into consideration the aforesaid provision of law. The Tribunal shall give such 7 opportunity as sought for by the assessee including the cross-examination of the persons on whose evidence the assessing authority has passed the order. Sd/- JUDGE Sd/- JUDGE ckl/- "