2014 (2) TMI 1159 - AT - Income Tax

Assessment u/s 158BD - whether belated initiation and completion of assessment was liable to be quashed? - Held that - Dispute is about the fabrication charges not offered to tax amounting to Rs. 4, 35, 300/-. A period of six years from the end of the relevant assessment year ends on 31.3.2003. As against that the notice u/s 158BD was issued on 1.9.2002. It shows that the date of such notice is well within the period of six years as prescribed u/s 149. In such a situation it cannot be held that the initiation of proceedings u/s 158BD was time barred. - Decided against assessee. No satisfaction was recorded - Held that - We are confronted with a situation in which Shri Ashish Soni availed the services from the assessee for which a consideration of Rs. 4, 35, 300/- was agreed upon. The said sum was not included by him in his expenditure for which the Assessing Officer made addition u/s 69C as Unexplained expenditure . Such expenditure of Shri Ashish Soni was the income of the assessee who failed to reflect this amount in her return. It shows that the income arising from being ledger of M/s Apoorve Apparels is the income of the assessee and expenditure of M/s Aproove Apparels. Since such expenditure was not recorded by Shri Ashish Soni in his books of account it was to be considered as unexplained expenditure u/s 69C and simultaneously it was to be considered as the income of the assessee as it constituted a receipt in her hands. Thus there is no question of recording satisfaction by the A.O of Shri Ashish Soni is relatable to the assessee in question alone and not Shri Ashish Soni. - Decided against assessee. Unexplained expenditure - Held that - Once the Tribunal has held that Shri Ashish Soni incurred expenditure of Rs. 4, 35, 300/- and showed only a sum of Rs. 55, 300/- in books the natural corollary which follows is that the equal amount will have to be considered as receipt in the hands of the assessee. As only a sum of Rs. 55, 300/- was recorded against the entry of Rs. 4, 35, 300/- there was unexplained expenditure in the hands of Shri Ashish Soni and undisclosed income in the hands of the assessee to the tune of Rs. 3, 80, 000/-. We therefore hold that addition to the tune of Rs. 3, 80, 000/- requires confirmation. Contention of the ld. AR that the entire amount of Rs. 4, 35, 300/- cannot be included in the assessee s total income and only profit margin therefrom should be added is again devoid of any force. No material has been placed on record to demonstrate that the assessee did not account for certain expenditure in her books account for which she rendered job services to M/s Soni & Associates for a sum of Rs. 4, 35, 300/-. In such a case it is gross receipt and not the profit element therein which escaped taxation and is hence liable to tax. The impugned order is accordingly modified and the addition is sustained at Rs. 3, 80, 000/-. - Decided partly in favour of assessee.

Summary

Issues:
1. Time limit for completion of block assessment u/s 158BD
2. Jurisdiction of Assessing Officer to frame block assessment
3. Taxability of undisclosed income in the hands of the assessee
4. Recording of satisfaction by the Assessing Officer
5. Deletion of addition in the hands of another individual
6. Inclusion of entire amount in assessee's total income

Analysis:

1. Time Limit for Completion of Block Assessment u/s 158BD:
The appeal challenged the initiation of assessment u/s 158BD as time-barred. The Tribunal clarified that the notice issued on 1.9.2002 and completion of assessment on 28.9.2004 fell within the two-year period from the notice date, as required by sec. 158BE(2)(b). The Tribunal cited a precedent to support the interpretation of time limits for such assessments.

2. Jurisdiction of Assessing Officer to Frame Block Assessment:
The appellant contested the Assessing Officer's jurisdiction to frame the block assessment. The Tribunal noted that there was no prescribed time limit for initiating block assessments u/s 158BD. Referring to a relevant case law, the Tribunal emphasized the importance of time limits in legal actions and concluded that the initiation of proceedings was not time-barred.

3. Taxability of Undisclosed Income in the Hands of the Assessee:
The case involved undisclosed income related to fabrication charges. The Tribunal rejected the argument that the Assessing Officer did not make a specific mention of taxability in the assessee's case. It was established that the undisclosed income was the assessee's receipt and unexplained expenditure of another individual, justifying its inclusion in the assessee's total income.

4. Recording of Satisfaction by the Assessing Officer:
The contention that the Assessing Officer did not record satisfaction regarding taxability was dismissed. The Tribunal differentiated this case from others where specific requirements existed. In this scenario, the unexplained expenditure of one individual was deemed the income of the assessee, warranting its inclusion.

5. Deletion of Addition in the Hands of Another Individual:
The appellant argued for relief based on the deletion of the addition in the other individual's case. The Tribunal reviewed the Tribunal order related to the other individual and concluded that the undisclosed income should be added to the assessee's total income due to the unexplained expenditure incurred.

6. Inclusion of Entire Amount in Assessee's Total Income:
The contention that only profit margin should be added was rejected. The Tribunal upheld the inclusion of the entire amount of unexplained expenditure in the assessee's total income, emphasizing that the gross receipt, not just the profit element, was liable for taxation.

In conclusion, the appeal was partly allowed, and the addition to the assessee's total income was sustained at the specified amount, based on the detailed analysis and interpretation of relevant legal provisions and precedents.