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2014 (11) TMI 53 - ANDHRA PRADESH HIGH COURTTreatment of income recovered during search - Whether the amount, which is discovered during the search, has the effect of just reducing the losses for the block period or it can be treated as income separately for the block period – Held that:- In CIT v. Harprasad and Co. P. Ltd. [1975 (2) TMI 2 - SUPREME Court] - if an assessee has incurred losses, more than the income, in an assessment year, he does not incur any tax liability, and if the loss spills over the concerned AY, he shall be entitled to claim adjustment against profits, if any, in the subsequent assessment year and for that purpose, filing of a return, albeit showing loss; is necessary - the undisclosed income attributed to the assessee did not have the effect of wiping off the accumulated losses - whatever may be the character of the undisclosed income, vis-a-vis the "total income", it cannot be treated as "income" within the connotation of Chapter XIV-B of the Act - there was nothing to be brought under the tax regime of Chapter XIV-B of the Act. The immediate concern of the Revenue was that the result of a search and unearthing of undisclosed incomes was proving futile, if it was being pitted against the aggregate or accumulated losses, and thereby, a device to penalise such concealments was invented - where the undisclosed income has the effect of just reducing the loss, thereby, disabling the Revenue, to levy any tax, whatever - The anomaly and the remedy was found in a different form, namely, to levy "penalty", as distinguished from "tax at a higher rate", on the undisclosed income - the subject-matter is not levy of penalty u/s 271(1) of the Act – the order of the Tribunal cannot be upheld – Decided in favour of assessee. Adjustment against amount of undisclosed income - Whether he is entitled to seek adjustment against any amount of undisclosed income, noticed in the search when there is unabsorbed depreciation available to an assessee in the previous assessment years – Held that:- The irregularities committed by the assessee remain unpunished, if such a course is adopted - There is no substance in the submission - whenever an undisclosed income is noticed against an assessee, and if it is set at naught, through accumulated depreciation, the corresponding amount of depreciation would not be available to be utilized by the assessee at a future date - The assessee feels the brunt of his concealment, to that effect - the ITO or Tribunal, have just to implement, what Parliament has handed out to its citizens, and they can neither expand nor restrict the scope of the relevant provisions – Decided in favour of assessee.
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