TMI Blog2012 (10) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant : Mr. Varun K Patel For Respondent : Mr Bandish Soparkar for Mr S N Soparkar JUDGEMENT Per : Akil Kureshi, J : 1. This appeal filed by the revenue involves the following substantial question of law which was framed by this court while admitting the appeal:- Whether the Appellate Tribunal was right in law in directing the Assessing Officer to exclude the income of Rs.12,21,105/- from the block period and assess it in accordance with law while framing the regular assessment, and in doing so, ignored the provisions of sec.158BB(c) of the Income-tax Act? 2. The question arises in the following factual background. The respondent assessee is assessed to tax as an individual. He was subjected to search and seizure operations. He was served with a notice dated 14-9-1996 issued under section 158BC of the Income Tax Act, 1961 (hereinafter to be referred to as 'the Act') for the block period from 1-4-1985 to 31-3-1995. In response to such notice he filed a return on 7- 11-1996 declaring total undisclosed income at Rs.50,000/-. While processing such return, the Assessing Officer dealt with several different issues. We are, however, concerned with only one of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was of the opinion that section 158BB of the Act prescribes the method of computing the undisclosed income of a block period, however, before making any such computation, the existence of undisclosed income must be shown. 6. It is this judgment of the Tribunal which the revenue has challenged before us in the present appeal. 7. Appearing for the appellant, learned counsel Shri Varun Patel placed heavy reliance on the statutory provisions contained in section 158BB and in particular, clause (c) of subsection (1) thereof. He contended that for the years during which the assessee filed no return, no adjustment of the salary income can be made from the total income of the block period for the computation of undisclosed income of the said period. He submitted that even in the later two years when the returns were filed, admittedly the same having been filed beyond the last date for filing such returns, income of salary disclosed in such return cannot be set off for computation of undisclosed income of block period. 8. Learned counsel Shri Bandish Soparkar, however, opposed the appeal. He submitted that undisputably on the salary income received by the assessee, the employer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax, at the rate specified in section 113, as income of the block period irrespective of the previous year or the years to which such income relates and irrespective of the fact whether regular assessment for any one or more of the relevant assessment years is pending or not. 11. Section 158BB of the Act pertains to computation of undisclosed income of the block period. Relevant portion of such provision as it stood at the relevant time reads as under:- 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 Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with Assessing Officer, 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,- (a) where assessments under section 143 or section 144 or section 147 have been concluded, on the basis of such assessments; (b) where returns of income have been filed under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income-Tax, Punjab reported in 48 ITR 1 , the Apex Court noted the distinction in approach of statutory interpretation of a taxing provision vis-a-vis a mechanism provision contained in a taxing statute. It was observed that the rule of strict construction applies only to a taxing provision and has no application to all provisions in a taxing statute. Such a principle would not apply to a provision not creating a charge over the tax but laying down the machinery for its calculation or procedure for its collection. It was observed that the provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction. 14. In case of Commissioner of Income-Tax, Central Calcutta vs. National Taj Traders reported in 121 ITR 535 , the Apex Court reiterated this principle that the rule of strict interpretation of a taxing statute does not apply to machinery provisions. 15. In case of Commissioner of Income-Tax vs. Punjab Financial Corporation reported in 254 ITR 6 , the Full Bench of Punjab Haryana High Court once again highlighted this aspect that a strict interpretation of taxing statute would apply to charging provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment, the same would have been duly reflected as income of the assessee. Thus, salary income in relation to which tax has been deducted at source cannot be said to be undisclosed income within the meaning of the said term as envisaged under section 158B(b) of the Act. 12. This view finds support from the decision of the Madhya Pradesh High Court in the case of Surendra Kumar Lahoti vs. Assistant Commissioner of Income Tax, 2005 (300) ITR 124 (M.P.) wherein the Court after considering the decisions of various High Courts has held that salary disclosed by the assessee on which tax at source was deducted could not have been treated as undisclosed income. The decision of the Rajasthan High Court in the case of Commissioner of Income Tax vs. Ashok Taksali, 2002 257 ITR 352 also takes the same view. It has been held that income from salary of the assessee for the block year, after tax deducted at source has been deducted and the same has not been refunded back to the assessee, has to be excluded while computing tax as there is not question of taxing the income when the income tax has been deducted at source. The other decisions on which reliance has been placed on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to be added by the revenue in the undisclosed income of the block period on the ground that the assessee had filed the return of income after the search was conducted. 20. In case of Surendra Kumar Lahoti vs. Assistant Commissioner of Income-Tax reported in 300 ITR 124 , the Madhya Pradesh High Court held that when a salaried employee suffers deduction of tax at source, he should be treated to have disclosed his income to the Department. Such income, therefore, cannot be treated as undisclosed income for the purpose of block assessment. The High Court observed as under:- 11. In view of the several clear enunciations we are clear in our mind that the salary income disclosed by the assessee on which tax at source was deducted could not have been treated as undisclosed income. We may also pronounce upon the fact in view of the clear enunciations of this court in Purshottamlal Tamrakar [2004] 270 ITR 314 that the income which is below the taxable limit cannot be taxed merely because the return has not been filed before the date of the search and seizure. 21. In case of Dr. Mrs. Alaka Goswami vs. Commissioner of Income-Tax reported in 268 ITR 178 , a Division Bench of Gauh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refunded back to the assessee, there is no question to tax that income again when tax deducted at source has already been deducted. The salary income has been excluded from computing the tax, there is no question of accommodation of tax deducted at source amount against any other income of the assessee received, or income other than salary income. 23. From the above, it can be seen that there is unanimity of opinion between different High Courts of the country on the issue. When an assessee is a salaried employee and on such salary income, suffers deduction of tax at source and such tax is also shown to have been deposited by the employer with the Revenue, it can hardly be stated that such income is undisclosed income. Additionally, we also notice that under section 192 of the Act, under certain circumstances, the employer is required to deduct tax at source on salary income. Section 199 of the Act provides for credit of such tax deducted at source. Section 205 of the Act provides for a bar against direct demand of tax where such tax is deductible at source. 24. Upon overall consideration of the statutory provisions noted hereinabove and the judicial trend brought to our not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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