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THE COMMISSIONER OF INCOME TAX AND THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2 (3) , BANGALORE Versus M/s HM EXPORTS GENEVA HOUSE

2015 (8) TMI 991 - KARNATAKA HIGH COURT

Income earned from export of exhibition rights of cinematographic films - whether would not constitute undisclosed income as per Section 158B(b) as the said amount has been declared in the regular return of income for the assessment year 1994-95 filed belatedly as held by ITAT - Held that:- In the present case, the disclosure by the assessee had been made to the Department by way of a disclosure under the Scheme (VDIS) of the respondent as well as by its communication dated 20.08.1998 and also t .....

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tion of such income already given by the assessee to the Department much prior to conduct of the search, as is so in the present case, the same cannot be termed as undisclosed income. It is not disputed by either of the parties that search was conducted by the Department on 29.05.2001, whereas disclosure by way of information or by way of filing of the return of income (both on 20.08.1998) was already there with the Department, which was given by the assessee nearly three years prior to the sear .....

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-2015 - Vineet Saran and B Manohar, JJ For The Appellant : Sri K V Aravind, Adv. and Sir G Kamaladhar, Adv. For The Respondent : Smt Jinita Chatterjee, Adv., for Sri S Parthasarthy JUDGEMENT Per: Vineet Saran: This appeal has been filed by the Revenue challenging the order of the Tribunal dated 30.04.2008 whereby the appeal of the assessee has been allowed. 2. The brief facts of this case are that for the assessment year 1994-95 the appellant had an income of ₹ 88,00,505/- from the export .....

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med that the same would be exempted under Section 80HHC of the Income Tax Act, 1961 (for short 'the Act') claiming that the said income was derived from export of the films and the revenue earned was in foreign currency which had been received by the assessee within six months of such export. 3. By communication dated 07.08.1998, the Department made some queries with regard to the claim of the assessee for exemption of the aforesaid amount from payment of income tax under Section 80HHC, .....

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ated against the petitioner, which was with regard to undisclosed income of same ₹ 88,00,505/- on the ground that it was not disclosed by the assessee. A notice in this regard was issued to the assessee on 06.02.2003, in response to which the assessee filed its return of income on 17.03.2003 for the block period from 01.04.1991 to 29.05.2001 declaring its undisclosed income as "NIL". The Assessing Officer, vide its order dated 25.02.2005, treated the income of ₹ 88,00,505/- .....

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the Revenue and has been ADMITTED on the following substantial question of law: "Whether the Tribunal was correct in holding that a sum of ₹ 88,00,505/- claimed by the assessee as earned from export of exhibition rights of cinematographic films would not constitute undisclosed income as per Section 158B(b) of the Act as the said amount has been declared in the regular return of income for the assessment year 1994-95 filed belatedly without noticing that the return is treated as non-e .....

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the one filed by the asseessee on 20.08.1998, would be an invalid return and would thus be non-est in the eye of law. It has been contended that an Assessing Officer cannot take cognizance of a belated or invalid return, and thus any disclosure made in such invalid return would not constitute a valid disclosure of income for the purpose of Chapter XIV-B relating to Special Procedure for Assessment of Search cases. It has thus been contended that the order of the Tribunal be set aside and that o .....

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the intention of the assessee would be clear that he did not want to conceal the said income from the Department and had disclosed (may be at a later stage) the true position as it stood. It is contended that even if the said return of income is to be treated as an invalid return under Section 139 of the Act, then too information supplied under the said return would be a disclosure of his income by the assessee which could have been used by the Department for initiating proceedings under Sectio .....

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ars before the search was conducted. 7. In support of their respective submission, learned counsel for the parties have relied on certain case laws which shall be considered and dealt with while dealing with their submissions. 8. Chapter XIV-B deals with Special Procedure for Assessment of Search Cases. Section 158B gives the definitions of certain terms for the purpose of the said chapter. Sub-section(b) of the said Section defines "undisclosed income" which is as under: "158B(b) .....

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d under this Act which is found to be false. The said definition may be simply read as to mean that an "undisclosed income" would include any money, bullion, jewellery or other valuable article or thing or any income which has not been or would not have been disclosed for the purposes of the Act. Meaning thereby, if the search is conducted after the filing of return, what has to be considered is such income 'which has not been' disclosed; and if the search is conducted before t .....

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- derived from the export of films was not to be subjected to tax and thus the same was not disclosed by the assessee at the initial stage. Thereafter, under VDIS 1997, which was a Scheme of the Department for voluntary disclosure of income not assessed to tax, the asseesee, under the impression that the said income may be subjected to tax, offered the same for tax vide disclosure dated 31.12.1997. Then, on advice given to the assessee that the said income would be exempted under Section 80HHC o .....

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r the relevant assessment year, which was duly received and acknowledged by the Department. Admittedly, it was the communication dated 20.08.1998 (and not the return filed on 20.08.1998), which was found during search conducted on 29.05.2001, which formed basis of the undisclosed income of ₹ 88,00,505/- of the assessee. 10. From the aforesaid, what we clearly find is that it was not any information suppressed by the assessee from the Department which was discovered during the search conduc .....

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e Department but on the other hand it was that very communication dated 20.08.1998 of the assessee to the Department which is the basis of treating the income of ₹ 88,00,505/- as undisclosed income of the assessee. From the facts of the case it appears that there was a confusion in the mind of the assessee (whether it be a genuine one or not) regarding his income of ₹ 88,00,505/- derived from export, being taxable or not. For such reason, the said income was initially not offered to .....

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said that there was no disclosure of the said income by the assessee either under the Scheme (VDIS) or under the provisions of the Act. Much emphasis has been laid by Sri K.V.Aravind, learned counsel for the Revenue, that sub-section (3) of Section 158BB of the Act provides that "the burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the re .....

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Income Tax -vs- A.R. Enterprises (2013) 350 ITR 489. 12. We have gone through the said judgment which relates to the claim of having made disclosure on the basis that advance tax had been duly deposited after deducting TDS. On such basis, the assessee therein was claiming that there was disclosure of income made by it and that in such circumstances, it would not amount to undisclosed income. The Apex Court held that while dealing with a case of payment of advance tax, there would be a distinctio .....

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t in paragraph-26 of the judgment, the Supreme Court observed that the disclosure of income would be a disclosure made by a valid return of income under Section 139 of the Act. The question there was with regard to payment of advance tax and such payment being treated as a disclosure of income made by the assessee. In our view, the facts of the case in hand being totally different, the ratio laid down in the case of A.R.Enterprises (supra) would not apply to the present case. 13. In the present .....

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cisions of Madras High Court (i) The Commissioner of Income Tax -vs- P.S.Mani (Tax Case (Appeal) No.549/2007 and (ii) The Commissionerof Income-Tax -vs- J.K.Narayanan (2007) 293 ITR 179 wherein it has been held that keeping in view the provisions contained in Section 158B(b) of the Act, the belated returns, which had been filed by the assessee, even though invalid, contained information showing the earning of the corresponding income and such information having been imparted by the assessee to t .....

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