TMI Blog2003 (4) TMI 597X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Act, 1961. Amounting to ₹ 63,760, in total disregard to the facts of the case and the relevant provisions of the Income-tax Act concerning the assessment provisions under Chapter XIV-B of the Income-tax Act. 1.2The learned DCIT ought to have strictly followed the procedure for assessment prescribed in Chapter XIV-B of the Income-tax Act and computation of Total Income ought to have been as per provisions of Chapter IV of the Income-tax Act. The learned DCIT failed to appreciate that the said Chapter IV of Income-tax Act consists of sections 28 to 59 of the Income-tax Act, and hence deduction/exemption under section 54F being part of heads of income - Capital Gains ought to have been allowed by the learned DCIT. 1.3Learned DCIT also failed to appreciate that the phrase Total Income is defined in section 2(45) of the Income-tax Act, read with section 5 of the Income-tax Act, the said phrase implies that the income is to be computed subject to all the provisions of the Act, including exemptions/allowances and deductions available under each of the Head of the income. The deduction under section 54F being part of the Head Capital Gains ought to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come for a block of 10 years. For this purpose the Legislature has also prescribed a uniform tax @ 60 per cent on such undisclosed income irrespective of the nature and source of such income. The Assessing Officer has con- cluded that there was no intention on the part of the appellants to disclose this income in the normal course. The returns of income for the rele- vant years had already been filed before the search action and the income arising from the capital gains were not disclosed in the said income-tax returns. Under the provisions, therefore, the subsequent application of such undisclosed income to get the tax benefit by applying section 54F should not be allowed and undisclosed income to be taxed at the flat rate of 60 per cent. The Assessing Officer has therefore disallowed the claim of deduction under section 54F and included the same in the computation of undisclosed income. 4. On behalf of the appellants Shri Bharat Desai appeared and vehemently argued that the Assessing Officer wrongly interpreted the provisions of section 158BB. He has argued that total income as defined in section 2(45) means the total amount of income referred to in section 5, compute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is going to be held as admissible under Chapter XIV-B. 6. We have carefully considered the submissions of both the sides and also thoroughly perused the order of the Assessing Officer passed under section 158BC(c) in the light of the material placed before us, as well as, case laws cited. The facts of the case have already been discussed in above paras in detail and apparently there is no dispute over the same. During the Search Action under section 132(1) conducted on 14-9-1995 at the premises of M/s. Desai Investment and Financial Consultants certain assets were found and seized. The assessee was required to explain the working of the undisclosed income and in compliance he has explained that the undisclosed shares seized had been considered as undisclosed income for the block period. The assessee has thus worked out the Block-period income under the head income from other sources and also under the head Capital gains . The objection of the Assessing Officer was that on one hand the assessee has shown long-term capital gain for the block-period and simultaneously on the other hand the entire gain was claimed to have been invested towards the purchase of an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of any previous year of a person who is a resident includes all income from whatever source. Therefore the total income as mentioned in section 158BB is the income earned or received from whatever source and that income is to be computed in the manner laid down in this Act. Chapter XIV-B also defines undisclosed income as per section 158B(b) under the head Definitions : At this juncture it is pertinent to mention that under the definition of undisclosed income certain words have now been inserted by Finance Act, 2002 which are w.r.e.f. 1-7-1995 reads, or any expense, deduction or allowance claimed under this Act which is found to be false. Side by side a consequential amendment is also made in section 158BB in the Finance Act, 2002 which is also w.r.e.f. 1-7-1995 and in place of the old language the new language substituted reads as follows : In accordance with 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 Assessing Officer and relatable to such evidence. In sequence thereto the Explanation to sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 158BB definitely gives an impression that the intention of the Legislature is to compute the total income in accordance with the provisions of Chapter IV, now substituted with the words, in accordance with the provisions of this Act. The only exception is of set-off of brought forward losses or unabsorbed depreciation. Thus, it indicates that the provisions of Chapter VI (Aggregation of income and set-off or carry forward of loss) are to be excluded while computing the income under section 158BB otherwise the other Chapters of IT Act has to be applied if not expressly mentioned otherwise. 9. Now we have to consider the effect of the amendment in the definition of undisclosed income provided in section 158B(b). The Finance Act, 2002, has inserted w.r.e.f. 1-7-1995 that any expense, deduction or allowance claimed under this Act if found to be false then should be treated as undisclosed income . Therefore, any deduction if found to be false after the search operation then only the same shall be taxed under the special provisions of Chapter XIV-B. Otherwise if the Assessing Officer do not found any deduction or allowance to be incorrect or false then he has to allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes forming parts of return filed for the block period. However, the issue is not in respect of the conduct of the assessee while filing the original return in the normal course but the issue is restricted only to the extent that whether the claim under section 54F is eligible or not as provided in Chapter IV while computing the total undisclosed income for the block period. We have already answered this question in favour of the assessee as per the reasons recorded above. The only question left as raised by ld. DR is yet to be answered that whether the claim under section 54F was as per the terms conditions laid down under section 54F was made or not. It is evident from the assessment order that the Assessing Officer has not considered this aspect and related facts. He has also not examined the nature of investment. For that purpose it is justifiable to restore it back to the file of Assessing Officer with the direction to examine the correctness of the claim of deduction under section 54F as the same was not done at the time of passing the impugned order. For this limited purpose we refer this matter back to Assessing Officer obviously with the direction to provide adequate op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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