INCOME TAX ACT, 1961

--Search and seizure--Block assessment Undisclosed income--The assessee was a firm a search operation under section 132 of the Act was carried out at the premises of another concern, ARM. During the course of search, certain books and documents pertaining to the assessee, were seized. On scrutiny, assessing officer found that though the assessee had taxable income for the assessment year 1995-96, no return of income had been filed (due to be filed on or before 31-10-1995) till the date of search. Based on the material seized by virtue of the aforesaid search, the assessing officer was satisfied that the assessee had not disclosed their income pertaining to the assessment year 1995-96. Accordingly (without recording any reasons for his satisfaction), he initiated action under section 158BD of the Act requiring the assessee to file their return of income. The assessee, after filing return for the block period (ten years preceding the previous year), which covered assessment years 1993-94 to 1995-96, pointed out that they had already filed returns for the assessment years 1993-94 and 1994-95. They objected to action initiated under Chapter XIVB of the Act on the ground that in relation to the assessment year 1995-96, Advance Tax had already been paid in three installments and, therefore, income for that period could not be deemed to be undisclosed. The assessing officer formed the opinion that the assessee had failed to file the return as on the date of search, and the seized documents did show income, which had not been or would not have been declared. Accordingly, he proceeded to compute total undisclosed income for the block period 1993-94 to 1995-96 (upto the date of search), treating the income returned by the assessee for the period 1995-96 as NIL, as stipulated in section 158BB (1)(c) of the Act. Held: Payment of advance tax by an assessee per se does not tantamount to disclosure of total income, for the relevant assessment year payment of Advance Tax and filing of return are functions of completely different notions of income i.e. estimated income and total income respectively. The payment of Advance Tax is based on an estimation of the total income that is chargeable to tax and not on the total income itself. Similarly, since the tax to be deducted at source is also computed on the estimated income of an assessee for the relevant financial year, such deduction cannot result in the disclosure of the total income for the relevant assessment year.