The Tax Publishers2008 TaxPub(DT) 0529 (Coch-Trib) : (2008) 024 (II) ITCL 0611 : (2008) 305 ITR 0034 : (2008) 115 ITD 0368 : (2008) 117 TTJ 0395 : (2008) 009 DTR 0368

B. Rajashekharan Nair v. Asstt. CIT

INCOME TAX ACT, 1961

Search and seizure- Block assessment-Computation of undisclosed income-Assessee paid advance tax

Assessment was framed under section 158BC read with section 143(3) after search action against assessee, determining the total undisclosed income for the relevant assessment years. CIT(A) reduced the quantum of undisclosed income. CIT (Central) during proceedings was found that AO while completing the block assessment, omitted to include the amounts declared by the assessee in his returns filed prior to the date of search in respect of the two relevant assessment years by invoking the provisions of section 263 and directed AO to include said amount in the undisclosed income of the relevant years. Held: On the basis of records it was found that the assessee had filed returns of income for the two relevant assessment years and also paid advance tax but after the expiry of stipulated periods, thus, said returns were invalid. But still if the assessee had paid the advance tax and had filed the returns, though the returns were invalid returns, the income declared by the assessee in those returns did not partake of the character of undisclosed income which could be subject-matter of the assessment under section 158BC. AO had independently worked out the entire undisclosed income and he had rightly considered the income declared by the assessee in the returns filed for the two relevant assessment years. It is well-settled principle of law that unless the order passed by AO is erroneous and also prejudicial to the interest of the revenue, CIT has no jurisdiction under section 263 to take action as said section mandates the compliance of both the conditions. In the present case, the income disclosed by the assessee in the returns filed for the two relevant assessment years on which the assessee had paid advance tax, though the said returns were invalid returns, could not be termed as undisclosed income and it could not be the subject-matter of assessment under section 158BC. Therefore, CIT (Central) had no jurisdiction to invoke section 263 as the order passed by AO was not erroneous nor was it prejudicial to the interest of the revenue. Therefore, the order passed by CIT(Central) was cancelled. [Para 7]

Hence, the appeal of the assessee was allowed. [Para 8]

Income-tax Act, 1961 Section 158BC read with section 263

Case Law Analysis:CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50/ 98 Taxman 457 (SC) (para 4), CIT v. Ratilal Bacharilal & Sons [2006] 282 ITR 457/ 153 Taxman 86 (Bom.) (para 4) and Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/ 109 Taxman 66 (SC) (para 7).

Decision: In favour of Assessee.
A.Y. 1-4-1996 to 19-12-2002

B. Rajashekharan Nair v. Asstt. CIT

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