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| DATE: | January 15, 2013 (Date of publication) |
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| Click here to download the judgement (AR_Enterprises_158B_undisclosed_income.pdf) |
S. 158B: Despite TDS & Advance-tax, income is “undisclosed” if ROI not filed by due date
A search u/s 132 was conducted on 23.2.1996 when it was detected that though the assessee had taxable income for AY 1995-96 it had not filed a ROI and the due date (31.10.1995) had lapsed. The AO issued a s. 158BD notice directing the assessee to file a return for the block period. The assessee claimed that as it had paid advance tax on the income for AY 1995-96, the income could not be said to be “undisclosed“. The AO rejected the claim though the Tribunal and High Court accepted the assessee’s claim on the basis that payment of Advance Tax itself necessarily implies disclosure of the income on which the advance is paid. On appeal by the department to the Supreme Court, HELD reversing the Tribunal and High Court:
S. 158B(b) defines the expression “undisclosed income” to mean that income “which has not been or would not have been disclosed for the purposes of this Act”. The only way of disclosing income on the part of an assessee is through filing of a return and therefore an “undisclosed income” signifies income not stated in the return filed. It cannot be said that payment of Advance Tax by an assessee per se is tantamount to disclosure of total income. There can be no generic rule as to the significance of payment of Advance Tax in construing intention of disclosure of income. This depends on the time at which the search is conducted in relation to the due date for filing return. If the search is conducted after the expiry of the due date for filing return, payment of Advance Tax is irrelevant in construing the intention of the assessee to disclose income because it is a case where income has clearly not been disclosed. The possibility of the intention to disclose does not arise since the opportunity of disclosure has lapsed. If search is conducted prior to the due date for filing return, the opportunity to disclose income by filing a return still persists. In such a case, payment of Advance Tax may be a material fact for construing whether an assessee intended to disclose. An assessee is entitled to make the legitimate claim that even though the search or the documents recovered show income earned by him, he has paid Advance Tax for the relevant assessment year and has an opportunity to declare the total income, in the return of income, which he would file by the due date. Hence, the fulcrum of such a decision is the due date for filing of return of income vis-à-vis date of search. Also, because Advance Tax is based on estimated income, it cannot result in the disclosure of the total income assessable and chargeable to tax. The proposition that payment of Advance Tax is tantamount to disclosure of income would be contrary to the very purpose of filing of return. On facts, as the assessee had not filed the ROI by the date of search and the due date had lapsed, the income found was “undisclosed” even though advance-tax thereon had been paid. Similarly, as TDS is also computed on the estimated income of an assessee for the relevant FY, it does not amount to disclosure of income, nor does it indicate the intention to disclose income if the ROI is not filed.
judgements seem to be okay. in the 3rd case roi was filed on 31.10.95 and search was on 22.2.1996, say within six months permitted under 143(2), so liability of assessee squarely arise ie with 4 spuds, assume if search is after 6 months , AO lost his opportunity to collect tax. As such AO is smart enough to move within six months limitation procedure stipulated in procedural law of tax, so SC deciion hits on bulls eye, i believe. so SC observation os right i believe.
Always procedural law has implications on very sections, like limitation, as it is settled law u/s 143(2) that CBDT does not allow sufficient time to AOs to issue notices beyond limitation of 6 months or 12 months in case of delayed returns beyond that period AQ is restrained to issue notices beyond the limitation periods. say if the AO conducted search after 6 months, he faces limitation in the matter, as the principle is alertness of taxman is emphasized when limitation is prescribed, after all AO is a public servant and he is paid salary from public exchequer, so limitation laws are imposed to see whether public servant is able to move within limitation, though after limitation may allow the assessee to take advantage of limitation and yet it is not illegal and is the principle of rule of law in a vibrant democratic society, as every society needs to follow rule of law.
Say an assessee files a roi on due date sometimes may be deliberately concealing income, where is the guarentee to him that AO will not proceed on him with in six months of limitation. so he takes risk. Some times risk gets exposed if AO moves within limitation, so AOs generally take on cases within limitation time prescribed that too he needs to take approval of his higher ups, and if AO does not obtain sanction of higher ups runs risk of losing the battle, after all higher ups are not expected to grant sanctions routinely but he has to apply his prudential mind, reason being unnecessary costs likely like legal and other costs that he cannot afford to incur to cause a whole in revenue, is my assessment, i may be wrong!
in seveal cases judged by SC, i find,, that a defect of jurisdiction goes to the root of the matter and strikes at the authority of the court to ass a decree. Such a basic and fundamental defect cannot be cured by consent(in a case SC recently held that an asseessee to buy piece with income tax accepted his illegal liability to get taxed though again modified his return, thus causing his liability but court’s observation is to emphasis you cannot say a lie however much you are forced is the principle, so tax man also cannot collect tax for revenue by lies and damned lies is the another principle in the recent decision every is aware, as otherwise why you need courts is another principle surfaced in this decision) of parties and the judgement or order passed by the court, however precisely certain and technically correct is ‘NULL AND VOID’ and its validity may be challenged at any stage., case law. Vasudev Dhanjibhai Modi v Rajabhai Abdul Rehman, AIR 1970 SC 1476;(1970) 2 SCJ 558;(1970)2 MAD LJ(SC) 85:Chandrika Mistr vBhaiyalal, AIR 1973 SC 2391 at 2393,(1973)2SCC 474,(1973)SCD 793. there are several judgements and they are per force applicable u/Artice 141 on all courts of india.. this is for information for proper appreciation of rule of la principles, tks n regds..
please read ‘pass a decree’ instead of ‘ass a decree in second line earlier comment’ sorry for my finger error.pardon me