A.M Sapre, J.:— This is an appeal filed by the assessee under section 260A of the Income-tax Act, 1961, against an order dated June 20, 2000, passed by the Income-tax Appellate Tribunal, Indore (for short hereinafter referred to as “the Tribunal”) in IT(SS)A No. 19.Ind/1998. The appeal was admitted for final hearing on the following substantial question of law:
“Whether, on the facts and circumstances of the case, a notice under section 158BD of the Income-tax Act could have been issued and was justified to the appellant, despite the fact that return for the relevant assessment year 1996–97 showing the receipt of Rs. 6.66 lakhs from sale of plot had already been filed and tax liability on the same was also met?”
2. The facts necessary for the disposal of the appeal need mention in brief to appreciate the issue sought to be raised in this appeal. A search operation was conducted under section 132(1) of the Income-tax Act in the residential premises of Shri Kripal Singh Bhatia, the husband of the assessee on February 1, 1996.
3. In this raid operation, it was revealed that the assessee, i.e, the wife of Kripal Singh Bhatia, had purchased one land measuring 0.70 acres at Piplierao jointly along with two other ladies of the family, i.e, Smt. Veena Bhatia and Smt. Gurucharan Bhatia in the year 1988–89 for Rs. 2,35,200. In this sale, the share of the assessee was of Rs. 78,400. This land was shown to be sold by the trio on January 2, 1996, for Rs. 9,00,000 being the price mentioned in the sale deed and received by cheque. However, in the raid operation, it was discovered that, in fact, the land was sold for Rs. 29,60,000 and not for Rs. 9 lakhs and a sum of Rs. 20,00,000 were received by the trio, i.e, by the assessee and other two, in cash in instalments on various dates through their power of attorney holder— Mr. Kripal Singh Bhatia (the hus-band of the assessee) over and above Rs. 9 lakhs. In other words, the entire sale transaction was for Rs. 29,60,000 whereas the assessee in the sale deed mentioned the sale price to be only Rs. 9 lakhs and shown this Rs. 9 lakhs to have been received by cheque towards the entire sale consideration.
4. On December 13, 1996, the assessee filed her regular return under sec-tion 139 ibid for the assessment year 1996–97. In this return she disclosed her total income at Rs. 8,84,380 being her ⅓rd share of sale consideration. In the return, she said that she has received a sum of Rs. 6,66,666 in cash which was detected in the course of the search operation.
5. On August 8, 1997, the Assessing Officer issued a notice under section 158BD to the assessee calling upon her to file a return under Chapter XIV-B. A notice under section 142(1) was also issued. The assessee on September 11, 1997 filed the return for the block period and disclosed her income at nil.
6. In block assessment proceedings, out of which this appeal arises, the contention of the assessee was that since the consideration was received on sale of capital asset (land), the assessee is liable to pay capital gains by paying tax at the rate of 20 per cent. It was also contended that since the income was not undisclosed and hence, the tax cannot be charged at the rate of 60 per cent, as per section 113 of the Income-tax Act which is appli-cable only to the return of income disclosed under section 158BC, i.e, block period assessment. The contention of the assessee did not find favour either with the Assessing Officer or the Tribunal in an appeal filed by the assessee against the order of the Assessing Officer. It is against this order of the Tribunal, the assessee has come up in appeal under section 260A ibid.
7. Heard Shri S.C Bagadia, learned senior counsel with Shri D.K Chhabra, learned counsel for the assessee, and Shri R.L Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the Revenue.
8. Having heard learned counsel for the parties and having perused the record of the case, we are of the view that this appeal has no merit.
9. In our opinion, the issue involved in this appeal has to be examined in the light of the two provisions of the Act. They are section 158B(b) which defines the word “undisclosed income” and section 158BA(3). They read as under:
“Section 158B.(b) ‘undisclosed income’ includes any money, bul-lion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or trans-actions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act.
Section 158BA.(3) Where the assessee proves to the satisfaction of the Assessing Officer that any part of income referred to in sub-sec-tion (1) relates to an assessment year for which the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 for any previous year has not expired, and such income or the transactions relating to such income are recorded on or before the date of the search or requisition in the books of account or other documents maintained in the normal course relating to such previous years, the said income shall not be included in the block period.”
10. A perusal of the definition of undisclosed income would show that it not only includes within its sweep, property which has not been disclosed by an assessee in his/her return but it also includes within its fold that pro-perty which would not have been disclosed for the purpose of this Act by the assessee.
11. Section 158BA(3) applies to those cases where some part of income which is or can be made the subject-matter of block assessment, relates to an assessment year for which its previous year has not ended or the date for filing the return of income under section 139(1) for any previous year has not expired. In such a situation, if such income or transactions relating to such income are recorded on or before the date of the search in the books of account or other documents maintained in the normal course relating to the previous years, then the said income shall not be included in the block period provided the Assessing Officer records his satisfaction on the assessee's proving with reference to the requirement stated supra.
12. Conjoint reading of the aforesaid two sections would, thus, make it manifestly clear that, in order to take any income or transaction out of the clutches of the block period, it is for the assessee, to prove to the satisfaction of the Assessing Officer that a particular income/transaction had already stood recorded in the books of account/documents in the normal course of business by the assessee prior to the date of search or their requisition. What is, therefore, material is its disclosure in the books of account and secondly, such disclosure should be prior to the date of search in point of time. In such circumstances, if an assessee has not filed his/her regular return under section 139(1), even then it would not make much difference because the assessee has already taken care to disclose the income/trans-action in his/her books of account the day it was required to be entered in accordance with the accountancy system. It is, as already mentioned supra, subject to the condition that entry must be made prior to the date of search and not subsequent to it. The object underlined in sub-section (3) is very clear. If the intention of the assessee is to pay normal rate of tax, he would disclose all the income/transaction in his/her books of account. But if his/her intention is to evade the tax, then he/she would not disclose the income/transaction in his/her books of account thereby will enjoy the income without paying any tax on it. It is only when he/she is subjected to search operation, he/she would make entry in his/her books subsequent to date of search to avoid higher rate of tax at 60 per cent. Such entry, i.e, an entry made subsequent to the date of search is of consequence. It is for this reason that the words used in section 158B(b) “would not have been dis-closed” are very significant. This clearly has a nexus with the intention of the assessee in dealing with his/her property.
13. Now, coming to the facts of this case, the assessee has not tendered her books of account or any document maintained by her in the normal course of her business/professional activities as contemplated under sub-section (3) of section 158BA before the Assessing Officer. The assessee, in fact, did not file any kind of evidence before the Assessing Officer which would have proved that income which she has disclosed in her regular return was already recorded in her books of account prior to the date of search. When it was her case that she received some amount in cash in addition to cheque, then it was incumbent upon her to have disclosed that receipt of cash amount which she has disclosed in her return, was already entered in the books of account prior to the date of the search, i.e, February 1, 1996. It is only then the assessee would have been able to take benefit of sub-sec-tion (3) so far as her income of Rs. 8,84,380 was concerned. This amount would have been then held to be an income from known sources thereby not being regarded as income from undisclosed sources within the meaning of section 158B(b) of the Act.
14. In our opinion, thus, it was a clear case of income from undisclosed source in the hands of the assessee as defined under section 158B(b) ibid. It is clear from the fact that firstly, the sale deed recited a sale consideration of Rs. 9 lakhs. Secondly, only a sum of Rs. 9 lakhs was shown to be received by cheque. Thirdly, the balance amount of Rs. 20,60,000 received in cash was not entered in the books of account of any of the trio, nor was it anywhere disclosed in any document such as bank account or in wealth-tax returns or in the form of issuing a receipt in favour of the purchaser against the sale consideration by any of the trio including the assessee to the extent of her ⅓rd share of Rs. 6,66,666. In this view, the intention of the assessee was not to disclose receipt of Rs. 20,60,000 or her ⅓rd share out of Rs. 20,60,000, i.e, Rs. 6,66,666 in her income for the year in ques-tion. It was thus a clear case which falls in the wording of section 158B(b) i.e, “would not have been disclosed for the purpose of this Act”.
15. In this view of the matter, the income in question had to be taxed in the hands of the assessee as per the provisions applicable to block assessment read with section 113 of the Act treating the income to be an income from undisclosed one as defined under section 158B(b) ibid. Accordingly and in view of the foregoing discussion, we are of the view that no fault can be found in the conclusion arrived at by the Assessing Officer and that of the Tribunal. Though we uphold their eventual con-clusion, but we do so on our own reasoning which we have arrived at on interpretation of the relevant sections referred to supra. In fact, the Tribunal should have examined the case legally on these lines rather than on simple facts and that too without taking recourse to any of the legal pro-visions which are applicable to the facts of this case.
16. The appeal, thus fails and is accordingly, dismissed. No costs.