Law:

Section:

I. Section 158BB of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income, computation of - Block assessment period 1986-87 to 1996-97 - Assessee carried on business of manufacture and sale of metallic utensils - A search and seizure was conducted on residential and business premises of assessee - A notice under section 158BC was issued to assessee for relevant block period - Assessee, thereupon, furnished return declaring certain undisclosed income - Before Tribunal, assessee claimed that deduction under section 158BB was not properly allowed by Assessing Officer in respect of assessment years 1988-89, 1989-90 and 1994-95 - Tribunal found that assessee had maintained books of account and income as per said books of account was below taxable limit - In such factual backdrop, Tribunal directed Assessing Officer to allow deduction under section 158BB in respect of income as per books of account - Whether, in view of provisions of section 158BB, Tribunal was right in law to direct Assessing Officer to allow deduction in respect of book profit for assessment years 1988-89, 1989-90 and 1994-95, though no return of income had been filed under section 139(1)/139(4) - Held, yes II. Section 40A(3) of the Income-tax Act, 1961 - Business disallowance - Cash payment exceeding prescribed limits - Block assessment periods 1986-87 to 1996-97 - Assessee's income from sale of utensils had been assessed on estimate basis i.e., by applying net profit rate - For assessment years 1995-96 and 1996-97, Assessing Officer disallowed certain amount under section 40A(3) and added it to assessee's income - On appeal, Tribunal, however, set aside order of Assessing Officer - Whether when net profit rate was applied by Assessing Officer, section 40A(3) was not applicable - Held, yes - Whether, therefore, Tribunal was right in law in holding that disallowance under section 40A(3) was not called for once net profit rate had been applied to compute income - Held, yes FACTS-I The assessee carried on the business of manufacture and sale of metallic utensils. A search and seizure was conducted on the residential and business premises of the assessee. The block period of…

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