Section 132 of the Income Tax: It is but natural that the undisclosed income found during search/survey has to be distributed to all the members of the family who were running or carrying on the business. However, it is also quite reasonable or equitable conclusion that the income from the business had been generated over a period of time and the same should be spread over several years.
The Issue: Whether the undisclosed income found during search/survey belongs to all assessees at the place raided or only the principal one
In the case – CIT vs. Rekha Bai (Supreme Court) The Madras High Court held that:
- An amount less than fifty percent of the promoters face value (FV) should be considered as advanced and accordingly the concealed income of the assessee;
- The undisclosed income of the assessee has to be considered as belonging to assessee’s family members and distributing the such above mentioned income between them rather than taxing the whole amount in hands of the assessee;
- The concealed income of the assessee has to be spread over a period of five years.
Supreme Court dismissed the appeal made by the Income Tax Department and held:
The Income Tax Department was unable to get on record any relevant and material to the contrary but only the seized documents; such documents could not absolve the Income Tax Department or give any right to contradict the view taken by the Appellate and the Tribunal.
As far the distribution of the income between assessee’s Family members is concerned, the court finds that all members of the assessee’s family were carrying on same business from the same place.
Consequently, it is but natural that if any undisclosed or concealed income found during search and survey, the same has to be divided between the family members of the assessee who were carrying on business.
