2003 (12) TMI 6 - HC - Income Tax

Block assessment question of law - Whether, Tribunal was correct in law in deleting the addition of Rs. 9,10,000 made on account of profits earned on unaccounted sales, notwithstanding the fact the additions on account of unexplained cash and unexplained investments in stocks had been restored to the file of the Assessing Officer for further investigations? if conclusion drawn by the Tribunal is allowed to attain finality, it would directly and substantially affect the rights of the Revenue - issue raised by the appellant deserves consideration - the order of the Tribunal involves a substantial question of law - We accordingly admit this revenue s appeal.

Issues:
1. Whether the Tribunal was correct in deleting the addition of Rs. 9,10,000?
2. Whether the Tribunal was correct in allowing relief to the assessee on profits from unaccounted sales?
3. Whether the Tribunal erred in ignoring certain documents considered by the Assessing Officer?
4. Whether the Tribunal's order was perverse in ignoring evidence on record?
5. Whether the Tribunal's order was perverse in fact and law?

Analysis:

1. The case involved an appeal by the Revenue against an order of the Income-tax Appellate Tribunal regarding the block period 1986-87 to 1995-96. The Tribunal had deleted an addition of Rs. 9,10,000 made on account of alleged profits earned on sales outside the books of account. The Tribunal reasoned that the addition was not warranted based on the peculiar facts and circumstances, including the surrender made by the assessee. The Revenue contended that until the quantum additions on unexplained cash and stocks were determined, it could not be concluded that the profits on sales were part of the surrendered amounts.

2. The Tribunal had allowed relief to the assessee on profits from unaccounted sales, stating that the additions made on unexplained cash and undisclosed assets would lead to double taxation if further addition on profits from sales outside the books was considered. The Tribunal's decision was supported by the assessee's counsel, arguing that the Tribunal's decision was reasonable and did not involve any substantial question of law.

3. The Revenue argued that the Tribunal erred in law by ignoring certain documents considered by the Assessing Officer. The Tribunal's decision to delete the addition without considering all documents was challenged, emphasizing the importance of determining the finality of the additions made on unexplained cash and stocks.

4. The Revenue contended that the Tribunal's order was perverse as it ignored the findings of the Assessing Officer and the evidence on record. The Tribunal's decision to delete the addition without proper consideration of the Assessing Officer's findings was highlighted as a point of contention.

5. The High Court admitted the appeal, framing a question for adjudication on whether the Tribunal was correct in deleting the addition of Rs. 9,10,000 despite the restoration of additions on unexplained cash and investments in stocks for further investigations. The Court found that the issue raised by the appellant deserved consideration as it directly and substantially affected the rights of the Revenue. The order of the Tribunal was deemed to involve a substantial question of law, leading to the admission of the appeal for further proceedings.

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