2004 (7) TMI 55 - HC - Income Tax

These reference applications u/s 256(2) are filed seeking a direction to Tribunal, to state the case and refer certain questions said to be questions of law arising out of the Tribunal s appellate order in the case of the same respondent-assessee by a common order. - Assessing Officer making certain additions on the basis of information supplied by foreign national - issuing of summoning foreign national under provisions of the CPC - We allow these applications and direct the Tribunal to state the case and refer the questions of law arising out of its appellate order for decision

Summary

Issues:
- Refusal of Income-tax Appellate Tribunal to refer questions of law to High Court
- Validity of additions made by Assessing Officer based on information from a foreign national
- Compliance with directions in earlier orders by Assessing Officer and Tribunal

Refusal of Tribunal to Refer Questions of Law:
The High Court addressed three reference applications under section 256(2) of the Income-tax Act, 1961, seeking direction to the Income-tax Appellate Tribunal to state the case and refer certain questions of law arising from the Tribunal's appellate order. The Tribunal had erred in declining to make the reference, as settled law dictates that if a question of law arises from the Tribunal's order, it must be referred to the High Court unless it is self-evident or settled by the apex court. The Tribunal's refusal was incorrect, and the applications were allowed.

Validity of Additions Based on Foreign National's Information:
The case involved additions made by the Assessing Officer based on information supplied by a foreign national regarding under-invoicing in transactions with the assessee and other jewellers. The Assessing Officer acted on certified copies of accounts authenticated by the Consul, while the assessee demanded production of originals and cross-examination of the foreign national. Despite the demands, additions were made, leading to a series of litigations and directions for proper verification. The Tribunal ultimately deleted the additions due to non-compliance with directions, emphasizing the need for thorough examination before making such additions.

Compliance with Earlier Directions by Assessing Officer and Tribunal:
The Assessing Officer's actions following directions to allow verification and examination of materials led to subsequent additions, affirmed by the Commissioner of Income-tax (Appeals). However, the Tribunal deleted the additions for non-compliance with earlier directions, highlighting the importance of following proper procedures. The High Court reiterated the necessity of addressing questions of law arising from the Tribunal's orders to avoid complications in implementing final decisions.

In conclusion, the High Court allowed the reference applications, directing the Tribunal to refer questions of law related to summoning foreign nationals, production of original documents, verification of statements, and compliance with directions before making additions. The Court emphasized the significance of addressing legal issues arising from Tribunal orders to ensure proper adjudication and resolution of tax matters.