2002 (7) TMI 39 - HC - Income Tax

Income from Undisclosed Sources - 1. Whether the Appellate Tribunal can make out a new case under section 68 of the Act treating credit balance in the account of the appellant and making additions accordingly without there being any ground in the appeal? - 2. Whether the Appellate Tribunal was justified in holding purchase as bogus on the basis of incomplete enquiry report in which the addresses of the purchasers were found to be correct and only because they were not available due to their nomadic characteristic no further efforts were made by the enquiry officer to trace the sellers and enquire about the fact of purchase? - 3. Whether the order of addition passed by respondent No. 3 is vitiated because the principles of natural justice were not followed? - we find no justification to interfere in the order of the Tribunal. Consequently the appeal stands dismissed.

Summary

Issues:
1. Appellate Tribunal's authority to make additions under section 68 without grounds in the appeal.
2. Justification of treating purchases as bogus based on incomplete enquiry report.
3. Alleged violation of principles of natural justice in passing addition order.

Analysis:

Issue 1:
The case involved an appeal against an order dated July 19, 2000, concerning the Appellate Tribunal's authority to make additions under section 68 without specific grounds in the appeal. The relevant assessment year was 1982-83, where the assessee, a manufacturer of woollen carpets, declared a total income of Rs. 1,35,653. The Assessing Officer raised concerns regarding the genuineness of purchases made by the assessee, leading to multiple rounds of assessments and appeals. The Tribunal ultimately confirmed an addition of Rs. 1,12,500 under section 68, emphasizing the assessee's failure to prove the genuineness of the transactions or credits. The High Court upheld the Tribunal's decision, stating that the finding was not perverse and declined to interfere.

Issue 2:
Regarding the justification of treating purchases as bogus based on an incomplete enquiry report, the Assessing Officer initially added Rs. 2,75,000 to the assessment order, suspecting the genuineness of the purchases. Subsequent appeals and enquiries led to reductions in the addition amount, with the Commissioner of Income-tax (Appeals) and the Tribunal making varying decisions. The High Court analyzed the facts, emphasizing the burden on the assessee to prove the genuineness of transactions, especially when parties were not available or their whereabouts were unknown. The court noted discrepancies in the assessee's claims about the nature of the parties involved and upheld the Tribunal's decision based on the lack of evidence provided.

Issue 3:
The allegation of a violation of principles of natural justice in passing the addition order was also addressed. The Commissioner of Income-tax (Appeals) had set aside the assessment order twice, directing further enquiries to be conducted. The Assessing Officer complied with these directions, engaging an Inspector of Income-tax to contact relevant parties. Despite multiple opportunities given to the assessee to produce evidence, the parties in question were not presented, leading to the Tribunal's decision to uphold the addition under section 68. The High Court found no basis to interfere with the Tribunal's decision, concluding that the assessee failed to discharge the onus of proving the genuineness of the transactions, thereby justifying the addition made.

In summary, the High Court dismissed the appeal, upholding the Tribunal's decision to confirm the addition under section 68 due to the assessee's failure to substantiate the genuineness of the transactions, despite multiple rounds of assessments and opportunities provided.