1999 (7) TMI 23 - HC - Income Tax

Summary

Issues involved:
The judgment involves issues related to the addition of unexplained deposits in the books of account of the assessee company, the justification of allowing relief to the assessee based on individual returns filed by depositors, and the inconsistency of the view taken by the Income-tax Appellate Tribunal with the material on record regarding credit worthiness and genuineness of transactions.

Issue 1: Addition of unexplained deposits
The Revenue filed an application u/s 256(2) of the Income-tax Act, 1961, seeking a reference to the High Court regarding the justification of holding the addition of unexplained deposits in the hands of individuals rather than the assessee company u/s 68. The Tribunal accepted the explanation provided by the assessee, showing that the credits were duly declared by the creditors in their returns, leading to the deletion of the addition. The Tribunal's decision was based on the satisfaction reached after considering the material before it, thus not warranting any question of law for consideration.

Issue 2: Relief based on individual returns
The second issue pertains to whether relief was rightly granted to the assessee based on individual returns filed by depositors, even though this issue was not raised before the Commissioner of Income-tax (Appeals). The Tribunal, upon reviewing the record showing that credits were declared in the new returns, concluded that the investment in the assessee-firm was duly explained, leading to the deletion of the addition. Since this issue was not raised earlier and did not arise from the appellate order, the Tribunal's decision was upheld.

Issue 3: Inconsistency with material on record
The final issue questions the consistency of the Tribunal's decision with the material on record regarding the unproved credit worthiness and genuineness of transactions. The Tribunal's acceptance of the explanation provided by the assessee, supported by the declaration of credits in the new returns, led to the deletion of the addition. The Tribunal's decision was deemed consistent with the material on record, and as such, the application was dismissed.

This judgment highlights the importance of providing explanations supported by documentary evidence and the Tribunal's discretion in accepting such explanations to determine the tax liability of the assessee.