2008 (9) TMI 972 - HC - Income Tax

Summary

Issues:
The judgment involves a challenge to assessment orders dated 14.03.2007 and 1.12.2005 for the assessment year 2003-2004, alleging arbitrariness and illegality, and seeking fresh assessment.

Assessment Year 2003-2004:
The petitioner, a company under the Indian Companies Act, filed a return of loss for the assessment year 2003-04. The assessing authority added an amount as undisclosed cash credit liable for taxation, leading to an appeal and subsequent revision petition under Section 264 of the Income Tax Act. The revision petition was dismissed, prompting the filing of the present writ petition.

Grounds of Challenge:
The petitioner contested the assessment on two main grounds. Firstly, it was argued that significant additions were made based on concessions from a Chartered Accountant not authorized to represent the assessee. Secondly, it was contended that the Assessing Officer erred in not accepting that a bank loan was discharged through funds transferred from family members, despite evidence of their financial standing.

Judicial Analysis:
The court noted that no power of attorney was executed for the Chartered Accountant to represent the assessee before the Assessing Officer. However, a power of attorney was executed for representation before the Commissioner of Income Tax. The authorities independently found that the income was not disclosed, leading to the addition in assessment. The court upheld the revisional authority's decision to reject the contention regarding representation.

Investigation Findings:
Regarding the bank loan discharge through family funds, it was revealed that crop loans were raised in the names of planters within the family circle, with transactions pointing to a fraudulent practice of name lending. Despite claims of funds transfer from these accounts, investigations showed discrepancies in account holders' tax returns and the petitioner's records. The revisional authority justified upholding the assessment order based on these findings.

Conclusion:
The court found no merit in the petitioner's arguments and dismissed the writ petition, affirming the assessment order for the assessment year 2003-2004.