2012 (9) TMI 1077 - HC - Income Tax

Summary

Issues involved: Reference u/s 256(1) of the Income Tax Act, 1961 for Assessment Year 1989-90 regarding addition made to assessee's income.

Summary:
1. The Tribunal referred the question of law to the High Court regarding the correctness of upholding a part of the addition made to the assessee's income.
2. The case involved the construction and sale of industrial galas by the assessee in Mumbai during the assessment years 1989-90 and 1990-91.
3. The Revenue added an amount as 'on money' for the sale of galas in 1989-90 based on a confession made by the assessee for the subsequent year.
4. The Commissioner of Income Tax (Appeals) upheld the addition of 'on money' based on the significant price difference in the sale of galas between the two assessment years.
5. The Tribunal partially allowed the appeal, making an ad-hoc addition of Rs. 7,00,000 to the income declared by the assessee.
6. The assessee challenged the ad-hoc addition as arbitrary and unsupported by evidence for the assessment year 1989-90.
7. The Revenue argued that the Tribunal's finding of fact should not be disturbed and that the evidence from the subsequent year justified the addition.
8. The High Court found that there was no material evidence to support the addition of 'on money' for the assessment year 1989-90 and criticized the Tribunal's arbitrary conclusion without proper reasoning.
9. The High Court ruled in favor of the assessee, stating that the Tribunal's decision lacked supporting reasons and was based on suspicion rather than concrete evidence.
10. The High Court disposed of the reference with no order as to costs.

This summary provides a detailed overview of the legal judgment, highlighting the key issues and arguments presented by both parties, ultimately leading to the High Court's decision in favor of the assessee.