2011 (6) TMI 496 - HC - Income Tax

Addition of cash credit / unexplained investment - depositors were not traced out or identified, two sister concerns of the respondent assessee came forward offering interest income on these deposits as undisclosed income, and the settlement Commission accepted the claim of those two sister concerns Held that - once the sister concerns are assessed on the interest income from the very same deposits, the deposits cannot be treated as unexplained cash credit or unexplained investment on the respondent assessee, Income Tax Appeals are dismissed

Summary

Issues involved:
Revised income tax assessments under Section 147 for the years 1989-90 to 1992-1993 - Addition of cash credit/unexplained investment in deposits - Acceptance of interest income by sister concerns - Tribunal's decision.

Analysis:
The High Court of Kerala dealt with connected appeals arising from revised income tax assessments under Section 147 of the Income Tax Act for the years 1989-90 to 1992-1993. The primary issue revolved around the addition of cash credit or unexplained investment concerning various deposits retained in the account of the respondent assessee in the name of different individuals. Despite the depositors remaining unidentified, two sister concerns of the respondent assessee, namely Nirmala Trust and Amala Finance, acknowledged offering interest income on these deposits as undisclosed income. The Settlement Commission accepted this claim by the sister concerns and allowed settlement in their cases.

The contention put forth by the learned Standing Counsel for the Department was that the amounts held in the respondent's account should be entirely assessable as cash credit due to the lack of proof regarding the credits. Conversely, the counsel for the respondent argued that once the income from the deposits was assessed in the hands of the two sister concerns, the credits could no longer be deemed unexplained. The Tribunal aligned with this explanation, leading to the allowance of the appeals. The High Court concurred with the Tribunal's view, emphasizing that since the sister concerns were assessed on the interest income from the same deposits, the deposits could not be treated as unexplained cash credit or unexplained investment on the respondent assessee.

Based on the factual position and the reasoning behind the Tribunal's decision, the High Court declined to interfere with the orders of the Tribunal. Consequently, the Income Tax Appeals were dismissed by the High Court of Kerala.