9911796707
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Issues:
1. Whether further addition to unexplained investment is justified? 2. Whether the unexplained investment should have been included in the intangible addition to income during the year? Analysis: The case involved a firm that filed its income tax return for the assessment year 1977-78, disclosing income at Rs. 1,38,866. The Income-tax Officer made two additions to the disclosed income: shortage of cash amounting to Rs. 35,737 and cash introduced through unpaid wages account amounting to Rs. 70,616, totaling Rs. 1,06,353. The Commissioner of Income-tax (Appeals) upheld the additions, except for reducing the second addition to Rs. 20,000, granting relief of Rs. 50,616 to the assessee. Both parties appealed to the Tribunal, which allowed the Department's appeal regarding cash introduced through unpaid wages account. The Tribunal held that there was no cogent explanation for the shortage, justifying the additions. The assessee sought a reference to the High Court under section 256(1) on whether the further addition to unexplained investment was justified and if it should have been included in the intangible addition to income during the year. Upon review, the High Court found that the question of whether the addition could be covered by intangible addition of income was a matter of fact. The court emphasized that the mere availability of a fund from undisclosed income does not automatically imply that unexplained expenditure or investment must be sourced from it. The taxing authority must consider various circumstances to determine if the unexplained expenditure or investment can be reasonably attributed to a pre-existing fund of concealed income. In this case, the assessee failed to establish the existence of such a fund. Moreover, the Tribunal did not address this aspect, and since the question was neither pleaded nor adjudicated, it did not arise from the Tribunal's order. Therefore, the High Court declined to answer the question, disposing of the reference without costs. In a concurring opinion, the second judge agreed with the decision to decline answering the question. The judgment highlights the importance of establishing the existence of a pre-existing fund of concealed income to attribute unexplained expenditure or investment correctly. The case underscores the need for thorough consideration of relevant circumstances by the taxing authority in such matters.
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