2012 (11) TMI 12 - HC - Income Tax

Reassessment - whether reasons recorded for reopening the assessment does not stand legal security. - held that - We do not find any error of law in the order of the Tribunal in deleting the additions and on the same grounds we do not find any legal error in the order of the Tribunal in holding that the interest charged under Section 139 (8) and 215/217 was not sustainable.

Summary

Issues:
Income Tax Appeal under Section 260-A of the Income Tax Act, 1961 arising from judgment and order dated 20.6.2002 passed by the Income Tax Appellate Tribunal, Agra Bench, Agra for the assessment year 1988-89. Substantial questions of law include the legality of reopening assessment, deletion of additions for unexplained investments, profit earned by minors, and interest charges under Sections 139 (8) and 215/217.

Analysis:

1. The assessee, a partner in M/s Chandra Timber Traders, faced search and seizure operations resulting in the AO issuing a notice under Section 148 of the Act. The AO added Rs. 49,925/- as profit earned by minor children, Rs. 1,55,000/- for unexplained hundies investment, and Rs. 40,000/- for a cash deposit. Interest charges under Section 139 (8) and 215/217 were also imposed.

2. The CIT (A) upheld the additions made by the AO. However, the Income Tax Appellate Tribunal reversed these decisions. It found no evidence linking the profit earned by minors to the assessee, deleted the hundies investment addition for being disclosed in a later year, and removed the cash deposit addition due to lack of verification.

3. The Tribunal's decision was based on legal grounds, stating that the minor children's income couldn't be clubbed with the assessee's as they filed returns independently. The hundies investment was deemed inapplicable for the assessment year in question, and the cash deposit lacked proper verification.

4. The Tribunal correctly applied the law, emphasizing that the Finance Act, 1992 amendments did not apply to the assessment year in consideration. The findings regarding the hundies and the cash deposit were supported by the evidence presented, leading to the deletion of the additions.

5. The Tribunal's decision to delete the additions was legally sound, as there was no error in law found in their judgment. The questions of law raised were decided in favor of the respondent-assessee and against the revenue, resulting in the dismissal of the Income Tax Appeal.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the Income Tax Appeal and ruling in favor of the respondent-assessee against the revenue on all substantial questions of law raised.