2013 (10) TMI 150 - HC - Income Tax

Application for rectification of tribunal order u/s 254(2) - Addition on account of section 69 of the Income Tax Act unexplained purchase - additions on the basis of octroi receipts found during receipt - ITAT observed that onus is on the assessee to explain as to on which purchases, recorded in the books, octroi was charged by octroi department during spot inspection. - Since spot inspection was carried out on 17.7.99 and books and documents were examined by the octroi department, this impugned purchase could only be pertained to dates prior to 17.7.99. Where assessee fails to discharge the onus lying on him then Assessing Officer will be within his right to infer that the impugned purchases are unexplained and, therefore, liable to be taxed under section 69. Held that - if the assessee had any dispute on the final conclusion, it was always open to seek further remedy of appeal in accordance with law. However, invoking the jurisdiction of the Tribunal for rectification was rightly not permitted by the Tribunal. - Decided against the assessee.

Issues involved:
Disputed sum addition to income of the assessee, Rectification application rejection by Tribunal, Interpretation of section 69 of Income Tax Act, 1961, Onus of proof on assessee, Post search investigation requirements, Unexplained purchases taxation under section 69, Tribunal's power for review under section 254(2) of Income Tax Act.

Analysis:

1. Disputed sum addition to income of the assessee:
The issue revolves around a disputed sum of Rs. 45,75,000/- which the Revenue contended should be added to the income of the assessee. The Tribunal, after accepting that the amount represented purchases on which octroi was not paid, retained only a sum of Rs. 1,93,202/- for addition based on the GP ratio and turnover of the assessee. The Tribunal's decision was challenged by the assessee, leading to a detailed analysis by the High Court.

2. Rectification application rejection by Tribunal:
Instead of appealing against the Tribunal's order, the assessee filed a Misc. Application for rectification, contending that various issues were not considered. The Tribunal rejected the rectification request, stating that accepting the contention would amount to a review of the previous order, a power not enjoyed by the Tribunal under section 254(2) of the Income Tax Act, 1961. The High Court upheld the Tribunal's decision on this matter.

3. Interpretation of section 69 of Income Tax Act, 1961:
The Court delved into the interpretation of section 69 of the Income Tax Act, emphasizing the onus on the assessee to explain unexplained purchases. It was established that if the assessee fails to discharge this onus, the Assessing Officer is justified in making additions to the income. The Court cited various precedents to support the invocation of section 69 in cases where purchases are unexplained and not reconciled by the assessee.

4. Onus of proof on assessee and post search investigation requirements:
The judgment highlighted the importance of the assessee's duty to prove the legitimacy of purchases, especially in cases where octroi duty was charged. It was noted that the onus is on the assessee to demonstrate that the purchases were recorded in the books. Additionally, the Court discussed the necessity of post-search investigation and the Assessing Officer's right to infer unexplained purchases if the onus is not discharged by the assessee.

5. Unexplained purchases taxation under section 69:
The Court reiterated that if the assessee fails to explain and reconcile purchases on which octroi duty was charged, the Assessing Officer is justified in making additions under section 69. It was emphasized that the correctness of the books of account cannot be prima facie accepted, especially when irregularities are found, and stock deficiencies exist.

6. Tribunal's power for review under section 254(2) of Income Tax Act:
The High Court affirmed that the Tribunal's power for review under section 254(2) of the Income Tax Act is limited, and rectification requests that seek a review of the previous order cannot be entertained. The Court clarified that if there are disputes with the final conclusion, the remedy of appeal is available in accordance with the law.

In conclusion, the High Court dismissed the Tax Appeal, stating that no question of law arises in this case. The Court maintained that the assessee could challenge the initial judgment of the Tribunal through the appropriate legal channels but declined to interfere with the rectification order.

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