2017 (8) TMI 1434 - HC - Income Tax

Unexplained deposits - deposits made in the bank account in Union Bank of India Cotton Green Branch Mumbai when the same was not disclosed by the assessee in its books of accounts - Held that - This matter should further have been seen and considered in the context of probabilities and possibilities of having earned any income by the assessee company from these transactions being based at Jaipur and carrying out such transactions in Bombay wherein no such blank authorities given to Mr. Mayur M. Thakkar was required in case he could have been carrying out these transactions regularly in Bombay. Thus the assessing authority has wrongly assessed and ld. CIT(A) has wrongly upheld the deposits as additions being unexplained income in the hands of the assessee. Also alternatively the counsel for the assessee submitted that if any income is found assessable it should only be a commission earned from such transactions by the assessee company. Also the alternative arguments made by the ld. Counsel for the assessee is that in case it is considered that all these transactions have been carried out by the assessee company and deposits and making out of drafts and carrying out all these business is a part of the work carried out by the assessee company and these deposits are considered as cash deposits in the bank account then there cannot be any assessment more than the amount of peak credit for both the years being a block period which does not exceed more than 10 lakhs. In no case there can be 100% assessment on the total deposits as an income and cannot be considered as undisclosed income of the block period - decided in favour of assessee

Summary

Issues Involved:
1. Common questions of law and facts in two appeals challenging Tribunal's judgment.
2. Substantial questions of law framed by the court for each appeal.

Analysis:
1. The High Court addressed common questions of law and facts in two appeals challenging the Tribunal's judgment. The appellant contested the Tribunal's decision to dismiss the department's appeal and partly allow the assessee's appeal. The substantial questions of law framed by the court for each appeal focused on additions made by the Assessing Officer regarding undisclosed bank deposits and commission income.

2. In the first appeal, the court examined whether the Tribunal was justified in deleting the addition of undisclosed bank deposits and treating commission income as the assessee's income. The court considered arguments related to the ownership of the bank account, authority to operate the account, non-disclosure in books of accounts, and the nature of transactions. The court analyzed the Tribunal's observations and upheld the finding in favor of the assessee, emphasizing the need to consider all transactions and circumstantial evidence.

3. The second appeal questioned the Tribunal's decision to delete additions related to transactions with a specific company and loose papers found during search. The court reviewed the evidence, including documents found during search operations, and assessed the involvement of the assessee in the transactions. The court highlighted discrepancies in the assessing authority's conclusions and supported the Tribunal's findings in favor of the assessee, emphasizing the importance of considering probabilities and circumstantial evidence.

4. The court extensively analyzed the arguments presented by both parties, including references to assessing officer's orders, CIT(A) observations, and Tribunal's findings. The court emphasized the need to evaluate all evidence, including circumstantial factors, to determine the true nature of transactions and the extent of the assessee's involvement. Ultimately, the court dismissed the appeals, supporting the Tribunal's decisions and suggesting appropriate actions by the department against any wrongdoing parties mentioned in the order.