2011 (6) TMI 973 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the appeal under Section 249(4)(a) of the Income Tax Act.
2. Telescoping between undisclosed income and unexplained investments.
3. Validity of revised returns filed during assessment proceedings.
4. Allocation of "on money" received from property sales and its tax implications.
5. Admissibility of additional evidence under Rule 46A of the Income Tax Rules.
6. Enhancement of income by the Commissioner of Income Tax (Appeals) [CIT(A)] without issuing a notice.

Issue-Wise Detailed Analysis:

1. Validity of the Appeal under Section 249(4)(a):
The Tribunal examined whether the appeal filed by the assessee was valid under Section 249(4)(a), which mandates the payment of tax due on the returned income before filing an appeal. The assessee had filed a return declaring an income of Rs. 19,43,200/- and paid the corresponding tax of Rs. 12,84,405/- before filing the appeal. Although the assessee later filed a revised return declaring a higher income of Rs. 71,06,300/-, the Tribunal held that the revised return filed during assessment proceedings was not valid under Section 139(5) of the Act. Consequently, the original return was considered, and the tax paid on it sufficed for the appeal to be valid. The Tribunal set aside the CIT(A)'s order passed under Section 154, which had dismissed the appeal for non-payment of tax on the revised income.

2. Telescoping Between Undisclosed Income and Unexplained Investments:
The Tribunal upheld the CIT(A)'s decision to allow telescoping between the undisclosed income declared by the assessee and the unexplained investments. It was noted that the assessee had declared additional undisclosed income of Rs. 1,60,05,700/- over two assessment years and had made investments amounting to Rs. 37,93,023/-. The Tribunal agreed with the CIT(A) that the additional income offered was available to the assessee for making investments, and thus, the unexplained investments could be telescoped with the undisclosed income. This approach was supported by various judicial precedents cited by the CIT(A).

3. Validity of Revised Returns Filed During Assessment Proceedings:
The Tribunal clarified that the scope of filing revised returns is limited to Section 139(5) of the Act, which allows revisions only within a specified period and under certain conditions. The revised return filed by the assessee during the assessment proceedings was deemed invalid as it did not comply with these provisions. Therefore, the income declared in the original return was considered for the purpose of Section 249(4) compliance.

4. Allocation of "On Money" Received from Property Sales and Its Tax Implications:
The Tribunal addressed the issue of "on money" received by the assessee from the sale of properties. The assessee had admitted to receiving Rs. 1.78 crores in cash over and above the registered sale consideration. The Tribunal rejected the assessee's retraction of this admission, noting that the retraction was not made at the earliest opportunity and lacked credibility. The Tribunal also dealt with the allocation of the "on money" between the two properties sold. It concluded that an equitable allocation should be made, considering various factors such as the characteristics of the properties and market rates. The Tribunal decided that 15% of the "on money" should be attributed to the urban property and 85% to the village agricultural land.

5. Admissibility of Additional Evidence Under Rule 46A:
The Tribunal found that the CIT(A) had admitted additional evidence (a jurisdictional map) without confronting it to the assessing officer, violating Rule 46A of the Income Tax Rules. Consequently, the Tribunal set aside the CIT(A)'s order on this issue and remanded it to the assessing officer for re-examination in light of the additional evidence.

6. Enhancement of Income by the CIT(A) Without Issuing a Notice:
The Tribunal addressed the issue of the CIT(A) enhancing the income without issuing a notice to the assessee. The Tribunal found that the CIT(A) had merely allocated the "on money" between the properties rather than making an additional assessment requiring a notice. Therefore, the Tribunal did not find any procedural violation in this regard.

Conclusion:
The Tribunal dismissed the revenue's appeals (ITA Nos. 166 to 168 of 2010) and partly allowed the appeal in ITA No. 169 of 2010 for statistical purposes. The assessee's appeal in ITA No. 447 of 2010 was allowed, and the other two appeals were partly allowed. The Tribunal's decision emphasized the importance of adhering to procedural rules and judicial precedents in tax assessments and appeals.