2012 (7) TMI 1110 - HC - Income Tax

Unexplained Cash Credits u/s 68 - The assessee claimed benefits u/s 80HHC for export sale. The AO declared those sales as bogus and therefore, denied such benefits - HELD THAT- Decision made by the tribunal is upheld, where it was observed that when the assessee had already offered sales realisation and such income is accepted by the AO to be the income of the assessee, addition of the same amount once again u/s 68 would tantamount to double taxation of the same income. CIT not only deleted addition u/s 68, but also directed that the assessee shall be entitled to deduction u/s 80HHC for such disputed amount also. Tribunal didn't address that issue. However, assessee clarified that the assessee does not claim any deduction u/s 80HHC to the extent of such disputed amount. He further submitted that diminution of his eligibility for deduction u/s 80HHC would have no bearing on the assessee's ultimate tax liability. Thus, all tax appeal dismissed, subject to clarification given by Assessee - Decision in Favour of Assessee.

Summary

Issues Involved:
Appeal against the Income Tax Appellate Tribunal's judgment regarding the deletion of a disallowance made on account of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Analysis:

1. Issue of Unexplained Cash Credit under Section 68:
The primary issue in this case revolved around the deletion of a disallowance of Rs. 70,00,000 made on account of unexplained cash credit under section 68 of the Income Tax Act. The Assessing Officer had initially concluded that the amount in question represented bogus sales by the assessee and therefore reduced the eligibility of the assessee's deduction under section 80HHC of the Act by the same amount. Subsequently, the Commissioner (Appeals) reversed this finding, stating that there was no concrete evidence to support the claim that the sales were bogus. The Commissioner further directed the grant of deduction under section 80HHC of the Act for the disputed amount. The Tribunal, while upholding the deletion of the amount under section 68, emphasized that taxing the same income twice would result in double taxation. The High Court concurred with the Tribunal's view, noting that the Assessing Officer's actions would indeed lead to double taxation and found no reason to interfere with the Tribunal's order.

2. Clarification on Deduction under Section 80HHC:
A secondary issue arose regarding the deduction under section 80HHC of the Act for the disputed amount of Rs. 70,00,000. The Commissioner (Appeals) had directed that the assessee should be entitled to deduction under section 80HHC for this amount. However, the Tribunal did not address this aspect. The High Court observed that the Tribunal's finding on double taxation was based on the deletion of the disputed amount while calculating section 80HHC benefits. The Court considered remanding the proceedings for a finding on this issue but noted that the assessee clarified that they do not claim any deduction under section 80HHC for the disputed amount. As a result, the High Court dismissed all tax appeals, subject to the clarification provided by the assessee regarding the deduction under section 80HHC.

In conclusion, the High Court upheld the Tribunal's decision to delete the disallowance of Rs. 70,00,000 under section 68 of the Income Tax Act, emphasizing the avoidance of double taxation. The Court also addressed the issue of deduction under section 80HHC, noting the assessee's stance on not claiming the deduction for the disputed amount, thereby avoiding the need for remand proceedings.