2017 (5) TMI 1780 - HC - Income Tax

Notice u/s 143(2) within period of limitation - Addition u/s 68 - HELD THAT - The matter is required to be remitted back to the tribunal in view of the fact that tribunal has committed an error in deleting the disallowance and wrongly allowed the appeal preferred by the assessee ignoring the submissions made by the department in this regard. The issue is answered in favour of the department. The matter is remitted back to the tribunal to decide the same afresh in accordance with law. The order of tribunal is set aside.

Summary

Issues:
1. Challenge to Tribunal's judgment allowing the appeal and reversing AO and CIT(A)'s view.
2. Substantial questions of law framed by the court.
3. Disallowance of addition made under section 68 of the Act.
4. Disallowance of cash payments under Rule 6DD of the Income Tax Act Rules.
5. Contrary observations to judgments of Delhi High Court and Punjab & Haryana High Court.
6. Service of notice under section 143(2) and its validity.
7. Error by the Tribunal in deleting disallowance and allowing the appeal.

Analysis:
1. The appellant challenged the Tribunal's judgment that reversed the views of the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) (CIT(A)). The High Court framed substantial questions of law related to the assessment being null and void, deletion of addition under section 68 of the Act, and disallowance of cash payments under Rule 6DD of the Income Tax Act Rules.

2. The Tribunal's decision was based on the appellant declaring all advances in the impugned year, completing the work in the following year, and declaring the advances as income in the subsequent year. The High Court considered whether taxing the appellant twice was justified and analyzed the surrender letter not signed by the assessee. The Court reversed the lower authorities' orders, citing lack of evidence of undisclosed income and satisfactory explanations for advances received.

3. The appellant argued that the Tribunal's observations contradicted judgments from the Delhi High Court and Punjab & Haryana High Court. The High Court emphasized the importance of raising factual questions at the earliest opportunity and highlighted the service of notice under section 143(2) as a crucial aspect in the case.

4. Regarding the service of notice under section 143(2), the High Court found a clerical error in the date mentioned in the affidavit/service report submitted by the Inspector. Despite the error, the Court favored the Revenue and remitted the matter back to the Tribunal for a decision on merits.

5. The High Court concluded that the Tribunal erred in deleting the disallowance and allowing the appeal without considering the department's submissions. The matter was remitted back to the Tribunal for fresh consideration in accordance with the law, setting aside the Tribunal's order. The appeal was disposed of accordingly.