2008 (7) TMI 57 - HC - Income Tax

Whether the Tribunal is right in deleting the addition of Rs.10,000/- from the income of the assessment year 1979-80 on the ground that this deposit did not fall in the previous year for this year - questions referred by the Tribunal do not require consideration by this Court because the amount involved is too small i.e. only Rs. 2500

Summary

Issues:
1. Deletion of addition of Rs.10,000/- despite the assessee's surrender.
2. Deletion of addition of Rs.10,000/- based on the timing of the deposit.

Issue 1 - Deletion of addition despite surrender:
The case involves the assessment year 1979-80 where the assessee, a partnership firm engaged in rice manufacturing, declared a cash credit of Rs.10,000/- in the name of a deceased individual, Prithi Singh. The Assessing Officer, upon inquiry, requested proof of the credit's genuineness. The assessee, unable to provide conclusive evidence due to Prithi Singh's demise, submitted an affidavit from Prithi Singh's son, Dharam Singh. Subsequently, the assessee revised the return, surrendering the Rs.10,000/- credit to avoid prolonged litigation, emphasizing it was advanced by Prithi Singh. However, the Assessing Officer rejected the surrender, treating it as unexplained income of the assessee.

Issue 2 - Timing of the deposit for deletion of addition:
The Assistant Commissioner upheld the Assessing Officer's decision, leading to the assessee's appeal to the Tribunal. The Tribunal, while acknowledging the credit's lack of genuineness, ruled in favor of the assessee. The Tribunal reasoned that the credit did not fall within the relevant "previous year" for assessment, as it predated the business setup. Consequently, the Tribunal deleted the addition of Rs.10,000/- from the income for the assessment year 1979-80.

The High Court, after considering the arguments, declined to address the substantial questions of law referred by the Tribunal due to the minimal tax effect of approximately Rs.2500/- and the precedents emphasizing non-interference in cases involving insignificant amounts. Citing various judgments, the Court highlighted the principle of not entertaining matters with limited tax implications, ultimately refusing to answer the questions and disposing of the reference accordingly.