2008 (5) TMI 141 - HC - Income Tax

Addition made on account of fictitious sale bills & cash paid out of undisclosed sources. out of addition of Rs.14,95,000, sum of Rs.10 lacs was offered for taxation by son of the assessee to purchase peace of mind or escape from litigation held that addition on the basis of surrender made by deceased-assessee s son is not justified If the Department does not allow the assessee to buy peace of mind, why should the assessee be bound by the offer to pay tax revenue s appeal dismissed

Summary

Issues:
1. Appeal filed by the revenue under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal.
2. Reopening of assessment based on information received regarding fictitious sale of goods.
3. Addition of cash paid out of undisclosed sources to the returned income.
4. Dismissal of appeal by the Commissioner of Income Tax (Appeals).
5. Deletion of addition made by the Assessing Officer by the Income Tax Appellate Tribunal.
6. Justification of deletion of the addition of Rs.14,95,000/- by the Tribunal.
7. Legality of deleting the addition made on account of fictitious sale bills in favor of M/s Goyal Industries Ludhiana.

Analysis:
The High Court dealt with appeals filed by the revenue under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The case involved the reopening of assessment based on information received regarding a fictitious sale of goods. The Assessing Officer added cash paid out of undisclosed sources to the returned income, leading to an appeal by the assessee which was dismissed by the Commissioner of Income Tax (Appeals).

The Income Tax Appellate Tribunal, in its order, deleted the addition made by the Assessing Officer. The Tribunal focused on the surrender of Rs.10 lacs by the deceased-assessee's son and concluded that no addition was justified based on the surrender. The Tribunal highlighted the lack of material to sustain the addition and emphasized that the terms of surrender were not accepted by the Assessing Officer.

The High Court, after hearing arguments from both sides, upheld the Tribunal's decision to delete the addition of Rs.14,95,000/-, stating that there was no error or infirmity in the Tribunal's order. The Court emphasized that if the Department does not allow the assessee to buy peace of mind, the statement of surrender has to be either accepted in full or ignored. Consequently, the Court found no merit in the revenue's appeal and dismissed it.

The key issue raised in the appeal was the legality of deleting the addition made on account of fictitious sale bills in favor of M/s Goyal Industries Ludhiana. The Court, after a thorough analysis, supported the Tribunal's decision, concluding that no question of law arose for determination from the Tribunal's order. As a result, both appeals were dismissed for being devoid of merit.