1981 (1) TMI 60 - HC - Income Tax

Summary

Issues:
1. Assessment of cash credits in the account books of the assessee for the assessment year 1967-68.
2. Rejection of evidence by the ITO regarding the genuineness of cash credits.
3. Setting aside of the ITO's order by the AAC and direction for a fresh assessment.
4. Appeal before the Income-tax Appellate Tribunal regarding the AAC's decision.
5. Questions of law referred to the High Court regarding the Tribunal's decision.
6. Interpretation of the powers of the Appellate Assistant Commissioner (AAC) under section 251 of the Income-tax Act, 1961.

Analysis:
The High Court of Punjab and Haryana dealt with a case involving the assessment of cash credits in the account books of the assessee for the assessment year 1967-68. The Income Tax Officer (ITO) found cash credits and added them to the assessee's income from undisclosed sources. The assessee produced evidence to prove the genuineness of the cash credits, but the ITO rejected it, considering the parties as mere name-lenders. The Additional Commissioner of Income Tax (AAC) set aside the ITO's order and directed a fresh assessment, emphasizing the need for proper evidence to link the cash credits to the assessee. The Income-tax Appellate Tribunal disagreed with the AAC's decision, stating that there was no justification for setting aside the assessment order without the assessee complaining of lack of opportunity to present evidence. The Tribunal directed the AAC to decide the appeal based on the existing evidence. The High Court addressed two questions referred to it, emphasizing the wide powers of the AAC under section 251 of the Income-tax Act, allowing for setting aside assessments and directing fresh assessments. The Court concluded that the AAC had the authority to remand the case to the ITO for a fresh assessment, especially when proper evidence was lacking. The Court also highlighted that the Tribunal's view on the remand order being arbitrary was incorrect, as the AAC had the power to gather further evidence to ensure justice. The Court rejected the assessee's reliance on a previous case, emphasizing that the AAC's power to decide based on existing evidence was not absolute. Ultimately, the High Court answered both questions in favor of the revenue, supporting the AAC's decision to set aside the assessment for a fresh evaluation, emphasizing the need for proper evidence and the AAC's wide powers to ensure a just outcome.