2019 (3) TMI 1167 - HC - Income Tax

Rectification petition u/s 254 - scope of undisclosed income u/s 158B(b) - rectification of 'mistake of fact' as well as 'mistake of law' - additions in the hands of the Assessee for NRI gift by CIT(A) - overlooking the disclosure of the NRI Gifts in the regular return filed prior to the date of search - search u/s 132(4) with regard to the NRI gifts - upholding the addition by Tribunal regarding NRI Gifts as 'undisclosed income' Finding of facts - substantial question of law - HELD THAT - No substantial questions of law arises in the present case. The findings on facts about the alleged NRI gifts which the Assessee in the present case specifically admitted in the statements recorded under Section 132(4) at the time of search that it was his own money routed back to his own family members who were the partners of the firm through an alleged NRI and was undisclosed income. There can be no better evidence than the said specific admission of the Assessee. Never, gifts have been accepted by any Assessing Authority by treating the explanation and confirmations given by the Assessee as sufficient and never was the NRI Donor produced and found to be genuine by the Assessing Authority. The CIT (Appeals) has discussed all these aspects after the specific enhancement notice was given by him and thereafter giving the cogent findings of the facts. Thus on the admission of the Assessee himself that such money was his own undisclosed income brought back in the country through alleged NRI gifts was the best evidence and in our opinion was sufficient to bring it to tax in the hands of the Assessee Firm, and the learned CIT (Appeals) cannot be said to have faulted in any manner in serving an enhancement notice, inter alia, on the said issue and making the additions in the hands of the Assessee Firm. In our opinion, the Tribunal was justified in rejecting the Miscellaneous Petition of the Assessee also under Section 254 of the Act as there was no mistake apparent in the original appeal order passed by the Tribunal - decided against the Assessee

Summary

Issues:
1. Appeal against order by Income Tax Appellate Tribunal regarding additions made by CIT (Appeals) after notice of enhancement.
2. Dismissal of miscellaneous petition under Section 254(2) for rectification of 'mistake of fact' and 'mistake of law'.
3. Correctness of NRI gifts being treated as 'undisclosed income' despite being disclosed in regular return for Assessment Year 1994-1995.

Issue 1: Appeal against Tribunal's Order
The Assessee filed an Appeal challenging the Income Tax Appellate Tribunal's order partially allowing the appeal but rejecting the ground for additions made by CIT (Appeals) regarding alleged NRI gifts of ?14,65,500. The Appeal raised substantial questions of law related to the correctness of the Tribunal's decision and the treatment of the NRI gifts as undisclosed income.

Issue 2: Dismissal of Miscellaneous Petition
A search conducted at the Assessee's business place revealed discrepancies in NRI gifts, leading to additions in the hands of the Assessee by CIT (Appeals). The Assessee filed a Miscellaneous Petition under Section 254(2) seeking rectification of 'mistake of fact' and 'mistake of law' in the Tribunal's order. However, the Tribunal rejected the petition, leading to the Assessee's appeal before the High Court.

Issue 3: Treatment of NRI Gifts as Undisclosed Income
The Assessee admitted during the search that the NRI gifts were actually his own undisclosed income routed through family members. Despite the Assessee's claim of disclosing the gifts in the returns for Assessment Year 1994-1995, the CIT (Appeals) upheld the additions based on the Assessee's admission and lack of evidence proving the NRI donors' authenticity. The Tribunal affirmed this decision, emphasizing the lack of connection between the gifts and the declared turnover.

In the detailed analysis, it is evident that the Assessee's admission of routing own funds as NRI gifts and the lack of evidence supporting the authenticity of the donors played a crucial role in the decisions made by the CIT (Appeals) and the Tribunal. The Tribunal's rejection of the Miscellaneous Petition was based on the absence of any apparent mistake in the original order. The High Court upheld the Tribunal's decision, emphasizing the Assessee's admission as substantial evidence justifying the additions made by the CIT (Appeals). The Court found no substantial question of law, dismissing the Assessee's appeal and ruling in favor of the Revenue.