1976 (11) TMI 25 - HC - Income Tax

Act Of 1922, Act Of 1961, Appellate Assistant Commissioner, Assessment Order, Income Tax, Provisional Assessment, Regular Assessment

Summary

Issues Involved:
1. Justification for upholding the addition of Rs. 56,258.
2. Rejection of the plea for retaining an addition of Rs. 1,25,000 for the assessment year 1961-62.

Issue-Wise Detailed Analysis:

1. Justification for Upholding the Addition of Rs. 56,258:
The Tribunal upheld the addition of Rs. 56,258 based on the examination of the books of the assessee, who was involved in the business of manufacturing and selling jewellery and precious stones. The Income-tax Officer (ITO) discovered loans taken on hundis, which were deemed not genuine and considered as the assessee's own unaccounted money. The peak credit of Rs. 1,25,000 was treated as income from undisclosed sources. The Appellate Assistant Commissioner (AAC) agreed with the ITO but allowed a deduction of Rs. 68,742, retaining Rs. 56,258. The Tribunal, upon further appeal, examined documents and testimonies from brokers and bankers, concluding that the loans were not genuine. The Tribunal found the testimonies of the brokers and bankers unsatisfactory but could not find sufficient grounds to justify adding the entire Rs. 1,25,000. Thus, it upheld the addition of Rs. 56,258.

The High Court noted that the Tribunal's decision must be based on acceptable material and reasoned that the Tribunal failed to consider all evidence properly. The broker's testimony was inconsistent, and the bankers' statements were self-serving. The Court emphasized that the Tribunal must dissect and assess the evidence thoroughly. The Tribunal's approach lacked a legal basis, and there was no clear rationale for differentiating between genuine and non-genuine hundis. Consequently, the High Court set aside the Tribunal's order in part and remanded the case for a fresh evaluation with clear reasoning.

2. Rejection of the Plea for Retaining an Addition of Rs. 1,25,000:
The department's plea for retaining the addition of Rs. 1,25,000 was rejected because it did not file a memorandum of cross-objections as required by section 253(4) of the Income-tax Act and rule 23 of the Tribunal Rules. The Tribunal's jurisdiction is limited to the subject matter of the appeal before it, and it cannot consider issues not properly brought before it. The department's failure to file an appeal or cross-objections precluded it from seeking an enhancement of the assessment during the appeal hearing. The High Court upheld the Tribunal's view, stating that the department could not leisurely contend for an enhancement without following the prescribed legal procedures. The Court cited the Supreme Court's decision in Hukumchand Mills Ltd. v. Commissioner of Income-tax, which clarified that the Tribunal's powers do not include enhancement of assessment unless properly invoked through an appeal or cross-objections. Therefore, the High Court answered the second question against the revenue, affirming that the Tribunal rightly limited its consideration to the Rs. 56,258 addition.

Conclusion:
The High Court remanded the case to the Tribunal for a fresh evaluation of the addition of Rs. 56,258, directing the Tribunal to base its conclusions on a thorough and reasoned analysis of all evidence. The Court upheld the rejection of the department's plea for retaining the entire Rs. 1,25,000, emphasizing the necessity of following proper legal procedures for such contentions.