1997 (1) TMI 6 - SC - Income Tax

Tribunal has found that the sources of investments (i.e. that the same were financed from out of the savings from the income of the properties which were left by her mother s first husband) could not be treated as income of the assessee - on a true interpretation of section 69, the Tribunal is right in law in holding that section 69 cannot be invoked in respect of the investments of the assessee and that, therefore, the addition made should be deleted

Summary

Issues: Interpretation of Section 69 of the Income-tax Act, 1961 regarding treatment of unexplained investments as income.

In this case, the Supreme Court heard appeals against the Kerala High Court's judgment regarding the interpretation of Section 69 of the Income-tax Act, 1961. The appeals pertained to the assessment years 1968-69 and 1969-70, involving a Muslim lady who had made land investments. The Income-tax Officer had added the investment amounts as income, which was affirmed by the Appellate Assistant Commissioner. However, the Income-tax Appellate Tribunal (the Tribunal) overturned the decision, stating that the assessee could not have earned the investment amounts. The Tribunal held that Section 69 conferred discretion on the Income-tax Officer to treat unexplained investments as income, not a mandatory obligation. The Tribunal referred the matter to the High Court, which upheld its decision, considering the assessee's lack of resources and age. The Revenue argued that the word "may" in Section 69 should be read as "shall," but the Court disagreed. The Court emphasized that Section 69 grants the Income-tax Officer discretion to treat unexplained investments as income based on the facts of each case. In this case, the Tribunal correctly exercised discretion by not treating the investments as income, considering the assessee's circumstances. The Court affirmed the Tribunal's decision, dismissing the appeals with no costs awarded.