1996 (1) TMI 154 - AT - Income Tax

Summary

Issues Involved:

1. Assumption of jurisdiction u/s 263 by CIT.
2. Addition of Rs. 48 lakhs as unexplained income.
3. Alternative plea for set-off of Rs. 48 lakhs u/s 71.
4. Addition of Rs. 94,601 as deemed dividend u/s 2(22)(e).

Summary:

Issue 1: Assumption of Jurisdiction u/s 263 by CIT

The assessee challenged the CIT's action in assuming jurisdiction u/s 263, arguing that all relevant enquiries and investigations were carried out by the Assessing Officer before passing the assessment order, which was subsequently cancelled by the CIT. The Tribunal noted that the Assessing Officer had all necessary information regarding the alleged payment of Rs. 48 lakhs to Shri J.M. Paul and had considered the statements made by the assessee before the Enforcement Directorate and the ADI. The Tribunal held that the CIT was not justified in setting aside the assessment order without a firm conclusion that the order was erroneous and prejudicial to the interest of revenue. The order of the CIT u/s 263 was cancelled, and the original assessment order was restored.

Issue 2: Addition of Rs. 48 Lakhs as Unexplained Income

The assessee contested the addition of Rs. 48 lakhs made by the Assessing Officer and confirmed by the CIT(A), arguing that the addition was based solely on a confessional statement made under duress and subsequently retracted. The Tribunal noted that the confessional statements were not corroborated by any other evidence, and Shri J.M. Paul had denied receiving the amount. The Tribunal ruled that the addition of Rs. 48 lakhs was not justified and directed its deletion.

Issue 3: Alternative Plea for Set-off of Rs. 48 Lakhs u/s 71

The assessee argued that if the addition of Rs. 48 lakhs were to be made, it should be allowed as a set-off against income u/s 71, citing the Supreme Court judgment in the case of Piara Singh. The Tribunal found no merit in this plea, stating that the decision in Piara Singh was not applicable to the facts of the case. However, since the addition of Rs. 48 lakhs was deleted on merits, this plea became redundant.

Issue 4: Addition of Rs. 94,601 as Deemed Dividend u/s 2(22)(e)

The assessee did not press this ground during the hearing, and it was dismissed as not pressed.

Conclusion:

The Tribunal allowed the appeals filed by the assessee, cancelling the order of the CIT u/s 263 and deleting the addition of Rs. 48 lakhs. The alternative plea for set-off was found to be without merit, and the addition of Rs. 94,601 as deemed dividend was dismissed as not pressed.