1988 (3) TMI 107 - AT - Income Tax

Summary

Issues:
1. Treatment of declaration made by assessee under High Denomination Notes Declaration as income from undisclosed sources.
2. Legal issue of reopening of assessment based on fresh information.

Analysis:

Issue 1: Treatment of Declaration as Income from Undisclosed Sources
The assessee declared Rs. 75,000 under the High Denomination Notes Declaration in 1978 as income from undisclosed sources. The Department questioned the source of this amount due to discrepancies with the bank's records. The assessee argued that the cash balance was legitimate, supported by cash receipts and the Managing Director's statements. The timeline of events, including the original return filing and subsequent assessments, was crucial in determining the legitimacy of the declared income. The assessee contended that the cash was available from various sources, and the Department's assumption of undisclosed income was unfounded. Citing tribunal decisions and legal provisions, the assessee challenged the Department's position on the source of the declared amount. Ultimately, the tribunal ruled in favor of the assessee, concluding that the amount was part of the cash balance and not undisclosed income.

Issue 2: Reopening of Assessment
The Revenue emphasized the assessee's conduct in compounding prosecution and changing statements regarding the source of the high denomination notes. The Department insisted on the assessee providing evidence to support the source of the amount. However, the tribunal noted that the original assessment included all relevant facts and there was no new information to warrant reopening. The tribunal found the reopening of the assessment to be a mere change of opinion without fresh information, rendering it legally invalid. Consequently, the tribunal quashed the reopening of the assessment.

In conclusion, the tribunal allowed the appeal in part, ruling in favor of the assessee on both issues of treating the declared amount as income from undisclosed sources and the legality of reopening the assessment.