2009 (8) TMI 629 - HC - Income Tax

Unexplained Investment- The assessee explained that the deposits were his accumulated agricultural income from the year 1981 onwards and produced his books of account from the financial year 1978-89 and a number of documents and certificates from the concerned state government officers. The Assessing Officer took the view that the books of account produced by the assessee should be rejected as the assessee had not maintained any stock register thus the income of assessee is unexplained income u/s 69 of the Act. Tribunal held that assessee could not have any agricultural income. Held that- the accounts not rejected only on the basis of that stock register is not maintained. The Tribunal also failed to consider the issue on the basis of the books of accounts of the assessee and the documents and certificates filed by the assessee. Thus the order of Tribunal were set aside and the matter was remitted back for fresh decision.

Summary

Issues Involved:
1. Rejection of books of account by the Assessing Officer.
2. Determination of agricultural income and its accumulation.
3. Validity of the Tribunal's reliance on the absence of returns under the Assam Agricultural Income-tax Act.
4. Consideration of documents and certificates submitted by the assessee.

Detailed Analysis:

1. Rejection of Books of Account by the Assessing Officer:
The Assessing Officer rejected the books of account of the assessee on the grounds that they were prepared subsequently and lacked a stock register, which was deemed essential for verifying the accounts. The Officer relied on the Supreme Court judgment in S. N. Namasivayam Chettiar v. CIT, which emphasized the importance of a stock register for a quantitative tally of transactions. However, the Commissioner of Income-tax (Appeals) found this reliance misplaced, stating that the lack of a stock register does not automatically warrant the rejection of books of account. The High Court agreed with the Commissioner, stating that the Assessing Officer was wrong in rejecting the books solely based on the absence of a stock register.

2. Determination of Agricultural Income and Its Accumulation:
The assessee claimed that the deposits in question were accumulated agricultural income from 1981 onwards, supported by various documents and certificates from state authorities. The Commissioner of Income-tax (Appeals) accepted this claim, as the Assessing Officer did not dispute the existence or the quantum of the agricultural income. The High Court, however, noted that the Commissioner should have independently verified the claims rather than assuming them to be true due to the lack of adverse findings by the Assessing Officer.

3. Validity of the Tribunal's Reliance on the Absence of Returns under the Assam Agricultural Income-tax Act:
The Tribunal reversed the Commissioner's decision, primarily on the grounds that the assessee had not filed any returns under the Assam Agricultural Income-tax Act for the years in question. The High Court found this approach flawed, stating that the absence of returns might raise suspicion but should not be the sole basis for rejecting the claim of accumulated agricultural income. Instead, the Tribunal should have considered all relevant facts and evidence.

4. Consideration of Documents and Certificates Submitted by the Assessee:
The High Court criticized both the Commissioner and the Tribunal for not adequately considering the documents and certificates submitted by the assessee. The Commissioner accepted the claims without sufficient scrutiny, while the Tribunal dismissed them solely based on the absence of returns. The High Court emphasized the need for a balanced consideration of all evidence, including the books of account and supporting documents.

Conclusion:
The High Court allowed the appeals filed by the assessees, set aside the Tribunal's orders, and remitted the matters back to the Tribunal for fresh consideration. The Tribunal was directed to judiciously determine the issue by considering all relevant facts, including the books of account and the documents submitted by the assessees, rather than relying solely on the absence of agricultural income returns.