2010 (10) TMI 47 - HC - Income Tax

Deposits were found in the books of account of the assessee in the name of various persons who had supplied hides and skins and to whom the commission was payable - assessee could produce only some of the Vayparies and failed to produce others because they were not available - Held that failure to produce Vayparies cannot be taken to be a concealment for fixing the penalty liability on the assessee - it was difficult to trace out such persons after the long time. The assessee has produced some of the depositors and there is no evidence of any concealment of income on the part of the assessee. - Revenue appeal dismissed

Summary

Issues:
Appeal under Section 260A of the Income Tax Act for assessment year 1983-84, treatment of deposits in the books of account as income under Section 68, penalty under Section 271(1)(c) of the Act, failure to prove identity of depositors, confirmation of additions and penalty, appeal against Tribunal's order.

Analysis:
The case involved an appeal under Section 260A of the Income Tax Act concerning the assessment year 1983-84. The assessee, engaged in the business of raw hides and skins in commission agency, had certain deposits in the books of account in the name of suppliers of hides and skins to whom commission was payable. The Assessing Authority requested proof of identity and creditworthiness of these persons, issuing notices under Section 131 of the Act. Despite the assessee providing evidence to establish the identity and creditworthiness of the depositors, the Assessing Authority treated the deposits as income under Section 68 of the Act.

The assessee appealed before the Commissioner of Income Tax (Appeal), which partially allowed the appeal. Subsequently, an appeal was filed before the Tribunal, which confirmed some additions and the Commissioner's order. Consequently, a penalty under Section 271(1)(c) was imposed based on the additions made during the assessment. The assessee appealed, and the penalty was canceled by the Commissioner of Income Tax (Appeal). The revenue then appealed to the Tribunal, which dismissed the appeal, stating that there was no concealment or contumacious conduct on the part of the assessee.

The Tribunal found that the deposits in various persons' names were related to the hides and skins business, with credits for supply and commission payments. The assessee could only produce some depositors as others were unavailable due to the long time gap between the assessment year and the notices issued. The Tribunal held that the failure to produce all depositors did not amount to concealment or justify penalty imposition. The Tribunal's decision was based on factual findings and required no interference.

Upon hearing arguments from both parties, the High Court upheld the Tribunal's decision, emphasizing the difficulty in tracing the depositors after a significant time lapse. The Court noted that the assessee had produced some depositors and found no evidence of income concealment. Consequently, the appeal was dismissed as having no merit in the circumstances of the case.