1970 (11) TMI 38 - HC - Income Tax

Whether Tribunal was right in law in entertaining the new contention raised on behalf of the assessee that past intangible additions made in the assessee s case explained the discrepancy in the capital figure - Whether Tribunal was right in law in holding that past intangible additions made in the case of an assessee should be taken into account in considering the unexplained investment made by it - When additions have been made in earlier assessment years towards income from undisclosed sources, the assessee can take advantage of the past intangible additions to explain the source of the alleged undisclosed income therefore both questions are answered in affirmitive

Summary

Issues:
1. Entertaining new contention regarding past intangible additions
2. Consideration of past intangible additions in unexplained investment

Entertaining new contention regarding past intangible additions:
The case involved questions referred by the Income-tax Appellate Tribunal regarding the assessee's explanation for a discrepancy in capital figures during assessment for the year 1964-65. The Tribunal allowed the assessee to raise a new contention that the difference in capital figures represented intangible additions made in previous years. The Tribunal considered this contention legal, citing precedents where intangible additions were taken into account while considering unexplained investments. The Commissioner of Income-tax challenged this decision, arguing that permitting new grounds involving fresh facts was not within the Tribunal's jurisdiction. However, the High Court held that the Tribunal had the discretion to allow new contentions, as supported by legal provisions and previous judgments. The Court emphasized that the departmental representative was given an opportunity to address the new ground, satisfying procedural requirements. Thus, the Court answered the first question in the affirmative, upholding the Tribunal's decision to consider the new contention.

Consideration of past intangible additions in unexplained investment:
The second issue revolved around whether the assessee could utilize past intangible additions to explain a sum treated as undisclosed income. The High Court reasoned that the assessee should be allowed to benefit from previously added intangible incomes to clarify the source of the disputed amount, even though this plea was not raised earlier in the assessment process. The Court highlighted the principles of equity and fair play, noting that the assessee had already paid taxes on the intangible additions. Referring to relevant Supreme Court judgments, the Court emphasized that the assessee's right to explain the source of income should not be restricted, especially when other explanations were rejected. Consequently, the Court answered the second question in the affirmative, allowing the assessee to consider past intangible additions in explaining the undisclosed income. The judgment favored the assessee's right to utilize previously added incomes for clarification purposes, ensuring a fair and just outcome in the assessment process.

In conclusion, the High Court's judgment addressed the issues of entertaining new contentions regarding past intangible additions and considering these additions in unexplained investments. The Court upheld the Tribunal's decision to allow the assessee to raise a new contention and utilize past intangible incomes for explanation purposes, emphasizing procedural fairness and equitable treatment in tax assessments.