1999 (4) TMI 8 - HC - Income Tax

Undisclosed Income - Whether the Appellate Tribunal is right in law and on facts in holding that only the net profit rate can be applied in respect of admitted sales of goods outside the books of account? - unless there is a finding to the effect that investment by way of incurring the cost in acquiring the goods which have been sold has been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. - We are, therefore, of the opinion that no question of law which requires to be referred to this court arises out of the Tribunal s appellate order. The order of the Tribunal under section 256(1) is not erroneous in reaching such conclusion.

Summary

The Commissioner of Income-tax sought a direction to the Income-tax Appellate Tribunal regarding undisclosed sales. The Tribunal found that only the estimated profits embedded in the sales should be added as income, not the entire sales amount. The High Court concluded that unless there is evidence of undisclosed investment in acquiring the goods, the undisclosed sales cannot be treated as income. The application was rejected as no legal question arose from the Tribunal's order.