2013 (4) TMI 289 - HC - Income Tax

Additions u/s 68 - assessee respondent is a partnership firm - ITAT deleted the addition stating that Revenue Authorities failed to consider the assessee s request for calling for information u/s 133(6) or u/s 131 - Held that - The Tribunal has not applied its mind to the various aspects of the case and has allowed the appeal of the assessee by making general remarks. The Tribunal being last fact finding authority should have considered the evidence and material produced by the respective parties in support of its findings. The order of Tribunal is far from satisfactory and therefore, the same cannot be allowed to stand. Also the department submits that in view of the aforesaid judgment of this Court in the case of Jagmohan Ram Ram Chandra (2004 (8) TMI 46 - ALLAHABAD HIGH COURT) the finding recorded by the Tribunal is unjustified wherein held that if an assessee, who is a partner in the partnership firm, has made investments which are not recorded in the books of account maintained by him for any source of income and the explanation given by the partner or individual regarding the source of deposits is disbelieved, then such deposits which are investment can be brought to tax as income from undisclosed sources under section 69. Thus remanding the matter back to the Tribunal to decide the appeal afresh in the light of observations made above keeping in view the ingredients of section 68 and other relevant provisions - in favour of revenue for statistical purposes.

Summary

Issues:
Appeal under section 260A of the Income Tax Act against ITAT order for Assessment Year 1997-1998 - Addition under section 68 for unexplained cash credits - Tribunal's decision on deletion of additions - Justification of Tribunal's decision - Application of mind by Tribunal - Remand of matter back to Tribunal for fresh decision.

Analysis:
The case involves an appeal under section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 1997-1998. The assessee, a partnership firm engaged in hire purchase finance, had filed a return disclosing income at Rs.280. During assessment proceedings, the Assessing Authority noted deposits received by the firm categorized under Fixed Deposits, Small Deposits, and Cumulative Deposits. The Assessing Officer added these amounts under section 68 of the Income Tax Act, as the nature and source of these cash credits were not adequately proven by the assessee. The CIT (A) upheld the additions, but the Tribunal allowed the appeal, leading to the present case.

The substantial questions of law admitted for consideration were twofold. Firstly, whether the Tribunal was justified in deleting the additions made under section 68 of the Act, and secondly, whether the Tribunal was justified in holding that the assessee proved the identity, capacity, and genuineness of the transactions related to the cash credits. The appellant contended that the Tribunal's order lacked reasoning and application of mind, merely making general remarks without proper analysis. The appellant cited a Division Bench judgment to support their argument.

On the other hand, the respondent supported the Tribunal's decision, emphasizing that the findings were factual and should not be interfered with under section 260-A of the Act. The respondent highlighted that some depositors were produced, and the firm, being in the finance business, received small deposits from various individuals. The High Court observed that the Tribunal's order, spanning fourteen pages, did not sufficiently analyze the evidence and material presented by the parties. The Court found the Tribunal's decision lacking in satisfactory reasoning and justification, leading to the order being set aside.

Additionally, a reference was made to a judgment by the High Court in a specific case, which was disputed by the respondent's counsel. As a result of the unsatisfactory nature of the Tribunal's order, the matter was remanded back to the Tribunal for a fresh decision. The High Court directed the Tribunal to rehear and redecide the appeal within a stipulated timeframe, emphasizing the importance of considering the provisions of section 68 of the Income Tax Act and other relevant laws in the fresh decision-making process. Ultimately, the High Court allowed the appeal, setting aside the previous order and restoring the matter back to the Tribunal for further proceedings.