2020 (9) TMI 495 - HC - Income Tax

Unexplained cash credits in bank accounts - HELD THAT - From perusal of the order passed by the Income Tax Appellate Tribunal, we find that the Tribunal has not decided the issue on merits and ought to have adjudicated the issue with regard to unexplained credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/-. Tribunal has held that orders of reassessment have been rendered infructuous. The issue with regard to unexplained credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/- needs to be adjudicated. The Tribunal erred in not adjudicating the issues on merits and therefore, we answer the first substantial question of law in favour of the revenue. Therefore, it is not necessary to answer the second substantial question of law. In the result, the impugned order dated 21.12.2012 passed by the Income Tax Appellate Tribunal is hereby quashed and the matter is remitted to Commissioner of Income Tax (Appeals) to determine the issue afresh with regard to the unexplained cash credits to the tune of ₹ 50,00,000/- and ₹ 65,10,000/-.

Summary

Issues:
1. Tribunal annulling reassessment under Section 147 for assessment years 1996-97 and 1997-98 without going into merits.
2. Application of provisions of sub-Section 2 to Explanation(c) of section 158BA by the Tribunal.

Analysis:

Issue 1:
The appeal involved a challenge by the revenue regarding the Tribunal annulling the reassessment made protectively under Section 147 for the assessment years 1996-97 and 1997-98 without delving into the merits of the case. The assessee, a proprietor of a firm, faced a search under Section 132 of the Income Tax Act in 2000, leading to the discovery of undisclosed income. The Assessing officer determined the total undisclosed income, including unexplained credits for the relevant assessment years. The Commissioner of Income Tax (Appeals) subsequently deleted these additions, stating that the credits were disclosed earlier and could not be assessed in block assessment. The Tribunal remitted the matter to the Commissioner of Income Tax (Appeals) for fresh consideration. However, the Tribunal, without deciding on the merits, held that the reassessment orders had become infructuous. The High Court found that the Tribunal erred in not adjudicating on the issue of unexplained credits, remitting the matter back to the Commissioner of Income Tax (Appeals) for a fresh determination.

Issue 2:
The second substantial question of law involved the application of provisions of sub-Section 2 to Explanation(c) of section 158BA by the Tribunal. The revenue contended that the Tribunal incorrectly applied these provisions and failed to consider the decision of the Supreme Court in a specific case. The High Court, however, did not delve into this issue as it found the need to remit the matter back to the Commissioner of Income Tax (Appeals) for a fresh determination on the unexplained cash credits. The High Court quashed the Tribunal's order and directed a reevaluation of the issue of unexplained cash credits amounting to specific sums for the relevant assessment years.

In conclusion, the High Court's judgment set aside the Tribunal's decision, emphasizing the necessity to address the issue of unexplained cash credits in a more detailed manner. The matter was remitted to the Commissioner of Income Tax (Appeals) for a fresh determination, highlighting the importance of adjudicating on the merits of the case thoroughly.