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TMI Blog2008 (7) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... t : None CORAM:- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON?BLE MR JUSTICE RAJIV SHAKDHER BADAR DURREZ AHMED, J (ORAL) 1. This reference under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as 'the said Act'), at the instance of the revenue, relates to the assessment year 1982-83. The following questions of law have been referred to this court by the Income Tax Appellate Tribunal:- 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the Commissioner's order u/s 263 without reversing the Commissioner's finding that the Income-tax Officer had failed to enquire into the source of deposits / investments made during the relevant accounting period and hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the department. It was noted that the investment in the FDRs, etc. were in the names of various partners of the firm, namely, Smt Santosh Rani, Prince Mohan Aggarwal and Shri Dinesh Kumar Aggarwal. During the course of the assessment proceedings of the firm, the Income-tax Officer had made certain inquiries regarding the source of investments but, according to the Commissioner, failed to take any action and did not assess the said amount which was seized during the search operations in the hands of the firm. According to the Commissioner, the assessment order was erroneous and as such was prejudicial to the interest of the revenue. Consequently, a notice under Section 263 of the said Act was issued. A written reply was submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In that letter, it had been submitted that the following investments had been made in the names of the partners:- 1. Santosh Rani Rs 5,000/- FDR dated 20.11.1981 Rs 80,000/- Bank deposit on 06.01.1982 Rs 20,000/- loan on 09.02.1982 2. Prince Mohan Aggarwal; Rs 25,000/- loan on February, 1982 3. Dinesh Kumar Aggarwal. Rs 10,000/- FDR on 20.11.1981. 4. It was stated in the said letter dated 06.02.1985 that the total investments to the tune of Rs 1,40,000/- in the year under consideration were made out of the accumulated come out of the undisclosed sources of the firm as on 31.03.1981. It was also stated in the said letter that this fact had been disclosed before the Settlement Commission and the same amount had been consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted that the undisclosed income of the assessee firm for the years upto and including the year ended 31.3.1981 amounted of Rs.2,40,000/- and that the said amount of Rs.2,40,000/- was available as on 31.3.81 and thereafter in the manner detailed in Annexure I hereto. ii) That the aforesaid amount of Rs. 2,40,000/- be assessed in the hands of the assessee firm by spreading the same equally over the assessment years 1976-77 to 1981-82 (both inclusive), i.e. an additional amount of Rs.40,000/- be assessed in the hands of the assessee firm, in each of the above mentioned assessment years, over and above the income disclosed by the books of accounts. Further, that the provisions of Section 245E of the Act be invoked so far as the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of undisclosed funds as on 31.3.1981", so much as is relevant for the present case, reads as under:- "III. Amount available in Cash with the firm as on 31.3.81 which was invested in banks, loans etc. in the previous year relevant to the A.Y. 1982-83 as under:- a) Smt. Santosh Rani 1) F.D.R. dt. 20.11.81 5,000 2) Bank Deposit on 6.1.82 80,000 3) Loan to Navin Jain Metal Udyog on 9.2.82 20,000 1,05,000 b) Sri Prince Mohan. 1) Loan to Navin Jain Metal Udyog on 11.2.82 25,000 25,000 c) Shri Dinesh Kumar F.D.R. Dt. 20.11.81 10,000 10,000 1,50,000/- 2,31,000/- Rounded off to Rs. 2,40,000/-" 8. After considering the said offer for settlement before the Settlement Commission and the other surrounding cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that if there was such a nexus, then there would be no occasion to pass the order under Section 263 of the said Act. It is because of the fact that the Commissioner felt that there was no such nexus that a further inquiry was necessary on the part of the Income-tax Officer. However, the Tribunal has taken note of the fact of the disclosures before the Settlement Commission as also Annexure-I to the said application for settlement. The said annexure clearly reflects the FDRs, bank deposits and loans mentioned in the letter dated 06.02.1985 issued by the assessee to the Income-tax Officer. It is in this context that the Tribunal came to the conclusion that in view of the contents of Annexure-I, no further examination was required by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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