2007 (4) TMI 233 - HC - Income Tax

Search investment in bank deposits and NSCs - AO made additions on account of interest in investments and unexplained investment in silver u/s 69A - Assessee s contention that the amounts invested were belonging to the individual and not to the assessee-HUF is acceptable since the interest income has been taxed in the hands of the individual and the investment in silver is also accounted for the same cannot be taxed again in the hands of assessee-HUF revenue appeal dismissed

Summary

Issues:
1. Whether Tribunal was justified in deleting additions made by Assessing Officer for interest income and unexplained investment in silver for assessment years 1985-86 and 1986-87Rs.

Analysis:
1. The case involved two reference applications under Section 256(2) of the Income Tax Act, 1961 filed by the Revenue against the Tribunal's order declining to refer questions of law related to additions made by the Assessing Officer. The additions pertained to interest income and unexplained investment in silver for the assessment years 1985-86 and 1986-87.

2. The Tribunal had deleted the additions made by the Assessing Officer, leading to the Revenue filing reference applications. The Assessing Officer had made the additions based on investments found during a search conducted in 1985, claiming they belonged to the assessee-HUF. However, it was contended that the investments were individual's, not HUF's.

3. The Dy. CIT (A) had sustained the additions, but the Tribunal overturned this decision. The Tribunal found that the investments belonged to the individual, not the HUF assessee. It rejected the Revenue's argument that interest income should be taxed in the hands of the assessee, as it had already been taxed in the individual's hands. Similarly, the investment in silver was accounted for in the individual's tax assessment.

4. The Tribunal held that taxing the same income twice would amount to double taxation, as the interest income and investment in silver had already been taxed in the hands of the individual. Therefore, the Tribunal concluded that no referable question of law arose from its decision, as the findings were factual. Consequently, both reference applications were dismissed, and the rule was discharged with no order as to costs.