2003 (8) TMI 25 - HC - Income Tax

Income from undisclosed sources - Whether on the facts and in the circumstances of the case the Tribunal was justified in law in deleting the addition of Rs. 65 lakhs when the assessee had failed to discharge its onus under the provision of the Income-tax Act? - when the very basis on which notice was issued to the assessee has since already been quashed nothing survives in the matter Thus no referable question of law arises. The petition is dismissed,

Summary

Issues:
1. Justification of deletion of addition of Rs. 65 lakhs by the Tribunal.
2. Requirement of referring the question of law for adjudication.
3. Interpretation of the Delhi High Court judgment in relation to the case.

Issue 1: The High Court analyzed the justification of the Tribunal in deleting the addition of Rs. 65 lakhs to the assessee's income. The case originated from a search and seizure operation revealing extra charges by the company. The Assessing Officer added Rs. 65 lakhs to the income, contested by the assessee. The Commissioner of Income-tax (Appeals) remanded the case due to a subsequent Delhi High Court decision setting aside the show cause notice. The Tribunal held the Delhi High Court decision binding and deleted the addition. The petitioner contended that the Tribunal should have referred the question for adjudication. The High Court found no merit in the petitioner's argument as the basis of the show cause notice was quashed by the Delhi High Court, rendering the annexures invalid. The High Court concluded that once the notice was set aside, there was no purpose in pursuing the show cause notice, ultimately dismissing the petition.

Issue 2: The petitioner argued that the Tribunal should have referred the question of law for adjudication as it was arguable based on the annexures with the show cause notice revealing extra charges by the company. The High Court disagreed, emphasizing that since the notice was quashed, the annexures lost their validity, and there was no basis for the show cause notice. The High Court highlighted that the Delhi High Court judgment, though not binding on the Income-tax Department, rendered the show cause notice irrelevant, leading to the dismissal of the petition.

Issue 3: The High Court interpreted the Delhi High Court judgment, stating that Mr. Vyas had charged extra money from some dealers but clarified that it was not counted as the company's income. The High Court emphasized that once the basis for the show cause notice was quashed, there was no substance left for the Department to proceed with the notice. The High Court referenced specific statements from dealers and Mr. Vyas to support its decision to dismiss the petition. Additionally, the High Court noted that the Delhi High Court's findings were crucial in determining the outcome of the case, ultimately leading to the dismissal of the petition.

In conclusion, the High Court dismissed the petition, ruling that no referable question of law arose due to the quashing of the basis for the show cause notice by the Delhi High Court, leaving the parties to bear their own costs.