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Commissioner of Income Tax v. M/s.Smt.Rekha Bai - Tax Case (Appeal) No.1302 of 2005 [2005] RD-TN 848 (14 December 2005)


DATED: 14/12/2005



THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.1302 of 2005

and Tax Case (Appeal) No. 1303 & 1304 of 2005

& TCMP.Nos.924 & 925 OF 2005

Commissioner of Income Tax

Salem ..Appellant -Vs-

M/s.Smt.Rekha Bai ..Respondent PETITIONS under Sections 260A of the Income Tax Act against the common orders of the Income Tax Appellate Tribunal Madras 'C' Bench dated 12.11.2002 in ITA.Nos.1490, 1491 and 1492/Mds/1992 for the assessment years 1988-99 to 1990-91.

For Appellant : Mr.J.Naresh Kumar

For Respondent : ---


(The Judgment of the Court was delivered by P.P.S.Janarthana Raja, J.) The following questions of law were formulated by the Revenue for entertaining these cases :

"i. Whether, in the facts and circumstances of the case, the Tribunal was right in upholding the order of the Commissioner of Income Tax (Appeals) that less than 50 of the face value of the promotes should only be treated as the amounts advanced and consequently the undisclosed income of the assessee ? ii. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the interest income for the assessment years 1989-90 and 1990-91 ?

iii. Whether, in the facts and circumstances of the case, the Tribunal was right in treating the concealed income as belonging to various members of the assessee's family and dividing the same between them instead of taxing the entire amount in the assessee's hands ? iv. Whether, in the facts and circumstances of the case, the Tribunal was right in spreading over the undisclosed income over a period of five years, when it has actually been assessed in three assessment years ? And v. Whether, in the facts and circumstances of the case, the Tribunal was right in cancelling the interest under Section 139(8) and 217 of the Income Tax Act ?"

2. The assessee is an individual carrying on the business of financier by giving her husband a power of attorney. On 9.8.1989, a search was conducted under Section 132 of the Income Tax Act in the premises of the assessee and several incriminating documents were seized. The pronotes to the value of Rs.28,16,900/-, the note books containing entries of amounts advanced and repayments received back, the details of amounts advanced to various parties and the details of date wise interest receipts were seized. After a detailed examination and after granting sufficient opportunity to the assessee, the Assessing Officer made an assessment. While making the assessment, he made an addition of Rs.15,21,120/-, Rs.6,05,163/- and Rs.10,22,082/- for the three assessment years i.e. 1988-89 to 1990-91 under the head 'income from other sources'.

3. Aggrieved by the orders of assessment, the assessee preferred appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) allowed the appeals by a common order holding that the concealed income should not be entirely assessed in the hands of of the assessee and should be divided among the assessee, her husband, her husband's HUF and her son. He further held that the face value of the pronotes cannot be taken as the amounts actually lent and fixed the concealed income at a much lower figure.

4. Against the common order of the Commissioner of Income Tax ( Appeals), the Revenue filed appeals before the Income Tax Appellate Tribunal. After hearing the arguments of the learned counsel, the Tribunal held that the order of the Commissioner of Income Tax (Appeals) is reasonable in all respects and confirmed the same. Hence these appeals.

5. Heard the learned counsel for the appellant.

6. In respect of Question No.1, there was clear finding given by the Tribunal that amount reflected in the seized pronotes were inflated and actual amount of advance made by the assessee respondent were less than the amounts so in the respective pronotes, and also the actual amount of money advanced was as low as 30 of the amount endorsed in the pronotes and these are all done as a precautionary practices followed in the line of business. The said fact had been already confirmed not only by the admission and statement made by the assessee respondent's husband in the course of the raid, but also the dispossession made by the various parties who were examined by the Assessing Officer in the course of the assessment proceedings. Both the authorities below had considered only the relevant materials and they had taken a view that the actual amount of advances were less than the amounts shown in the respective pronotes. The counsel for the revenue not produced any further evidence or material to show that what is stated in the pronote was the actual amount advanced. Hence, there is no substantial question of law.

7. In respect of Question Nos.2 and 3, there was factual finding that the assessee respondent, her husband and H.U.F. were assessed to income tax, since long in the past and the assessee respondent's son filed his return of income. Therefore, the facts available which are borne out from the records of the revenue, could not be brushed aside while determining the responsibility of undisclosed income to be determined in these cases. Therefore, we do not find any error in the order of the Tribunal and their finding that the income computed in these cases were to be attributed to the assessee respondent, her husband, H.U.F. and her son.

8. In respect of Question No.4 that the authorities below rightly pointed out that it is not so probable that the entire income was earned by the assessee respondent at a particular assessment year or assessment years. A reasonable conclusion was made that the income had been earned over a period of time. Therefore, we are of the view that the view taken by the authority below were correct and also there is no basis or materials /for the revenue to estimate the interest income for the period relevant to the concerned assessment year. We are also of the view that the authorities below had taken a correct view that there is no justification in levying interest under Section 139 (8 ) and Section 217 of the Income Tax Act. Hence there is no substantial question of law arising out of the order of the Tribunal, in respect of the Question No.5.

Accordingly, the Tax Appeal filed by the revenue is dismissed. Consequently, the connected TCMPs are closed. No costs. To

1.The Assistant Registrar, Income-tax Appellate Tribunal, III Floor, Rajaji Bhavan, Besant Nagar, Madras 90 (with records five copies). 2.The Secretary, Central Board of Revenue, New Delhi (3 copies). 3.The Commissioner of Income Tax (Appeals), Coimbatore. 4.The Commissioner of Income Tax, Coimbatore.


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