2013 (9) TMI 89 - HC - Income Tax

High Court remands gift genuineness issue to Tribunal. Appeal dismissed under Section 254(2).

Smt. Renu Aggarwal Versus The Income-tax Officer 3 (3) Mathura

Smt. Renu Aggarwal Versus The Income-tax Officer 3 (3) Mathura - [2013] 358 ITR 483 Issues Involved:1. Error in adjudicating merits of addition under Section 68.2. Scope of reference for the third Member.3. Dismissal of miscellaneous application under Section 254(2).4. Genuineness of gifts received by the assessee.5. Applicability of Sections 68 and 69 of the Income Tax Act.Issue-Wise Detailed Analysis:1. Error in adjudicating merits of addition under Section 68:The Tribunal was questioned for not adjudicating the merits of the addition under Section 68. The Judicial Member believed that the legal question of whether the amount could be added under Section 68 needed resolution first. The Judicial Member held that Section 68 applies only to credit entries in the books of accounts, not bank passbooks. The Accountant Member disagreed, stating that the bank account forms part of the assessee's accounts, making Section 68 applicable. The third Member agreed with the Accountant Member, affirming that the addition could be justified under Section 69 if not under Section 68.2. Scope of reference for the third Member:The third Member was tasked with resolving whether the Commissioner of Income Tax (Appeals) was wrong in confirming the disallowance of gifts received by the assessee as cash credit under Section 68. The third Member supported the Accountant Member's view that the bank account is part of the assessee's accounts, thus Section 68 is applicable. The Tribunal, with the third Member's concurrence, treated the appeal as dismissed.3. Dismissal of miscellaneous application under Section 254(2):The Tribunal dismissed the assessee's application under Section 254(2), which sought rectification of the alleged mistake of not adjudicating the merits of the addition. The Tribunal held that a debatable issue could not be considered a mistake apparent on record and thus could not be rectified under Section 254(2). The Tribunal relied on precedents to assert that it lacked the power to review its orders.4. Genuineness of gifts received by the assessee:The Assessing Officer disallowed the gifts received by the assessee, citing lack of proof of the donors' capacity to gift the amounts. The CIT (A) confirmed this finding. The Judicial Member did not address the genuineness of the gifts, focusing instead on the legal applicability of Section 68. The Accountant Member and third Member, while agreeing on the legal point, did not adjudicate the merits of the genuineness of the gifts. The High Court found that the Tribunal erred in not deciding the genuineness of the gifts on merits, remanding the matter back to the Tribunal for this purpose.5. Applicability of Sections 68 and 69 of the Income Tax Act:The Judicial Member held that Section 68 applies only to entries in the books of accounts, not bank passbooks. The Accountant Member argued that the bank account forms part of the assessee's accounts, making Section 68 applicable. The third Member agreed that the addition could be justified under Section 69 if not under Section 68. The High Court upheld the Tribunal's majority view that Section 68 applies and that the addition could also be justified under Section 69.Conclusion:The High Court allowed the Income Tax Appeal (Defective) No.36 of 2013, remanding the matter to the Tribunal to decide the genuineness of the gifts on merits. The Income Tax Appeal No.67 of 2013 was dismissed, affirming the Tribunal's dismissal of the application under Section 254(2).