2014 (9) TMI 49 - HC - Income Tax

High Court remands case for fresh decision on Income Tax Act section 68 application

The High Court remanded the case to the Tribunal for a fresh decision regarding the legitimacy of invoking section 68 of the Income Tax Act, 1961. The ... Invocation of section 68 – amount received from stock of bullion treated as sum found credited in the books – Held that:- Section 68 applies where any sum is found credited in the books of an assessee and for which the assessee offers no explanation about the nature and source or where the explanation offered is not, in the opinion of the Assessing Officer, satisfactory - the sum credited may be charged to income-tax as the income of the assessee for the previous year - there has been no attempt on the part of the Tribunal to determine as to whether section 68 could have been invoked – the AO had made it abundantly clear that he was invoking the provisions of section 68 by adding the entire sale proceeds as income of the assessee - it is primarily for the Tribunal to consider as to whether the invoking of section 68 was in order – thus, it would be appropriate to restore the proceedings for a fresh consideration – Decided in favour of Assessee. Issues:1. Application of section 68 of the Income Tax Act, 1961 on the assessee's case.2. Legitimacy of invoking section 68 in the case.Analysis:The case involves an appeal by the assessee regarding an order of the Income Tax Appellate Tribunal for Assessment Year 2008-09. The primary issue revolves around the application of section 68 of the Income Tax Act, 1961. The assessee questioned whether any addition could be made under section 68 by treating the sale price of bullion as a sum found credited in their books. The Tribunal's decision was challenged based on the contention that the finding to disbelieve part sale of bullion stock was against the weight of evidence and based on presumptions.During the financial year 2007-08, the assessee began trading in gold bullion and engaged in transactions that led to a dispute with the tax authorities. The Assessing Officer treated a cash deposit of Rs. 87 lacs as undisclosed income, which was later partially sustained by the CIT (Appeal) and the Tribunal. The CIT (Appeal) found that the first gold purchase was made from the assessee's funds, and the sale proceeds were used for subsequent purchases, indicating no new credit in the books. The Trade Tax Authorities had accepted the sale of gold, supporting the genuineness of the transactions.The Tribunal confirmed the deletion of Rs. 44 lacs but allowed the addition of Rs. 43 lacs, leading to the appeal. The core argument on behalf of the assessee was that section 68 should not apply as the initial gold purchase was funded by the assessee, and the sale proceeds were used for further transactions. However, the Tribunal did not address the invocation of section 68 explicitly, leading the High Court to remand the case for a fresh decision by the Tribunal to determine the legitimacy of invoking section 68 based on the case record.In conclusion, the High Court restored the proceedings to the Tribunal for a fresh decision, avoiding a direct answer to the questions of law framed. The case highlights the importance of a thorough examination of the applicability of tax provisions like section 68 and the need for clear reasoning in tax assessments to ensure fair treatment of taxpayers.