2017 (11) TMI 680 - HC - Income Tax

Landmark Judgment on Undisclosed Income Challenges under Income Tax Act

VM Dawra Versus Commissioner of Income Tax, Dy. Commissioner of Income Tax

The High Court of Rajasthan ruled in favor of the appellant, Mr. V.M. Dawra, in a consolidated judgment addressing undisclosed income challenges under the ... Scope for recovery of any amount from the appellant - addition of undisclosed income of the appellant, irrespective of the fact that inter-transactions are involved in group of the cases including the appellant and other cases of group have been set-aside by the Tribunal - Held that:- First of all, on the question of company, in view of the fact that the original order which was passed under Section 256(1), in which relief was granted and permission was not granted by the Tribunal which was not challenged. In that view of the matter, the order of the company would stand final. In the case of V.M. Dawra, in view of the statement which was made, since the source of income is to be established by the department and they cannot merely rely on a letter written by the Chartered Accountant, in that view of the matter, the contention raised by counsel for Mr. V.M. Dawra is required to be accepted. Even otherwise in the case of Mr. Vimal Choudhary, the matter was remanded back to the authority and the relief was granted which was not challenged by the department. On the basis of reasoning given by the tribunal, if in one case, the department has not challenged the order of the tribunal which was remitted back and relief granted in favour of the assessee. Thus on the principle of parity, Mr. V.M. Dawra is required to be granted the same relief. In that view of the matter, the issue is answered in favour of the assessee and against the department. Issues:1. Common questions of law and facts in multiple appeals.Analysis:In a consolidated judgment, the High Court of Rajasthan addressed several appeals challenging the tribunal's decision on undisclosed income and additions made under the Income Tax Act. The primary issue revolved around the tribunal's decision to sustain an addition of Rs. 119.73 lakhs as undisclosed income, despite related inter-transactions within a group of cases. The court examined the validity of such additions and the consistency of the tribunal's approach in different cases within the group.The court considered the application of Section 69 concerning the recording and source of investments in the books of account. It also evaluated whether additions under Section 68/69 for unexplained investments in bank deposits were justified when sourced from available assets or opening balances. Additionally, the court examined the possibility of double additions when taxing unaccounted income of a group head and its members separately.The judgment highlighted specific instances related to different directors within the group. It noted discrepancies in treatment, such as relief granted to one director but not challenged by the department, leading to questions of parity and fairness in tax assessments. The court emphasized the importance of establishing the actual source of income and the need for concrete evidence rather than solely relying on representations by chartered accountants.The court ultimately ruled in favor of the appellant, emphasizing the principle of parity and granting relief to Mr. V.M. Dawra based on the treatment of similar cases within the group. The decision in one appeal concerning Mr. Dawra influenced the outcome of all related appeals, leading to the disposal of multiple cases based on the established precedent.In conclusion, the High Court's judgment provided clarity on undisclosed income assessments, the application of tax provisions, and the significance of consistent treatment within related cases. The court's emphasis on fairness, evidence-based decisions, and the principle of parity ensured a just outcome in the appeals before it.