1979 (10) TMI 41 - HC - Income Tax

Court rules in favor of assessee, invalidating income addition from undisclosed sources. Clarification on assessing income under different sections.

The High Court ruled in favor of the assessee, holding that the addition of Rs. 38,500 as income from undisclosed sources during the assessment year ... Financial Year, Previous Year, Undisclosed Sources Issues involved: The issue involves the addition of Rs. 38,500 in the assessment year 1969-70 and whether it is legal and valid.Judgment Details:The Patna Bench of the Income-tax Appellate Tribunal referred a question of law regarding the addition of Rs. 38,500 in the assessment year 1969-70 for the opinion of the High Court. The assessee's capital account indicated a cash deposit of Rs. 25,500, explained as the share of income from a joint venture. The Income Tax Officer (ITO) added Rs. 38,500 as income from undisclosed sources during assessment. The assessee appealed to the Appellate Authority Commissioner (AAC) and then to the Tribunal, which confirmed the addition.The Tribunal's order was challenged by the assessee for rectification of factual mistakes. The High Court considered the relevant provisions of the Income Tax Act and previous case law. It was argued that the income from undisclosed sources should have been assessed for the financial year ending on March 31, 1969, not the accounting year ending on September 30, 1968. The High Court clarified the difference between assessing income under section 68 or section 69 of the Act.The High Court referred to the Supreme Court's decision in Baladin Ram v. CIT and emphasized the importance of determining the relevant accounting year for assessing undisclosed income. It was noted that the findings of the Tribunal did not address the specific issue of the relevant accounting year for assessment. Ultimately, the High Court held that the sum of Rs. 38,500 could not be assessed for the assessment year 1969-70 based on the accounting year ending on September 30, 1968. The question was answered in the negative, in favor of the assessee, who was awarded costs and a hearing fee.Separate Judgment: No separate judgment was delivered by the judges in this case.