2023 (4) TMI 43 - HC - Income Tax

Court upholds income addition from undisclosed source, dismisses challenge on NRE gift. Net additional income determined.

Charangjit Singh Channi Versus C.I.T., Central Circle-1, Jalandhar

The court upheld the addition of Rs. 1 lakh as income from an undisclosed source, dismissing the appellant's challenge regarding the NRE gift. The ... Income from undisclosed sources - Tribunal held that an amount of Rs.1 lac was rightly added as income of the assessee from undisclosed source as this was reflected by the assessee as NRE gift - HELD THAT:- After the order by the appellate authority (Annexure A-3) and before the Tribunal, the assessee had got relief of Rs.6,15,291/- by deleting the said amount from his income. On a meager amount of Rs. 1 lac, the petitioner filed an appeal before this Court. There is no ground to entertain this appeal as income of Rs. 12 lacs as declared by the petitioner has been accepted and deletion of Rs.6,15,291/- has already been made by the Tribunal The argument of the learned counsel for the appellant that addition of Rs. 1 lac towards income as a gift given by NRE, is liable to be rejected as the petitioner failed to explain its source and genuineness of the gift. No substantial question of law. ISSUES PRESENTED AND CONSIDERED 1. Whether the Tribunal correctly sustained an addition of Rs.1,00,000 as income from undisclosed source, characterised as an NRE gift, when the assessee purportedly failed to explain its source and genuineness. 2. Whether any substantial question of law survives for adjudication by the High Court after (a) extensive deletions of other additions by the Commissioner (Appeals) and the Tribunal and (b) acceptance of the declared income of Rs.12,00,000. 3. Whether the appellant is entitled to challenge, before the High Court, the limited addition of Rs.1,00,000 when larger additions have been deleted and the net taxable position has been favourably adjusted. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of addition of Rs.1,00,000 as income from undisclosed source (NRE gift) Legal framework: The assessment of undisclosed income following search and seizure rests on whether incriminating material or unexplained cash/transactions establish income from undisclosed sources. A purported gift must be explained as to source and genuineness to be accepted as non-taxable; unexplained receipts revealed during search may be added to income. Precedent treatment: The Court notes that the learned counsel for the appellant relied on authorities which were considered inapplicable on the facts; the judgment does not adopt, distinguish, or overrule any specific precedent by name. The Tribunal applied established principles governing treatment of unexplained receipts post-search. Interpretation and reasoning: The Tribunal found that Rs.1,00,000 was rightly added as income because the amount was reflected as an NRE gift but the assessee failed to satisfactorily explain its source and genuineness. The Court accepts the Tribunal's approach that absence of a credible explanation for a receipt found/linked to search justifies treating it as income from undisclosed sources. The Court further observes that other contested additions had been deleted on consideration, leaving only the Rs.1,00,000 issue alive before the Tribunal, which was sustained. Ratio vs. Obiter: Ratio - where a receipt claimed to be a gift is reflected in seized material and the assessee fails to establish source/genuineness, such receipt may be added as income from undisclosed sources. Obiter - the Court's brief comment that certain referred authorities are not applicable, without elaboration, is not binding precedent. Conclusions: The Court finds no merit in the contention that the Rs.1,00,000 addition ought to be rejected; the Tribunal's conclusion that the sum represented unexplained income is upheld. Issue 2: Existence of a substantial question of law after deletion of major additions and acceptance of declared income Legal framework: High Court jurisdiction to entertain an appeal from the Tribunal requires a substantial question of law to be raised; appeals lacking any substantial question of law or which relate solely to factual inferences ordinarily do not merit interference. Precedent treatment: While specific authorities are not discussed or applied, the decision follows the general principle that appellate intervention on pure facts or on points already concluded in favour of the assessee (by deletion) is not warranted absent a substantial legal question. Interpretation and reasoning: The Court notes that the Assessing Officer's total additions were largely deleted by the Commissioner (Appeals) and the Tribunal, that the assessee's declared income of Rs.12,00,000 has been accepted, and that only a modest addition of Rs.1,00,000 remains challenged. Given that the bulk of disputed additions (aggregate figures specified in the orders) have already been deleted and the net tax position favours the assessee, the Court concludes there is no remaining substantial question of law to be adjudicated in the High Court. The Court implicitly treats the contested Rs.1,00,000 issue as a factual determination sustained by the Tribunal. Ratio vs. Obiter: Ratio - where appellate fora have deleted primary additions and accepted declared income, an appeal limited to a small factual addition, without a substantial legal question, may be dismissed for want of any substantial question of law. Obiter - the Court's observation about the proportionality of litigation (i.e., pursuing a meagre sum after major relief) is a practical consideration rather than a binding legal principle. Conclusions: No substantial question of law survives; the High Court will not entertain the present appeal concerning the Rs.1,00,000 addition in light of prior deletions and acceptance of declared income. Issue 3: Entitlement to challenge a limited addition when larger additions have been deleted Legal framework: Appellate remedies must be exercised to raise substantial questions of law; where earlier forums have granted relief on substantial items, subsequent challenges to minor residual additions must nonetheless raise legal questions to attract higher-court intervention. Precedent treatment: The judgment does not rely on or distinguish particular authorities but applies the settled standard that the High Court's interference is limited to questions of law and not routine reappraisal of facts. Interpretation and reasoning: The Court reasons that after the Commissioner (Appeals) and the Tribunal deleted aggregate additions amounting to several lakhs and accepted the assessee's declared income in full, it is not appropriate to entertain an appeal directed only at the modest balance addition of Rs.1,00,000, especially when that addition was sustained on the ground of inadequate explanation. The Court further notes that the appellant's cited authorities are inapposite, reinforcing that no legal issue of substance arises. Ratio vs. Obiter: Ratio - appellate courts may decline to entertain challenges to minor residual factual additions where no substantial question of law is raised and where higher fora have already granted major reliefs. Obiter - emphasis on practical unreasonableness of pursuing minor sums is illustrative, not doctrinal. Conclusions: The appeal is dismissed for lack of any substantial question of law; the limited addition of Rs.1,00,000 stands as affirmed by the Tribunal. Cross-references See Issue 1 for the factual and legal basis of sustaining the Rs.1,00,000 addition; see Issue 2 for the High Court's assessment of the absence of any substantial question of law following deletions by earlier fora; see Issue 3 for the Court's conclusion declining to entertain an appeal directed only to a minor factual addition after substantial relief was granted.