Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the additional ground that the addition of Rs. 5,11,000 as income from undisclosed sources is covered by intangible additions of earlier years does not deserve to be entertained for the first time before the AAC and/or before the Tribunal ?

High Court Of Delhi

Late R. Dalmia Through LR vs. CIT

Section 68

Asst. Year 1966-67

Arijit Pasayat, C.J. & D.K. Jain, J.

IT Ref. No. 87 of 1983

7th August, 2001

Counsel Appeared

None, for the Petitioner : R.C. Pandey with Ms. Premlata Bansal, for the Respondent

JUDGMENT

ARIJIT PASAYAT, C.J.:

Pursuant to direction given by this Court under s. 256(2) of the IT Act, 1961 (‘the Act’), following questions have been referred for opinion of this Court by the Income-tax Appellate Tribunal, Delhi Bench ‘A’ Delhi (in short “Tribunal”) :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the additional ground that the addition of Rs. 5,11,000 as income from undisclosed sources is covered by intangible additions of earlier years does not deserve to be entertained for the first time before the AAC and/or before the Tribunal ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in depriving the appellant of the benefit of intangible additions of earlier years to cover the addition of Rs. 5,11,000 as alleged income from undisclosed sources ?”

The dispute relates to the asst. yr. 1966-67.

2. Essentially the questions referred, which are to be answered, relate to the desirability of taking into account intangible additions in the past. By application of s. 68 of the Act, additions were made by the ITO relating to credits totalling to Rs. 5,11,000 in 12 names. Consequentially, the interest claimed on those amounts was disallowed. In appeal, stand of assessee was that relevant details were not examined, which was accepted. The ITO pursuant to direction passed by the Appellate Assistant Commissioner (in short ‘AAC’) examined the matter in detail and held that the bona fides of the claims were not established. The same was assailed before the AAC again. An alternative plea was taken that intangible additions in the past could take care of the cash credits. The AAC did not consider this stand, primarily on the ground that such plea was not taken earlier before the AAC and was also not taken before the AO at any stage. Matter was challenged in appeal before the Tribunal, which upheld the views of the ITO and the AAC. It was observed that a fresh plea has been taken for the first time after long passage of time and even before the AAC on the first occasion the plea was not taken and additionally before the ITO when the matter was under examination pursuant to the order of remand. It cannot be an abstract proposition in law that intangible additions of previous year are to be taken note of while considering cash credit. On the facts of each case a specific plea and proof that there was any link between the intangible additions in the previous year and the cash credit has to be established, if that be a fact while tendering explanation regarding cash credit, must plainly state as a fact that the cash credit concerned did come out of the earlier intangible additions. Unless this is done, there is no requirement to make an enquiry regarding reasonableness of the explanation. It is not open to the assessee to offer two different explanations by way of alternative pleas. Similar view was expressed by this Court in CIT vs. Kulwant Kaur (1980) 121 ITR 914 (Del) : TC 42R.1236. But if any unexplained cash credit can reasonably be related to the amount covered by the intangible addition made in the past, or in the very year, necessary set off is not impermissible. But as observed by the Supreme Court in CIT vs. Manik Sons (1969) 74 ITR 1 (SC) : TC 42R.1344, it is not permissible to give credit for intangible additions, without indication of reasons as to why credit can be given. The question whether a particular cash credit can be covered by intangible addition is essentially one of fact. It is within the domain of taxing authorities to consider whether a particular cash credit, or unexplained expenditure or investment can reasonably be attributed to intangible additions, if materials are placed in that regard. No material was placed before the authority to substantiate the plea. additionally second question does not arise out of the order of the Tribunal and consequentially the first question is really of academic interest. Therefore, we decline to answer the questions referred.

3. Reference is disposed of accordingly.

[Citation : 255 ITR 401]

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