Manish Dhirajlal Mehta L/H of Late Dhirajlal C Mehta V. Asstt C I T

TAXAP/463/2000

AI Insights

The case involves a series of tax appeals by Manish Dhirajlal Mehta, the legal heir of late Dhirajlal C Mehta, against the orders of the Income Tax Appellate Tribunal, Rajkot Bench. The appeals challenged the Tribunal's findings on unaccounted business income and subsequent penalties for the assessment years 1985-86 to 1988-89. The main legal issues revolved around the Tribunal's inference of unaccounted income and the appropriateness of penalties under Section 271(1)(c) of the Income Tax Act. The High Court's decision differentiated between the substantive issues of unaccounted income and the procedural imposition of penalties, leading to a partial allowance of the appeals.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 798831 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 05-11-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Krishi Tyre Retreading and Rubber Industries, Naresh Chand Agarwal vs. Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: J P SHAH
• Keywords: Assessment years; Income Tax; Income tax appellate tribunal; Penalty; Unaccounted business income
• Section: 271(1)(c)

Judgement Text

"O/TAXAP/461/2000 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 461 of 2000 TO TAX APPEAL NO. 464 of 2000 With TAX APPEAL NO. 833 of 2005 TO TAX APPEAL NO. 836 of 2005 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ MANISH DHIRAJLAL MEHTA L/H OF LATE DHIRAJLAL C MEHTA....Appellant(s) Versus ASSTT C I T....Opponent(s) ================================================================ Appearance: Page 1 of 6 O/TAXAP/461/2000 JUDGMENT MR JP SHAH, ADVOCATE for the Appellant(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 05/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and orders passed by the Income Tax Appellate Tribunal, Rajkot Bench (hereinafter referred to as ‘the Tribunal’) dated 12.09.2000 in ITA Nos. 856/Ahd/1193, 857/Ahd/1193, 858/Ahd/1193 and 859/Ahd/1193 for the Assessment Years 1985-86, 1986-87, 1987-88 and 1988-89 respectively, the assessee has preferred the Tax Appeals No. 461 to 464 of 2000 for consideration of the following substantial question of law: “ Tax Appeal No. 461 of 2000 A. Whether, on the facts of the case and the evidence on record, the Tribunal erred in raising an inference that the appellant had an unaccounted business income for the A.Y. 1985-86? B. Whether the Tribunal was right in raising an inference from the facts on record of unexplained investment in the sum of Rs. 40,000/- and unaccounted business income of Rs. 30,000/-? Page 2 of 6 O/TAXAP/461/2000 JUDGMENT Tax Appeal No. 462 to 464 of 2000 A. Whether, on the facts of the case and the evidence on record, the Tribunal erred in raising an inference that the appellant had an unaccounted business income for the assessment year in question” 2. On the other hand, the assessee by way of filing Tax Appeals No. 833 to 836 of 2005 has sought to challenge the orders dated 29.10.2004 passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot in ITA Nos. 813/RJT/2003 for A.Y. 1985-86, 814/RJT/2003 for A.Y. 1986-87, 815/RJT/2003 for A.Y. 1987-88 and 816/RJT/2003 for A.Y. 1988-89. These appeals were admitted for determination of the following substantial question of law: “Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in sustaining the penalty levied under Section 271 (1)(c ) of the Income Tax Act, 1961?” 3. The common ground of appeals is regarding additions of Rs. 70000/-, Rs. 1,22,000/-, Rs. 60000/- and Rs. 90000/- made by the assessee for the assessment years 1985-86, 1986-87, 1987-88 and 1988-89 respectively on the basis of unaccounted business profits out of their sales of silver ornaments are not reflected in the books of account. According to the assessee, CIT(A) has erroneously confirmed the additions without considering the various stages where melting had taken place. The Appellate Authority as well as the Tribunal confirmed the findings of the Assessment Officer and therefore being Page 3 of 6 O/TAXAP/461/2000 JUDGMENT aggrieved by the same, the assessee has filed the present appeals. 4. Learned advocate appearing for the assessee submitted that the books of accounts maintained by the assessee have not been considered though the Assessing Officer could not point out any irregularity in such books of account. He submitted that the CIT(A) committed an error in not considering the affidavits filed by various workers in this regard. 4.1 Learned advocate for the appellant also submitted that the Tribunal has erred in upholding the penalty levied u/s 271(1)(c ) of the Act by the respondent in respect of alleged unaccounted gross profit earned out of alleged unaccounted sale of silver ornaments. In support of his submission, reliance has been placed on a decision reported in the case of Commissioner of Income Tax vs. Krishi Tyre retreading and Rubber Industries reported in [2014] 360 ITR 580 and Naresh Chand Agarwal vs. Commissioner of Income- Tax reported in [2013] 357 ITR 514. 5. Mr. Bhatt, learned Senior Counsel appearing for the revenue submitted that the detraction of disclosure made by the assessee was an afterthought. He has supported the impugned decision imposing penalty upon the assessee. He supported the decisions impugned in the present appeals and submitted that the same do not call for any interference by this Court. 6. Heard both the parties and gone through the material Page 4 of 6 O/TAXAP/461/2000 JUDGMENT available on record. In the instant case, we are of the opinion that assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. Therefore, the issues raised in appeals no. 461 to 464 of 2000 are required to be answered in the affirmative and against the assessee. 6.1 So far as the issue involved in appeals no. 833 to 836 of 2005 is concerned, in view of the decisions cited hereinabove by learned advocate for the appellant we are of the opinion that the penalty has been wrongly imposed under Section 271(1)(c) of the Act. In the case of Krishi Tyre Retreading and Rubber Industries (supra), it has been held that as the addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. We therefore answer the issue involved in appeals no. 833 to 836 of 2005 in the negative and in favour of the assessee. 7. In the premises aforesaid, Appeals No. 461 to 464 of 2000 are dismissed. Appeals no. 833 to 836 of 2005 are hereby allowed. (K.S.JHAVERI, J.) Page 5 of 6 O/TAXAP/461/2000 JUDGMENT (K.J.THAKER, J) divya Page 6 of 6 "