This appeal has been filed before the Honorable Supreme Court pursuing to the judgment of the Honorable High Court of Rajasthan wherein the decision came in contrary of the appeal filed by the appellant wherein the interpretation is taken by the High Court stands in complete dismissal to the appellant’s interpretation of the provision of the law, where the High Court after full proceeding of the matter the decision taken by the Honorable Trial Court was reinstated for the appeal filed. The appellant herein is of the opinion that provision was wrongly interrelated by the trial court, and so was the appeal. The appeal was dismissed on 21st August 2008.
The brief facts that were stated the appellant also an assess were due for assessment for the year 1998-1999 wherein due to some reason a notice was issued against the appellant under section 143(2) of the Income-tax Act, 1961, and the notice was issued by the Income-tax officer, such notice was issued on the date of 30th November 2000. The notice involved thorough directions from the officer with regards to the accounting treatment in the books of accounts wherein some of the head in the accounts had small additions that were the Trading Accounts and the Credits while in the assessment order. The Income Tax officer while placing its reliance on the balance sheet and the books of accounts and while taking the note of the credit for the amount of INR 2, 26, 000/- and the income tax officer under the provision of the Income-tax Act, 1961 under section 68 wherein he made a second addition to the head of the income of the assessee under the declared income head, but such entry of the money was under section 68, but the same was interpret as the cash credits.
The officer declared the books to be completed and the income was calculated without proper accounting treatment, and the calculation was that the assessee had registered the amount of INR 2, 26, 000/- under the name of fifteen different people such as the report made by the officer after examining of the Balance Sheet and Books of Accounts. The Officer has allotted the assessee sufficient time and period for showcasing that the amount as added or any treatment of the amount and to prove its validity and integrity, but the contention was made that the time and period provide by the officer was used by the assessee to submit the false or wrong particulars as an explanation to the amount of credit. The document that was provided was in default, and such document makes no sense whereas the bifurcation made by the assessee that the amount of credit was in the name of 15 people and no proof of the names has been provided by the assessee and so the notice. A long computation was made by the officer under the income tax and the provision made in this behalf for the assessment year 1998-1999. After due assessment completed the necessary compliances, the notice was issued by the officer and the assessment officer also issued necessary form that was required for the assessee, and a different notice was issued which included a provision under which the penalty had to be charged under section 272(1)(c) of the Income Tax Act, 1961. The assesses aggrieved by the decision of the officer filed a complaint against such order before the Commissioner of the Income Tax wherein the appeal was filed in the establishment that there lies no assessment against the assessee and the accounting treatment was wrongly conducted, and therefore the order passed is to be set aside.
The CIT partly allowed the appeal and the question regarding the credits and trading account was upheld accordingly. The assessee (appellant) filed an appeal against the order by the CIT in the Income Tax Appellate Tribunal wherein the appellant made the same pleading where the calculation was a misappropriation of the accounting principles and should be invalidated, but after the thorough proceeding, the tribunal decided the appeal should be allowed partly, and the decision regarding the credit amount was upheld by the tribunal. The appellant then pursuing to the provision of the Act filed an appeal in the High Court under section 206A of the Act also the rationale for the appeal was provided by the appellant that once a person rejects the report of the books of accounts resent no officer then can rely on the same with regards to assessment and make any addition in the books. The High Court states that the entries made in the books of accounts are bogus and had nothing for providing the opportunity for reconsideration and dismissed the appeal and thus this appeal.
- Whether the Tax officer is right on deciding the accounts under section 68?
- Whether the decision made by the lower courts and CIT appropriate?
- Whether the appellant should be allowed for reconsideration?
- Whether the decision by the High Court valid?
The Honorable Supreme Court after hearing the learned counsels representing both the parties in the matter above and considering the facts and the precedents submitted established by the Honorable Judges to support the prayers and pleadings of the parties in the matter above states its observation herein that the court finds it's appropriate to allow the appeal filed by the assessee/appellant wherein the question regarding the amount of INR 2, 26, 000/- was supported by various evidence and in the process of the penalty proceeding wherein the unregistered dealer who submitted a statement that concluded the credit of the amount mentioned above and also there were other affidavits that provides enough evidence to understand there was nothing that inaccurate or fraudulent also there was no error in the document to prove the penalty should be levied for misapplication or non-compliance of the provision of the Income Tax Act. The court finds that appeal should also be allowed and no order should be implemented as there is no validity to such.
The Honorable Court, after such a long proceeding herein decides the appeal of the appellant is allowed, and the order of penalty is to be set aside. The decision made by the CIT should remain undisturbed, and all the interlocutory application stands disposed accordingly with no order to cost.