DY. CIT (ASSTT) vs. PANNA CORPORATION

TAXAP/323/2000HC GujaratGJHC24022843200016 June 2012Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MS. JUSTICE HARSHA DEVANI8 pages
AI SummaryDismissed

What were the facts?

The assessee, Panna Corporation, a partnership firm engaged in construction, was subjected to a search on July 4, 1996. A partner initially disclosed undisclosed income of Rs. 3.5 lakhs, later confirmed by another partner. The assessee filed a return declaring Rs. 26 lakhs as undisclosed income. During the search, a loose paper detailing the sale of two flats was found, leading the Assessing Officer (AO) to estimate unaccounted cash collection at Rs. 1 lakh per flat. For 62 flats sold during the block period, the AO determined an undisclosed income of Rs. 62 lakhs and levied tax and interest. The Income Tax Appellate Tribunal (Tribunal) confirmed the finding of cash collection but held that only the profit embedded in such receipts, not the entire amount, was taxable. The Tribunal, considering the assessee's disclosure of Rs. 26 lakhs, found no further tax liability. The revenue appealed this decision.

What did the High Court hold?

The High Court held that the Tribunal was justified in its decision. The core issue was whether the entire on-money receipts of Rs. 62 lakhs were taxable as income or only the profit element embedded within them. The Tribunal, relying on its prior decision in Kishor Mohanlal Telwala, held that only the profit embedded in the receipts was taxable. The High Court, referencing its own judgments in CIT v. President Industries, CIT v. Gurubachhan Singh J. Juneja, and CIT v. Samir Synthetics Mill, as well as a Madhya Pradesh High Court decision in Man Mohan Sadani v. CIT, affirmed the principle that only the profit element of unaccounted receipts is taxable, not the entire sum. The Court noted that in the absence of findings regarding the assessee's investment or cost of goods sold, the entire sale proceeds could not be treated as income. The Tribunal's acceptance of Rs. 26 lakhs as profit out of the Rs. 62 lakhs in undisclosed receipts was deemed not to give rise to a substantial question of law. Therefore, no interference with the Tribunal's order was called for. The appeals were dismissed.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the addition made on account of undisclosed income earned by the assessee out of “on money” receipts from the sale of row houses done during the block period? Assessee's Contentions: - No substantial question of law arises from the Tribunal's order, as per Section 260-A of the Income Tax Act. - Even if Rs. 62 lakhs is considered as on-money collection, only the income embedded therein is taxable, not the entire receipt. - The Tribunal's acceptance of Rs. 26 lakhs as profit out of total receipt of Rs. 62 lakhs should not be interfered with, as estimation of income does not give rise to a substantial question of law. - Reliance was placed on various High Court decisions, including CIT v. President Industries, CIT v. Gurubachhan Singh J. Juneja, CIT v. Samir Synthetics Mill, and Man Mohan Sadani v. CIT. Revenue's Contentions: - The Tribunal committed a serious error in reversing the AO's order. - Having confirmed the on-money collection, the Tribunal ought not to have rescinded the directions for collection of tax and interest.

Which sections of the Income-tax Act were involved?

Section 132(4),Section 260-A

AI-generated summary — verify with the full judgment below

TAXAP/323/2000 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 323 of 2000 With TAX APPEAL No. 325 of 2000 For Approval and Signature: HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS.JUSTICE HARSHA DEVANI ========================================= 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 ? ========================================= DY. CIT (ASSTT) - Appellant(s) Versus PANNA CORPORATION - Opponent(s) ========================================= Appearance : MR SUDHIR M MEHTA for Appellant MR SAURABH N. SOPARKAR, SR. ADVOCATE with MR. BANDISH S. SOPARKAR and MRS SWATI SOPARKAR for Respondent ========================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS.JUSTICE HARSHA DEVANI Date : 16/06/2012 ORAL JUDGMENT

TAXAP/323/2000 2/8 JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KU

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 132(4)

All 3,708 judgments and leading authorities on Section 132(4) →

Recent GST High Court judgments

Search GST case law →