COMMISSIONER OF INCOME TAX vs. HARIRAM KHIMKARAN BAROT FAMILYTRUST

ITR/46/1995HC GujaratGJHC24022371199507 December 2005Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MS. JUSTICE HARSHA DEVANI5 pages
AI SummaryAllowed

What were the facts?

The assessee, Hariram Khimkaran Barot Family Trust, made cash payments totalling Rs. 19,72,500/- to M/s Sonal Gum Industries during the accounting period ending June 30, 1980, for Assessment Year 1981-82. The Assessing Officer, under Section 143(3) read with Section 144B of the Income Tax Act, 1961, restricted the disallowance under Section 40A(3) to Rs. 6,52,500/- and made this amount as an addition to the assessee's income. The Commissioner (Appeals) deleted the entire addition, relying on a previous High Court decision. The Income Tax Appellate Tribunal concurred with the CIT(A) and dismissed the departmental appeal. The Commissioner of Income Tax has filed a reference application before the High Court.

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in deleting the addition of Rs. 6,52,500/- made under Section 40A(3) of the Income Tax Act, 1961. The Tribunal had found, after appreciating the evidence, that (1) the identity of the payee was established, (2) the genuineness of the transaction was not in doubt, (3) the payment was made in exceptional and unavoidable circumstances, and (4) the payment was made as demanded by the payee. The Tribunal further noted that the payee demanded cash due to the necessity of retiring Hundies through banking channels and releasing railway receipts. The High Court found that the revenue had not brought any material on record to dislodge these findings of fact. Therefore, the question was answered in the affirmative, in favour of the assessee. The reference was disposed of accordingly.

What were the issues?

1. Whether the Appellate Tribunal is right in law in deleting the addition of Rs. 6,52,500/- made under Section 40A(3) of the Income Tax Act, 1961? Assessee's Contention: The judgment does not record any specific arguments made by the assessee before the Tribunal or the High Court, as there was no appearance on behalf of the assessee before the High Court. However, the Tribunal's decision, which was concurred with by the CIT(A), implies that the assessee would have argued that the conditions for disallowance under Section 40A(3) were not met. Revenue's Contention: The revenue, represented by the Commissioner of Income Tax, contended that the addition made under Section 40A(3) was justified. The revenue's argument, as implied by the High Court's response, was that the findings of fact by the Tribunal were not dislodged by any material on record.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 143(3),Section 144B,Section 256(2)

AI-generated summary — verify with the full judgment below

ITR/46/1995 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 46 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MS.JUSTICE H.N.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 ? ============================================================== COMMISSIONER OF INCOME TAX - Applicant(s)

Versus HARIRAM KHIMKARAN BAROT FAMILYTRUST - Respondent(s) ============================================================== Appearance : MRS MM BHATT FOR MR MANISH R BHATT for Applicant NOTICE SERVED for Respondent(s) : 1, ================================================================== CORAM :  HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 07/12/2005 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.M

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