DEPUTY COMMISSIONER OF INCOME TAX 2 (1), vs. SHRI CHHAGANLAL MUNDRA, C - 8,

Facts

The Revenue, the Deputy Commissioner of Income Tax 2(1), Raipur, filed an appeal before the High Court of Chhattisgarh, Bilaspur, under Section 260A of the Income Tax Act, 1961. The appeal challenged an order dated January 12, 2018, passed by the Income Tax Appellate Tribunal (ITAT), Raipur Bench, in IT (SS) A No. 32/RPR/2013. The ITAT had dismissed the Revenue's appeal against an order of the Commissioner of Income Tax (Appeals). The assessment proceedings in question were finalized by the Assessing Officer based on 'diary entries' and 'loose sheets' found during a search and seizure operation. The CIT(A) had set aside the assessment order, leading to the Revenue's appeal to the ITAT.

Held

The High Court held that no substantial question of law was involved in the appeal. The Court noted the submission made by the learned Standing Counsel for the Revenue that the issue was covered by the Apex Court's decision in Common Cause (A Registered Society) & Others Vs. Union of India & Others. The Apex Court had ruled that 'diary entries' and 'loose sheets' recovered from the assessee's premises cannot be the basis for finalizing the assessment, treating them as evidence. In light of this precedent, the High Court found that the issue stood covered against the Revenue and in favour of the Assessee. Consequently, the appeal was dismissed as devoid of merits. No specific amount in dispute was recorded.

Key Issues

1. Whether the 'diary entries' and 'loose sheets' recovered from the assessee's premises can form the basis for finalizing the assessment, as a question of law? The Revenue contended that the appeal involved substantial questions of law. However, the learned Standing Counsel for the Department conceded that the issue was no longer res integra. The Revenue submitted that the legal position had been clarified by the Apex Court in Common Cause (A Registered Society) & Others Vs. Union of India & Others (Writ Petition (Civil) No. 505 of 2015) dated January 11, 2017. This judgment, according to the Revenue's submission, indicated that such entries and loose sheets could not be treated as evidence for finalizing assessment. Therefore, the matter could be decided in terms of the Apex Court's verdict.