DEPUTY COMMISSINER OF INCOME-TAX, FARIDABAD, vs. OM PARKASH AGGARWAL

Facts

The assessee, Om Parkash Aggarwal (HUF), filed its return for assessment year (AY) 1989-90 declaring an income of Rs. 23,280. A search on the assessee's premises on 28.04.1988 led to the recovery of cash and jewellery. The assessee surrendered Rs. 1,25,000 as cash and Rs. 75,000 for silver articles. The Assessing Officer (AO) made additions for declared cash, seized silver, and unexplained property investment in AY 1988-89, which the assessee accepted. However, the AO subsequently included the surrendered income and seized silver in AY 1989-90. The CIT(Appeals) reduced the addition of Rs. 75,000 to Rs. 42,000. The ITAT set aside the orders of the CIT(Appeals) and the AO, holding that the assessee could not be taxed again for the same income in AY 1989-90 as it was already taxed in AY 1988-89, and proceedings under Section 263 were dropped.

Held

The High Court answered the substantial question of law in favour of the revenue, holding that Section 69-A of the Income Tax Act, 1961, requires an assessee to be assessed in the relevant assessment year in which they are found to be the owner of money, bullion, jewellery, or valuable articles. Therefore, the AO was required to assess the assessee in AY 1989-90. However, the Court did not set aside the ITAT's order. It noted that the assessee had already been assessed and paid tax for the declared income and seized silver in AY 1988-89, despite the violation of Section 69-A. Since the revenue had already received the tax payable, restoring the AO's order for AY 1989-90 would result in no revenue gain. The Court agreed with the ITAT's reasoning that additions for the same items could not be made in two assessment years, especially when no new facts had come to light for the subsequent assessment. The Court also noted that proceedings under Section 263 initiated by the Commissioner were dropped, lending credence to the ITAT's finding that no loss would accrue to the revenue.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT was justified in law in deleting legally and correctly made additions in AY 1989-90 just because some addition was not so correctly made in some other assessment year? (Question of law, turning on Section 69-A of the Income Tax Act, 1961). Assessee's contentions: The assessee argued that since tax on the surrendered income and seized silver had already been assessed and paid for AY 1988-89, any assessment for AY 1989-90 would be an academic exercise with no tax effect. Even if the substantial question of law were answered in favour of the revenue, the ITAT's order, based on a rational view, should be affirmed. Revenue's contentions: The revenue argued that the search on 28.04.1988 necessitated assessment for these additions in AY 1989-90, as per Section 69-A. The fact that the assessee might have been wrongly assessed in AY 1988-89 did not absolve them of liability for AY 1989-90. If the AY 1988-89 assessment was erroneous, it should have been challenged through appeal.