THE COMMISSIONER OF INCOME TAX vs. SHRI.K.P.RASHIDALI

ITA/266/2010HC KeralaKLHC01026958201006 January 2014Author: HONOURABLE MR.JUSTICE A.M.SHAFFIQUE,HONOURABLE THE CHIEF JUSTICE DR. MANJULA CHELLUR9 pages
AI SummaryDismissed

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT). The assessee, Shri K.P. Rashidali, had ` 5,00,000/- seized under Section 132A of the Income Tax Act based on information from the police. A block return was filed declaring ` 50,000/- as undisclosed income. The Assessing Officer (AO), relying on the assessee's statement, estimated profit at 10% for assessment years 1996-97 to 2001-2002, arriving at ` 21,58,720/-. The CIT(Appeals) reduced the figure to ` 13,57,500/- and the undisclosed income to ` 80,000/-. The assessee then appealed to the ITAT. The ITAT noted that the department's estimation was based solely on the seized amount and the assessee's statement, despite the assessee providing explanations for the source of the ` 5,00,000/-.

What did the High Court hold?

The Tribunal held that additions to undisclosed income cannot be made solely based on the statement of the respondent assessee without any corroborating material. Relying on the decision in Commissioner of Income Tax v. J.K. Narayanan [(293) ITR 220], the Tribunal opined that unless material comes out based on such material, there cannot be any addition to undisclosed income based on the details given in the statement. Consequently, the Tribunal disallowed additions made by the authorities by virtue of the assessee's statement, finding no justification. The Tribunal concluded that only the seized amount of ` 5,00,000/- could be considered as undisclosed income for the block period. The High Court found no irregularity or illegality in the Tribunal's order.

What were the issues?

1. Whether the Tribunal erred in holding that additions to undisclosed income cannot be made based solely on the statement of the respondent assessee in the absence of other corroborating material? (Question of law turning on the interpretation of evidence and computation of undisclosed income). Assessee's Contentions: The assessee argued that the ITAT correctly disallowed additions made by the authorities based solely on the assessee's statement, as there was no other material to support such additions. The assessee relied on the case of Commissioner of Income Tax v. J.K. Narayanan [(293) ITR 220]. Revenue's Contentions: The Revenue contended that the AO was justified in estimating the undisclosed income based on the seized amount and the assessee's statement, as the source of the ` 5,00,000/- was not properly explained. The Revenue argued that the profit estimation at 10% was a reasonable method for arriving at the undisclosed income for the block period.

Which sections of the Income-tax Act were involved?

Section 132A,Section 158BC

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE MONDAY, THE 6TH DAY OF JANUARY 2014/16TH POUSHA, 1935 ITA.No. 266 of 2010 ( ) ------------------------ (AGAINST THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN IT(S & S)A.31/COCH/2006 DATED 20-01-2010) ------------------------------------ APPELLANT/RESPONDENT: ------------------------------------------- THE COMMISSIONER OF INCOME TAX, CALICUT. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT: --------------------------------------------- SHRI.K.P.RASHIDALI, AMINAS, NEAR MANKAV POST, CALICUT, PIN- 673 007. BY ADV. SRI.K.A.SALIL NARAYANAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06-01-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: sts

I.T.A.NO.266/2010 APPENDIX PETITIONER'S ANNEXURES: ANNEX A COPY OF THE ASST. ORDER DATED 26/08/2002 ANNEX B COPY OF THE CIT(A)'S ORDER DATED 02/02/2006 ANNEX C COPY OF THE ITAT'S ORDER DATED 20/01/2010 RESPONDENT'S ANNEXURES: NIL // P.A.TO.JUDGE sts

MANJULA CHELLUR, CJ & A.

The order continues below.

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