Rajasthan High Court Judgments — 2003

Regarding the first issue concerning the deletion of Rs.3,46,879/- for under-valuation of closing stock, the High Court found that the ITAT's conclusion, concurring with the CIT (Appeals) and relying on the Supreme Court judgment in CIT Vs. British Paints India Ltd., did not require interference. Thus, the first question was answered against the revenue and in favour of the assessee. For the second issue, the High Court examined Section 69 of the Income Tax Act, 1961, which deals with unexplained investments. The Court noted that investments made in a financial year are deemed income of that financial year, which immediately precedes the assessment year. The transactions in question occurred between November 3, 1986, and March 31, 1987. The Court held that this period falls within the financial year 1986-87, making the assessment year 1987-88 the correct year for addition, not 1988-89. Consequently, the ITAT's finding that the amount could only be added in 1988-89 was set aside. The Court directed that the addition should be made in assessment year 1987-88, restoring the CIT's order reducing the addition to Rs.88,000/-. The addition would not be made in 1988-89.