THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 16.01.2013
+ ITA 606/2012
COMMISSIONER OF INCOME TAX-VIII ... Appellant
AJAI SHUKLA ... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Sanjeev Sabharwal, sr. standing
counsel with Ms Gayatri Verma, Adv.
For the Respondent : Mr S. Krishnan, Adv.
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR
BADAR DURREZ AHMED, J (ORAL)
This appeal has been preferred by the revenue in respect of the
assessment year 2008-09 from the order dated 23.12.2011 passed by the
Income Tax Appellate Tribunal, New Delhi in ITA No.2896/Del./2011.
2. The only issue that is sought to be raised here before us concerns
the deletion of the addition of `70,18,518/- by the Commissioner of
Income Tax (Appeals) as also by the said Tribunal. The said addition had
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been made by the assessing officer on account of purported unexplained
investments by invoking Section 69 of the Income Tax Act, 1961.
3. The assessing officer had made the said addition on the ground that
there was no evidence/explanation offered by the assessee in respect of he
said investments totaling `70,18,518/-. We may state at the outset that
this finding of the assessing officer was ex-facie wrong as has been
expressed by the Commissioner of Income Tax (Appeals) and also by the
Income Tax Appellate Tribunal. This is so because the assessee had
offered material by virtue of its letter dated 03.12.2010 and 13.12.2010.
The assessee had also furnished certain other materials in support of its
contention that the investments were clearly accounted in their books and
that the same could not be recorded as unaccounted investments.
4. The Commissioner of Income Tax (Appeals) by virtue of its order
dated 31.03.2011 held in favour of the assessee in the following manner :-
"4. I have considered the submissions of the appellant on
the issue and it is seen that the Assessing Officer has made
the addition without examining the submissions detailing the
sources of investment of `70,15,800/-. The evidence filed
by the assessee during the assessment proceedings has been
completely ignored, whereas the same clearly shows that
investment made by the assessee during the assessment
proceedings has been completely ignored, whereas the same
clearly shows that the investment made by the assessee are
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duly unaccounted for. In view of this, the addition made by
the Assessing Officer is deleted."
The revenue was aggrieved by the said order and therefore, it preferred an
appeal before the Tribunal. The Income Tax Appellate Tribunal also
dismissed the revenue's appeal and agreed with the Commissioner of
Income Tax (Appeals) in the following manner :-
"6. We have heard the rival contentions in light of the
material produced and precedent relied upon.
(i) Apropos investment of `70,18,518/-.
We find that the assessee has submitted the necessary
information before the Assessing Officer vide submission
dated 3.12.2010. The copy of the same has been provided
before us vide paper book page no.101 & 102.
From the above, it is evident that the assessee has duly
submitted before the Assessing Officer the detail of source
of investment. Considering these submissions of the
assessee, Ld. Commissioner of Income Tax (Appeals) held
that the Assessing Officer has made the addition by
completely ignoring the evidences filed during the course of
assessment proceedings. In view of the aforesaid detail filed
by the assessee before the Assessing Officer, in our
considered opinion, the order of the Ld. Commissioner of
Income Tax (Appeals) does not need any interference on our
part. Accordingly, we uphold the same."
5. In this backdrop Mr Sabharwal, appearing for the revenue
submitted that while it is true that the assessee had offered an explanation
and the Commissioner of Income Tax (Appeals) and also the Tribunal
had concluded that the assessee had offered an explanation, neither the
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Commissioner of Income Tax (Appeals) nor the Tribunal has returned
any clear-cut finding as to whether the explanation offered by the
assessee was satisfactory. He submitted that there must be a clear finding
inasmuch as both the Commissioner of Income Tax (Appeals) as also by
the Tribunal are appellate authorities and they are supposed to return
findings of fact. The only finding of fact that has been returned by the
two authorities is that the assessee had offered an explanation. The
further finding of fact that the explanation was satisfactory has not been
expressly stated by either the Commissioner of Income Tax (Appeals) or
by the Tribunal.
6. The learned counsel for the assessee submitted that the findings are
clear that the assessee had not only offered an explanation but that the
explanation was acceptable to the Commissioner of Income Tax
(Appeals) and also the Income Tax Appellate Tribunal.
7. However, we feel that the learned counsel for the revenue has
raised an important question which needs to be answered. Consequently,
we admit this appeal. The substantial question of law which arises for
consideration in the backdrop of the facts narrated is :-
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"Whether the Income Tax Appellate Tribunal ought to have
returned a specific finding that the explanation offered by the
assessee was satisfactory or not in the wake of the provisions
of Section 69 of the Income Tax Act, 1961?"
8. With the consent of the counsel for the parties the appeal has been
taken up for hearing and disposal straightaway.
9. The point in issue can be decided by looking at Section 69 of the
Income Tax Act, 1961. The said provision reads as under :-
"Section 69- Unexplained Investments
Where in the financial year immediately preceding the
assessment year the assessee has made investments which
are not recorded in the books of account, if any, maintained
by him for any source of income, and the assessee offers no
explanation about the nature and source of the investments
or the explanation offered by him is not, in the opinion of the
Assessing Officer, satisfactory, the value of the investments
may be deemed to be the income of the assessee of such
A plain reading of the aforesaid provision would show that it envisages
two situations when an addition can be made on account of unexplained
investments. The first situation being, where the assessee does not offer
any explanation about the nature and source of the investment. The
second situation being, where the explanation offered by him is, in the
opinion of the assessing officer, not satisfactory.
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10. In the present case, we find that the assessing officer was clearly
wrong in holding against the assessee by concluding that the assessee had
not offered any explanation. This fact has been realized both by the
Commissioner of Income Tax (Appeals) as also by the Income Tax
Appellate Tribunal. It is clear that the assessee had offered an
explanation. However, there is no express finding of the Commissioner
of Income Tax (Appeals) or of the Tribunal as to whether the explanation
offered by the assessee was satisfactory or not. Although, to be fair to the
respondent/assessee, an inference could possibly be gathered that the
Commissioner of Income Tax (Appeals) had found the explanation to be
satisfactory. But according to us, the matter cannot be decided on
inferences and the authorities below have to arrive at the clear and
express conclusion as to whether the explanation offered by the assessee
was satisfactory or not. We may also point out that the Tribunal is the
final fact finding authority under the scheme of Income Tax Act and
therefore, it is incumbent on the Tribunal to return a finding in clear and
express terms. This is so, because it is only when the finding is clear that
a question of law based on those findings can be examined by the High
Court. Consequently, we feel that it would be appropriate that we remit
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the matter to the Tribunal to return a clear finding as to whether the
explanation offered by the assessee is satisfactory or not : The question is
answered in favour of the revenue.
11. The appeal is allowed. The matter is remitted to the Tribunal for
returning a finding on the explanation offered by the assessee as to
whether the same is satisfactory or not for the purposes of Section 69 of
the said Act. The parties shall appear before the Tribunal in the first
instance on 06.05.2013.
BADAR DURREZ AHMED, J
JANUARY 16, 2013
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