Unexplained cash credit or investment - Opening capital balance

CIT vs Prameshwar Bohra

208 CTR 218

High Court of Rajasthan

CIT vs Prameshwar Bohra

IT Appeal No. 7 of 2003

Rajesh Balia and Chatra Ram Jat, JJ

4 January 2007

K.K. Bissa for the Appellant
Anjay Kothari for the Respondent

JUDGMENTBy the Court:

This appeal is directed against the order of the Tribunal, Jodhpur Bench Jodhpur dt. 6th Dec., 2001. While admitting the appeal on 17th Feb., 2003, the following questions of law have been framed as substantial questions of law for consideration in this appeal:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in quashing the notice issued on 17th June, 1997 under s. 148 of IT Act for the asst. yr. 1993-94 by resorting to proviso to s. 147 even by holding that there is no failure on the part of assessee in disclosing fully and truly all material facts necessary for the assessment in question ?

2. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of ss. 68 and 69 of the IT Act, 1961, the Tribunal was right in holding that the unexplained investment/cash credit amounting to Rs. 1,55,316 appearing in the books of account on the first day of previous year relevant to the asst. yr. 1993-94 was not taxable as income of the assessee for the said previous year ?"

2. The first question does not give out the real picture of the controversy raised and decided by the Tribunal inasmuch as it is not a case in which the question of expiry of limitation for assuming jurisdiction to issue notice under s. 148/147 arises for consideration. In fact, the impugned notice for reassessment of the income for asst. yr. 1993-94 has been issued on 17th June, 1997, that is to say, before expiry of 4 years from the end of the asst. yr. 1993-94, hence, the case falls within the province of proviso to s. 147 or under s. 149 providing limitation for initiating proceeding under s. 147 which remains within limitation. The question really was raised about the validity of taking action under s. 147 at all. In fact, in relation to the asst. yr. 1993-94, under s. 147 the first notice was issued on llth July, 1996 itself and the income which allegedly escaped assessment from tax was the one which is subject-matter of question No. 2, that is to say, an amount of investment/cash credit of Rs. 1,55,316 was appearing in the books of account of the assessee on the first date of previous year relevant to the asst. yr. 1993-94, that is to say, on 1st April, 1992 or in other words that was carried forward from the previous year ending on 31st March, 1992.

3. The notice issued on 11th July, 1996 was not pursued by the AO inter alia on the ground that it was issued without obtaining prior approval from the. Addl. CIT and hence, after seeking prior approval of the Addl. CIT fresh notice was issued under s. 147/148 on 17th June, 1997. The assessee has raised contention that since first notice was already pending, the second notice could not have been issued and secondly, that there is no provision in the IT Act to vacate the already issued notice and considering it to be pending, by ignoring the vacation order, no fresh notice could be issued.

4. Apparently the question No. 1 has not been framed to bring out this controversy. The question No. 2 is a question which relates to the merits of the additions made in the assessee's income through reassessment as we shall presently notice that the question No. 2 deserves to be decided in favour of the assessee and against the Revenue, we do not deem it necessary to reframe the question about the validity of reassessment proceedings in the present case as it would not be necessary to decide the case.

5. On the merit of the additions made in the income of the assessee, there is a clear finding, and about which there is no dispute, that the amount added in the income of the assessee as unexplained investment or cash credit in the asst. yr. 1993-94 was the same amount which was credited in the books of account of the assessee for previous year ending on 31st March, 1992. The Tribunal has categorically come to a finding, and that finding is not under challenge, that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business and this amount was shown as a closing capital as on 31st March, 1992 and on 1st April, 1992 it was an opening balance. Considering this aspect, the Tribunal has come to the conclusion that what was already credited in the books of account ending on 31st March, 1992 for financial year 1991-92 relevant to asst. yr. 1992-93 cannot be an unexplained cash credit or investment in the books of account maintained for the financial year 1992-93, the accounting period of which ends on 31st March, 1993 so as to warrant its consideration as unexplained investment or cash credit for its relevant asst. yr. 1993-94.

6. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94. This alone is sufficient to sustain the order of the Tribunal in deleting the amount of Rs. 1,55,316 from the assessment for asst. yr. 1993-94. Since the appeal succeeds on the merit of the assessee's case in respect of the additions made in the income computed on reassessment, the validity of notice dt. 17th June, 1997 need not be gone into.

7. Accordingly, this appeal fails and is hereby dismissed. No order as to costs.