COMMISSIONER OF INCOME TAX SALEM Vs. M PACHAMUTHU

JUDGEMENT

(1.) THE appeals are filed against the order of the Income Tax Appellate Tribunal Madras 'D' Bench made in I.T.A.Nos.123 and 124/Mds/2004 dated 28.7.2006. THE relevant assessment year is 2000-2001.

(2.) THE aseessees were the Directors of M/s.Hotel AMS Pvt. Ltd., Kondalapatti, Salem. During the course of survey conducted on 16.11.1999 under Section 133A of the Income Tax Act, it was noticed that the company had constructed the hotel with the share capital funds said to have been floated by the Directors. On enquiry with the assessees, the assessees offered a sum of Rs.12,00,000/- as income, out of which Rs.2,00,000/- each in the name of the assessees and remaining in the name of other members in Hindu Undivided Family. THE assessees also admitted that there was no source for share capital and their share in the construction amounting to Rs.2,00,000/- each can be taken as unexplained investment. THE assessees filed return of income on 21.9.2001 admitting the income of Rs.2,80,000/- each. However, when notice under Section 148 was issued on 16.10.2001, return was filed admitting additional income of Rs.2,00,000/- each as their unexplained income. In the Section 143(3) proceedings made on 26.3.2003, the unexplained investment of Rs.2,00,000/- was treated as additional income and penalty proceedings were initiated for concealment of income and furnishing of inaccurate particulars. Thus orders were passed on 26.9.2003 one against M.Pachamuthu and other against Balavenkatesan, the brother of the former imposing penalty of Rs.37,400/- each under Section 271(1)(c) of the Act. THE assessees being aggrieved by the same preferred appeals before the Commissioner of Income Tax (Appeals), who allowed the same and the department preferred appeals before the Income Tax Appellate Tribunal have also been dismissed not on merits but with reference to the tax effect involved in the case. THE correctness of the same is now canvassed before this Court.

(3.) IT is not argued by the counsel for the revenue that the circular issued is not binding on the revenue. However, he relied on the decision reported in 286 ITR 1 C(P&H) (COMMISSIONER OF INCOME TAX VS. ABHISHEKINDUSTRIES LTD.,). The issue involved in these appeals has been considered by us in the order made in T.C.(A) No. 222 of 2004 (COMMISSIONER OF INCOME TAX VS. ASSOCIATED ELECTRICAL AGENCIES) dated 16.8.2007 and held against the Revenue in the sense that if the tax effect is less than as provided in the CBDT circular in F.No.279/126/98-1 TJ and if the case has not come within the exceptions made in the circular, the appeals filed by the revenue in the light of the circular cannot be legally maintainable. The relevant portion of the order reads as follows:-