Law:

Section:

Section 2(24) of the Income-tax Act, 1961 - Income - Definition of - Assessment years 1987-88 and 1988-89 - Whether primary function of Income-tax Act is to bring income of various kinds into tax net and tax authorities are not concerned about manner or means of acquiring income - Held, yes - Whether income might have been earned illegally or by resorting to unlawful means, but illegality tainted with earning has no bearing on its taxability and income earned by an offender still would be an income liable for assessment - Held, yes - Whether, therefore, income earned by assessee from income-tax refunds collected by him illegally by producing bogus TDS certificates would be assessed under Act - Held, yes FACTS The assessee was engaged in tax consultancy and audit work. A search and seizure operation was conducted in his residential and office premises and various documents were seized which revealed that the assessee had been claiming and receiving income-tax refunds by filing bogus TDS certifi- cates along with returns of income prepared by him even in the name of non-existent persons. The Assessing Officer considered entire amount of refund received by the assessee from the Department as his income and made assessment accordingly. On appeal, the Commissioner (Appeals) recorded a factual finding with regard to the modus operandi as well as justification for taxing the income at the hands of the assessee even though the same was obtained in an unlawful manner, but reduced the additions to certain extent. On further appeals by the assessee and the revenue, the Tribunal held that the amount of refund received by the assessee by fraudulent means could not be assessed as his income and, thus, allowed the assessee's appeal. On the revenue's appeal : HELD The Tribunal held that the entire refund collected illegally by the assessee could, under no circumstances, be the income of the assessee. The finding recorded by the Tribunal was clearly unsustainable in law. When the Tribunal found that the assessee had indulged in fabricating TDS certificates and got it refunded from the Department, it should not have come to the conclusion that such income was not taxable. [Para…

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