Law: Income Tax Act, 1961

Section: 256,256(2)

Income-tax---Reference--Promissory note found during a search of residential premises of assessee---Additions made in income of assessee during assessment year 1987-88 deleted by CIT (Appeals) on the ground that additions had already been made in assessment year 1983-84---Did not give rise to any question of law---Indian Income Tax Act, 1961, S.256(2). A search was carried out at the residential premises of the assessee on October 14, 1986, during the course of which three promissory notes executed by VC in favour of the assessee were found. The three promissory notes were of the denomination of Rs.50,000, Rs. one lakh and Rs. one lakh. The Assessing Officer-found that the promissory note of Rs.50,000 was bearing the date of. June 2, 1982, and did not relate to the assessment year 1987-88 with which the reference application was concerned. However, he was of the opinion that from the other two promissory 'notes it was not possible to discern the date of then execution and having regard to the fact that search took place during the financial year 1986-87 the amount represented by the two promissory notes of Rs.2 lakhs was brought to tax by making additions to the income of the assessee for the assessment year 1987-88. On appeal, the Commissioner of Income-tax (Appeals) deleted the addition of Rs. two lakhs on the ground that it was already taxed in the assessment year 1983-84. The Tribunal confirmed the order of the Commissioner (Appeals). On a reference application under section 256(2) of the Income Tax Act, 1961: Held, that the deletion of addition of Rs. two lakhs had been founded on the finding of fact that the promissory notes were executed somewhere-in 1982 and the income represented by these promissory notes had been already subjected to tax for the assessment in the assessment year 1983-84. These findings did not give rise to any question of law. So also the disallowance of Rs.24,000 on the supposed accrued income on the amount of promissory notes had been deleted on the ground that the assessee was not maintaining his accounts on the mercantile system. Therefore, the income arising from the investment made should be taxed on the basis of actual receipts…

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