2000 (9) TMI 31 - HC - Income Tax

Summary

Issues Involved:
1. Sustaining additions made by the Income-tax Officer in the broom account and the rapeseed oil account.
2. Disallowing part of interest on borrowings.

Summary:

Issue 1: Sustaining Additions in Broom and Rapeseed Oil Accounts
- The Assessing Officer (AO) made additions to the broom account and rapeseed oil account due to discrepancies in the books of account, invoking the proviso to sub-section (1) of section 145 of the Income-tax Act, 1961.
- For the broom account, the AO noted unsupported purchases, failure to produce documentary evidence, and unexplained variations in stock values. The Tribunal upheld the AO's reasons but reduced the additions.
- For the rapeseed oil account, the AO found excessive shortages claimed by the assessee, which were not substantiated. The Tribunal upheld the AO's decision but adjusted the amounts.
- The court found no error in the AO's method and upheld the Tribunal's decision, answering question No. 1 against the assessee.

Issue 2: Disallowing Part of Interest on Borrowings
- The AO disallowed part of the interest claimed on unsecured loans, attributing it to investments made in a house property belonging to a Hindu undivided family without charging interest.
- The Tribunal reversed the Commissioner of Income-tax (Appeals) decision, restoring the AO's assessment.
- The court referred to previous judgments, notably Highways Construction Co. Pvt. Ltd. v. CIT, which held that notional interest cannot be added to income if not actually collected.
- The court answered question No. 2 in favor of the assessee, stating that the AO's addition of notional interest was not justified.

Conclusion:
- Question No. 1: Answered against the assessee and in favor of the Revenue.
- Question No. 2: Answered in favor of the assessee and against the Revenue.