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Issues Involved:
1. Deletion of hundi credits addition of Rs. 70,000 u/s 68 of the Income-tax Act, 1961. 2. Deletion of addition of Rs. 4,050 representing interest alleged to have been paid on hundi loans. Summary: Issue 1: Deletion of hundi credits addition of Rs. 70,000 u/s 68 of the Income-tax Act, 1961 The assessee, a proprietor of a rice mill, was assessed for the year 1965-66. The ITO noticed five hundi loans of Rs. 20,000 each, totaling Rs. 1,00,000, which were treated as income from undisclosed sources due to lack of satisfactory proof of genuineness. The AAC directed a reassessment, but the assessee failed to produce the bankers or their books. Only one banker, Paramanand Kishindas, appeared and admitted to being a name lender. The ITO concluded the transactions were fictitious and added Rs. 70,000 as income from undisclosed sources, disallowing Rs. 4,050 as interest. The Tribunal, on appeal, found the transactions genuine and deleted the additions. However, the High Court noted that the Tribunal did not have sufficient material to establish the identity, capacity, or genuineness of the creditors and the transactions. The Tribunal's reliance on the broker's conflicting statements was also found unreasonable. The High Court concluded that the Tribunal acted without proper material and answered the first question in the negative, favoring the Revenue. Issue 2: Deletion of addition of Rs. 4,050 representing interest alleged to have been paid on hundi loans Given the conclusion on the first issue, the High Court also found the Tribunal in error for deleting the addition of Rs. 4,050 as interest on the hundi loans. The second question was answered in the negative, favoring the Revenue. Conclusion: The High Court held that the Tribunal's findings were not supported by valid materials and were unreasonable. Both questions were answered in the negative, in favor of the Revenue, with costs awarded to the Revenue.
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