1997 (6) TMI 371 - HC - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 18,000 as cash credit and disallowance of interest amounting to Rs. 1,828.
2. Addition of Rs. 11,555 based on loose sheets recovered during search operations.
3. Addition of Rs. 17,824 on account of difference in closing stock.
4. Addition on account of low withdrawals.
5. Revenue's appeal regarding cash credits, interest, and investment in house property.
6. Revenue's appeal regarding additions u/s 40A(3), low drawings, and materials from loose papers.

Summary:

Issue 1: Addition of Rs. 18,000 as Cash Credit and Disallowance of Interest
The assessee's appeal contested the addition of Rs. 18,000 and disallowance of Rs. 1,828 interest, treated as income u/s 68. The assessee explained that the loan was from Smt. Girja Devi, who obtained it through account payee cheques from two tax-assessed individuals. The Tribunal found that the assessee discharged the onus under s. 68, following the principle laid down in Addl. CIT v. Bahri Bros. (P) Ltd. [1985] 154 ITR 244 (Patna). The addition and interest were directed to be deleted. However, a separate judgment was delivered by one judge, who upheld the addition and disallowance, citing insufficient evidence and non-compliance with procedural requirements.

Issue 2: Addition of Rs. 11,555 Based on Loose Sheets
The assessee argued that the loose sheets recovered during search operations belonged to his son, who was separately assessed. The Tribunal agreed that the matter should be referred to the AO assessing the son, Shri Indra Kumar, and directed the deletion of the addition from the assessee's income.

Issue 3: Addition of Rs. 17,824 on Account of Difference in Closing Stock
The AO added Rs. 17,824 due to discrepancies in the closing stock of silver. The Tribunal found that the difference had already been taxed in the previous year and that adding it again would result in double taxation. The addition was directed to be deleted.

Issue 4: Addition on Account of Low Withdrawals
The AO made an addition for low household withdrawals. The Tribunal found that other family members, also Income Tax assessees, had made sufficient withdrawals. The addition of Rs. 6,000 was directed to be deleted.

Issue 5: Revenue's Appeal on Cash Credits, Interest, and House Property
The Revenue appealed against the CIT(A)'s decision to set aside and remand the assessment for fresh investigation regarding cash credits of Rs. 69,000, interest of Rs. 6,891, and house property investment of Rs. 4,00,000. The Tribunal upheld the CIT(A)'s decision for further investigation and dismissed the Revenue's appeal.

Issue 6: Revenue's Appeal on Additions u/s 40A(3), Low Drawings, and Loose Papers
The Tribunal upheld the deletion of Rs. 6,047 u/s 40A(3) and Rs. 14,000 for low drawings, agreeing with the CIT(A) that the additions were not justified. Regarding Rs. 1,02,329 based on loose papers, the Tribunal directed that any addition should be made in the assessment of the assessee's son, Shri Indra Kumar, as previously decided in the assessee's appeal.

Conclusion
The Tribunal directed deletions and upheld certain findings, ensuring no double taxation and proper allocation of income and expenses. The separate judgment on the cash credit issue highlighted procedural adherence and the necessity of substantial evidence.