1976 (7) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Deletion of Rs. 31,000 addition by the Income-tax Officer under the head "other sources" for the 1963-64 assessment.
2. Reasonableness of the Tribunal's conclusion in deleting the addition of Rs. 31,000.

Summary:

Issue 1: Deletion of Rs. 31,000 Addition by the Income-tax Officer

The assessee, a dealer in crepe soles and raw rubber, reported an income of Rs. 10,260 for the assessment year 1963-64. The Income-tax Officer added Rs. 15,500 to the disclosed trading results and assessed Rs. 31,000 as income from other sources due to unexplained hundi transactions. The assessee admitted the hundi loans were unverifiable and requested the amount be treated u/s "F" of the return of income. The assessee also sought to set off Rs. 31,000 against intangible additions from previous years, totaling Rs. 53,359. The Income-tax Officer rejected this request, stating the assessee failed to link the intangible additions to the hundi credits.

The Appellate Assistant Commissioner upheld the Income-tax Officer's decision, stating the ruling in S. Kuppuswamy Mudaliar v. Commissioner of Income-tax [1964] 51 ITR 757 (Mad) was overruled by the Supreme Court in Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). However, the Tribunal accepted the assessee's contention, applying the Kuppuswamy Mudaliar decision, and directed the deletion of Rs. 31,000 as income from "other sources."

Issue 2: Reasonableness of the Tribunal's Conclusion

The court found the Tribunal erred in relying on the Kuppuswamy Mudaliar decision, as the facts of the present case differed significantly. In Kuppuswamy Mudaliar, the assessee had clearly linked unexplained credits to additions made in previous years. In contrast, the present case involved unverifiable hundi credits in the names of third parties, with no evidence linking them to previous intangible additions. The court emphasized that the assessee must prove the source of credits, even if claiming they originated from previous additions.

The court also disagreed with the Punjab and Haryana High Court's reasoning in Commissioner of Income-tax v. Ram Sanehi Gian Chand [1972] 86 ITR 724 (Punj), which allowed an assessee to raise new contentions at the Tribunal stage. The court held that such contentions must be substantiated with evidence, and the Tribunal's decision to allow the assessee to claim set-off without proper verification was incorrect.

Conclusion:

The court answered the first question in the negative, against the assessee, and found it unnecessary to address the second question. The Tribunal's reliance on the Kuppuswamy Mudaliar decision was misplaced, and the deletion of Rs. 31,000 was unjustified. There was no order as to costs.