1999 (7) TMI 93 - AT - Income Tax

Issues Involved:

1. Deletion of Cash Credits in the names of Miss Preeti V. Mehta and Shri C.S. Amin.
2. Deletion of Rs. 60,000 treated as income from undisclosed sources.
3. Deletion of disallowance of interest payment of Rs. 10,155.
4. Deletion of Rs. 16,000 treated as income from undisclosed sources.
5. Confirmation of addition of Rs. 1,05,263 by way of adoption of net profit on gross profits.
6. Two cash credits of Rs. 60,000 and Rs. 40,000 in the name of Miss Preeti V. Mehta.

Summary:

1. Deletion of Cash Credits in the names of Miss Preeti V. Mehta and Shri C.S. Amin:

The Revenue's appeal contended that the CIT(A) erred in deleting the disclosed deemed income introduced as Cash Credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively. The CIT(A) had accepted these credits as genuine based on the documentary evidence and affidavits provided by Smt. Parulben M. Jayakrishna. However, the ITO had argued that both Miss Preeti V. Mehta and Mr. C.S. Amin denied ownership of these loan accounts during their statements recorded under oath. The Tribunal upheld the CIT(A)'s decision, stating that the source of deposits was proved beyond doubt, relying on the affidavits and confirmations provided. However, the Judicial Member dissented, emphasizing that the capacity and genuineness of the transactions were not satisfactorily proved.

2. Deletion of Rs. 60,000 treated as income from undisclosed sources:

The ITO had treated a deposit of Rs. 60,000 in the name of "Paldi Jain Sangh" as income from undisclosed sources due to the lack of confirmation. The CIT(A) deleted this addition, noting that confirmations from 60-70% of the persons traveling in the group were provided, and the tickets were issued against this money. The Tribunal agreed with the CIT(A), dismissing the Revenue's contention that fresh evidence was admitted in violation of rule 46A.

3. Deletion of disallowance of interest payment of Rs. 10,155:

This ground was consequential to the first issue. Since the Tribunal upheld the genuineness of the two credits, the CIT(A) was justified in deleting the interest disallowance of Rs. 10,155 on these credits.

4. Deletion of Rs. 16,000 treated as income from undisclosed sources:

The ITO had added Rs. 16,000 credited in the names of Gokul Jayakrishna and Munjal Jayakrishna, minor sons of Smt. Parulben Jayakrishna, as income from undisclosed sources. The CIT(A) deleted this addition, accepting the explanation that the money came from personal savings and gifts received on auspicious occasions. The Tribunal confirmed the CIT(A)'s finding.

5. Confirmation of addition of Rs. 1,05,263 by way of adoption of net profit on gross profits:

The ITO had estimated the assessee's net profit at 20% of its receipts, resulting in an addition of Rs. 1,05,263, citing high expenses. The CIT(A) confirmed this addition. However, the Tribunal deleted the addition, noting that the assessee maintained regular books of account, which were audited, and no specific defects were pointed out by the ITO.

6. Two cash credits of Rs. 60,000 and Rs. 40,000 in the name of Miss Preeti V. Mehta:

The CIT(A) restored the matter back to the ITO for verification of fresh evidence regarding these cash credits. The Tribunal found no infirmity in the CIT(A)'s directions and upheld the same.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal in part. The matter regarding the deletion of cash credits in the names of Miss Preeti V. Mehta and Shri C.S. Amin was referred to the President u/s 255(4) due to a difference of opinion between the members. The Third Member agreed with the Judicial Member, holding that the CIT(A) erred in deleting the cash credits, emphasizing the lack of satisfactory evidence regarding the capacity and genuineness of the transactions.

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