1978 (4) TMI 106 - AT - Income Tax

Summary

Issues:
1. Addition of Rs. 21,176 to disclosed trading results - estimation of turnover and gross profit.
2. Addition of Rs. 27,800 as income from undisclosed sources - cash credits in accounts.

Analysis:

Issue 1: Addition to disclosed trading results
The appeals before the ITAT Ahmedabad relate to the assessment year 1973-74, where the assessee firm, engaged in the sale of various food items, contested the addition of Rs. 21,176 to the disclosed trading results. The Income Tax Officer had raised concerns regarding the lack of voucher support for sales, leading to an estimation of sales at a higher figure than disclosed by the assessee. The ITAT, after considering the arguments presented, found that the estimate of turnover by the Appellate Assistant Commissioner was on the high side. The ITAT acknowledged the past turnover records of the assessee and directed the Income Tax Officer to modify the addition in respect of gross profit, estimating turnover at Rs. 1 lac and gross profit rate at 27.5%.

Issue 2: Income from undisclosed sources
The second issue pertains to the addition of Rs. 27,800 as income from undisclosed sources, based on cash credits found in the accounts of the assessee firm. The Income Tax Officer treated these cash credits as income from undisclosed sources under section 68 of the Income Tax Act. The Appellate Assistant Commissioner upheld this decision, leading to an appeal by the assessee. Interestingly, a similar addition of Rs. 27,800 was made in the hands of a partner of the assessee firm, Shri Gurcharan, based on cash credits in his accounts. The ITAT highlighted the fundamental principle that the same amount cannot be taxed twice under different provisions of the Act. The ITAT found that the authorities had overlooked this principle and remitted the matter back to the Appellate Assistant Commissioner for reassessment, emphasizing the need for proper inquiries and adherence to accepted principles of taxation.

In conclusion, the ITAT partially allowed the appeal filed by the firm regarding the addition to trading results and fully allowed the appeal of the partner, Gurcharan, concerning income from undisclosed sources.