1997 (7) TMI 187 - AT - Income Tax

Summary

Issues:
1. Inclusion of income from tailoring work of assessee's wife in the hands of the assessee.
2. Deletion of income of Sarvodaya Family Trust and the wife of the assessee from the total income of the assessee.
3. Deletion of interest charged under s. 139(8) and under s. 217.

Issue 1:
In the case of ITA Nos. 1607 & 1608/Ahd/91, the main issue was whether the income earned by the assessee's wife from tailoring work should be included in the hands of the assessee. The Dy. CIT(A) confirmed the addition based on a statement given during a search. However, the counsel for the assessee argued that such statements made under mental strain should not be conclusive evidence. The ITAT held that the income from tailoring work should not have been added to the assessee's income, as it was more in the nature of capital formation assessment. The tribunal emphasized that if the capital formed by the wife did not benefit the assessee directly, it should not be added to his income. Therefore, the ITAT allowed these two appeals.

Issue 2:
Regarding ITA Nos. 1848 & 1849/Ahd/1991, the first issue was the inclusion of the income of Sarvodaya Family Trust in the total income of the assessee. The AO contended that the trust was not genuine and was created by the assessee to avoid tax. However, the Dy. CIT(A) noted that the trust had been assessed from 1980-81 onwards without any remedial action taken by the department, indicating its genuineness. The ITAT agreed with the Dy. CIT(A) that there was no evidence to show the assessee benefited from the trust's income, thus confirming the deletion of the trust's income from the assessee's total income.

Issue 3:
In the same appeals, the question of deleting interest charged under s. 139(8) and under s. 217 was raised. The DC(A) had canceled the interest, stating that the assessments were framed under s. 147, which did not warrant the levy of such interest. The ITAT upheld the DC(A)'s decision, finding no fault in his order.

In conclusion, the ITAT allowed the assessee's appeals and dismissed the revenue's appeals, thereby resolving all the issues raised in the case.