1976 (9) TMI 47 - AT - Income Tax

Summary

Issues:
1. Whether the Tribunal was correct in accepting the assessee's claim that transactions in the red diary were fictitious and if the burden of proof was on the Income-tax Officer?
2. Whether the Tribunal was right in confirming the deletion of income added back from undisclosed sources and suppressed receipts?

Analysis:

Issue 1:
The Commissioner of Income-tax sought a reference to the High Court regarding the Tribunal's acceptance of the assessee's contention that the red diary transactions were fictitious and whether the burden of proof lay with the Income-tax Officer. The red diary contained entries of loan transactions, with the assessee claiming they were fictional to impress clients. The Income-tax Officer added the total advances as undisclosed income, including a peak credit in the name of the assessee's wife. The Appellate Assistant Commissioner held the diary was not a cash book but a memorandum book, deleting the additions as no material justified them. The department appealed, arguing the additions should stand, but the Tribunal found the entries were not cash credits and the Income-tax Officer failed to verify the parties involved. The Tribunal deemed the assessee's explanation reasonable, upholding the deletion of the additions.

Issue 2:
The second issue involved confirming the deletion of income added back from undisclosed sources and suppressed receipts. The Appellate Assistant Commissioner deleted the additions, emphasizing the lack of evidence to support the Income-tax Officer's claims and the reasonable nature of the assessee's explanation. The Tribunal concurred, stating the findings were based on the material on record and did not raise any legal question. Consequently, the reference application was dismissed as no question of law arose from the Tribunal's decision.