1984 (2) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income-tax Act, 1961.
2. Addition made to the trading profit.
3. Addition of Rs. 18,000 for unexplained investment.

Detailed Analysis:

1. Reopening of Assessment under Section 147:

The assessee initially contested the reopening of the assessment under section 147 of the Income-tax Act, 1961, but later gave up this plea during the hearing. The reopening was based on the information that the total payment received from MES during the year was higher than initially reported. The ITO received certificates indicating discrepancies in the total payments received, leading to the reassessment.

2. Addition Made to the Trading Profit:

The original assessment was made under section 143(3) of the Act, where the assessee, dealing in leather and hides, reported payments amounting to Rs. 1,95,586 and was charged a profit rate of 10%. The ITO later received information that the total payments were Rs. 2,95,052, leading to a reassessment with a profit rate of 12.5%, resulting in a profit of Rs. 31,881.

The assessee argued that the ITO proceeded on unverified information and conflicting certificates from the MES authorities. The Tribunal found that the ITO did not provide any material evidence to justify the higher profit rate and conflicting information from MES authorities could not be relied upon. Thus, the Tribunal did not favor the addition based on conflicting information or the higher profit rate.

3. Addition of Rs. 18,000 for Unexplained Investment:

The ITO added Rs. 18,000 for unexplained investment based on the payments received in the first month of the contract work. The AAC maintained this addition. The assessee argued that the ITO had all necessary information at the time of the original assessment and no new material was brought forward to justify a second look. The Tribunal agreed that the law does not permit a second look on the same facts without fresh material and deleted the addition of Rs. 18,000.

Separate Judgments by Judges:

Accountant Member's View:

The Accountant Member disagreed with the Judicial Member on deleting the additions. He pointed out factual errors and emphasized that the discrepancy in contract receipts justified the reopening of the assessment. The ITO had given multiple opportunities to the assessee to reconcile the figures, which proved in vain. The Accountant Member concluded that the gross payments were Rs. 2,93,641 and upheld the application of a 12.5% net profit rate, considering it reasonable. He also justified the addition of Rs. 18,000 for unexplained investment, as the assessee failed to provide sufficient evidence.

Third Member's Order:

The Third Member resolved the differences by upholding the addition of Rs. 18,000. He agreed that the reopening of the assessment was valid due to positive escapement of income. He found that the source of initial investment had not been properly explained and the addition was justified and reasonable.

Conclusion:

The appeal was partly allowed, with the Tribunal deleting the addition based on conflicting information but upholding the addition of Rs. 18,000 for unexplained investment. The matter was referred back to the original Bench for disposal according to law.