1994 (3) TMI 134 - AT - Income Tax

A Firm A Partner Amnesty Scheme Assessing Officer Assessment Proceedings Assessment Year Cash Credits

Summary

Issues Involved:
1. Addition of Rs. 135 lakhs as income under Section 68.
2. Enhancement of Rs. 40 lakhs by the CIT(A).
3. Levy of interest under Section 217.

Issue-wise Detailed Analysis:

1. Addition of Rs. 135 lakhs as Income under Section 68

Facts and Arguments:
- The assessee, engaged in the liquor business as an excise contractor, had Rs. 135 lakhs credited to his bank account in May 1985.
- The assessee claimed that his son, K. Venkatesh Dutt, arranged the funds, which were initially shown as loans from Shri P.J. Fernandez.
- Subsequent investigations revealed that Fernandez and another individual, Shri S.D. Wodeyar, denied lending the money, with Fernandez admitting he acted as an accommodator.
- Venkatesh Dutt later filed a petition admitting the funds were from his business activities and offered them for tax.
- The Assessing Officer (AO) added the Rs. 135 lakhs to the assessee's income under Section 68, citing unsatisfactory explanations.

Judgment:
- The Tribunal noted that the same AO assessed the Rs. 135 lakhs in both the assessee's and Venkatesh Dutt's hands on the same day.
- The Tribunal found that the money likely belonged to Venkatesh Dutt, who was involved in high-value financial activities and faced financial troubles, leading him to shift unaccounted money to his father's account.
- The Tribunal emphasized the consistent stand of the assessee and the eventual destination of the funds back to Venkatesh Dutt.
- The Tribunal ruled that the assessee discharged the onus of proving the source of the money and reversed the lower authorities' orders, deleting the Rs. 135 lakhs addition.

2. Enhancement of Rs. 40 lakhs by the CIT(A)

Facts and Arguments:
- During appellate proceedings, the CIT(A) found additional credits of Rs. 40 lakhs in the assessee's account, attributed to loans from various persons.
- The CIT(A) directed further inquiries, leading to the discovery that the supposed lender, Shri B. Rajanna, denied lending the money.
- The CIT(A) enhanced the assessee's income by Rs. 40 lakhs based on this denial.

Judgment:
- The Tribunal ruled that the CIT(A) lacked jurisdiction to make this enhancement as the Rs. 40 lakhs credit was neither disclosed by the assessee nor mentioned in the AO's assessment order.
- Citing Supreme Court judgments, the Tribunal held that the CIT(A) could not travel beyond the subject matter of the assessment or the record.
- The Tribunal struck down the enhancement as illegal and invalid.

3. Levy of Interest under Section 217

Facts and Arguments:
- The assessee challenged the levy of interest under Section 217, initially relying on a Bombay High Court judgment.
- The assessee's counsel later conceded that the judgment did not apply to the present case and sought only consequential relief.

Judgment:
- The Tribunal noted that consequential relief would be allowed automatically and dismissed the appellate ground regarding interest under Section 217.

Conclusion:
The appeal filed by the assessee was partially allowed. The Tribunal deleted the addition of Rs. 135 lakhs and struck down the enhancement of Rs. 40 lakhs. The challenge to the levy of interest under Section 217 was dismissed, with consequential relief to be granted automatically.