1981 (6) TMI 47 - AT - Income Tax

Summary

Issues:
Assessment of unexplained investments in construction cost.
Validity of explanations provided by the assessee regarding the source of investments.
Acceptance of savings claimed by the assessee.
Consideration of evidence for the sale of old materials.
Assessment of total income and adjustments made by the lower authorities.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore pertained to the assessment year 1977-78, involving an individual assessee who constructed a line of shops during the accounting year. The total area constructed was approximately 24 squares, with a claimed cost of Rs. 95,000. The sources of funds were explained as advances from tenants, realization from old materials, past savings, and pending payments. The Income Tax Officer (ITO) accepted part of the explanations but added Rs. 12,000 as unexplained investments, which was confirmed by the Additional Commissioner of Income Tax (AAC).

Upon second appeal, the assessee contended that the investments were sourced from inherited properties and provided a detailed explanation for the funds utilized. The assessee argued that the savings claim should have been accepted in full, highlighting the absence of personal expenditures due to living arrangements with family. The assessee also defended the estimate for the sale of old materials, emphasizing the lack of concrete evidence but asserting the fairness of the estimate.

The Departmental Representative supported the lower authorities' decisions, questioning the belated mention of family income and expenses by the assessee. The representative emphasized the lack of evidence for the sale of old materials and supported the assessments made by the ITO and AAC based on the available information.

Upon careful consideration, the Appellate Tribunal found merit in the assessee's explanations. The tribunal accepted the savings claim, considering the circumstances of the assessee's living arrangements and property income details. Regarding the sale of old materials, the tribunal relied on the broad probabilities of the case to accept a portion of the claim, aligning with the accepted construction cost. Consequently, the tribunal allowed the appeal, reducing the total income by Rs. 12,000 based on the accepted explanations and evidence presented by the assessee.