1981 (12) TMI 48 - AT - Income Tax

Summary

Issues:
- Assessment years 1962-63, 1963-64, and 1965-66
- Adequate opportunity for explanation of Hundi loans
- Assessments completed by ITO under sections 143(2) and 144 of the Act
- Additions made by ITO in original assessments
- Appeals filed before AAC and CIT (A)
- Deletions of additions by CIT (A)
- Revenue's appeal challenging deletions
- Consideration of hundi loans and gross profit additions

Analysis:
The judgment pertains to three appeals concerning assessment years 1962-63, 1963-64, and 1965-66, collectively addressed due to common grounds. The assessee, a registered firm engaged in the sale of watches and clocks, faced original assessments with various additions by the ITO. The AAC set aside the assessments due to insufficient opportunity for the assessee to explain Hundi loans treated as undisclosed income. The ITO then initiated fresh assessments under sections 143(2) and 144 of the Act, requesting details and evidence regarding the Hundi loans, which the assessee failed to provide adequately. Consequently, the ITO made additions to the income for each respective year, including undisclosed income from Hundi loans and other sources.

The CIT (A) reviewed the additions made by the ITO and found that the earlier years' book balance concerning unverified Hundi loans was high, indicating genuine transactions. As a result, the CIT (A) deleted the additions for the assessment year 1962-63. Similarly, for the assessment year 1963-64, the CIT (A) concluded that there was no justification for the additions related to Hundi loans and gross profit, given the maintenance of regular stock books with detailed records. The same rationale led to the deletion of additions for the assessment year 1965-66 by the CIT (A).

Subsequently, the Revenue appealed the CIT (A)'s decisions to delete the additions regarding Hundi loans and gross profit for the respective years. Upon reviewing the submissions and evidence, the tribunal noted the historical scrutiny of Hundi loans, substantial borrowings in previous years, and the genuineness of verified Hundi loans. Considering the lack of new evidence to challenge the CIT (A)'s findings, the tribunal declined to interfere with the deletions made by the CIT (A).

In conclusion, the tribunal dismissed the appeals, upholding the CIT (A)'s decisions to delete the additions concerning Hundi loans and gross profit for the assessed years.