1989 (10) TMI 84 - AT - Income Tax

Issues Involved:
1. Whether the addition of Rs. 1 lac as income from undisclosed sources under Section 69B of the IT Act, 1961, in the hands of the appellant, is justified.

Detailed Analysis:

Issue 1: Addition of Rs. 1 lac as Income from Undisclosed Sources

Background and Facts:
The appellant challenged the order of the CIT(A)-II, Bombay, which confirmed the ITO's addition of Rs. 1 lac to the appellant's income under Section 69B of the IT Act, 1961, as income from undisclosed sources. The appellant contended that she did not pay Rs. 1 lac to Mr. B.H. Abhyankar for the purchase of a flat, asserting that the payment was made by her father's brother, Mr. Rohit Agnihotri.

Evidence and Examination:
The ITO's investigation revealed three critical documents:
1. A dishonored cheque for Rs. 1 lac dated 14th April 1981.
2. A receipt dated 28th March 1981, acknowledging Rs. 1 lac from the appellant.
3. A receipt dated 2nd May 1981.

The ITO and CIT(A) concluded that the flat was purchased for Rs. 2,50,150, not Rs. 1,50,150, and attributed the Rs. 1 lac cash payment to the appellant's undisclosed income. The appellant's father claimed the payment was made by his brother in lieu of the dishonored cheque, but the ITO did not examine Mr. Rohit Agnihotri.

Appellant's Argument:
The appellant argued that the flat was purchased by her father, and the payment of Rs. 1 lac was made by her uncle. The receipts dated 28th March 1981 and 2nd May 1981 were explained as related to the same payment. The appellant and her father contended that the addition of Rs. 1 lac should be in the father's hands if the flat's purchase price was considered Rs. 2,50,150.

Tribunal's Observations:
The Tribunal noted the lack of examination of Mr. B.H. Abhyankar and the absence of evidence proving the appellant had Rs. 1 lac in ready cash. The Tribunal found the ITO's inference that the flat was purchased for Rs. 2,50,150 unsubstantiated by documentary evidence. The Tribunal emphasized that any addition should be made in the father's hands, not the appellant's, if the flat's purchase price was indeed Rs. 2,50,150.

Judicial Member's View:
The Judicial Member disagreed with taxing Rs. 1 lac in the appellant's hands, stating it should be taxed in the father's hands if at all. The Judicial Member found the explanation of the appellant and her father plausible and noted the lack of evidence to support the ITO's conclusion.

Accountant Member's View:
The Accountant Member upheld the addition, emphasizing the appellant's ignorance of the transaction and the lack of evidence supporting the father's explanation. The Accountant Member found the explanation of the father's letter dated 30th January 1984 unconvincing and viewed the receipt dated 28th March 1981 as an unexplained investment by the appellant.

Third Member's Decision:
The Vice-President, acting as the Third Member, agreed with the Accountant Member. He found the explanation of the appellant and her father implausible and unsupported by evidence. The Vice-President concluded that the Rs. 1 lac was rightly taxed in the appellant's hands as income from undisclosed sources under Section 69B of the IT Act, 1961.

Conclusion:
The Tribunal, by majority opinion, upheld the addition of Rs. 1 lac as income from undisclosed sources in the appellant's hands for the assessment year 1981-82. The appeal was dismissed, confirming the CIT(A) and ITO's actions.

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