1978 (7) TMI 119 - AT - Income Tax

Summary

Issues:
1. Dispute over income from undisclosed sources.
2. Discrepancy in treatment of construction cost of a property.

Analysis:

Issue 1: Dispute over income from undisclosed sources
The case involves the assessment year 1972-73 of an individual who was the Managing Director of a company, which was later taken over by the Government. The Income Tax Officer (ITO) included Rs. 1 lakh as the individual's income from undisclosed sources based on a deposit in a bank account. The individual claimed it was a refund from the company, but the ITO rejected this due to lack of produced company accounts. The Appellate Authority Commission (AAC) upheld the ITO's decision, emphasizing the individual's failure to produce company accounts. However, the individual argued that the company's accounts were at the colliery and not available due to the Government takeover. The individual presented evidence from the company's cash book, showing the amount in question was related to a payment made by the company to him. The tribunal found a clear link between the amount deposited and the payment received from the company, thus ruling in favor of the individual and deleting the addition of Rs. 1 lakh as undisclosed income.

Issue 2: Discrepancy in treatment of construction cost
The individual and his son jointly constructed a property, and the ITO treated the difference in property account balances as income from undisclosed sources. The individual provided a confirmatory letter from his son, stating the construction cost was borne by him. The son's adjustment account showed the cost division and adjustments made between them. The tribunal noted that the investment during the year was explainable from the son's construction cost account, indicating the son's financial capacity. As a result, the tribunal deleted the addition of Rs. 53,767, ruling in favor of the individual.

In conclusion, the tribunal allowed the individual's appeal, resolving both the dispute over income from undisclosed sources and the treatment of construction cost in the property account in the individual's favor.