1981 (8) TMI 107 - AT - Income Tax

Summary

Issues Involved:

1. Validity of reopening the assessment under Section 147(1)(a) and issuance of notice under Section 148.
2. Legitimacy of the gift of Rs. 20,000 by Smt. Jadav Bai to Shri Radhey Shyam.
3. Whether the amount of Rs. 20,000 withdrawn by the assessee firm was used twice.
4. Admissibility of various documents and evidence.
5. Disallowance of Rs. 500 out of traveling and shop expenses.

Detailed Analysis:

1. Validity of Reopening the Assessment:

The assessee argued that the assessment could not be reopened under Section 147(1)(a) and that the notice under Section 148 was invalid. The ITO had reopened the assessment based on information obtained during the gift-tax proceedings. The Appellate Tribunal held that the reopening was valid as the original assessment was completed under Section 143(1) without any investigation. The reopening was justified under Section 147(1)(a) read with Section 143(2)(a).

2. Legitimacy of the Gift:

The case revolved around a claimed gift of Rs. 20,000 by Smt. Jadav Bai to Shri Radhey Shyam. The GTO and ITO concluded that Smt. Jadav Bai did not have the capacity to make such a gift, as her agricultural income was insufficient to accumulate such an amount. The Tribunal noted that the gift deed was executed on non-judicial stamp paper, but the purchase details were suspicious. Despite the assessee's argument that Smt. Jadav Bai had sufficient agricultural income, the Tribunal found that the evidence did not support the claim of a genuine gift.

3. Usage of Rs. 20,000 Twice:

The ITO added Rs. 20,000 to the assessee's income, alleging it was used twice: once as cash in the assessee's books and again deposited in Shri Radhey Shyam's bank account. The Tribunal examined the evidence, including the cheque issued by the assessee firm, the pay-in-slip filled by Shri Ram Gopal, and the bank's payment and receipt scrolls. The Tribunal concluded that the evidence did not establish a nexus between the Rs. 20,000 withdrawn by the assessee and the amount deposited in Shri Radhey Shyam's account. The Tribunal held that the addition of Rs. 20,000 as income from undisclosed sources was not justified and ordered its deletion.

4. Admissibility of Documents and Evidence:

The Tribunal addressed the admissibility of various documents presented by both the assessee and the revenue. It excluded certain documents that were not produced before the ITO or AAC, including letters and certificates from the bank manager. The Tribunal considered only those documents that were part of the original assessment and appellate proceedings. The statement of the bank manager recorded at the back of the assessee was admitted as it was confronted to the assessee by the ITO.

5. Disallowance of Rs. 500:

The ITO had disallowed Rs. 1,000 out of traveling and shop expenses, which the AAC reduced to Rs. 500. The Tribunal upheld the disallowance of Rs. 500, considering the unvouched nature of the expenditure.

Conclusion:

The appeal by the assessee was partly allowed. The Tribunal held that the reopening of the assessment was valid, but the addition of Rs. 20,000 as income from undisclosed sources was not justified and was deleted. The disallowance of Rs. 500 out of traveling and shop expenses was upheld.