1979 (4) TMI 51 - AT - Income Tax

Issues Involved:
1. Validity of the addition of Rs. 20,000 to the assessee's income under Section 69 of the Income Tax Act, 1961.
2. Assessment of the income and savings of the assessee's wife, Smt. Achhro Devi, from her tailoring work.
3. The reliability of the Inspector's report and its use in the assessment.
4. The applicability of the doctrine of res judicata in income-tax proceedings.
5. The legitimacy of the gift of Rs. 20,000 from the assessee's wife to the assessee.

Detailed Analysis:

1. Validity of the Addition of Rs. 20,000 under Section 69:
The Income Tax Officer (ITO) added Rs. 20,000 to the assessee's income under Section 69, concluding that the amount spent on house construction, claimed to be a gift from the assessee's wife, could not be substantiated. The ITO found contradictions in the statements and savings records of the assessee's wife, leading to the conclusion that the Rs. 20,000 was unexplained income of the assessee.

2. Assessment of Income and Savings of Smt. Achhro Devi:
The ITO noted that Smt. Achhro Devi had shown Rs. 11,000 as cash in hand as of 31st March 1975, in addition to the Rs. 20,000 gift. The ITO concluded that her income from tailoring was not more than Rs. 1,500 per annum based on local enquiries. However, the assessee argued that even by the ITO's own estimate, she could have saved Rs. 24,000 from 1959 to 1974, sufficient to make the gift.

3. Reliability of the Inspector's Report:
The assessee contended that the Inspector's report, which formed the basis of the ITO's local enquiries, was never shown to him, violating principles of natural justice. The Appellate Assistant Commissioner (AAC) observed that the ITO did not provide any evidence to rebut the Municipal Commissioner's certificate about Smt. Achhro Devi's income and that the ITO's finding was not based on concrete material.

4. Applicability of Doctrine of Res Judicata:
The revenue argued that the doctrine of res judicata does not apply to income-tax proceedings, relying on Calcutta High Court decisions. They contended that the assessments of Smt. Achhro Devi should not preclude the re-examination of the veracity of the assessee's explanation about the gift.

5. Legitimacy of the Gift:
The AAC and the Tribunal found that the income from tailoring and sewing work of Smt. Achhro Devi had been accepted by the Revenue in her assessments for several years. The Tribunal noted that the ITO's own assessments showed that Smt. Achhro Devi had sufficient income to save Rs. 20,000. The Tribunal concluded that the gift was valid and that the Rs. 20,000 was not unexplained income of the assessee.

Conclusion:
The Tribunal upheld the AAC's order, finding no justification for the addition of Rs. 20,000 to the assessee's income under Section 69. The evidence indicated that Smt. Achhro Devi had sufficient income and savings from her tailoring work to make the gift. The Tribunal dismissed the appeal, confirming that the Rs. 20,000 was not taxable as the assessee's income.

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